Explanation of Indiana’s Schedule Rating Plan
Indiana law requires a system of schedule rating. Indiana Code 27-7-2-15 reads “The department shall after consultation with members of the bureau and after investigation approve a system of schedule rating for use in this state. Only the system filed by the bureau and approved by the department may be used in Indiana.”
The plan is available to any insured except assigned risk policies. It allows for credits or debits up to 50% maximum (even though the table shows up to 65% possible). The intent of the plan is to allow premium adjustments to reflect such characteristics of the risk that are not reflected in its experience. The insurance company underwriter determines the adjustment on a per policy basis. The adjustment does not require ICRB or Department of Insurance approval. The carrier must maintain documentation which supports the adjustments. In Indiana, carriers may only use the plan filed by the ICRB as shown below.
Indiana Schedule Rating Table
|Employee: selection, training, supervision||10%|
|Management: safety organization||5%|
|Drug Free Workplace Program||5%|
The amount of the schedule credit or debit is applied in a multiplicative manner after the experience modification and before premium discount and expense constant. The Indiana premium algorithm is approved for use by the IDOI and shows the schedule rating factor is applied after total modified premium:
TOTAL MODIFIED PREMIUM
x Schedule Rating factor (1 – SR credit %) or (1 + SR debit %)
However, the algorithm is advisory as indicated by this wording in the NCCI Basic Manual, Indiana Miscellaneous Rules:
“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.[*]
[*] The above rating method would be used in absence of independent carrier filings.”
Schedule Rating is not subject to Experience Rating Modification.
Use of Credits and Debits
Carriers have inquired as to when credits or debits can be removed from a policy. Typically these are done as part of a renewal application review.
Schedule Rating rule 7 says debits and credits “shall be based on evidence that is contained in the file of the carrier at the time the schedule debit or credit is applied.”
Schedule Rating Rule 8 says, “To the degree that the insured can correct the reason for any schedule debit to the satisfaction of the insurer, the debit may be removed effective the date documentation for the correction is received in the insurer’s office.”
For example, if part of the credit deals with loss control compliance, and that condition is not met, then the carrier can pick a date to change the credit structure, notify the insured and put that documentation in the file.
As of that date, your evidence is updated and a new, or no credit, is applicable. On the debit side, if the insured corrects the reason for a schedule debit, then the debit should be removed.
9887 Schedule Rating Premium Credit
9889 Schedule Rating Premium Debit