The Unearned No Claim Bonus

The claims experience of a motorcar insurance is assumed to give some indication about the risk (basic claim frequency) of that insurance. The experience rating systems in motor insurance are based on this supposition. In these systems the premium to be paid in some year is a function of the individual claims experience of preceding years. That premium can be considered as the difference between: -- a basic premium, being the expected value of the premium to be paid for insurances with a basic claim frequency equal to tile mean value of the basic claim frequency of the portfolio or the tariff class. -- a positive or negative bonus; although in the negative case the word bonus is misleading this word will nevertheless be used for both cases in this paper.