Page "Insurance" Paragraph 149

* Retrospectively rated insurance is a method of establishing a premium on large commercial accounts.

The final premium is based on the insured's actual loss experience during the policy term, sometimes subject to a minimum and maximum premium, with the final premium determined by a formula.

Under this plan, the current year's premium is based partially ( or wholly ) on the current year's losses, although the premium adjustments may take months or years beyond the current year's expiration date.

The rating formula is guaranteed in the insurance contract.

Formula: retrospective premium = converted loss + basic premium × tax multiplier.

Numerous variations of this formula have been developed and are in use.