Page 366 - IC38 GENERAL INSURANCE

By loading the premium the higher probability of claims or occurrence of
large claims is taken into consideration.

Example

i. Normal rate of premium is charged for cargo shipped by liners or other
vessels, which comply with the prescribed standards. However, if an over-
aged or under-tonnage vessel ships the cargo then extra premium is
charged.

ii. In personal accident insurance if the insured is engaged in hazardous
pursuits like mountaineering, racing on wheels, big game hunting etc. extra
premium is charged.

iii. In health insurance if there are adverse features at the time of
underwriting, it can also lead to loading of premium.

Sometimes loading of premium is also done for adverse claims ratio, as in case
of motor insurance or health insurance policies.

As per the recent regulation of IRDAI Individual claim based loading cannot be
applied. Loading can only be applied to the overall portfolio, based on objective
criteria.

b) Imposition of warranties

Insurers incorporate appropriate warranties to reduce the physical hazard.
Some examples are provided below.

Example

i. Marine cargo

A warranty is inserted to the effect that goods (e.g. Tea) are packed in tin lined
cases.

ii. Burglary
It is warranted that the property is guarded by a watchman for twenty four
hours.

iii. Fire
In fire insurance, it is warranted the premises would not be used beyond normal
working hours.

iv. Motor
It is warranted that the vehicle will not be used for speed testing or racing.

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