Premium allocation

Can it improve a company’s risk management?

December 15, 2016
| Australia

When it comes to premium allocation, linking it to risk profiles can help businesses better understand how they can influence their insurance costs, as well as drive greater efficiencies.

Risk and Analytics team senior consultant Debbie Pilling has written an insightful guide into how companies can potentially improve their risk management and behaviour by linking premium allocation to risk.

The allocation method should give your business units a better understanding of their own risks, and how controls can impact on claims in the long-term – resulting in more motivation to continue those improvements.

Premium allocation – can it improve a company’s risk management? looks in detail at the design process, including key drivers of risk. Allocation models can be a ‘carrot and stick’ approach, to penalise or reward business units based on several metrics – including their claims to date, improved risk management, complacency or lack of controls. The paper also discusses the need for accurate data, flexibility and to look at insurance market conditions.