A system of collecting insurance premiums on the basis of actual or anticipated use.
A method of establishing premiums for health insurance in which the premium is based on the average cost of actual or anticipated health care used by various groups and subgroups of subscribers and thus varies with the health experience of groups and subgroups or with such variables as age, sex, or health status. It is the most common method of establishing premiums for health insurance in private programs.
Establishment of insurance or health care plan premiums on the basis of an actuarial analysis of the sex and age composition of the group, type of industry, and other factors, which are used to set the initial premiums., calls for lower premiums for healthier subsets of the population and higher for subsets, such as the elderly, who require more care In subsequent years, the actual record of the group may be used to modify the rating and the premiums. Often preexisting conditions are taken into the analysis and may be cause for rejection of enrollment of certain individuals. Actuarial analyses would, for example, give weights to sex and age: A preponderance of young males would point to a lower rate than females because of the lower obstetric exposure, but this would be countered by the higher accidental injury rates for males. Actuarial analysis is a complicated science. Experience rating is, of course, sought by employers of young, healthy individuals. The result is that the remainder of a given population, with poorer experience, pays more.
A projection of the cost of an insurance policy (e.g., of a malpractice insurance policy) based on the claims history of the person or party seeking to be insured.