PACICC -Compensation - 2015 spring 13
in PACICC.Comp
How shall we deal with 30% of UPR? Does the 350, 000 include the coinsurance payment of 150 already?
Comments
Hi,
With PACICC, the insured can recover on the claims side as well as on the premium side.
On the claims side, you would look at the terms of the insurance contract and then determine the unpaid claim amount (subject to certain recovery limits). In this question, the claim had a deductible only (no coinsurance) so that was taken into consideration when computing the unpaid claim amount.
On the premium side, you look at the unearned premium. PACICC says that they will refund unearned premiums to a maximum of $1000 per policy, subject to 30% coinsurance. What this means here is that maximum possible recovery is 70% of unearned premium (subject to the $1000 limit). In this question, the unearned premium was $500, so the insurer only recovers 70% of this. The 30% is not recovered.
In summary, the 30% coinsurance feature that PACICC has applies to the unearned premium, and not the claim. So this 30% of $500 (or $150) does not need to be taken into consideration in the question, as it is not recovered by the insured.
Thanks for your detailed explanation! It helps.