Understanding Construction Insurance Rates and Premiums
Content
10/25/13
Understanding Construction Insurance Rates and Premiums
Understanding Construction Insurance Rates and Premiums Course Outline
I. Chapter 1: Introduction to Understanding Construction Insurance Rates and Premiums II. Chapter 2: Introduction to Insurance Rating
A. The Rating Process 1. Rates versus Loss Costs B. Advisory Organizations C. Determining Insurance Premiums 1. Calculation of Loss Cost Multiplier D. Proactive Approach to Insurance Purchasing
III. Chapter 3: Commercial Auto Insurance Rating
A. Rating the Business Auto Policy 1. Rating Owned Autos—An Overview 2. A Step-by-Step Process B. Rating Hired and Nonowned Autos C. Some Other Issues To Consider, Including Cost-Cutting Options 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. Assess Whether Mobile Equipment Should be Covered under the Auto Policy Assess the Need for Drive Other Car Coverage Be Aware of Differences in Rates between Insurers Comprehensive or Specified Causes of Loss Coverage? Consider Effect of Deductibles Consider Self-Insuring Collision What about Self-Insuring Bodily Injury and Property Damage Liability? Seek to Obtain Schedule Credits, Dividents, and Deviations Consider the Use of Experience Rating Be Carefulif Using the Suspension of Insurance Endorsement Be Ware of the “Stated Amount” Approach Discontinue Medical Payments and Personal Injury Protection Coverage Where Possible Reject Uninsured/Underinsured Motorists Coverage Where Possible
D. Rental Car Issues 1. Reject Liability Coverage on Rental Cars 2. Reject Accident and Health Coverages on Rental Cars 3. Think Twice about Rental Car Physical Damage Loss Waivers
IV. Chapter 4: Commercial General Liability Insurance Rating
A. B. C. D. Bodily Injury and Property Damage Liability Coverage Personal and Advertising Injury Liability Coverage Medical Payments Coverage Rating the CGL Policy 1. 2. 3. 4. Determine Applicable Classifications Identify and Understand Premium Bases Select Appliable Basic Limits Rates Adjust Basic Limits Rates by Increased Limites Factors Less any Applicable Deductible Credits) 5. Multiply Exposure Units for Each Classification Code Times the Rate for that Code 6. Assess Application of Minimum Premiums E. Some Cost-Cutting Options and Other Issues To Consider
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10/25/13
Understanding Construction Insurance Rates and Premiums
1. 2. 3. 4. 5. 6. 7.
Obtain Schedule Credit/Dividends Consider the Use of Deductibles Negotiate Premium Credits if Coverage Limitations Are Imposed Consider the Use of Experience Rating Consider Dropping Medical Payments Coverage Obtain Insurance Certificates from Independent Contractors Exclude Exposures for Operations Covered under a Wrap-Up Program
F. Owners and Contractors Protective (OCP) Liability Insurance and Railroad Protective Liability Insurance
V. Chapter 5: Commercial Umbrella Insurance Rating
A. Basic Umbrella Pricing Methods 1. First Million B. Second Million and Higher Limits 1. 2. 3. 4. 5. Decreasing Percentages Increasing Percentages Fixed Percentages Advanced Pricing Methods High Excess Layers
C. Minimum Premiums
VI. Chapter 6: Workers Compensation and Employers Liability Insurance
A. Rating the Workers Compensation Policy 1. Rating Terms and Formulas B. Workers Compensation Rate Making in General 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. Rating the Contractor’s Workers Compensation Policy Workers Compensation Classification System and its Terminology Some Special Contracting Classifications Determining Appropriate Classifications What If No Basic Classification Exactly Describes the Business? Dealing with Multiple Classification Codes What Is Included in Payroll? What about Overtime? What about Payroll Limitations? What about Subcontractors?
