Hello, The answer of this question, when asking about the impose of the new NCD scheme of 2% compound every claim free year, state that: Those with steep discounts for a high number of claim free years are likely to see their premiums increase. Those with little or no discounts will see small discounts I thought the opposite way: when the previous discount is higher than the current discount scheme, they see more room to decrease their renewal rate so that expected office premium stay the same. Could you further explain my argurment and the answer above?
Read the sentence in context. The comparison is between the new discount and the current discount. The examiners aren’t comparing companies with different discounts. In other words, companies currently offering a bigger discount than the required 2% discount will see an increase in premiums, and vice versa.
They currently have 5% discount of premium 100. So premium after discount is 95. Now discount 2% so premium is 98. Renewal premium (usually set by underwriters) tend to decrease so that after discount premium is close to 95. That is my thinking
The question doesn't say they have a 5% discount. Try not to introduce new details if you can help it, it's likely to lead you in the wrong direction. Nor does the question talk about renewal premiums in general, it's asking specifically about the NCD. Again, I think it likely that you're concentrating on a minor technicality which is leading you away from the thrust of the question.
