CAARP Introduction, Part IV: Commercial Auto


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Miscellaneous Issues (Loss Control Surveys, Premium Audits, Experience Rating, Commissions, and Change Endorsements)

Loss Control Surveys

These surveys are usually done within the first 90 days of policy issuance. They are done on:

Public Auto Fleets
Hazardous Carriers
Truckmen with Motor Carrier Filings
Others as deemed appropriate by the servicing carrier

There are 3 ways of conducting a survey:

Physical Inspections
Desk Surveys (by mail)
Phone

Information found in the surveys is compared to the original application for accuracy. Premiums may be adjusted accordingly.

Premium Audits

All commercial policies are issued on an annual estimated premium basis. The policy may be audited and the policy allows for audits to take place during the policy period and up to three years following expiration or cancellation.

A written questionnaire, phone survey or physical inspection may be performed on the business. By policy contract the insured and producer are required to cooperate with the audit practices. Audit findings will be compared to the information used to rate the policy and discrepancies will result in policy and premium changes.

Experience Rating

Applications or policies covering five (5) or more private passenger or commercial vehicles (excluding trailers) or three or more vehicles used to transport members of the public, or the equivalent of hired auto exposures and Employers Non-ownership with annual premium of $5000 or more are eligible for experience rating.

Loss information from your prior insurance company covering the previous one to four years is required. The experience used is the latest available three years, with a minimum of one completed policy year, ending 6 months prior to rating date. The premium could be adjusted up or down, with no minimum or maximum, based upon past claims history.

Commissions

In commercial assigned risk business the commission percentage can be either 5% or 12% depending upon the type of risk being insured.

The commission is 5% for the following:

Truckers and truck risks operating over 50 miles and subject to increased limits.
Public autos operating for hire or compensation with seating capacity of 16 or less.

The commission for all others is 12%.

When both commission rates apply to a portion of a risk, the lower (5%) rate is paid unless 80% or more of the premium is generated in the 12% class.

Change Endorsements

There is no standard "change request" form for CAIP. All endorsements must be in the form of a written request and should clearly state what change is to be made, and the requested effective date of the change along with a 25% deposit for the change if the change develops additional premium. The servicing carriers will not issue the request until the 25% deposit is received. A producer complaint form will be sent to ensure that it is received. Requests via telephone cannot be honored. Faxes are acceptable when there is no premium change, however, the request for change will not be honored until the day after the fax is received.

For requests that require an addition deposit, you must mail your request to the servicing carrier with the proper 25% deposit amount. Request to increase limits over basic must be accompanied by copies of the ordinance, resolution or law that substantiates the requirement.

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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.