how is experience rating different from community rating ? explain in one paragraph

Expert Solution

Experience rating different from community rating :-

Experience rating and community rating are the common method of pricing insurance. The experience rating is insurance company premium on the base of past level payouts and which is mainly on the case of homeowner’s insurance and car insurance. The community rating is applicable each member, that is per person or family an insurance pool pays the same premium for same coverage. Experience rating based on claims experience but, community rating is based on geographical rating area. Experience rating focus to reduce individual risk, basing rates on actual claim experience. Community rating build by Insurance carriers and department of financial service in the State. So that commission or rating scheduled by carrier, same for all brokers and experience rating can be negotiated. Community rating plans must be Affordable Care Act (ACA) compliant and experience rating plans can do pre- Affordable care act.

jeff jeffy answered 2 years ago

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