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Bonus malus systems in motor insurance

Bonus malus systems in motor insurance. Michael Neeb 6 March 2008 . Motor insurance rating and bonus malus systems. Simple rating structure. Rating factors to differentiate between risks Segments – groups of risks with similar characteristics (risk premium)

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Bonus malus systems in motor insurance

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  1. Bonus malus systems in motor insurance Michael Neeb 6 March 2008

  2. Motor insurance rating and bonus malus systems Simple rating structure • Rating factors to differentiate between risks • Segments – groups of risks with similar characteristics (risk premium) • Differences within segments remain  need for bonus malus systems • Basis of bonus malus systems: claims frequency Bonus-malus systems in motor insurance

  3. German bonus malus system – risk premium index 409 SF = “claims-free” (bonus class) SF 1 = 100 Bonus-malus systems in motor insurance

  4. Characteristics of bonus malus systems German bonus malus system • Classification according to claims experience (period: 1 year) • Number of classes and period required to reach maximum bonus • Ratio of highest to lowest bonus malus premium • Beginners’ class • Reclassification at renewal Bonus-malus systems in motor insurance

  5. Development of the German bonus malus system (MTPL insurance) Bonus-malus systems in motor insurance

  6. Client informs insurer about his b/m class Client Previous insurer New insurer Check of b/m information Possibly correction of b/m class and premium Exchange of information • Correct assessment only at renewal  exchange of information between insurers required • Exchange of information limited • Common database not necessary Bonus-malus systems in motor insurance

  7. Summary / outlook • Bonus malus systems  powerful instrument to assess individual risk • Need for cooperation between insurers • Common database or multilateral agreements • Limited exchange of information • Improved underwriting quality for all insurers • Fairer premiums for policyholders. Bonus-malus systems in motor insurance

  8. Thank you for your interest! Michael Neeb

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