Under TRIP, the insurer's deductible is calculated as a percentage of premiums collected in the previous year.

• A. 20% of premiums collected in the previous year
• B. 15% of premiums collected in the previous year
• C. 25% of premiums collected in the previous year
• D. 10% of premiums collected in the previous year

Answer: (A)

Under TRIP, the deductible for an insurer is designed to scale with how much business the insurer did last year. The deductible is set as a fixed percentage of the premiums collected in the previous year, so it grows or shrinks with the insurer’s premium volume. This keeps the amount fair relative to the insurer’s size and aligns the deductible with the level of business risk the company carried.

For this question, the deductible is 20% of last year’s premiums. So, if an insurer collected, say, $100 million in premiums last year, the deductible would be $20 million. The other percentages would yield different deductible amounts, but they don’t reflect the TRIP rule of tying the deductible to prior-year premiums, making 20% the correct design.