C. Other Key Factors Influencing Workers Compensation Costs 1. 2. 3. 4. 5. 6. 7. 8. 9. Experience Rating Risk Control Claims Risk Financing Obtain Correct Classifications Don’t Forget the Effect of an Anniversary Rating Date Delete Overtime Payroll Surcharge Consider a Deductible Plan Take Advantage of Schedule Rating and Dividends
VII. Chapter 7: Workers Compensation Experience Rating
A. Experience Rating Overview 1. 2. 3. 4. 5. 6. 7. 8. Eligibility Experience Rating Period Eligibility Rating Examples Method of Gathering Data for Experience Rating Combinability of Entities Majority Ownership Joint Ventures Change in Ownership
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10/25/13
Understanding Construction Insurance Rates and Premiums
9. Nominal versus Material Changes 10. Continuation of Experience B. How an Experience Modifier is Calculated 1. 2. 3. 4. 5. 6. 7. 8. Definitions and Details of the Experience Rating Formula Unit Statistical Plan First Report Subsequent Reports Correction Reports Application of Experience Modification Changes in Experience Modifications Intrastate/Interstate Experience Rating
C. Some Actions To Consider 1. 2. 3. 4. 5. 6. 7. 8. 9. Implement a Loss Control Program that Focuses on Loss Frequency Review Reserves Ask To Review Statistical Cards before They Are Filed Prepare a Test Modifier Review Final Modifier Correct Calculation Errors Recognize the Effect of Ownership on Experience Modifiers Do Not Try To Avoid Experience Rating Summary
VIII. Chapter 8: Retrospective Rating
A. B. C. D. Retrospective Tabular Plans Retrospective Rating Option V (Old Plan D) Lines of Coverage Retrospective Rating Limits 1. Subject Limits 2. Loss Limitations E. Retrospective Premium Formula 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. Standard Premium Basic Premium Converted Losses Incurred Losses Loss Conversion Factor Excess Loss Premium (if Optional Loss Limitation Applies) Retrospective Development Premium (Optional) Tax Multiplier Maximum Premium Minimum Premium
F. Determing the Basic Premium Factor for a Retro Plan 1. Expense Allowance in Basic Premium Factor 2. Insurance Coverage in Basic Premium Factor 3. Putting the Components All Together G. Paid Loss Retrospective Rating Plans 1. Advantages nad Disadvantages of Paid Loss Retro Plans H. I. J. K. L. M. Three-Year versus One-Year Retrospective Plans Long-Term Construction Projects Wrap-Up Construction Projects Large Risk Alternative Rating Option Canceling a Retro Plan Advantages and Disadvantages of Retrospective Rating Plans
IX. Chapter 9: Commercial Property Insurance Rating
A. Factors Influencing Property Insurance Costs
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10/25/13
Understanding Construction Insurance Rates and Premiums
1. 2. 3. 4. 5.
Characteristics of the Property Loss History Deductibles Property Valuation Limits of Insurance
B. Property Insurance Rating 1. Insurers Use Insurance Advisory Organizations 2. Class Rating and Specific Rating 3. Loss Costs versus Rates C. Property Rating Steps 1. 2. 3. 4. Determining Basic Causes of Loss Premium Determining Broad Causes of Loss Premium Determining Special Causes of Loss Premium Individual Risk Premium Modification
D. Some Cost-Cutting Options and Other Factors To Consider 1. 2. 3. 4. 5. Consider Higher Deductibles Obtain Coinsurance Credits Invest in Fire Loss Prevention Install Underwriters Laboratory-Approved Roofing Investigate Other Rate Credits and Surcharges
X. Chapter 10: Inland Marine Insurance Rating
A. Underwriting and Rating Contractors Equipment Insurance 1. Contractors Equipment Rating Process B. Underwriting and Rating Builders Risk Insurance 1. Builders Risk Rating Process C. Some Cost-Cutting Options and Other Factors To Consider 1. 2. 3. 4. 5. Obtain Individual Risk Premium Modifications Use Higher Deductibles Pay Attention to Coinsurance and Full Value Reporting Requirements Use Proper Builders Risk Values Invest in Protection against Theft and Vandalism
© 2000-2013 International Risk Management Institute, Inc. (IRMI). All rights reserved.
