Certified Authority of Workers Compensation (CAWC) Practice Test 2026 - Free CAWC Practice Questions and Comprehensive Study Guide

A retrospective rating plan adjusts premiums after the policy period based on actual losses. In this approach, the insured often pays an initial deposit premium, and the final cost is determined later using a formula tied to the losses that occur during the term. If losses come in lower than expected, the premium can be reduced; if losses are higher, the premium increases (within stated maximums/minimums). This method aligns cost with actual risk and smooths premium volatility by tying the final price to what actually happened.

This differs from a guaranteed cost approach, where the premium is fixed for the policy period regardless of losses. Assigned risk/residual market and state fund mechanisms address access to coverage and funding but do not revolve around adjusting the premium after losses are known in the same loss-based way.