What does a variable sanction refer to in insurance?

The concept of variable sanctions in insurance relates specifically to how penalties or adjustments to premiums can change based on circumstances. In this context, a surcharge for chargeable claims at renewal serves as a variable sanction because it directly ties the penalty to the insured's claims history. When a policyholder files a claim that is deemed chargeable, it reflects the risk that the insurer associates with that policyholder. At renewal, the insurer may implement a surcharge, which makes the insurance premium higher due to the increased likelihood of future claims based on past behavior. This approach allows the insurer to adjust for the specific risk presented by the individual's claims history, which is key to managing risk within insurance underwriting.

Other options involve fixed penalties or discounts that do not adapt based on the insured's behavior or claims experience, making them less aligned with the notion of a variable sanction. A fixed penalty would not vary according to circumstances, and both discounts for long-term policyholders and incentives for new policyholders are proactive measures rather than penalties linked to individual claims history. These solutions are related to customer retention strategies rather than adjusting premiums based on risk assessments stemming from claims.