Which rating method determines the final premium at the end of the policy period based on prior loss experience?

The correct choice, which is retrospective rating, is a method used primarily in workers' compensation and liability insurance. Under this approach, the final premium is calculated after the policy period has ended. It takes into account the actual loss experience during the policy term, allowing for adjustments to the premium based on claims that occurred. This means if the insured has fewer losses than expected, the premium can decrease, while if losses are higher, the premium may increase. This creates a direct financial incentive for policyholders to manage and minimize risks.

In contrast, judgment rating involves an underwriter's subjective assessment of the risk and does not rely on prior loss experience or statistical measures. Experience rating also utilizes past loss data but does so in a way that adjusts future premiums based on an insured's prior losses rather than calculating a final premium post-policy term. Manual rating, on the other hand, determines premiums based on a set of predetermined rates and classifications, independent of the individual insured’s loss history. Each of these methods serves different purposes and suits various types of insurance scenarios, but retrospective rating specifically focuses on evaluating actual past claims to finalize the premium.