In chapter 13, the Course Notes state that
I’m not very close to this kind of business as I’m more involved in commercial lines but I thought the press had been full of stories recently about motor rates hardening having had several years in which the motor insurance industry suffered heavy losses. Isn’t this evidence of a profound cyclical effect? Didn’t it happen for a lot of the reasons set out in the Course Notes?
P.S. Before anyone says anything about claims fraud and referral fees, it is in theory at least possible to allow for these when setting premiums. The cyclical effect was manifest in the fact that, for several years, rates did not seem to respond to either of these two factors.
Last edited by a moderator: Aug 22, 2012