LAW ENFORCEMENT LIABILITY RATING CONSIDERATIONS

(July 2019)

INTRODUCTION

Since Law Enforcement Liability coverage is not standard, each insurance company develops its own classifications, rating format, rates and rate calculations.

BASE RATE FORMAT

The following is similar to the approach used in commercial general liability coverage:

· The rating basis is the combined number of both full and part-time officers, plus additional employees.

· A base rate is used for the basic coverage. It is modified by loadings or additions for any optional endorsements. The number of full-time equivalent officers is then multiplied by the modified rate. If applicable, an increased limits factor is then applied.

· Depending on the program, a second calculation may be used and added to the first. This is a base rate multiplied by the number of additional employees that is then multiplied by the increased limits factor.

· The total of the two components is the coverage premium. It may be reduced or increased by individual risk credits or debits based on a given risk’s exposures or loss experience.

Example:

NNNN (Class XXXXX Base Officers Rate)

+ .nnn (Authorized Moonlighting Extension charge)

+ .nnn (Foreign, International or Worldwide Coverage charge)

NNNN (Modified Base Rate)

X .mm (Increased Limits Factor)

NNNN (Final Primary Rate)

X Number of officers

NNNN Final Primary Premium

Depending on the program, a second calculation may be used and added to the first. This is a base rate multiplied by the number of other employees multiplied by the increased limits factor.

Example:

MMMM (Class XXXXX Base Other Employees Rate)

X .mm (Increased Limits Factor)

Final Officers Rate

X Number of Other Employees

NNNN (Final Secondary Premium)

+ NNNN (Final Primary Premium)

Final Premium

The total of the two components is the premium for the coverage. Individual risk credits or debits based on unique exposures or individual loss history and experience can be applied to develop the final premium. In most cases the final premium is subject to a set minimum premium.

TABLE FORMAT

Another approach is a table format, where the insurance company publishes a rate table based on the classification and liability limit. Other similarly calculated premiums are then added to the base charge for officers. A similar approach is used for each endorsement and option selected to determine a premium to add to the base charge.

Premium Table
Classification	Limit 1	Limit 2	Limit 3	Optional Coverage
XXXXX	NNNN	NNNN	NNNN	NNNN
XXXXX	NNNN	NNNN	NNNN	NNNN
XXXXX	NNNN	NNNN	NNNN	NNNN

Note: Credits or debits based on applicable exposures or individual loss history and experience are applied to the premiums.

Significant differences in premium between insurance companies can be expected because coverage and rating is not standard. Premium charges alone should never be used as the sole criteria when selecting an insurance company or coverage. Careful examination and evaluation of what is covered, what is not covered, and who is covered is most important.