Under the alternative funding method used by the Trilogy Company, the insurer charges Trilogy an initial premium that is based on the assumption that claims will be 93% of the expected claims for the year. If claims exceed 93% of expected claims, then Trilogy must reimburse the insurer for any additional claims paid, up to 112% of expected claims. The insurer bears the responsibility for paying claims in excess of 112% of expected claims. From the following answer choices, choose the name of the alternative funding method described.

Question

Quizplus · Accepted Answer

The description matches that of a retrospective-rating arrangement, where the final premium is determined based on the actual claims incurred during the policy period, with the initial premium serving as a deposit. The reimbursement and cutoff provisions specified in the description are also characteristic of retrospective-rating arrangements.

Under the Alternative Funding Method Used by the Trilogy Company