Page 368 - IC38 GENERAL INSURANCE

f) Discounts

Lower rates are charged or a discount is given in the normal premium if the
risk is favourable.

The following features are considered to contribute to improvement of risk
in fire insurance.

i. Installation of sprinkler system within the premises buckets, portable

ii. Installation of hydrant system in the compound
iii. Installation of hand appliances consisting of

extinguishers and manual fire pumps

iv. Installation of automatic fire alarm

Example

Under motor insurance a discount in the premium is provided if the motor
cycle is always used with a side-car attached, as this feature contributes to
improved risk because of the greater stability of the vehicle.

In marine insurance, the insurer may consider giving discounts on premium for
“Full Load” container as this reduces the incidence of theft and shortage.

Under a group personal accident cover, discounts would be given for coverage
of a large group, which reduces the administrative work and expenses of the
insurer.

g) No claim bonus (NCB)

A certain percentage is given as bonus for every claim free renewal year
with a limit to the maximum bonus that can be availed. It is allowed by way
of deduction on the total premium at renewal only, depending upon the
incurred claim ratio for the entire group.

No claim bonus is a powerful strategy to improve underwriting
experience and forms an integral part of rating systems. This bonus
recognises the factor of moral hazard in the insured. It rewards the insured
for not lodging claims either by adopting better driving skills as in motor
insurance or taking better care of his health as in mediclaim policies.
h) Declinature

If the physical hazard involved is considerably bad, the risk becomes
uninsurable and is declined. Based on their past loss experience, knowledge
of hazards and overall underwriting policy, insurers have formulated a list of
risks to be declined in each class of insurance.

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