ANNIVERSARY RATING DATE ENDORSEMENT

(December 2020)

INTRODUCTION

A workers compensation policy’s initial effective date is its anniversary date. The same date is used on each renewal. That date cannot change unless the National Council on Compensation Insurance (NCCI) or another rating organization that has jurisdiction approves doing so. The consistency of the date is very important because NCCI uses it to establish the experience modification.

THE ENDORSEMENT

There is no need to change the anniversary date if the named insured never changes the effective date of its workers compensation policies. However, fiscal accounting changes, new acquisitions, and mergers sometimes require changing the effective date. WC 00 04 02–Anniversary Rating Date Endorsement is attached when the named insured requests a change in the policy effective date. It states that the policy rates, premium, and any experience rating modification factor that applies may change on the anniversary rating date month and day listed on the endorsement schedule.

APPLICATION AND USE

Table 1:

For a single policy risk whose policies have run consecutively (or in cases where the risk is a new entity), the insurance company must apply the rates effective on the normal ARD for the full term of either of the following:

• The policy that begins on that date
• Any other policy that begins up to three months after that date

Example: Mike's Miracle Metals Workers Compensation and Employers Liability Insurance Policy’s term is 01/01/20 to 01/01/21. The ARD is 01/01/20. Mike adds a new entity that has operations in another state on 03/15/20. The 01/01/20 ARD applies to that new entity even though it was added on 03/15/20.

For a single policy risk whose policy has been cancelled and rewritten (by either the same carrier or another carrier), the insurance company must apply to the rewritten policy all of the rewriting carrier's rules, classifications, and rates in effect as of the following:

• The normal ARD to the new policy until reaching the next normal ARD or until the rating organization establishes the next ARD
• The next normal ARD until the rewritten policy's expiration date or until the rating organization establishes the next ARD. When the rewritten policy expires, a new ARD is established based on the rewritten policy's effective date. This new ARD becomes the normal ARD for future policies.

Example: Mike's Miracle Metals Workers Compensation and Employers Liability Insurance Policy’s term is 01/01/2020 to 01/01/2021. The ARD is 01/01/2020. The rates are also effective 01/01/17 and will change on 01/01/2020. Mike cancels and rewrites his policy effective 03/15/20 to 03/15/21, so all his policies have common expiration dates. The ARD effective 01/01/2020 applies to the current rates until 01/01/2020. It will then apply to the new rates effective 01/01/2020 for the period 01/01/2021 to 03/15/2021. The new ARD is 03/2020, based on the rewritten policy's effective date.

Table 2:

For a multiple policy risk with different effective dates that is neither a long-term policy nor a Three-Year Fixed-Rate Policy, the insurance company must apply the rules, classifications, and rates in effect on the normal ARD until the next normal ARD as follows:

• These rules, classifications, and rates apply to the portion of each policy that falls within the 12-month period, regardless of their effective and termination dates.
• The renewal rules, classifications, and rates must be applied the same way.
• The policy with the largest standard premium determines the ARD unless the rating organization determines otherwise.

Example: Mike's Miracle Metals has two Workers Compensation and Employers Liability Insurance Policies. Policy A written with Aardvaark Insurance Company is the controlling policy because it has the highest standard premium. It runs from 07/01/15 to 07/01/16 and renews annually on 07/01. Policy Z with Zippidydoodah Insurance Company runs from 10/01/15 to 10/01/16 and renews annually on 10/01. The rates are effective 07/01/15, 07/01/16, and 07/01/17.

The following is how the rules, classifications, and rates apply to the initial and subsequent Policy As:

• Policy A is effective 07/01/18. The ARD is 07/01/18. Rates effective on the ARD are 07/01/18 and apply until the 07/01/19 expiration.
• Policy A is effective 07/01/19. The ARD is 07/01/19. Rates effective on the ARD are 07/01/19 and apply until the 07/01/20 expiration.
• Policy A is effective 07/01/20. The ARD is 07/01/20. Rates effective on the ARD are 07/01/20 and apply until the 07/01/21 expiration.

The following is how the rules, classifications, and rates apply to the initial and subsequent Policy Zs:

• Policy Z is effective 10/01/18. For the period 10/01/18 to 07/01/19, the ARD is 07/01/188. Rates effective on the ARD are 07/01/18 and apply until 07/01/19. For the period 07/01/19 to 10/01/19, the ARD is 07/01/18 and applies until the 10/01/19 expiration.
• Policy Z is effective 10/01/19. For the period 10/01/19 to 07/01/20, the ARD is 07/01/19. Rates effective on the ARD are 07/01/19 and apply until 07/01/20. For the period 07/01/20 to 10/01/20, the ARD is 07/01/20 and applies until the 10/01/20 expiration.

For a multiple policy risk with different effective dates that has been cancelled and rewritten (by either the same carrier or another carrier), the insurance company must apply to the rewritten policy all of its rules, classifications, and rates that were in effect as of the following:

• The normal ARD to the new policy until reaching the next normal ARD or until the rating organization establishes the next ARD
• The next normal ARD until the rewritten policy's expiration date or until the rating organization establishes the next ARD. When the rewritten policy expires, a new ARD is established based on the rewritten policy's effective date. This new ARD becomes the normal ARD for future policies.

Table 3:

For other situations, such as a long-term policy (defined as one issued for more than one year and 16 days and as other than a Three-Year Fixed-Rate Policy), the insurance company must apply all of the rules, classifications, and rates to individual units as if a separate policy has been issued:

• Divide the policy into consecutive units of 12 months each.
• This division designates either the first unit or the last unit of less than 12 months as a short-term policy.

For other situations, such as a Three-Year Fixed-Rate Policy, the insurance company applies the rates in force on the policy’s effective date without change until its termination.

Exception: A single rate revision that results in an increase of 10% or more on outstanding policies must be applied to the remaining portion of the policy.

Example: Mike's Miracle Metals has a Workers Compensation and Employers Liability Insurance Policy that runs from 07/01/18 to 12/01/19 (17 months). The rates are effective 07/01/18 and 07/01/19. The normal ARD is 07/01. For Anniversary Rating Date purposes, divide the policy into two units, as follows:

• 07/01/18 to 07/01/19
• 07/01/19 to 12/01/19

The 07/01/18 rules, classifications, and rates apply to the 07/01/18 to 07/01/19 unit.

The 07/01/19 rules, classifications, and rates apply to the 07/01/19 to 12/01/19 unit.

Table 4:

Applicable Endorsements:

• WC 00 04 02–Anniversary Rating Date Endorsement

Use this endorsement when necessary. It lists the normal anniversary rating date if it is different than the policy effective date.

• WC 00 04 05–Policy Period Endorsement

Use this endorsement if the policy period is not a multiple of 12 months. It establishes the first or last unit of less than 12 months as a short-term policy.