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-2001 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:

Employer's liability increased limits

Indiana deductible or co-insurance premium credit or debit

Rate deviation

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:​

Assigned risk surcharge (30% for policies with premium in excess of $2,750)

Aircraft passenger seat surcharge

Schedule Rating

6. Add other premium items to get estimated annual premium

Premium discount (applied to standard premium defined in Basic Manual Rule 3.A.19).

Coal mine disease charge

Expense constant

Terrorism and catastrophe surcharges


7. Add the following non-premium item to get total amount due

Second Injury Fund Surcharge


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.

 PREMIUM ELEMENTSEXPLANATORY NOTES
 MANUAL PREMIUM[(PAYROLL / 100) * RATE]
+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)]
 TOTAL MANUAL PREMIUM 
+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]
 TOTAL SUBJECT PREMIUM 
xExperience Modification (Exp Mod) 
 TOTAL MODIFIED PREMIUM 
+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]
 TOTAL STANDARD PREMIUM 
+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]
 ESTIMATED ANNUAL PREMIUM 
+Second Injury Fund Surcharge 
 TOTAL AMOUNT DUE 

[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.



NOTICE: Although the formatting of this online manual, including any state exceptions, may differ from the hard copy, the content is identical.

©  Copyright 2000–2019  National Council on Compensation Insurance, Inc. All Rights Reserved.​




Indiana Voluntary Market Premium Algorithm:

Effective 01 Jan 2015 12:00:01

Indiana 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.[*]

 PREMIUM ELEMENTSEXPLANATORY NOTES
 MANUAL PREMIUM[(PAYROLL / 100) * RATE]
+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)]
 TOTAL MANUAL PREMIUM 
+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 increased limits factor (Admiralty, FELA)[Factor applied to the portion of Manual Premium where Admiralty/FELA coverage is applicable]
+Employers Liability/Voluntary Compensation flat charge[Coverage in Monopolistic State Funds]
Small Deductible credit[% applied to Total Manual Premium]
 TOTAL SUBJECT PREMIUM 
xExperience Modification (Exp Mod) 
 TOTAL MODIFIED PREMIUM 
xSchedule Rating factor (1 – SR credit %) or (1 + SR debit %) 
+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, FELA) 
 TOTAL STANDARD PREMIUM 
Premium Discount[§][% applied to Standard Premium]
+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]
 ESTIMATED ANNUAL PREMIUM 
+Second Injury Fund Surcharge 
 TOTAL AMOUNT DUE 

[**Premium charges established for Waiver of Subrogation are not filed by ICRB for the voluntary market.

[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 retrospective rating.

[§For policies subject to premium adjustments under a retrospective rating plan, premium discount does not apply.


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.


[*The above rating method would be used in absence of independent carrier filings.




NOTICE: Although the formatting of this online manual, including any state exceptions, may differ from the hard copy, the content is identical.

©  Copyright 2000–2019  National Council on Compensation Insurance, Inc. All Rights Reserved.​



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