Calendar Year Experience

We all have experiences that make some years more memorable than others. (Brief moment while we stare off into space remembering the summer between high school and college...) But a calendar year experience from an insurance company's point of view is basically subtracting expenses from revenue.

Revenue comes in the form of premiums paid by their policyholders and expenses are the claims the company had to pay throughout the year.

So let's say Avoid a Bad Nursing Home Inc. collects premiums of $6 million for long term care insurance throughout the calendar year of January 1 through December 31. Now that all the baby boomers are getting older, Avoid a Bad Home had to pay out $4 million in claims for assisted living and in-home care. So their calendar year experience is $6 million minus $4 million, equaling $2 million. Given that the result is positive, Avoid a Bad Home is doing a decent job in selecting those they are willing to insure and pricing their premiums appropriately.