Under TRIP, the insurer's deductible is calculated as a percentage of premiums collected during which time frame?

• A. The current year
• B. The year before
• C. The previous quarter
• D. The year two years prior

Answer: (B)

The main idea is that the TRIP deductible is based on premiums earned in the prior policy year. This keeps the deductible stable and tied to the insurer’s actual annual business, avoiding the swings that can come from looking at current-year or quarterly results.

Using the year before ensures the amount reflects a full year of premium activity, which aligns with annual accounting and budgeting for the program. In contrast, using the current year would shift as premiums are earned, and using a previous quarter would be too small and not representative of full-year risk. A time frame two years prior would be out of date and not reflect current exposure.

For example, if the prior year’s earned premiums were $80 million and the TRIP deductible rate is 1.5%, the deductible would be $1.2 million.