Retrospectively rated insurance is a type of insurance

Insurance

In law and economics, insurance is a form of risk management primarily used to hedge against the risk of a contingent, uncertain loss. Insurance is defined as the equitable transfer of the risk of a loss, from one entity to another, in exchange for payment. An insurer is a company selling the...

 that uses retrospective

Retrospective

Retrospective generally means to take a look back at events that already have taken place. For example, the term is used in medicine, describing a look back at a patient's medical history or lifestyle.-Music:...

 rating: 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

Formula

In mathematics, a formula is an entity constructed using the symbols and formation rules of a given logical language....

: retrospective premium = converted loss + basic premium × tax

Tax

To tax is to impose a financial charge or other levy upon a taxpayer by a state or the functional equivalent of a state such that failure to pay is punishable by law. Taxes are also imposed by many subnational entities...

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

External links

• Dictionary of Insurance Terms - Retrospective Premium