Chapter 20 Glossary Flashcards
Adjustment premium
The adjustment premium is an additional premium payable at the end of a period of cover. This may result from the use of retrospective experience rating or from a situation where the exposure cannot be adequately determined at the start of the period of cover.
Bonus hunger
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. Also known as hunger for bonus.
Bonus-malus
A rating system in which the base premium level can be discounted or loaded in response to the policyholder’s claims 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, or the premium to be paid is dependent on the claims experience during the policy term. An initial premium is paid at the start of the period of cover, followed by an adjustment at the end when the information required is known,
Where this latter adjustment is stipulated at the outset as being upwards only, the term “Minimum and Deposit Premium” applies.
Where it is found in cases 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, at least in part, on the actual claims experience of that risk (usually in an earlier period, but sometimes in the period covered). The latter case is sometimes referred to as swing rated or loss sensitive, and there are often upper and lower limits a “collar”
Experience rating also has a more general meaning: for example, in the context of London Market rating. In this context, it is rating based purely on the experience of the historic risk presented, as opposed to “exposure rating”.
Fleet rating
The process of determining premium rates for fleets.
