Discussion of the rate filing process, advisory rates, assigned risk rates, loss costs, and carrier choices.
Rate Development
The ICRB produces advisory and loss cost rates annually based on historical premium and loss data. Under Indiana’s competitive rating law which became effective January 1, 1990, the ICRB files three types of rates: loss cost, advisory, and assigned risk. Here’s an overview of each type of rate:
- Loss cost rates only include the costs to pay losses; comprised of lost wages and medical payments to injured workers. Loss costs rates do not include expenses common to all business (salaries, rent, utilities, etc.). By definition, the expense provisions excluded are: production, general expense, taxes, and profit and contingency allowance.
Claims frequency, time out of work, injury severity, the number of treatments, and any increase in healthcare costs all affect the average loss cost calculation.
- Advisory rates include the loss costs above as well as the costs of insurance company operations (all of the expense provisions). Advisory rates are developed on a standard premium basis. This means the advisory rates do not contemplate the competitive pricing of carriers such as premium discounts, deductibles, schedule rating, rate deviations, and dividends.
- Assigned risk rates are the same as advisory rates, only mandatory (not advisory) for assigned risk business.
Indiana is a competitive rating state. The ICRB files “advisory” rates for voluntary business for approval with the Department of Insurance. “Advisory” means that a carrier can use the advisory rates, or file its own rates with the Department. If a carrier files its own rates it can use the “loss cost” rates and add in a factor for its own expenses, usually called the “loss cost multiplier.” A carrier that is more efficient and keeps its expenses down is able to use lower rates than its competitors and attract more customers (employers who buy insurance).If a carrier chooses to use the advisory rates, it simply uses them and does not make a filing with the IDOI. If a carrier decides to use rates other than what the ICRB filed, then it must make its own actuarially justified filing with the IDOI.
IDOI Bulletin & Statutory Authority
For more information on this subject, please reference the Indiana Department of Insurance Bulletin 67, “Procedures for Rating Organizations and Insurers Electing to File Loss Costs” effective 01/01/91.
IC 27-7-2-20.2
Minimum premiums, rates, and supplementary rate information; filing; approval; proof of notice; public inspection
Sec. 20.2. (a) Every company and the bureau shall file with the commissioner all minimum premiums, rates, and supplementary rate information that are to be used in Indiana. Such minimum premiums, rates, and supplementary rate information must be submitted to the commissioner at least thirty (30) days before the effective date. The commissioner shall disapprove a filing that does not meet the requirements of section 20.1 of this chapter. A filing shall be deemed approved unless disapproved by the commissioner within thirty (30) days after the filing is made. A company may adopt by reference, with or without deviation, the minimum premiums, rates, and supplementary rate information filed by another company or by the bureau.
(b) Minimum premiums, rates, and supplementary information filed under this section shall be filed in the form and manner prescribed by the commissioner.
(c) There shall accompany each filing adequate proof that notice of the filing has been mailed, by first class United States mail, to each interested person at the person’s address as shown on the records of the department.
(d) All information filed under this chapter shall, as soon as filed, be open to the public for inspection and copying under IC 5-14-3.
ICRB Rate Filings
A list of recent ICRB annual rate filings can be located in the Circular section of our website.
