Comments for Specific Countries. Rate of Convergence

As detailed in chapter 2, the old Belgian system, in force since 1971, exemplified the major problem faced by insurers using a mild bonus-malus system: a strong clustering of policies in the high-discount classes. With only a two-class penalty for the first claim, the system was designed for an average claim frequency close to 1/3. The much lower claim frequencies observed since the 1974 oil shock created an increasing lack of financial balance, with over 80 percent of the policyholders in one of the three lowest classes in 1992, and less than 0.5 percent of insureds in the malus zone. This led the Professional Union of Insurance Companies to set up a study group and suggest a new system to the regulatory authorities (see Lemaire, 1988a). The new system was implemented late in 1992. It penalizes the first claim by four classes.