Tier 1 rates are set at _________ above comparable voluntary market rates.

Tier 1 rates are established to ensure that the pricing of certain types of coverage is competitive yet provides a necessary level of profitability for insurance carriers, especially in more challenging markets, such as those dealing with high-risk scenarios. Setting Tier 1 rates at 25 percent above comparable voluntary market rates reflects a strategic decision. This approach helps to manage the underwriting of policies effectively, enabling insurers to operationalize different tier systems while still being able to cover the potential risk exposure adequately.

The 25 percent increase allows insurers to attract a specific market segment that may not have access to standard rates due to the risk profile, while also providing a buffer to account for potential losses and expenses related to underwriting those policies. By being set at this level, Tier 1 rates can fulfill regulatory requirements while ensuring market stability in insurance offerings.