1155 Flagmore Drive
Katy, TX 77450
The characteristics of the insured are identified, and used in a standardized rating formula to obtain the individual's rate based on the
average cost of an individual with those characteristics. Class rating is the first step in rating all risks except for unique or very large
Rate adjustments (credits or debits) are given to an individual risk for features the underwriter believes makes the risk better or worst
than the average risk with the average class characteristics. These credits and debits are limited within a defined range of credits and
debits, and also subject to limits on the total credits and debits given.
Composite rating is used on commercial risks to simplify the rating to only use one exposure base (such as Sales) to measure the
amount of risk and to determine the premium in place of several exposure types (receipts, number of visitors, store floor area, etc.)
being used to rate each portion of the risk.
After a commercial risk reaches a sufficient size, Experience Rating is required for some lines of business. Experience rating compares
the risk's recent past experience to the average base risk, and assigns a rate adjustment that will apply. This adjustment is not subject
to adjustment based on the actual results that occur during the future policy period.
The insured has to agree to be retrorated prior to the commencement of the policy. The risk is typically Experienced Rated initially, but
after the policy expires, and sufficient time allowed for the losses to be known, the premium for that policy period is adjusted up or
down within preset limits to reflect the risk's actual loss experience.
This rating is for a very large risk that agreed to pay their own losses plus an agreed amount for the insurance company to handle the
administration of the insurance and claim handles costs.