Indiana law requires a system of schedule rating. IC 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."
Indiana is one of 26 states with a Schedule Rating Plan listed in the Basic Manual, Appendix AD. It lists all states with a schedule rating plan. In Indiana, the plan has been in effect since September 1, 1989 and was first announced in ICRB circular IN-89-10 dated September 28, 1989.
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 need only maintain evidence in its customer file which supports the adjustments. In Indiana, carriers may only use the plan filed by the ICRB as shown below.
Indiana Schedule Rating Table
effective 9/1/89, revised 7/1/99
|Employee: selection, training, supervision
|Management: safety organization
|Drug Free Workplace Program (added 7/1/99)
Applying the Factor
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 just 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.”
Use of Credits and Debits
Carriers have asked when can credits or debits be removed from a policy? In the original 1989 filing, 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."
Further, 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."
So, if part of your credit deals with loss control, for example, and that condition is not met, then you could pick a date to change the credit, notify the insured and put that documentation in your 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.
ICRB Circular 99-29, 10/12/1999 "Revised Schedule Rating Plan" which added the drug free workplace characteristic.
Schedule Rating is not subject to Experience Rating Modification.
9887 Schedule Rating Premium Credit
9889 Schedule Rating Premium Debit
Drug Free Workplace Program Information
Check out these websites for more information on the subject: