Which method is used to rate a risk based on subjective judgment?

The method that uses subjective judgment to assess a risk is known as judgment rating. This approach relies on the expertise and experience of underwriters or insurance professionals to evaluate the unique characteristics of a risk that may not be easily quantifiable through objective data. Judgment rating is particularly useful in situations where there is little statistical data available or where the risk is unique or complex, requiring a more personalized assessment.

In contrast, manual rating involves predetermined rates based on classifications that categorize similar risks; experience rating adjusts premiums based on the historical claims record of a specific insured over time; and statistical rating leverages data analysis and statistical methods to estimate risk based on large datasets and trends. While these methods rely more on data and empirical evidence, judgment rating prioritizes the underwriter's qualitative insights and intuition, making it distinct in its approach to risk evaluation.