Reviewable IP contracts

[Studystuff]

Hi,

I was hoping someone could clear up some confusion I am having with reviewable IP contracts in chapter 1. The core reading emphasises in respect of these contracts, that premium can be adjusted in light of claims experience being different than expected. However, it makes no reference to premiums increasing at each review as age and in turn the expected cost of claim increasing.

In my company, premiums are generally increased at review to cover up until the next review period, in light of how the expected cost of claim increases with age... Am I correct in saying the core reading here is describing a different type of situation, where the insurer sets a premium which they hope to be able to keep level over the contract term (i.e to not increase with age specifically) but only to increase/decrease premiums in light of emerging claims experience?

Thanks for any help that can be offered, this has caused me great confusion!

 

[Em Francis]

Hi,

I was hoping someone could clear up some confusion I am having with reviewable IP contracts in chapter 1. The core reading emphasises in respect of these contracts, that premium can be adjusted in light of claims experience being different than expected. However, it makes no reference to premiums increasing at each review as age and in turn the expected cost of claim increasing.

In my company, premiums are generally increased at review to cover up until the next review period, in light of how the expected cost of claim increases with age... Am I correct in saying the core reading here is describing a different type of situation, where the insurer sets a premium which they hope to be able to keep level over the contract term (i.e to not increase with age specifically) but only to increase/decrease premiums in light of emerging claims experience?

Thanks for any help that can be offered, this has caused me great confusion!

Hi

Generally the premiums for IP products do not increase with age (unlike PMI insurance). The age of the policyholder at the date of policy issue will help determine the premium, eg the initial premium will increase with the age at entry but then no subsequent increases will occur in respect of policyholder age.
The insurer may reserve the right to increase premiums should claim experience across the whole portfolio be poor (and may reduce if it has been good). So this may be the case in relation to your employer.
Premiums could also increase throughout policy due to inflation, with benefits possibly increasing as well.

Hope this helps.

Thanks
Em