Analysis of the No-Claim Discount system and the proposed modification: a case study in Malaysia
The No-Claim Discount (NCD) is a system that adjusts the premium paid by policyholders according to their individual insurance claim history. The current NCD system in Malaysia is not protecting good drivers more than bad drivers. Good drivers, who are in the maximum discount group are being pena...
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| Main Authors: | , |
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| Format: | Article |
| Published: |
Penerbit ukm
2009
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| Online Access: | http://journalarticle.ukm.my/1932/ http://www.ukm.my/~ppsmfst/jqma/index.html |
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| Summary: | The No-Claim Discount (NCD) is a system that adjusts the premium paid by policyholders
according to their individual insurance claim history. The current NCD system in Malaysia is
not protecting good drivers more than bad drivers. Good drivers, who are in the maximum
discount group are being penalised unfairly more than those in the 0-percent discount level.
Therefore, this paper introduces an alternative step-back NCD system with additional classes
and a malus zone, which is rather “tough” to policyholders. The idea is that the bonuses
awarded to good drivers should be compensated for by maluses from bad drivers. The main
actuarial tools for evaluating and comparing different NCD systems are then used in this study
in terms of the fairness of penalty charges to policyholders, the total difference of premium
income collected by insurance companies and the efficiency of the systems |
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