(July 2019)
This rating analysis addresses the following coverages contained in the Insurance Services Office (ISO) commercial crime coverage forms and policies.
o Kidnap/Ransom and Extortion–Direct Loss
o Kidnap/Ransom and Extortion–Expenses Incurred
o Detention or Hijack
o In-transit Delivery of Property
The primary components of
the rating process are the limits of insurance selected and the exposure basis.
Although it can be difficult, the named insured must determine the limit of
insurance based on what it believes is its maximum exposure to loss. Developing
this information involves the named insured analyzing its financial records,
record keeping, and inventory controls and the coverage requested. There is no
coinsurance penalty for underinsurance. The only penalty is that the named
insured’s loss is not fully compensated if the limit is inadequate.
There is a specific method to determine the correct exposure basis for each coverage but most of the Commercial Crime insuring agreement formulas are derivations of the Employee Theft formula and all of the Kidnap/Ransom and Extortion insuring agreement formulas are derivations of the Kidnap/Ransom and Extortion-Direct Loss formula.
1. The number of ratable employees, consisting of officers, employees who handle money, securities, or other property, persons who handle employee benefits plans, leased employees, and former employees hired as consultants
2. One percent (1%) of all other employees
3. The number of premises
1. The number of ratable employees, consisting of officers, employees who handle money, securities, or other property, persons who handle employee benefits plans, leased employees, and former employees hired as consultants
2. One percent (1%) of all other employees
3. The number of premises
The number of premises
The number of premises
The number of premises
1. The number of ratable employees, consisting of officers, employees who handle money, securities, or other property, persons who handle employee benefits plans, leased employees, and former employees hired as consultants
2. One percent (1%) of all other employees
3. The number of premises
Rates are in a table based on the limit of insurance.
1. The number of ratable persons, consisting of employees, directors, trustees, partners, members of limited liability companies, officials, officers, and consultants who were formerly employees
2. One percent (1%) of all other employees
3. The number of premises
1. The number of ratable persons, consisting of employees, directors, trustees, partners, members of limited liability companies, officials, officers, and consultants who were formerly employees
2. One percent (1%) of all other employees
3. The number of premises
1. The number of ratable persons, consisting of employees, directors, trustees, partners, members of limited liability companies, officials, officers, and consultants who were formerly employees
2. One percent (1%) of all other employees
3. The number of premises
1. The number of ratable persons, consisting of employees, directors, trustees, partners, members of limited liability companies, officials, officers, and consultants who were formerly employees
2. One percent (1%) of all other employees
3. The number of premises
1. Select the limit of insurance.
2. If a deductible applies, add the deductible to the limit of insurance to develop the limit of insurance to be used in computing the premium.
3. In Rule 113 – Exposure Units Table – Blanket Coverage, select the exposure units based on the limit of insurance and the number of ratable employees.
4. In Rule 113 – Exposure Units Table – Blanket Coverage, select the premises exposure units based on the limit of insurance.
5. Multiply the exposure units by the number of premises. If there are more than 25 premises, multiply the next 25 premises by the exposure unit and then by .25. If there are more than 50 premises, multiply the next 50 premises by .05. There is no charge for additional premises over 100. Add the charges for the first 25 plus the next 25 plus the next 50 to develop the additional premises exposure units.
6. Add Step 3 and Step 5 together.
If a deductible applies, follow Steps 7
through 12. If no deducible skip to step 13.
7. In Rule 113 – Exposure Units Table – Blanket Coverage, select the exposure units based on the deductible limit of insurance and the number of ratable employees.
8. In Rule 113 – Exposure Units Table – Blanket Coverage, select the premises exposure units based on the deductible limit of insurance.
9. Multiply the exposure units by the number of premises. If there are more than 25, multiply the next 25 premises by the exposure unit and then by .25. If there are more than 50 premises, multiply the next 50 premises by .05. There is no charge for additional premises over 100. Add the charge for the first 25 plus the next 25 plus the next 50 to develop the additional premises exposure unit.
10. Add Step 7 and Step 9 together.
11. Multiply Step 10 by the deductible credit factor.
12. Subtract Step 11 from Step 6 to develop the net exposure units.
13. Determine the class code based on the named insured’s primary activity.
14. Select the loss cost in the supplemental tables based on the class code. Multiply the loss cost by the insurance company’s loss cost multiplier to develop a rate.
15. Multiply Step 14 by Step 12.
16. Apply experience and schedule rating if eligible and where warranted.
If Employee Theft and Forgery or Alteration is written with the same limit of insurance and the same deductible, multiply the premium developed in the Employee Theft formula above by Forgery or Alteration Factor.
If the limits are not the same, follow the steps above for the applicable limits and deductible and then multiply for the Forgery or Alteration Factor.
1. Determine the class code based on the named insured’s primary activity.
2. Select Rule 29 Rating and Relatives Factor in the Supplemental table based on the class code.
3. If Employee Theft and Inside the Premises – Theft of Money and Securities are written with the same limit of insurance and the same deductible, multiply the premium developed in the Employee Theft formula above by Step 2.
4. If the limits are not the same, follow the Employee Theft steps above for the applicable limits and deductible and then multiply by Step 2.
