Question

Identify the correct statement about experience rating in group insurance.

a. It provides a direct economic incentive for risk managers to control claims.

b. The experience of smaller groups is considered sufficiently statistically credible or reliable to determine premiums completely.

c. The smaller the group, the more credit the group receives for its own claims experience.

d. Most small companies have experience-rated premiums in which the group’s own claims experience affects the cost of coverage.

e. Final experience-rated premiums exclude administrative charges and fees.

Answer 1

Option D is correct among all i.e Most small companies have experience-rated premiums in which the group’s own claims experience affects the cost of coverage. The reason behind it is that Experience rating (insurance) is the amount of loss that an insured party experiences compared to the amount of loss that similar insureds experience. Experience rating is most commonly associated with workers’ compensation insurance. It is used to calculate the experience modification factor.This evaluation includes determining whether certain classes of policyholders are more prone to claims, and are thus more risky to insure. This is only pertains with my views and opinions and any alternate view can be possible.