Bonus-malus

The term bonus-malus (Latin for good-bad) is used for a number of business arrangements which alternately reward (bonus) or penalize (malus). It is used, for example, in the call center and insurance industries.

Call centers

In call centers, a bonus-malus arrangement is a section in the contract between the company buying the call center services (buyer) and the company providing the call center services (call center) allowing for a payment to be made from one company to the other. As part of the contract, both companies agree on a set of Key Performance Indicators (KPIs). These are measurements for how the call center is performing. If the call center is performing poorly, then there would be a malus payment (payment from the call center company to the buyer). If the call center is doing well, then there is a bonus payment from the buyer to the call center company. Bonus-malus payments are in addition to the normal cost of call center services.

Insurance

In insurance, a bonus-malus system (BMS) is a system that adjusts the premium paid by a customer according to his individual claim history.