What factor determines the final premium in a retrospective rating plan?

In a retrospective rating plan, the final premium is primarily determined by the actual losses incurred during the policy period. This type of plan allows for a premium adjustment based on the losses experienced, meaning that if a policyholder has higher-than-expected losses, the premium will increase accordingly. Conversely, if the actual losses are lower than anticipated, the premium may decrease.

Retrospective rating plans are designed to be fairer and more reflective of the policyholder's risk by directly linking their premium to their loss experience. This feature incentivizes policyholders to implement loss control measures since lower losses can lead to reduced costs. Therefore, the actual losses that occur during the policy period are pivotal in calculating the final premium, making them the correct answer to this question.