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Premium Discount

Premium Discount

Definition

A volume discount applied to premiums that acknowledges the administrative cost savings associated with larger premiums. Mostly used in workers compensation insurance, it is available in states where rates are approved and published (insurers in loss cost states are already free to discount the expense factor of their premium). After experience rating, the premium discount is applied to premiums in excess of $5,000 on a graduated rate increasing with the premium. Premium discount is not available when a retrospective plan applies.

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