AAIS COMMERCIAL OUTPUT PROGRAM OVERVIEW

(August 2019)

BACKGROUND

The Commercial Output Program is the American Association of Insurance Services, Inc. (AAIS) version of a Manufacturer’s Output Policy. When switching a client from a standard commercial property coverage form or policy to the COP, it is important to understand that the roots of the COP lie in Inland Marine and not Commercial Property. This means that coverage under the COP is more flexible. The COP is not location specific unless modified to be that way, and coinsurance does not apply. The latter feature means that there could be significant insurance-to-value problems if adequate insurance limits are not provided and maintained. Adequate pricing depends on the client providing appropriate and accurate statements of values for each location insured. In the event that that the customer's coverage changes from the COP back to a standard commercial property coverage form or policy, it is important to remember to include full disclosure of the reductions in coverage involved with such a change.

ELIGIBILITY

POLICY CONSTRUCTION

The COP can be issued as either a monoline policy or as part of a package policy.

Mandatory forms are:

CO 1100–Commercial Output Program Declarations
CO 1050 or CO 1051–Commercial Output Program Schedules of Coverages

CO 1000–Commercial Output Program–Property Coverage Part

Related Article: CO 1000–Commercial Output Program Property Coverage Part Analysis, for a detailed analysis of this coverage form.

CL 0100–Common Policy Conditions

ENDORSEMENTS

A number of coverage parts can be added along with many expansion and restrictions of coverage. The COP is designed to be customized so the listing of endorsements should be carefully reviewed.

UNDERWRITING

The broad nature of the coverage provided by the COP requires both inland marine and commercial property underwriting expertise.

RATING PLAN

The COP rating plan is a deficiency point rating plan system that starts at 0. As the risk is evaluated, deficiency points are developed. These points are added together and converted to rates. These rates are then added to category rates, resulting in a unique rate for the specific risk. The program has an experience-rating plan that increases the rate but is applied only when the deductible is less than $5,000. This final risk rate is applied to the total property values to determine the final premium. All rating is risk rather than location specific.

OTHER COVERAGES

The following coverages may be added to the COP and should be carefully considered.

Loss of Income and Extra Expense

Equipment Breakdown

Crime

This includes Employee Dishonesty, Theft, and Destruction of Money and Securities and Other Property plus other Crime coverages.