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Premium Calculation - Third Party Liability (General)

Pricing Methods

Method 1: Simplified Fixed Pricing (Current Business Practice)

For standard TPL policies:

Limit of Liability Premium (incl. VAT)
AED 500,000 Minimum AED 1,525
AED 1,000,000 Minimum AED 1,800
Above AED 1,000,000 Underwriter referral required

Application: - Fixed minimum premiums for standard limits - Quick pricing for general business operations - Above AED 1M requires custom assessment

Above Threshold Requirements: - Detailed business activity assessment - Turnover and exposure analysis - Claims history review - Special risk evaluation

Restrictions: - Certain high-risk activities require special approval - To be discussed with underwriting team

Method 2: Detailed Rating Method

Based on 1,660 policies with calculable rates from Premia UAT database.

Product 5010 - General Third Party Liability

Metric Value
Minimum Rate 0.0001%
Maximum Rate 3.23%
Average Rate 0.15%
Median Rate 0.12%
Sample Size 1,660 policies

Premium Calculation Methodology

General TPL uses sum insured percentage-based rating:

Base Premium = Sum Insured × Rate %

Final Premium = Base Premium + Loadings - Discounts

Where:
- Sum Insured = Business liability coverage limit
- Rate = Based on business activity and risk classification
- Typical Rate: 0.12% (median from actual data)

Rating Factors

1. Business Activity Classification

  • Low risk: Offices, consultancies (0.10% - 0.20%)
  • Medium risk: Retail, light manufacturing (0.20% - 0.50%)
  • High risk: Heavy industry, hazardous operations (0.50% - 3.0%)

2. Sum Insured

  • Average: AED 2,369,774
  • Range: AED 0 - AED 70,000,000
  • Higher limits = higher absolute premium

3. Claims History

  • Claims-free operations: Potential discount
  • Poor claims record: Loading applied

4. Business Turnover

  • Annual revenue impacts risk assessment
  • Higher turnover = higher exposure

Actual Premium Examples

From 1,714 policies:

Sum Insured Rate % Premium Business Type (Typical)
AED 1,000,000 0.12% AED 1,200 Office/Consultancy
AED 5,000,000 0.15% AED 7,500 Retail operations
AED 2,369,774 (avg) 0.15% (avg) AED 2,483 (avg) Mixed portfolio
AED 10,000,000 0.20% AED 20,000 Light manufacturing

Coverage Breakdown

Main Coverage (501001 - Third Party Liability)

  • Used in: 2,159 coverage instances
  • Average Sum Insured: AED 1,880,705
  • Average Premium: AED 1,955

Premium Components

Base Premium Calculation

  1. Determine sum insured requirement
  2. Classify business activity risk level
  3. Apply appropriate rate (0.10% - 3.23%)
  4. Calculate: SI × Rate = Base Premium

Adjustments

  • Loadings: High-risk activities, poor claims history
  • Discounts: Large accounts, good risk management
  • Minimum Premium: May apply for small policies

Database Fields

Premium information stored in: - PGIT_POLICY.POL_FC_PREM - Final premium amount - PGIT_POLICY.POL_SI_FC - Sum insured - PGIT_POL_RISK_COVER.PRC_FC_PREM - Coverage-level premium - PGIT_POL_RISK_ADDL_INFO - Business risk details

PL/SQL Packages

Premium calculation likely handled by: - PGIPK_CALC_PREMIUM_* - Premium calculation packages - AIGPK_VAL_* - Validation packages - Rating tables for business classification

Comparison to Other Products

Product Avg Rate Calculation Method
General TPL (5010) 0.15% SI × Rate %
Professional Indemnity (5050) 0.38% SI × Rate %
Workmen Compensation (5030) 0.93% Wages × Rate %

General TPL has the lowest average rate among commercial liability products.

Data Source: Analysis of 1,660 policies (product 5010) from Premia UAT database. All rates and statistics from actual policy data.

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