The maximum claims loading that the Insurer can charge is 25% of the total amount they have paid. This 25% will be spread over a 5 year period such that you are charged 5% per year of the total amount paid. The payable claims’ loading is added to your Firm’s base premium.
Illustration 1: Firm A has 100 Legal Prectitioners. The Firm’s base premium is RM125,000 ie RM1,254 per practitioner x 100 practitioners. The firm made a notification in 2016 which is then settled in 2018 for RM2 Million.
The calculation of Firm A’s Claims’ Loading for the year will be either:
- 25% of RM2 Million (25% of claim amount paid) = RM 500,000.00 spread over 5 years equals to RM 100,000 per year
OR
- RM 125,400 x 5 (Five times their base premium) = RM 627,000.
Whichever is the lower.
As RM100,000 is the lower of the two amounts, the Claims Loading of RM100,000.00 will be added to the Base premium of RM125,400 for Firm A, for each renewal AFTER the payment has been made by Insurers. Since Claims’ Loading is charged for 5 years from date of notification, the Firm would have to incur this until the year 2021. Service tax is separate, and must be added.