The premium loading applied to an impaired medical risk, expressed as a percentage of the base rate or as an amount per unit of sum insured.
A substandard rating translates into money the expected gap in mortality or morbidity between an applicant and a standard life of the same age. It is expressed in two ways that are not equivalent: a percentage of the base rate, which grows mechanically with age since the rate does, or a fixed amount per unit of sum insured, which stays flat. The loading may be permanent, where the impairment is definitive, or temporary where it matches a period of elevated risk that expires, and well drafted contracts provide a review clause allowing it to fall away if health improves. Its alternative is a condition exclusion, which leaves the premium untouched but hollows out the cover exactly where the need is greatest, so the choice between the two is not a pricing detail but determines what the policyholder actually buys. The problem solved is keeping insurable an applicant whom single rate pricing would push into decline, without making the rest of the pool carry the extra cost.
France's AERAS agreement caps the loading for borrowers whose income stays below a threshold: the total cost of the insurance may then not exceed 1.4 points of the loan's effective interest rate, the excess being absorbed by a pooling fund financed by insurers and banks. That capping mechanism has run since 2007 and was widened in 2015.
majoration de cotisation pour risque aggravé, extra premium