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[Underwriting and Rating: Setting Insurance Rates]
Which factor could explain poorer performance of renewal clients as opposed to new business clients?
New business clients often want to present themselves as low-risk to secure better premium rates. As a result, they may be cautious about reporting small claims or may practice better loss prevention---at least initially. This can make new business perform better from a loss-ratio perspective.
However, renewal clients may become less cautious over time or more willing to submit smaller claims once they are already insured. Additionally, insurers sometimes relax underwriting scrutiny on renewals compared to new applications, which can further widen performance differences.
Option A (automated renewals) does not inherently affect claims behaviour.
Option B is incorrect---renewal underwriting is typically less strict, not more.
Option C is false; reinsurance availability does not differ based on new vs. renewal status.
Thus, the factor most likely contributing to poorer renewal performance is D: New business clients limit claims to keep premiums low, improving their initial results relative to renewals.
If you have Questions 85 onward, feel free to send them!