Premium Algorithms

The method and steps for calculating Indiana workers compensation insurance premium.

Premium in Indiana is calculated per the algorithm contained in NCCI’s Basic Manual-2021 Edition-Indiana. The algorithm is reviewed as part of the annual rate filing and approved by the Indiana Department of Insurance.

Step-by-Step Explanation

The following provides an explanation of how to calculate total estimated premium based on the algorithm.

  1. For each class code: payroll X rate / 100 = estimated manual premium
  2. Add all class code estimated annual premium to get total manual premium
  3. Add to manual premium all premium items subject to experience rating to get total subject premium

    “Subject premium” is the audited manual premium.  It does not include premium discount, any surcharges, schedule rating, etc.  We use it to determine eligibility for experience rating. It doesn’t mean much if you are trying to determine the actual policy premiums paid for that term.

    Premium Subject to experience rating:
    1. Employer’s liability increased limits
    2. Indiana deductible or co-insurance premium credit or debit
    3. Rate deviation
    4. Waiver of subrogation
  4. Multiply total subject premium by the experience modification to get total modified premium
  5. Add premium not subject to experience rating to get total standard premium

    Premium not subject to experience rating:​
    1. Assigned risk surcharge (30% for policies with premium in excess of $2,750)
    2. Aircraft passenger seat surcharge
    3. Schedule Rating
  6. Add other premium items to get estimated annual premium
    1. Premium discount (applied to standard premium defined in Basic Manual Rule BM‐PREM‐P46FC).
    2. Coal mine disease charge
    3. Expense constant
    4. Terrorism and catastrophe surcharges
  7. Add the following non-premium item to get total amount due
    1. Second Injury Fund Surcharge
    2. Below you will find the algorithms for Indiana’s Assigned Risk and Voluntary Workers Compensation markets.

Assigned Risk Premium Algorithm

Effective 01 Jan 2020 12:00:01

Indiana Assigned Risk Workers Compensation Premium Algorithm

The following algorithm provides the framework for premium charges and credits. Where not specified, the premium base would be the result from the prior line.

+ Supplementary Disease (foundry, abrasive, sandblasting) [(SUBJECT PAYROLL / 100) * DISEASE RATE]
+ USL&H Exposure for non-F classification codes [(SUBJECT PAYROLL / 100) * (RATE * USL&H FACTOR)]
+ Waiver of Subrogation factor [% applied to the portion of Total Manual Premium where waiver is applicable]
+ Employers Liability (E/L) increased limits factor [% applied to Total Manual Premium]
+ Employers Liability increased limits charge [Balance to E/L increased limits minimum premium]
+ Employers Liability factor (Admiralty) [Factor applied to the portion of Manual Premium where Admiralty coverage is applicable]
Small Deductible Coinsurance credit [% applied to Total Manual Premium]
xExperience Modification (Exp Mod) 
+ Supplemental Disease Exposure (Asbestos[NOC])[] 
+ Atomic Energy Radiation Exposure [][NOC] 
+ Charge for nonratable catastrophe loading[] 
+ Balance to Minimum Premium (State Act)[Balance to minimum premium at Standard Limits]
+ Balance to Minimum Premium (Admiralty)[Balance to minimum premium at Standard Admiralty Limits]
xAssigned Risk Surcharge[A 30% surcharge is applicable to the premium in excess of
$2,750 of the standard premium, subject to audit]
+ Coal Mine Disease Charge [Underground, surface, surface auger]
+ Expense Constant  
+ Terrorism [(PAYROLL / 100) * TERRORISM VALUE]
+ Catastrophe (other than Certified Acts of Terrorism) [(PAYROLL / 100) * CATASTROPHE (OTHER THAN CERTIFIED ACTS OF TERRORISM) VALUE]
+ Second Injury Fund Surcharge 

[NOC] = Not Otherwise Classified.[Nonratable Element Premiums generated by nonratable portion of manual rate are subject to all applicable premium elements applied to the policy, however, not subject to experience rating or NCCI’s Loss Sensitive Rating Plan.

Note: For short rate cancellations, short rate percentage/short rate penalty premium factor is subject to experience rating, included in Total Subject Premium, and applied prior to Experience Modification.