Retrospective scoring is the practice of modifying an initial premium on the basis of actual losses. The initial premium for a policy noted retroactively is based on an estimate and it is agreed that it will then be adjusted based on losses incurred during the insurance period. Note: If the plan contains workers` compensation and other occupational accident insurance, the total retroactive premium, including the minimum and maximum retroactive premium, is based on all insurance lines included in the plan. October 1, 1994 – The Insurance Department approves the new Insurance Charge Reflecting Los Limitation (ICRLL) process, which eliminates the need for excess loss adjustment (ELAA) amounts. Options I, II, III and IV (Tabular Plan) and the V rating option were also eliminated. With these changes, the two retrospectives of the premium mentions, WC000501 and WC0000502, were eliminated, and the next six retrospectives were approved wc000503A, WC000504A, WC0005055A, WC000513A and WC00514A. (See circular #1688 august 2, 1994 and #1764 September 30, 1996.) A retro retro rating plan has some potential benefits. First, companies with good loss experience may, under a retro plan, pay significantly less for workers` compensation insurance than under a guaranteed cost program. Second, a retro plan encourages policyholders to implement heavy losses in loss control and return to work. Third, the premium paid by an employer for a policy reflects the employer`s actual loss experience for the period covered by that policy. The main drawback of retrospective rating is the risk of a high premium if an employer`s actual losses are significantly greater than expected. Not all companies are eligible for retroactive insurance. Companies that have low premiums or premiums, change significantly from one insurance period to the next, or have unstable finances, are not suitable.
An assessment of experience is most often associated with employee compensation insurance and is used to calculate the change of experience factor. Insurance companies monitor the rights and losses of the policies they have insured. This assessment determines whether certain categories of policyholders are more sensitive to rights and are therefore more risky to insure. Retrospective assessment is often used in the insurance of compensated workers. It is occasionally used in general liability, commercial automobile liability and commercial auto damage insurance. The Massachusetts Benefits Deductible Program and the Massachusetts Benefits Claim and Aggregate Deductible Program are not available to policyholders with devalued policies. (See circular #1624 february 3, 1993 and #1761 September 18, 1996.) Retrospective rating is an insurance pricing method in which the premium is directly affected by losses incurred during the insurance period. The insured pays an interim premium on the basis of the expected losses. At the expiry of the policy, the premium is adjusted upwards or downwards to reflect the insured`s actual loss experience during the insurance period.
Retrospective evaluation is an optional program agreed upon by the employer and the carrier. This is a program in which, for the most part, before the policy begins, the employer agrees to pay compensation losses for its own workers, plus a basic fee that largely covers the cost of the services provided by the airline. An insurance policy that is rated after the fact adapts premiums differently from an experience rating insurance. An assessment of experience involves an adjustment on the basis of previous periods, while retrospective notation involves an adjustment on the basis of the current political period.