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 level or at the product line 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.

Modifiers in a multi-line product

Product-level modifiers are not copied over when the product is attached to a multi-line product.

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.