Rate modifiers

Rate modifiers are used to adjust a policy's premium based on a set of risk characteristics. A rate modifier can take a single value or it can have multiple rate factors. A rate modifier that takes a single value is called an unscheduled rate modifier, while a rate modifier that has multiple rate factors is called a scheduled rate modifier. You create a rate modifier at the product, product line, or risk object level. An underwriter sets the value of a rate modifier when they create a submission for an installed product in PolicyCenter. If the rate book uses the modifier, the value is submitted to a rating engine which then calculates the premium for the policy.

Unscheduled rate modifiers

A rate modifier that does not have multiple rate factors is called an unscheduled rate modifier. An unscheduled rate modifier can be modeled as a rate modifier or as an attribute. If it is modeled as an attribute, it does not appear in the Modifiers section within a submission.

An experience modifier, often used in commercial lines of business, is modeled as an unscheduled rate modifier. For example, the value of the experience modifier in a workers compensation policy is provided by the state.

A good driver discount can be modeled as an unscheduled rate modifier with minimum and maximum values. Alternatively, a good driver discount can be modeled as an attribute or a set of attributes by creating questions such as:
  • Did the driver take a driver's education course?
  • Is the driver age 17 or over?
  • Does the driver have a GPA of 3.0 or higher?
  • Has the driver had an at-fault accident?

The answers to these questions, along with rate tables, determine the amount of the discount. In the example above, the discount is applied to a coverage rather than the entire premium.

To create a rate modifier where the underwriter chooses a value from several options, use an attribute with a drop-down list.

Scheduled rate modifiers

Scheduled rate modifiers are often used by commercial lines of business, and include multiple rate factors. The underwriter's letter of authority limits how much the value of a rate factor can be changed. The change applies to the policy premium rather than a specific coverage. This type of scheduled rate modifier is an Individual Risk Premium Modification (IRPM).

For example, an IRPM for a commercial property product has the following rate factors:
  • Safety program
  • Hazardous waste storage
  • 24x7 security

Actuaries provide minimum and maximum values you can assign to each rate factor. You can also specify a minimum and maximum IRPM, where IRPM is the total percentage adjustment that an underwriter can apply to the premium.

Create a rate modifier

You can create a rate modifier on a product, product line, or risk object. The minimum and maximum values for a rate modifier must be percentages.

Procedure

  1. In the navigation pane, select the product, product line, or risk object.
  2. Do one of the following:
    • For a product, click Add Modifier.
    • For a product line or risk object, in Elements:
      1. Click Modifiers.
      2. Click Add Element.
  3. In Element Details:
    1. Type the label and short name for the rate modifier.
    2. Choose Rate from the Type drop-down list.
    3. Optionally, type the minimum and maximum values for the rate modifier.
      The min-max range appears in the Details column on the Modifiers or Elements screen.
  4. Optionally, in Properties:
    1. Set the availability. The default is Available. To add a rule, click Add Rule.
    2. To add a rule for the minimum or maximum values, click Add Rule.
      These values take precedence over minimum and maximum values defined in the product model.

Define rate factor types

You choose from a typelist when you create a rate factor for a scheduled modifier. APD lists the rate factor types in the Manage Rate Factor Types dialog and indicates which values are provided by PolicyCenter and which values have been added in APD.

Procedure

  1. In the navigation pane, select the product.
  2. In the upper right corner of the Product Model screen, select ... > Manage Rate Factor Types.
    In the External column, Yes indicates that the value is provided by the PolicyCenter typelist RateFactorType and No indicates that the value has been added in APD.
  3. In Manage Rate Factor Types, click Add Rate Factor Type.
  4. Type the label and short name for the rate factor type and confirm the entry.
  5. Click Apply.

Create a scheduled rate modifier

You can create a scheduled rate modifier on a product, product line, or risk object. The minimum and maximum values for a rate modifier or rate factor must be percentages.

Before you begin

Define rate factor types.

Procedure

  1. In the navigation pane, select the product, product line, or risk object.
  2. Do one of the following:
    • For a product, click Add Modifier.
    • For a product line or risk object, in Elements:
      1. Click Modifiers.
      2. Click Add Element.
  3. In Element Details:
    1. Type the label and short name for the scheduled rate modifier.
    2. Choose Scheduled Rate from the Type drop-down list.
    3. Optionally, type the minimum and maximum values for the rate modifier.
      The min-max range appears in the Details column on the Modifiers or Elements screen.
  4. Optionally, in Properties:
    1. Set the availability. The default is Available. To add a rule, click Add Rule.
    2. To add a rule for the minimum or maximum values, click Add Rule.
      These values take precedence over minimum and maximum values defined in the product model.
  5. In Element Details, check Justification to create a text box on the Modifiers screen in PolicyCenter.
    The underwriter can enter an explanation of why they applied the rate modifier in the text box.
  6. Click Manage Rate Factors.
  7. In Rate Factors:
    1. Click Add Rate Factor.
    2. In Element Details, type the label and short name.
      You can use a rate factor's label in APD App, for example to create an availability rule. However, the label is not used in PolicyCenter.
    3. Type the minimum and maximum values for the rate factor.
      The sum of the minimum or maximum values for the rate factors may exceed the minimum or maximum value for the scheduled rate modifier. The minimum or maximum value for the modifier is validated when the user creates a submission in PolicyCenter.
    4. In Rate Factor Type, choose a type from the drop-down list.
      Within a modifier, a rate factor type can be associated with one and only one rate factor.
  8. Optionally, in Properties:
    1. Set the availability. The default is Available. To add a rule, click Add Rule.
    2. To add a rule for the minimum or maximum values, click Add Rule.
      These values take precedence over minimum and maximum values defined in the product model.
  9. Create additional rate factors as necessary.