Could someone please clarify when and for what class of insurance its appropriate to use cost based or numbers based experience rating?
Hi jjjkkk Number-based experienced rating would generally be used for small individual risks with relatively low expected numbers of claims, where there might be a large variability in the actual claim cost in any one policy year. A good example here is anything which might use a NCD system such as private motor or household insurance. Cost-based experience rating tends to be used for larger risks where the aggregate cost of claims is less volatile. Examples here would include Employers Liability and Motor Fleet. Have a look at Section 3 of Unit 13 for more details.
