Opinion ID: 1428677
Heading Depth: 1
Heading Rank: 3

Heading: The Retrospective Plans:

Text: All three retrospective plans have this in common: Final determination of premium cost is delayed, being computed retrospectively after the expiration of the insurance and on the basis of paid and actual loss experience during the insurance period. Each insured's premium is determined on an individual basis, without reference to other employers or to particular fields or occupations. (However, in each retrospective plan, a sort of tentative premium is paid initially, and then adjusted at the end of the insurance period to the actual premium.) PLAN D: Plan D provides for retrospective determination of premium for employers who produce $5,000 or more in annual premium from operations in all states. Determination may be on an annual or three-year basis. The unique feature of Plan D is that the employer may combine premiums from other lines of liability insurance with his workmen's compensation premium in order to become eligible for this plan. (This multiline provision is not in either Plan A or B.) In brief, Plan D may be chosen if annual premium is over $5,000, based on premiums from all states, including other types of liability insurance. (Test: $5,000 total, multistate, multiline.) PLAN A: Plan A provides for retrospective determination of premium for employers who produce $1,000 or more in workmen's compensation premium in all states. (Workmen's compensation only; not a multiline plan.) The standard (or tentative) premium in Plan A is always the maximum premium, and the minimum premium is higher than in Plan B. (Test: $1,000 total, multistate, workmen's compensation only.) PLAN B: Plan B provides for retrospective determination of premium for employers who produce $1,000 or more in workmen's compensation premium in all states. (Workmen's compensation only; not a multiline plan.) In this plan, the standard (tentative premium) is lower than the maximum, and the minimum premium is lower, correspondingly, than the minimum premium in Plan A. These maximum-minimum levels are the chief differences between Plans A and B. (Test: $1,000 total, multistate, workmen's compensation only.) How retrospective plans work: Retrospective rating is defined in Appendix B to Ruling 67 as a plan or method which permits adjustment of the final premium for a Risk on the basis of its own loss experience subject to Maximum and Minimum limits. In tabular plans A and B, the maximum and minimum premiums are fixed in relation to the standard (tentative) premium, which in Plan A is the maximum and in Plan B is much lower. In Plan D, the selection of maximum and minimum limits is left (within limits) to agreement between the buyer and seller. Within the limits of the maximum and minimum, Ruling 67 provides formulae reflecting loss experience and costs used in determining the final cost of the insurance. The appropriate formula is applied at the end of the insurance period, and the result is an adjustment of the standard premium to reflect the actual loss and cost experience during the insurance period. This adjustment results in the retrospective rate.