Long term agreements

Here, insurers agree to offer premium discounts to an insured who agrees to renew a policy with them for a period of a specified number of years e.g. three to five years. The discount rates vary a but a typical one is five per cent for a period of three years and 7.5 per cent for a period of five years.

The insured is bound by the the agreement to renew the policy during during the agreed period but the insurer is not under obligation to accept the insureds offer.

Should the insurer intimate the insured that the renewal of the policy will be subject to the imposition of the new terms or a higher rate than the existing one, the insured is not obliged to renew with the insurer in spite of a long term agreement being in force.

Long term agreements are common in property, liability and business interruption insurances but not in motor insurance