Charlotte Finance

Feb 7 2018

A Look At the Commercial Auto Insurance Rating Process, vehicle insurance rating.#Vehicle #insurance #rating

A Look At the Commercial Auto Insurance Rating Process

A Look At the Commercial Auto Insurance Rating Process

In our previous blog article, we cited a report from Fitch that indicated that the commercial automobile insurance segment continues to face pressure. Here we are taking a look at some of the factors underwriters look at when underwriting and rating a business auto policy.

The first exposure an underwriter will evaluate is the account s liability risk. If a business auto is not acceptable for liability insurance, the other coverages will most likely not be considered. An underwriter will look at the driving history of the vehicle operators and the conditions of the vehicles. Other considerations include whether the insured has a fleet safety program, which many carriers offer.

Business auto policies use class rating : an approach that reflects the average probability of loss for businesses within large groups of similar risks. But when a policy develops a large enough premium, it can also be eligible for experience rating : a technique that adjusts the client s premium for the upcoming policy period based on the operation s experience for the current period. Schedule rating is used to modify the premium to better reflect characteristics not inherent in class rates, with debits and credits awarded based on specific categories, such as training and selection of employees.

Private passenger autos under a commercial auto policy are charged a flat fee for liability whereas trucks, tractors and trailers are classified and rated using four factors: vehicle weight and size, vehicle use, radius of operation and special industry classifications. The ISO Commercial Lines Manual provides nine size classes of trucks. Depending on the class of truck, the greater the exposure. For example, the damage from an accident can be greater with a heavy truck as it is more difficult to maneuver in traffic, inner-city streets and presents a higher loss risk.

Vehicle use, of course, is important in the rating process because there is difference in risk between employees driving to and from job sites and those using vehicles to haul goods. ISO has three types of vehicle use definitions: service use, which applies to vehicles used mainly to transport personnel and material to job sites; retail use for those vehicles used principally to make deliveries to households; and commercial use, which applies to vehicles that fall outside of service or retail use classifications. An underwriter must understand the nature of the insured s business to properly classify the vehicles being used.

At NetRate Systems, we facilitate the commercial lines auto rating process with our customized software solutions. We offer flexible and cost-effective rating solutions that are designed for MGAs, Program Administrators, and Insurance Carriers. Please give us call at (877) 790-1114 to learn more about products and how we can help you with your commercial automobile insurance product and other coverage lines for the industries you serve.

Sources: ISO, American Institute for Chartered Property Casualty Underwriters

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