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4/4
Understanding Construction Insurance Rates and Premiums
Understanding Construction Insurance Rates and Premiums Course Outline
I. Chapter 1: Introduction to Understanding Construction Insurance Rates and Premiums II. Chapter 2: Introduction to Insurance Rating
A. The Rating Process 1. Rates versus Loss Costs B. Advisory Organizations C. Determining Insurance Premiums 1. Calculation of Loss Cost Multiplier D. Proactive Approach to Insurance Purchasing
III. Chapter 3: Commercial Auto Insurance Rating
A. Rating the Business Auto Policy 1. Rating Owned Autos—An Overview 2. A Step-by-Step Process B. Rating Hired and Nonowned Autos C. Some Other Issues To Consider, Including Cost-Cutting Options 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. Assess Whether Mobile Equipment Should be Covered under the Auto Policy Assess the Need for Drive Other Car Coverage Be Aware of Differences in Rates between Insurers Comprehensive or Specified Causes of Loss Coverage? Consider Effect of Deductibles Consider Self-Insuring Collision What about Self-Insuring Bodily Injury and Property Damage Liability? Seek to Obtain Schedule Credits, Dividents, and Deviations Consider the Use of Experience Rating Be Carefulif Using the Suspension of Insurance Endorsement Be Ware of the “Stated Amount” Approach Discontinue Medical Payments and Personal Injury Protection Coverage Where Possible Reject Uninsured/Underinsured Motorists Coverage Where Possible
D. Rental Car Issues 1. Reject Liability Coverage on Rental Cars 2. Reject Accident and Health Coverages on Rental Cars 3. Think Twice about Rental Car Physical Damage Loss Waivers
IV. Chapter 4: Commercial General Liability Insurance Rating
A. B. C. D. Bodily Injury and Property Damage Liability Coverage Personal and Advertising Injury Liability Coverage Medical Payments Coverage Rating the CGL Policy 1. 2. 3. 4. Determine Applicable Classifications Identify and Understand Premium Bases Select Appliable Basic Limits Rates Adjust Basic Limits Rates by Increased Limites Factors Less any Applicable Deductible Credits) 5. Multiply Exposure Units for Each Classification Code Times the Rate for that Code 6. Assess Application of Minimum Premiums E. Some Cost-Cutting Options and Other Issues To Consider
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10/25/13
Understanding Construction Insurance Rates and Premiums
1. 2. 3. 4. 5. 6. 7.
Obtain Schedule Credit/Dividends Consider the Use of Deductibles Negotiate Premium Credits if Coverage Limitations Are Imposed Consider the Use of Experience Rating Consider Dropping Medical Payments Coverage Obtain Insurance Certificates from Independent Contractors Exclude Exposures for Operations Covered under a Wrap-Up Program
F. Owners and Contractors Protective (OCP) Liability Insurance and Railroad Protective Liability Insurance
V. Chapter 5: Commercial Umbrella Insurance Rating
A. Basic Umbrella Pricing Methods 1. First Million B. Second Million and Higher Limits 1. 2. 3. 4. 5. Decreasing Percentages Increasing Percentages Fixed Percentages Advanced Pricing Methods High Excess Layers
C. Minimum Premiums
VI. Chapter 6: Workers Compensation and Employers Liability Insurance
A. Rating the Workers Compensation Policy 1. Rating Terms and Formulas B. Workers Compensation Rate Making in General 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. Rating the Contractor’s Workers Compensation Policy Workers Compensation Classification System and its Terminology Some Special Contracting Classifications Determining Appropriate Classifications What If No Basic Classification Exactly Describes the Business? Dealing with Multiple Classification Codes What Is Included in Payroll? What about Overtime? What about Payroll Limitations? What about Subcontractors?
