What is the term for a reduction in premium due to no claims being made in a prior period?

What is the term for a reduction in premium due to no claims being made in a prior period?

• A. No claims bonus
• B. Pro Rata Cancellation
• C. Policy wording
• D. Renewal

Answer: (A)

The term for a reduction in premium due to no claims being made in a prior period is referred to as a no claims bonus. This concept is commonly used in the insurance industry to reward policyholders for not making any claims during a specified period. When an individual or business maintains a claim-free record, the insurer recognizes this as a positive behavior, which often results in a discount on their premium upon renewal of the policy. This reward system not only encourages individuals to be more cautious and responsible in their risk management but also helps insurers to reduce their overall claims costs. Over time, this can lead to significant savings on premiums, fostering customer loyalty as policyholders see tangible benefits from their disciplined approach to insurance usage.

The term for a reduction in premium due to no claims being made in a prior period is referred to as a no claims bonus. This concept is commonly used in the insurance industry to reward policyholders for not making any claims during a specified period. When an individual or business maintains a claim-free record, the insurer recognizes this as a positive behavior, which often results in a discount on their premium upon renewal of the policy.

This reward system not only encourages individuals to be more cautious and responsible in their risk management but also helps insurers to reduce their overall claims costs. Over time, this can lead to significant savings on premiums, fostering customer loyalty as policyholders see tangible benefits from their disciplined approach to insurance usage.