🏠 Module 4-Secrets of Property Rating Flashcards
Secrets of Property Rating
Difference between “rate” and “premium”
Rate - the dollar amount per unit of coverage determined by the risk of the property (based on COPE)
Premium - the total amount paid for coverage
Example:
* Price per gallon (rate)
* Tank of Gas (premium)
Calculate Rate
Premium ÷ (TIV/100)
Calculate Premium
Rate * (TIV/100)
3 Types of Base Rates
- Class Rate
- Specific Rate
- Tentative Rate
Class Rate
- Developed by ISO or carrier
- An average of rates based on losses, premiums, COPE
Specific Rate
- Risk that is individually rated because there are special hazards or special protection.
- Requires physical inspection of the property by an ISO engineer
Tentative
- Just a W.A.G. (wild-assed guess)
- An estimated rate that is subject to change after inspection
- Potential E&O claim
Be SURE the insured knows that there is a “Tentative Rate Endorsement”/”Subject-To Rate”
Rating Factors
- Group I - Fire
- Group II - Other Catastrophic Perils (“Mother Nature”)
- Additional Causes of Loss
- Coinsurance
- Deductible
True or False: Rates can be negotiated
True
Always ask for rating pages from the carrier to see where/which factors are of concern.
Five Steps To Estimating An Insured’s Premium
- Step 1: Determine ISO Construction Type (1-6)
- Step 2: Determine current average RC/SF for type
- Step 3: Determine TIV (Total SF * RC/SF)
- Step 4: Determine competitive market rate based on construction type
- Step 5: Calculate expected premium (TIV/100) * rate
W
Wind
X-Wind
Excluding Wind
AOP
All Other Perils
UL
Underwriter’s Laboratory
Used to apply discretionary pricing
W/H
Wind/Hail