C. Other Key Factors Influencing Workers Compensation Costs 1. 2. 3. 4. 5. 6. 7. 8. 9. Experience Rating Risk Control Claims Risk Financing Obtain Correct Classifications Don’t Forget the Effect of an Anniversary Rating Date Delete Overtime Payroll Surcharge Consider a Deductible Plan Take Advantage of Schedule Rating and Dividends
VII. Chapter 7: Workers Compensation Experience Rating
A. Experience Rating Overview 1. 2. 3. 4. 5. 6. 7. 8. Eligibility Experience Rating Period Eligibility Rating Examples Method of Gathering Data for Experience Rating Combinability of Entities Majority Ownership Joint Ventures Change in Ownership
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www.irmi.com/sf/insurance-continuing-education/cris/curriculum/course-outlines/cris-reaccreditation-courses/understanding-construction-insurance-rates…
10/25/13
Understanding Construction Insurance Rates and Premiums
9. Nominal versus Material Changes 10. Continuation of Experience B. How an Experience Modifier is Calculated 1. 2. 3. 4. 5. 6. 7. 8. Definitions and Details of the Experience Rating Formula Unit Statistical Plan First Report Subsequent Reports Correction Reports Application of Experience Modification Changes in Experience Modifications Intrastate/Interstate Experience Rating
C. Some Actions To Consider 1. 2. 3. 4. 5. 6. 7. 8. 9. Implement a Loss Control Program that Focuses on Loss Frequency Review Reserves Ask To Review Statistical Cards before They Are Filed Prepare a Test Modifier Review Final Modifier Correct Calculation Errors Recognize the Effect of Ownership on Experience Modifiers Do Not Try To Avoid Experience Rating Summary
VIII. Chapter 8: Retrospective Rating
A. B. C. D. Retrospective Tabular Plans Retrospective Rating Option V (Old Plan D) Lines of Coverage Retrospective Rating Limits 1. Subject Limits 2. Loss Limitations E. Retrospective Premium Formula 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. Standard Premium Basic Premium Converted Losses Incurred Losses Loss Conversion Factor Excess Loss Premium (if Optional Loss Limitation Applies) Retrospective Development Premium (Optional) Tax Multiplier Maximum Premium Minimum Premium
F. Determing the Basic Premium Factor for a Retro Plan 1. Expense Allowance in Basic Premium Factor 2. Insurance Coverage in Basic Premium Factor 3. Putting the Components All Together G. Paid Loss Retrospective Rating Plans 1. Advantages nad Disadvantages of Paid Loss Retro Plans H. I. J. K. L. M. Three-Year versus One-Year Retrospective Plans Long-Term Construction Projects Wrap-Up Construction Projects Large Risk Alternative Rating Option Canceling a Retro Plan Advantages and Disadvantages of Retrospective Rating Plans
IX. Chapter 9: Commercial Property Insurance Rating
A. Factors Influencing Property Insurance Costs
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10/25/13
Understanding Construction Insurance Rates and Premiums
1. 2. 3. 4. 5.
Characteristics of the Property Loss History Deductibles Property Valuation Limits of Insurance
B. Property Insurance Rating 1. Insurers Use Insurance Advisory Organizations 2. Class Rating and Specific Rating 3. Loss Costs versus Rates C. Property Rating Steps 1. 2. 3. 4. Determining Basic Causes of Loss Premium Determining Broad Causes of Loss Premium Determining Special Causes of Loss Premium Individual Risk Premium Modification
D. Some Cost-Cutting Options and Other Factors To Consider 1. 2. 3. 4. 5. Consider Higher Deductibles Obtain Coinsurance Credits Invest in Fire Loss Prevention Install Underwriters Laboratory-Approved Roofing Investigate Other Rate Credits and Surcharges
X. Chapter 10: Inland Marine Insurance Rating
A. Underwriting and Rating Contractors Equipment Insurance 1. Contractors Equipment Rating Process B. Underwriting and Rating Builders Risk Insurance 1. Builders Risk Rating Process C. Some Cost-Cutting Options and Other Factors To Consider 1. 2. 3. 4. 5. Obtain Individual Risk Premium Modifications Use Higher Deductibles Pay Attention to Coinsurance and Full Value Reporting Requirements Use Proper Builders Risk Values Invest in Protection against Theft and Vandalism
© 2000-2013 International Risk Management Institute, Inc. (IRMI). All rights reserved.
www.irmi.com/sf/insurance-continuing-education/cris/curriculum/course-outlines/cris-reaccreditation-courses/understanding-construction-insurance-rates…
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