Which rating approach combines both manual and individual loss records to determine a premium?

The rating approach that combines both manual and individual loss records to determine a premium is known as Retrospective Rating. This method allows premiums to be adjusted after the policy period based on the actual loss experience of the insured. Initially, a baseline premium is established using manual rates, which are statistically derived from the overall loss experience of similar risks in a given class.

As the policy period progresses, the insured’s individual claims and losses are tracked. At the end of the period, the final premium is calculated, which reflects both the manual rates and the actual loss experience. This ensures that businesses that have low losses pay less than those with higher losses, promoting safer practices and providing a more equitable premium calculation.

Retrospective rating is particularly common in workers’ compensation and liability insurance, providing businesses with incentives to manage risks effectively. Other methods, such as Experience Rating, focus solely on the insured's past losses relative to their class, without the same level of adjustment capability during the policy term. Merit Rating and Loss Ratio methods also have different focuses that do not incorporate the same blending of manual and individual loss records as Retrospective Rating does.