Merit Rating for Doctor Professional Liability Insurance

Merit rating is the use of the insured’s actual claim experience to predict future claim experience. This paper discusses merit rating for professional liability insurance for both individual doctors and group practices. The paper presents several different theoretical formulations for merit rating. Credibilities are stated in terms of the parameters of the risk process. The paper discusses several methods of estimating the key parameters, along with sample data. Finally, the paper discusses several practical considerations in the design of a merit rating formula.