Retrospective rating plan, defined

It is offered to employers whose premium is large enough that their own losses are statistically meaningful, most often on workers compensation and sometimes on general liability and auto. The formula converts losses to premium using a loss conversion factor that covers claim handling, adds a basic premium for the carrier's expenses and profit, and applies a tax multiplier; the minimum protects the carrier's expenses and the maximum protects the insured from a catastrophic year. Adjustments run for several years after the policy ends because claims keep developing, so a business must be able to fund a later bill. Good loss control and a strong return-to-work program pay back directly, since every dollar of avoided loss reduces premium. The analysis models the plan against the insured's last five years of losses before recommending it over a guaranteed cost policy.