Insurer C: The dynamic bonus system

Abstract

The third private health insurer considered in this study is a comparatively young, fast-growing company, to be called insurer C henceforth. Insurer C constitutes a perfect complement to insurers A and B, running an experience-rated system of rebates for no claims. Since an insured’s merit rating depends on claims submitted in a series of previous years, this system will be called a “dynamic bonus” system for short. As of 1981 and 1982 (the observation period used in the statistical analysis of Chapter 8), insurer C offered two monthly premiums worth of rebates for no claims at the end of the first year without claims, three monthly premiums at the end of the second and a maximum of four starting in the third consecutive year without claims. In the meantime, many private health insurers in Germany have strengthend this (2, 3,4) rating to a (3,4, 5) or even (4, 5,6) rating.