1. Determine the class code based on the named insured’s primary activity.
2. Select Rule 30 Rating and Relatives Factor in the Supplemental table based on the class code.
3. If Employee Theft and Inside the Premises – Robbery or Safe Burglary or Other Property are written with the same limit of insurance and the same deductible, multiply the premium developed in the Employee Theft formula above by Step 2.
4. If the limits are not the same, follow the Employee Theft steps above for the applicable limits and deductible and then multiply by Step 2.
1. Determine the class code based on the named insured’s primary activity.
2. Select Rule 31 Rating and Relatives Factor in the Supplemental table based on the class code.
3. If Employee Theft and Outside the Premises are written with the same limit of insurance and the same deductible, multiply the premium developed in the Employee Theft formula above by Step 2.
4. If the limits are not the same, follow the Employee Theft steps above for the applicable limits and deductible and then multiply by Step 2.
If Employee Theft and Computer and Funds Transfer Fraud are written with the same limit of insurance and the same deductible, multiply the premium developed in the Employee Theft formula above by the Computer and Funds Transfer Fraud Factor.
If the limits are not the same, follow the Employee Theft formula above for the applicable limits and deductible and then multiply for the Computer and Funds Transfer Fraud Factor.
1. Select the limit of insurance.
2. Multiply the loss cost by the insurance company’s loss cost multiplier to develop a rate.
3. Multiply the rate by the limit of insurance per $1,000.
4. Apply the appropriate deductible factor, if any.
5. Apply experience and schedule rating if eligible and where warranted.
1. Select the limit of insurance.
2. If a deductible applies, add the deductible to the limit of insurance to develop the limit of insurance to be used in computing the premium.
3. In Rule 113 – Exposure Units Table – Blanket Coverage, select the exposure units based on the limit of insurance and the number of ratable employees.
4. In Rule 113 – Exposure Units Table – Blanket Coverage, select the premises exposure units based on the limit of insurance.
5. Multiply the exposure units by the number of premises. Multiply by .25 for the first 10 premises. If there are more than 10 premises, multiply the next 10 premises by the exposure unit and then by .05. There is no charge for additional premises over 20. Add the charges for the first 10 plus the next 10 to develop the additional premises exposure units.
6. Add Step 3 and Step 5 together.
If a deductible applies, follow Steps 7
through 12. If no deducible skip to step 13.
7. In Rule 113 – Exposure Units Table – Blanket Coverage, select the exposure units based on the deductible limit of insurance and the number of ratable employees.
8. In Rule 113 – Exposure Units Table – Blanket Coverage, select the premises exposure units based on the deductible limit of insurance.
9. Multiply the exposure units by the number of premises. Multiply by .25 for the first 10 premises. If there are more than 10 premises, multiply the next 10 premises by the exposure unit and then by .05. There is no charge for additional premises over 20. Add the charges for the first 10 plus the next 10 to develop the additional premises exposure units.
10. Subtract Step 9 from Step 6.
11. Multiply Step 10 by the deductible credit factor.
12. Subtract Step 11 from Step 6 to develop the net exposure units.
13. Determine the class code based on the named insured’s primary activity.
14. Select the loss cost in the multistate loss costs section based on the class code. Multiply the loss cost by the insurance company’s loss cost multiplier to develop a rate.
15. Multiply Step 14 by Step 12.
16. Apply IRPM schedule rating if eligible and where warranted.
1. Follow the steps in the Kidnap/Ransom and Extortion – Direct Loss above but skip all deductible steps because this insuring agreement is not eligible for deductible.
2. Multiply Step 1 by the Kidnap/Ransom and Extortion–Expenses factor.
3. Apply IRPM rating if eligible and where warranted.
1. Follow the steps in the Kidnap/Ransom and Extortion – Direct Loss above but skip all deductible steps because this insuring agreement is not eligible for deductible.
2. Multiply Step 1 by the Kidnap/Ransom and Extortion–Detention or Hijack factor.
3. Apply IRPM rating if eligible and where warranted.
1. Follow the steps in the Kidnap/Ransom and Extortion – Direct Loss above
2. Multiply Step 1 by the Kidnap/Ransom and Extortion–Expenses factor.
3. Apply IRPM rating if eligible and where warranted.
The Crime and Fidelity Experience and Schedule Rating Plan is an optional supplemental rating plan that ISO developed for insurance companies to use to recognize differences in individual risks. The experience rating part of the plan uses the named insured's loss experience to develop credits or debits. The schedule rating part of the plan uses risk characteristics that experience rating does not recognize or take into consideration to develop credits or debits. Exposure size determines eligibility. A higher threshold applies for experience rating than for schedule rating because the credibility needed for experience rating requires more exposure units.
These plans vary both by state and insurance company. As a result, it is important to be aware of the approach used by a specific company in applying these plans.
The Kidnap/Ransom and Extortion coverage form and policy are not subject to the Crime and Fidelity Experience and Schedule Rating plan. They have their own individual risk premium modification plan capped at plus or minus 25% in many states in place of those plans. Experience rating is not available for use with this coverage form or policy.