RULE VI – RATING VALUES AND PREMIUM DETERMINATION

Item 4 of the Information Page – continued

1. DCRB Loss Cost DCRB Loss Costs – Dollar amounts per unit of exposure attributable to the payment of losses under workers compensation and employers liability coverages, filed by the DCRB based on the aggregate experience of all DCRB members and approved by the Insurance Commissioner.
2. Disease Or Radiation Loading
   a.  A supplemental disease loading (e.g. Code 0176) may apply to certain basic classifications (e.g. Code 513). The supplemental disease loading is an additional charge. It is not included within the rating value of the basic classification to which it is assigned. Once authorized, a supplemental disease loading may only be removed upon approval of the Delaware Compensation Rating Bureau, Inc.
   b.  The Delaware Workers Compensation Law includes “all occupational diseases arising out of and in the course of employment.” The classification and loss cost values applicable to basic classifications without a corresponding supplemental disease loading include the usual exposure to diseases with those classifications.
   c. A supplemental occupational disease loading may be applied to the carrier rate for any individual risk where the occupational disease hazard is abnormal. When a carrier plans to use the supplemental loading, they shall supply the DCRB with an inspection report either by an insurance carrier, Industrial Accident Board or some outside source which supports the abnormal disease exposure. Based on this report, the DCRB will authorize the supplemental loading and publish it on the DCRB data card for a minimum of one year. The supplemental loading can be removed only by an inspection report from an insurance company, or some other outside agency evidencing the abnormal exposure no longer exists. The supplemental disease loading is non- ratable in the experience and retrospective plans.
3. Terrorism
   Premium for Terrorism is calculated on the basis of total payroll according to Rule V. The premium charge is calculated by dividing a risk’s total payroll by $100 and multiplying the result times the carrier’s rating value. This premium is applied after standard premium and is not subject to any other modifications, including but not limited to premium discount, experience rating, schedule rating, or retrospective rating. Non-payroll exposures are not subject to premium charges for Terrorism. Policies issued on an “If Any” basis will not be charged a terrorism rate, unless premium develops during the policy term or at audit. Per capita charges are not subject to premium for Terrorism. Terrorism shall be separately stated on the Standard Policy and shall be designated to Statistical Code9740
4. Catastrophe (other than Certified Acts of Terrorism)
   Premium for Catastrophe (other than Certified Acts of Terrorism) is calculated on the basis of total payroll according to Rule V. The premium charge is calculated by dividing a risk’s total payroll by $100and multiplying the result times the carrier’s rating value. This premium is applied after standard premium and is not subject to any other modifications, including but not limited to premium discount, experience rating, schedule rating, or retrospective rating. Non-payroll exposures are not subject to premium charges for Catastrophe (other than Certified Acts of Terrorism). Policies issued on an “If Any” basis will not be charged a terrorism rate, unless premium develops during the policy term or at audit. Per capita charges are not subject to premium for Catastrophe (other than Certified Acts of Terrorism).Catastrophe (other than Certified Acts of Terrorism) shall be separately stated on the Standard Policy and shall be designated to Statistical Code 9741.

Premium for each classification shown in the policy is determined by multiplying the basis of premium by the rate.

All premiums shall be shown to the nearest dollar. A remainder of $.50 shall be rounded to the next higher dollar.

1. Expense Constant
   Expense Constant (if any) is determined by individual carriers’ rating values. It applies to every policy and it covers expenses such as those for issuing, recording and auditing, which are common to all workers compensation policies regardless of size.
2. Minimum Premium
   Minimum Premium (if any) is determined by individual carriers’ rating values. It is an expression of the lowest premium amount for which a single risk can be written and carried for any period of time.
   
3. Premium Discount
   Premium Discount (if any) is determined by individual carriers’ rating values. It recognizes that the relative expense of issuing and servicing larger premium policies is less than for smaller policies.
4. Retrospective Rating Factors

1. If the risk is subject to experience rating, the experience rating modification shall be shown in Item 4 of the Information Page and applied to the premium in accordance with the Experience Rating Plan Section.
2. Copies of Experience Rating Calculation
   a. The insurance carrier is furnished with the experience rate calculation. Subsequent insurance carriers may obtain copies of the experience rating calculation by way of special service at the appropriate charge
   .b. The DCRB shall furnish to any insured employer upon his written request, or to the Home Office or Branch Office of any member of the DCRB upon the written request of the employer, a copy of the experience rating calculation of that employer at an appropriate charge.
   c. The insurance carrier of record shall be notified of the DCRB experience modification established by the Experience Rating Procedure not more than 90 days prior to the effective date of the rating.

Additional rating procedures are in Rules XII and XIII for insurance for employers subject to the U.S. Longshore and Harbor Workers’ Act, the Federal Employers Liability Act and Admiralty Law.

1. An insurer may adopt a schedule rating plan, subject to such a plan being “Filed” (approved) by the Delaware Insurance Department. The plans permit the carrier to apply a schedule credit (use Code9887) or debit (use Code 9889) to the standard premium determined in accordance with the DCRB rating values and rating plans filed by the Delaware Compensation Rating Bureau, Inc.
2. The schedule modification is to be applied after application of any experience modification but before premium discount if applicable. The schedule modification does not apply to the expense constant or the minimum premium, if applicable, but does to the following:
   a. Premium for higher limit under Employers Liability.
   b. Short rate penalty premium
   c. Additional premium resulting from flat increase on outstanding policies.
   d. Non-ratable elements and supplemental loadings.
3. Show the schedule modification percentage and applicable statistical code on the Information Page.

Delaware and Pennsylvania Premium Algorithm Preface:

Optional use upon July 1, 2000. Mandatory use for policies effective on or after January 1, 2002.

The computation of workers compensation premium includes a broad complement of potential rating values, pricing programs and other similar or related variables. To the extent that these component parts of premium determination may be applied in a prescribed sequence and using defined formulas and/or relationships, several potential benefits arise including the following:

• Competitive differences within the marketplace can be more clearly defined and consistently applied;
• Similarly situated risks can receive comparable treatment with respect to specific rating values, pricing programs or other factors, increasing the equity of the marketplace;
• Analysis of the effects of various components of overall premium determination can be better understood and more intelligently compared across carriers, states and/or time;
• In the event that new pricing programs or other factors are introduced in the future, the defined existing formulas can provide a consistent basis for the development of programs and system procedures within the workers compensation industry.

                                                           Updates optional use November 26, 2002. Mandatory use for policies effective on or after October 1, 2004.                                                                                                                                                   Delaware and Pennsylvania Workers Compensation Premium Algorithm                                                                                                                                                                                                                                Premium Calculation Algorithm