What is the term for a self-rating plan where actual losses determine the final premium?

The term for a self-rating plan where actual losses determine the final premium is known as Retrospective Rating. This approach allows businesses to adjust their insurance premiums based on the actual losses incurred during a policy period. At the beginning of the policy term, an initial premium is set, but the final premium is later adjusted based on the insured's actual loss experience. If a business has fewer losses than expected, the premium may be reduced, rewarding them for maintaining a safe operational environment. Conversely, if losses exceed certain thresholds, the premium could increase, reflecting the higher risk associated with the business. This system encourages policyholders to engage in risk management practices as their total costs are directly related to their claims experience.