In workers' compensation, which arrangement features a fixed premium independent of loss experience?

In workers' compensation, which arrangement features a fixed premium independent of loss experience?

• A. Guaranteed cost
• B. Small deductible program
• C. Retrospective rating plan
• D. Large deductible program

Answer: (A)

Guarantee cost pricing keeps the premium fixed for the policy period, no matter how many claims occur. This means you pay a set amount up front, and the cost does not rise or fall based on actual losses during the year. That budget certainty is the defining feature. This contrasts with other structures where the total cost can shift with loss activity: a small deductible program reduces out-of-pocket losses up to the deductible, but overall costs still tend to be linked to claim activity; a retrospective rating plan adjusts the premium after the year based on actual losses; and a large deductible program lowers the upfront premium but final costs depend on losses beyond the deductible. Because the premium in guaranteed cost is not tied to loss experience, it best fits scenarios seeking predictable budgeting.

Guarantee cost pricing keeps the premium fixed for the policy period, no matter how many claims occur. This means you pay a set amount up front, and the cost does not rise or fall based on actual losses during the year. That budget certainty is the defining feature.

This contrasts with other structures where the total cost can shift with loss activity: a small deductible program reduces out-of-pocket losses up to the deductible, but overall costs still tend to be linked to claim activity; a retrospective rating plan adjusts the premium after the year based on actual losses; and a large deductible program lowers the upfront premium but final costs depend on losses beyond the deductible. Because the premium in guaranteed cost is not tied to loss experience, it best fits scenarios seeking predictable budgeting.