What type of insurance arrangement occurs when policyholders profit from excess risk-sharing?

A participating plan is an insurance arrangement where policyholders share in the financial outcomes of the insurer, particularly in terms of profits or dividends. When the insurer performs well and the risk is less than anticipated, policyholders receive a portion of the profits in the form of dividends or reduced premiums. This profit-sharing mechanism incentivizes policyholders and can lead to higher customer satisfaction since they directly benefit from the insurer's financial success.

In contrast, the non-participating plan does not allow policyholders to benefit from the profits, meaning they have fixed premiums without the opportunity for dividends. The retrospective plan adjusts premiums based on loss experience, but it doesn't involve profit-sharing in the same way that a participating plan does. Finally, a fixed premium plan charges a set premium regardless of the insurer's performance and does not provide any means for policyholders to share in potential profits. This emphasizes the unique characteristic of participating plans, as they allow for profit-sharing that directly connects policyholder interests with the performance of the insurance company.