In the context of group insurance, what does blend rating refer to?

Blend rating in the context of group insurance refers to a rating method that combines both experience rating and manual rating. This approach takes into account the actual claims experience of the group as well as broader statistical averages established by insurance companies. By blending these two methods, insurers can create a more tailored and accurate premium that reflects the risk profile of the group.

The experience rating component uses the group's specific claims history to determine their risk, potentially resulting in lower premiums for groups with favorable loss experience. Meanwhile, the manual rating provides a baseline based on historical data from similar groups, ensuring that rates are anchored to industry standards and not solely dependent on the group's individual claims.

This combination allows for a balanced assessment of risk, which can encourage healthier groups to maintain or improve their risk profile, as they can benefit from reduced premiums if their claims experience is favorable. Thus, blend rating serves to incentivize groups to engage in risk management while still providing a safeguard for insurers based on generalized data.