Loss-sensitive programs are ideal for large companies that are able to withstand the additional risk. These programs generally have variable rates and large deductibles, so that when a fee is admitted, the insured participates in a significant portion of the payment. This reduces costs in advance, resulting in significant savings for people with low harmful activity. At the beginning of the insurance year, the insured pays a standard premium consisting of the base premium and the loss forecast. In 18 months after the policy began, the insurance company assesses losses and puts them in the Retro Premium formula (see box). These fees include fee adjustment fees – court fees, supervision, managed care and other ALAE. Unaffected claims costs represent salaries and other overheads incurred for the adjustment of rights, but which cannot be attributed to a particular file. Claims processing costs can be a factor in converting losses or by claim tax. The forecast is an estimate of the fully developed losses (total cost actually paid, plus foreseeable or future costs) that an insurer expects to pay under a policy. Actuaries are used by insurers to estimate these losses using actuarial science.
The prognosis is also called „Loss Pick.“ Loss-sensitive plans offer flexibility, which means your client will be able to find the best for his business needs. Understanding these plans gives brokers the opportunity to differentiate themselves from low-priced buyers and add value to their clients. It is important that you work closely with your client to determine which loss-sensitive plan is right for their business. The aggregates represent the total amount (per debt or policy base) for which the insured must pay premiums under a policy, including the costs of regularizing the allocated losses. The maximum retro premium (based on insurance) limits the amount of premium an insured must pay and is a different number from an insured`s standard premium and other factors such as the loss evolution factor, loss conversion factor and tax multiplier. Maximum retro premium caps are required because policyholders would not be interested in plans that do not limit potential loss payments. The first step that brokers need to take is to understand the different types of deficit plans and the important intricacies involved in evaluating each of them.