Under the two-or-more-claims rule, what is the maximum surcharge as a percentage of the total premium?

Under the two-or-more-claims rule, what is the maximum surcharge as a percentage of the total premium?

• A. 5%
• B. 20%
• C. 15%
• D. 10%

Answer: (D)

When a policyholder has two or more claims, insurers may apply a surcharge to the total premium to reflect the higher risk. But there’s a cap to keep these increases reasonable. Under this rule, the maximum surcharge cannot exceed ten percent of the total premium. So, if the total premium is, say, $1,000, the surcharge you could see for two or more claims is limited to $100. This balance lets risk-based pricing account for multiple claims without making coverage unaffordable.

When a policyholder has two or more claims, insurers may apply a surcharge to the total premium to reflect the higher risk. But there’s a cap to keep these increases reasonable. Under this rule, the maximum surcharge cannot exceed ten percent of the total premium. So, if the total premium is, say, $1,000, the surcharge you could see for two or more claims is limited to $100. This balance lets risk-based pricing account for multiple claims without making coverage unaffordable.