Further considerations when rating

Question 1

• The premium actually charged will differ from the office premium

Answer 1

o To meet business objectives, eg to increase market share
o To maintain market share in highly competitive markets or in certain market conditions (such as the ‘soft phase’ of the insurance cycle)
o If it is difficult to establish the technical premium
o If insurers can charge certain loyal customers more (inertia pricing)
o If the market does not accept different premiums (eg between new business and renewal premiums)
o Where no-claim discounts apply

Question 2

practical considerations affecting premium rates

Answer 2

o Capital availability
o Reinsurance capacity
o Sales and quote systems
o Regulations
o Relationships with sellers
o The method of sale