Experience rating is primarily intended for which type of groups?

Experience rating is primarily intended for large groups. This method of determining insurance premiums is based on the past claims experience of a specific group rather than using a standard or community rating system. Large groups typically have more extensive data regarding claims history, which allows insurers to evaluate their risk more accurately.

In large groups, experience rating helps to establish premiums that reflect the actual claims incurred by that particular group, incentivizing them to manage their risks and claims effectively. Large employers or organizations may have better access to resources for managing health and wellness, leading to potentially lower claims, which can then lower their overall costs. This system reinforces the idea that the premiums paid should directly correspond to the claims experience of the insured group, making it more beneficial for large groups that can show a solid claims history.

Smaller groups or individual policies do not usually have the volume of claims data necessary to effectively use experience rating, as their sample sizes are not large enough to draw statistically significant conclusions. Thus, they often rely on community ratings that aggregate risk across a broader base.