What process involves reviewing past claims experience to determine future premiums for a group insurance contract?

Experience rating is the correct process that involves reviewing past claims experience to determine future premiums for a group insurance contract. This method allows insurance companies to analyze the historical claims data of a particular group, assessing how often and how much the group has tended to use their insurance benefits. By examining this data, insurers can calculate the expected cost of claims for the group in the upcoming policy period, which in turn helps to set appropriate premium rates.

This approach effectively reflects the group's actual experience, enabling premium adjustments that are more accurately aligned with the specific risks presented by that group. It contrasts with other methods that might apply a more generalized or standard rate that does not take individual group performance into account. Experience rating can be especially beneficial for businesses or organizations with a large number of insured members, as it tailors premiums to their unique risk profile, potentially leading to cost savings if the group's claims experience has been favorable.

Understanding experience rating is crucial for both policyholders and insurers, as it promotes a more equitable and reflective pricing strategy in group insurance contracts.