Premium Development (Basic Rating Steps)
There are 4 types of premium developments in the commercial manual.
- Trucks, Tractors and Trailers
- Public Autos (taxis, limousines, buses, etc)
- Special Types and Operations (ambulances, farm equipment, etc)
- Hired and Non Owned Coverages
The two most common types are the first two. The following will provide the basic steps to rating these two types of commercial risk. Please refer to the CAARP Commercial Manual for information pertaining to the other two types of coverages.
Steps to rating a commercial Truck, Tractor or Trailer risk:
- Determine your rating territory. This is based on the zip code of the applicant or entity vehicle garaging location.
- Determine what limits are required for your risk. That would be what is required by law.
- Determine your vehicle size. The Truck, Tractor and Trailer sizes are determined by the gross vehicle weight.
- Determine your risk's business use. It can be service, retail, or commercial.
- Determine your risk's radius of operation. 0 up to 50 miles is local, 51 up to 200 miles is intermediate and over 200 miles is long haul.
- Determine you increase limits factor from the table. This is based on your limit requirements.
- Determine what your Pollution liability factor will be. This can be a 5%, 10% or 25% increase based on the commodity hauled.
- Determine the total number of surcharges to add on. This is based on all drivers' motor vehicle records of accidents and convictions.
Once you have all of this information you are ready to rate your Truck, Tractor, Trailer risk.
The manual is available on the website www.aipso.com/ca.
You can use the manual in two ways. You can search by topic through our interactive manual. For example if you want the territory pages enter "territory pages" and it will take you directly to them. Or, you can go into a PDF layout of the manual and go through it page by page. The manual also has a worksheet, which would be very helpful to print out first. The worksheet describes each step of the rating process as follows below but also has "links" that take you directly to the pages you need to get the correct information.
- First go to the rate pages and find your base rate by territory, which is determined by your zip code.
- Next go to the Fleet (5 or more units) or No-fleet (less than 5 units) primary classification tables and use the matrix based on your size, use and radius of your vehicle to determine your primary rating factor.
- Then go to the secondary classification tables to find your secondary rating factor, which is based on type of risk. (i.e., Trucker, food delivery, etc.)
- The primary rating factor and the secondary rating factor are added together to come up with your overall rating factor.
- Take your base rate times your overall rating factor times your increase limits factor times your pollution factor for your vehicle total premium.
BASE RATE X OVERALL RATING FACTOR X INCREASE LIMITS FACTOR X POLLUTION FACTOR = TOTAL VEHICLE PREMIUM
- Add in your surcharges for driver points for your total policy premium.
If your risk requires higher limits or filings you must also add hired and non-owned coverage premiums to the policy. It is usually added on at minimum premiums and determined at time of audit as to what was actually used and billed accordingly.
Steps to rating a commercial Public Auto risk:
- Determine your rating territory. This is based on the zip code of the highest rated area the vehicle is operating in. (Not the garaging location)
- Determine what limits are required for your risk. That would be what is required by law.
- Determine your vehicle type. Is it a taxi, bus, limousine, etc.?
- Determine your risks business use.
It can be service, retail, or commercial.
- Determine your risks radius of operation.
0 up to 50 miles is local, 51 up to 200 miles is intermediate and over 200 miles is long haul.
- Determine you increase limits factor from the table.
This is based on your limit requirements.
Once you have all of this information you are ready to rate your Public Auto risk.
- First go to the rate pages and find your base rate by territory, which is determined by your zip code of the highest rated territory the vehicle operates in.
- Next go to the Fleet (5 or more units) or No-fleet (less than 5 units) primary classification tables and use the matrix based on your type, use and radius of your vehicle to determine your primary rating factor.
- Then go to the secondary classification tables to find your secondary rating factor, which is based on seating capacity and is only used for bus categories and airport limousines.
- The primary rating factor and the secondary rating factor are added together to come up with your overall rating factor.
- Take your base rate times your overall rating factor times your increase limits factor for your vehicle total premium.
BASE RATE X OVERALL RATING FACTOR X INCREASE LIMITS FACTOR = TOTAL VEHICLE PREMIUM
- Add in your surcharges for driver points for your total policy premium.
If any of the above vehicles operate in a radius of 200 miles or more ("long haul") the rating steps are done differently to arrive at the base rates. The base rates are taken from a table called "Zone Rating Table" in lieu of the rate tables. It utilizes a garaging location (in California it is one of 3 different Zones, Zone 18 for Los Angeles area, Zone 36 for San Francisco area and Zone 40 for the remainder of the state). You then choose the highest rated city you would pass through or go to from the many boxes on the Zone sheet, in the box you will find the base rates for BI and PD. If you need combined single limits you add the two together for your CSL base rate.
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Not only are policy forms, clauses, rules and court decisions constantly changing, but forms vary from company to company and state to state. This material is intended as a general guideline and might not apply to a specific situation.
The authors, LunchTimeCE, Inc. and AIPSO, and any organization for whom this course is administered will have neither liability nor responsibility to any person or entity with respect to any loss or damage alleged to be caused directly or indirectly as a result of information contained in this course.
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