Flashcards in NCCI 2 - Retro Rating for WC and Employers Liablity Deck (2):
Intend to minimize the effect that high cost losses will have on retro premium
Excess loss premium = SP * ELPF *LCF
Retro Development Prem
Reason why an insurance company will include retro development factor
stabilize premium adjustment. Included in first 3 adjustment of retro premium.
Retro development premium = SP*RDPF*LCF
- include this b/c it stabilizes premium adj. bringing them closer to ultimate so that premium paid upfront is closer to final amount.
- it reduces credit risk of collecting subsequent premiums from adjustment.