Chapter 20 - Further Considerations When Rating Flashcards
Adjustment premium
An additional premium payable at the en of a period of cover. May result from retrospective experience rating or from a situation where the exposure cannot be adequately determined at the start of the period of cover.
When this adjustment is stipulated at outset as being upwards only, the term ‘minimum and deposit premium’ applies.
When it is the case relating to retrospective experience rating, the term ‘swing rated premium’ is often applied.
Bonus hunger. AKA ‘hunger for bonus’
The reluctance of policyholders under a no-claim discount (NCD) or bonus-malus system to notify claims or claim amounts when faced with a potential increase in premiums
Bonus malus
A rating system in which the base premium level can be discounted or loaded in response to the policyholder’s claim experience
Deposit premium
This occurs in cases where all relevant exposure or rating information is not known at the start of the period of cover. This is where an initial premium is paid at the start of the period of cover (‘deposit premium’), followed bu an adjustment at the end of cover when the information required is known (‘adjustment premium’).
When this adjustment is stipulated at outset as being upwards only, the term ‘minimum and deposit premium’ applies.
When it is the case relating to retrospective experience rating, the term ‘swing rated premium’ is often applied.
Experience rating
A system by which the premium of each individual risk depends, in part, on the actual claims experience of that risk. There may be a ‘collar’ on the adjustment specifying upper and lower limits.
May also relate to a premium rating that is based purely on the experience of historic risk (as opposed to exposure rating)
