Patent ID: 7769609

Claim:
A method for determining insurance rates comprising: retrieving loss and exposure data for a state; grouping the loss and exposure data by ZIP code and by time unit data; calculating pure premiums for each ZIP code; calculating a credibility weight for a target ZIP code; defining a first neighbor region comprising ZIP codes that are immediate neighbors of the target ZIP code; calculating a pure premium for the first neighbor region; calculating a credibility weight for the first neighbor region; calculating, using a data processor, a first estimated pure premium for the target ZIP code based on the pure premium for the target ZIP code, the credibility weight for the target ZIP code, the pure premium for the first neighbor region, and the credibility weight for the first neighbor region; defining a group including the target ZIP code and the first neighbor region; calculating a credibility weight for the group; defining a second neighbor region comprising ZIP codes that are immediate neighbors of the group; calculating a pure premium for the second neighbor region; calculating a credibility weight for the second neighbor region; and calculating, using the data processor, a second estimated pure premium for the target ZIP code based on the first estimated pure premium for the target ZIP code, the credibility weight for the group, the pure premium for the second neighbor region, and the credibility weight for the second neighbor region.