Target
Rating
We all know price is a major consideration for many.
It would often help to know the exact IRPM (Schedule
Mod) needed to write a commercial account. Here's
how to do that!
Companies are required to file with TDI their Loss
Cost Multipliers, Minimum Premiums, Package Mods,
etc..., including IRPM maximum and minimum percentages.
On all risks other than those defined by statute
as "Large Risks", the company must use
the filing data in their rating process. In the regulated
market, the underwriter and agent negotiate price
by changing the IRPM percentage (within the range
filed by the company). We realize there are other
competitive tools.
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Let's use an example
to demonstrate the rating steps needed to determine
the IRPM needed to write an account. The account
you're quoting has Property, General Liability, Auto
and Comp on the table. Meet or beat $33,272 on the
whole account, and it's yours!
Your best quote is as follows:
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Your
price on the Auto and Comp are the best you have
available (no more games to play with the price).
The Property and CGL were quoted with a -15% IRPM.
The company has filed a maximum IRPM discount of
-40%. What IRPM do you tell the underwriter you need
on the Property and CGL to write this account?
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Step 1-Re-rate your Property and CGL without
IRPM.
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Step 2-Subtract your Auto and Comp quote from the competitors
total. |
Step 3 - Divide the Target Premium by your Property
and CGL Total Premium w/o IRPM: |
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Step 4-Convert the result to a percentage. This is
the IRPM needed to meet the competitors price.
.6809 = -31.91%
WARNING--There are some "gotcha's" in
this example:
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If any minimum premiums are included in the
rating then the calculation could be off if the
company does not apply IRPM to minimums (some
do and some don't).
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If the indicated IRPM doesn't fall within the
range filed by the company then you are limited
to the filing maximum and/or minimum percentage.
- Rounding will cause a slightly different final
premium. Always re-rate the risk with the indicated
IRPM to assure accuracy.
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