For assigned risk policies in Indiana, the Graduated Table is used to calculate the agent commission (producer fee). The table appears in the Assigned Risk Supplement to the Basic Manual, Rule 4-H-6. Commission is payable to an agent that holds an Indiana resident or non-resident license.
First $ 1,000
|Next $ 4,000
|Next $ 95,000
For example, the producer fee for a $10,000 policy is $430 and is calculated as follows:
first 1,000: 1,000 x 8% = 80
next 4,000: 4,000 x 5% = 200
next 95,000: 5,000 x 3% = 150
Total = 10,000 premium and 430 fee
The Assigned Risk Supplement to the Basic Manual, Rule 4-H-4 defines Premium Basis for producer fees as, "Total Standard Premium charged and collected."
The Basic Manual Rule 3.20., page R35 defines standard premium as follows:
Standard Premium is the premium before the application of the premium discount. It is the state premium determined on the basis of:
Aircraft seat surcharges
Premium for increased limits of liability
Experience rating modification
Applicable schedule rating modification
Total Standard Premium is the total premium... excluding expense constant and any disease charge subject to the Federal Coal Mine Safety & Health Act before the application of the premium discount.
The Assigned Risk Supplement to the Basic Manual, Rule 4-C-5 c.(12) defines LSRP Standard Premium as follows:
(a) LSRP standard premium is determined on the basis of authorized rates...and includes any:
Increased limits of liability
Experience rating modification
Deductible credit, if applied
ARAP and/or assigned risk surcharge programs and/or other assigned risk pricing programs other than LSRP
(b) Determination of LSRP standard premium must exclude:
Premium resulting from non-ratable elements
Premium developed by the passenger seat surcharge under Code 7421
Premium developed by the occupational disease rates for employers subject to the Federal Coal Mine Safety and Health Act
Premium developed by catastrophe provisions in accordance with Rule 3-A-24
(c) LSRP standard premium is calculated differently than standard premium as defined in Rule 3-A-20.
(d) LSRP standard premium may change before, during, and/or after a policy due to reasons including, but not limited to:
The deposit premium calculation should include the appropriate surcharge amount when applicable.
LSRP Exceptions - no commission
The Loss Sensitive Rating Plan does not pay commission for:
The servicing carrier pays the fee to the producer. The fee is based on state standard premium charged and collected. The fee is payable upon payment and receipt of premium due (reference Assigned Risk Supplement to the Basic Manual, Rule 4-3-l). The year 2000 Servicing Carrier Performance Standards, part E.2.f also states that the carrier will pay the producer fee as premium is collected. The carrier is required to process and mail fee payments within 30 days from the date the policy or from receipt of premium.
NOTE: Any producer/agent may submit an assigned risk application for Indiana coverage. You do not need an Indiana agent's license. However, only licensed Indiana agents (either resident or nonresident license) receive commissions. The carrier will recognize the non-licensed agent as the agent-of-record on the account for all other purposes.
Click here for information about producer licensing on the Indiana Department of Insurance website.
An agent can assume responsibility for a policy midterm via an Agent of Record letter. The new agent would then receive all applicable correspondence and notices from that point forward, but would not be eligible for commission until the renewal (unless changed within 30 days from effective date).
Agent Commission Includes Surcharge
Effective January 1, 2011, the assigned risk surcharge is adjusted so that the 25% surcharge is applied to only that portion of premium greater than $2,500. Commission is paid on standard premium which includes the surcharge. The anniversary rate date rule does apply and will in some cases determine the application of the surcharge.
The Premium Algorithm can be found on the Indiana Exceptions to Assigned Risk Policies (green pages) page 5. This shows that the surcharge is part of standard premium. Note: Coal mine nonratable disease element is excluded from the surcharge since the element is for federal, not state coverage.