Question

What type of group rating uses the actual experience of the group as a factor in developing the rates to be charged?

A) Experience rating
B) Manual rating
C) Class rating
D) Composite rating

Answer 1

Experience rating is the method that adjusts insurance premiums based on the historical claims experience of the insured group.

Step-by-step explanation:

The type of group rating that uses the actual experience of the group as a factor in developing the rates to be charged is known as Experience rating. Experience rating involves adjusting the insurance premiums based on the historical claims experience of the group. If a group has a lower-than-expected claims experience, they may be charged lower premiums, whereas if they have higher-than-expected claims, their premiums might be increased. This method is commonly used in health insurance, workers' compensation insurance, and unemployment insurance among others to tailor the rates for a specific group based on their track record.