Page 134 - Policy Wording - Hollard Business Binder (2020-08-26)

Motor Traders
3.3 All new business quotations and renewals to be submitted to Hollard for approval prior to providing terms.
3.4 Social domestic and pleasure use must be underwritten with caution, all drivers must be named in the schedule.
3.5 Treat dealerships dealing in older or lower value vehicles as Accommodation risk.
4. MAXIMUM ACCEPTANCE LIMITS
Sedan, LDV, SUV, MPV
Commercial vehicles, busses
Agriculture
Special types
Motorcycles
Other
Watercraft
Values exceeding above limits must be referred to Hollard for approval. Facultative reinsurance may be required.
5. RATING
5.1 Motor Trader’s premiums were previously based on salaries, wages and/or commission with adjustments for own damage limit and optional extensions.
5.2 Unfortunately, this method is no longer accurate as the correct values are not always disclosed.
5.3 There are two rating methods that can be used:
1. Premium calculated on the past performance of the risk (claims trending).
2. Flat rates applied to own damage limit, third party liability limit and optional extensions.
5.4 Method 1 – claims trending:
5.4.1 Calculate premium based on past performance of the risk.
5.4.2 Establish the inception and/or renewal date of the policy.
5.4.3 Obtain 3 year loss history (including blow by blow claims).
5.4.4 Apply a percentage increase to total gross claims per year (period of cover must start with inception/renewal date) to make allowance for inflation and other increased costs:
45% 35% 25%
5.4.5 If there is still an unexpired portion in respect of the current year, trend as follows:
• gross claims ÷ expired months x 12
• add 7.5% for claims incurred but not reported (IBNR)
• multiply by 125%
5.4.6 Premium calculation is based on a 65% loss ratio.
5.4.7 Ensure that the calculated premium is not less than the minimum rate required.
Example:
1 April R500 000 R2 500 000
Class or type of vehicle
Own damage limit (VAT exclusive)
R2 500 000 Refer Refer R550 000 R150 000 Refer Decline
Period of cover
Year 3
Trend
Year 2
Year 1 (current year)
Renewal date
Own damage limit
Third party limit
Commercial Underwriting Mandates and Guidelines – Binder – Version 2 2020
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