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Effect of Deductible Structures on Property Insurance Premiums

Abstract

The study examines the effect of deductible structures on property insurance premiums, focusing on how different deductible arrangements influence the amount charged to policyholders for property insurance coverage. Deductibles represent the portion of an insured loss that the policyholder agrees to bear before the insurer becomes responsible for the remaining claim amount. Their structure is therefore an important consideration in property insurance pricing and the management of claims exposure. The study will investigate the relationship between deductible structures and property insurance premiums. It will examine how variations in deductible amounts and arrangements affect premium levels for property insurance policies. The study will also consider the extent to which deductible structures influence insurers’ expected claims payments and the overall pricing of property risks. The analysis will focus on deductible amounts, claim frequency, claim severity, expected claim costs, and property insurance premiums. Actuarial pricing techniques will be applied to estimate the expected loss payable by insurers under different deductible structures. The study will compare premium outcomes across alternative deductible levels to determine how changes in policyholder loss retention affect insurance pricing. A quantitative research approach will be adopted for the study. Relevant property insurance claims and premium data will be analysed using descriptive statistics, probability distributions, and actuarial loss modelling techniques. Comparative analysis will be used to estimate expected claims costs under different deductible structures and assess their relationship with the corresponding premium levels. The study is expected to reveal that deductible structures have a measurable effect on property insurance premiums. Policies with higher deductibles may generate lower premiums because a greater proportion of losses is retained by policyholders, while lower deductibles may be associated with higher premiums due to greater insurer claims exposure. The magnitude of the effect is expected to depend on the frequency and severity of property insurance claims. The findings are expected to provide useful information for insurance companies and actuaries when designing deductible structures and determining appropriate property insurance premiums. The study may support more accurate assessment of expected losses and improve the alignment between premium levels and the risks retained by insurers. It may also help policyholders understand the relationship between deductible choices and insurance costs. The study concludes that deductible structures are an important component of property insurance premium determination. It is therefore recommended that insurers apply appropriate actuarial techniques when evaluating deductible arrangements to ensure that premiums adequately reflect expected losses and the level of risk retained by both insurers and policyholders.

Keywords: Deductible structures, property insurance, insurance premiums, deductible amounts, expected losses, claim frequency, claim severity, property risks, insurance pricing, actuarial pricing, loss modelling, claims exposure, risk retention, premium determination, property insurance claims.