Reprinted with permission from the March 2009 edition of The
Corporate Counsel © 2009. Incisive Media US Properties, LLC.
All rights reserved.
Retrospective premium insurance policies, or
retrospectively-rated policies, may, at first blush, appeal to the
cost-conscious risk manager or executive. The selling point is
simple, yet patently attractive: the total premiums paid are
determined by the amount of loss incurred by the policyholder and
actual claim payments made by the insurance company. Thus, the risk
manager with effective and proven loss control procedures and a low
loss history could reasonably anticipate paying lower premiums than
when purchasing a traditional, fixed-premium policy. Despite the
curb appeal of these policies, however, policyholders must have
their eyes open in advance of purchase and claims submission to
appreciate the myriad issues and claims handling tactics that could
result in dramatically increased premiums.
