In the context of group insurance, what is a blended rating?

Blended rating in the context of group insurance refers to a combination of manual and experienced ratings. This approach is designed to provide a more balanced and equitable way to determine premiums for a group insurance policy. Manual rates are predetermined standard rates set by the insurance company based on factors such as the demographics of the group and expected risk. On the other hand, experienced rates are based on the actual claims experience of the group over a certain period.

By blending these two methods, insurers can adjust the premiums to reflect both the expected risk as per broader industry standards as well as the specific experience of the group, which can provide discounts or surcharges depending on their claims history. This allows for a more tailored approach to risk assessment and premium calculation, offering fairness to groups with differing risk profiles.

The other options do not accurately capture the essence of blended rating. A fixed rate for all employees does not take into account the varying risks presented by different individuals within the group. A flat rate insurance premium simplifies pricing but lacks the customization offered by blended ratings. Lastly, a premium based on pooled resources does not convey the integration of individual claims experience which is a key component of a blended rating.