Which rating plan adjusts premiums based on loss experience over past policy periods?

The experience rating plan is designed to adjust premiums based on the loss experience of a particular insured over previous policy periods. This method takes into account the actual losses incurred by the insured and compares them to expected losses, allowing for a tailored premium that reflects the individual risk profile of the insured.

If the loss experience is better than average, the premium may be reduced, rewarding the insured for maintaining lower claims. Conversely, if the loss experience is worse than expected, the premium can increase to reflect the higher associated risk. This approach encourages risk management and loss prevention by aligning the costs with the insured's actual behavior regarding claims.

This contrasts with the other rating plans, which do not specifically adjust premiums based on individual loss history. For instance, judgment rating relies on the underwriter's discretion and experience to determine the rate, while manual/class rating uses predefined classifications based on the type of business or risk, rather than individual claim history. Merit rating might involve premium adjustments based on a combination of individual risk factors, but not as directly linked to past loss experiences as experience rating.