The formula to calculate the Composite Premium (CP) is:
\[ CP = \frac{TP}{N} \]
Where:
A composite premium is a single rate that is applied to all employees in a group, regardless of individual risk factors. This type of premium is often used in group insurance plans, where the insurer calculates an average rate based on the overall risk profile of the group. The composite premium simplifies the billing process and ensures that all employees are charged the same amount for their coverage. It is particularly useful for employers who want to offer uniform benefits to all employees without having to manage individual premium rates.
Let's say the total premium for all employees (TP) is $50,000, and the number of employees (N) is 100. Using the formula:
\[ CP = \frac{50,000}{100} = 500 \]
So, the Composite Premium per Employee (CP) is $500.