Experience rating mechanism adjusting premium according to the policyholder's own claims history, correcting both the residual adverse selection and the moral hazard that a priori rating leaves behind.
A priori rating observes characteristics; it does not observe carefulness. Two drivers of the same age, vehicle and territory do not carry the same risk, and the residual gap is exactly what a no-claims discount captures by charging policyholders according to what they have done. The mechanism works on two registers at once. It corrects heterogeneity that a priori criteria never reach, which makes it a direct application of credibility theory, with the discount class playing the role of the Z factor. And it creates an incentive, since a reported claim costs not only the deductible but several years of surcharge, which reduces moral hazard and, as a less desired effect, discourages reporting small claims. Designing one means settling three parameters: how severe the surcharge is, how fast the scale comes back down after a clean year, and whether discount protection exists. In France the reduction and increase coefficient is framed by the insurance code and follows a uniform rule, while other European markets let each insurer define its own scale, which makes cross-border premium comparison misleading.
The French reduction and increase coefficient applies a 25% surcharge per at-fault claim and a 5% reduction per claim-free year, with a floor at 0.50 reached after thirteen years and a ceiling at 3.50. A driver at 0.50 who reports an at-fault claim moves to 0.625 and needs three clean years to come back down, a cumulative extra cost that frequently exceeds the amount of a small property claim.
coefficient de réduction-majoration, CRM, no-claims discount, experience rating personnel, merit rating