Underwriting Authority & Standardized Credit Programs

Scheduled Credit/Debit

Depending on state regulation a Carrier may file to apply ‘Scheduled Modification’ to a WC quote.  This is a way to provide underwriter discretion, a human element.  This deviation is typically +/- 25% but can be less or more depending on state regulation (TX is +/- 40%).

Using 25% as an example, this presents the potential for a very large pricing swing and therefore a competitive market.  In a state where LCM filings are used, it presents a carrier with a higher (less competitive) LCM to compete with a more aggressive carrier (lower LCM). 

Standardized Credit Programs

Many states have some sort of standardized credit program that a business may file for and if approved receive a certification granting them a credit on their WC policy.  If the business qualifies for the credit it applies to their policy regardless of the carrier, so it is a constant.  Some examples include the PA Construction Class Premium Credit (CCPC), the Employer Workplace Safety Program Premium Credit in FL or a Managed Care Credit in NJ. 

Let’s look at PA’s CCPC.  The CCPC was created in an effort to off-set the higher wages paid (and ultimately higher premium) to Union employers vs. Non-Union employers.  In order to qualify the business submits their total (PA) payroll and corresponding total hours worked for each applicable classification covering the business’s operations.  The total payroll is divided by the total hours worked to come up with the business’s hourly rate (wage).

If the business’s hourly rate paid exceeds the ‘Qualifying Rate’ the business will receive a credit.  The credit is a sliding scale (with a cap) based on how much their hourly rate exceeds the qualifying rate.  If the business’s hourly rate does not exceed the qualifying rate they do not receive a credit.  Once approved, this credit applies to the business’s policy rating regardless of the carrier, so it is a constant.  Also, the business must file for it annually. 

Some states and some programs require that the carrier issuing coverage file to use the premium reduction credit.  NJ’s Managed Care is a great example.  If the business uses an approved Managed Care Organization (MCO) they qualify for the credit, however the carrier issuing coverage must notify the Rating Bureau in writing (on the appropriate form, no cocktail napkins) if they intend to apply the credit.  So if the business qualifies but the insurer has not filed to use it, the credit will not be applied to the policy. 

In a state with relatively inflexible pricing, such as NJ, knowing the type of credits available as well as the carriers who are filed to use them is very critical because it is one of the few options available to provide the prospect with savings.