For assigned risk policies in Indiana, the Graduated A Scale is used to calculate the agent commission (producer fee). The table appears in the Assigned Risk Supplement to the Basic Manual, Appendix-9, Exhibit-C.
|
Premium |
% |
|
First $ 1,000 |
8
|
Next $ 4,000
|
5
|
Next $ 95,000
|
3
|
Over $100,000
|
2
|
For example, the producer fee for a $10,000 policy is $430 and is calculated as follows:
first 1,000: 1,000 x 8% = 80
next 4,000: 4,000 x 5% = 200
next 95,000: 5,000 x 3% = 150
Total = 10,000 premium and 430 fee
Standard Premium
The Basic Manual Indiana Assigned Risk Special Rules (green pages), Article II, rule 2.12(a). Producer Fee, page 11, states that the producer fee "shall be based on the state standard premium charged and collected..."
The Basic Manual Rule 3.20., page R33 defines standard premium as follows:
Standard Premium is the premium before the application of the premium discount. It is the state premium determined on the basis of:
-
Authorized rates
-
Disease loadings
-
Nonratable elements
-
Aircraft seat surcharges
-
Premium for increased limits of liability
-
Experience rating modification
-
Applicable schedule rating modification
-
Minimum premiums
Total Standard Premium is the total premium for all states covered by the policy excluding expense constant and any disease charge subject to the Federal Coal Mine Safety & Health Act before the application of the premium discount.
The Basic Manual Indiana Assigned Risk Special Rules (green pages), LSRP Section, C.2.f. Standard Premium defines standard premium as "the premium for the risk determined on the basis of authorized rates, any experience rating modification, ARAP, assigned risk surcharge programs other than LSRP, and minimum premiums."
The deposit premium calculation should include the appropriate surcharge amount when applicable.
When Payable
The servicing carrier pays the fee to the producer. The fee is based on state standard premium charged and collected. The fee is payable upon payment and receipt of premium due (reference Assigned Risk Supplement to the Basic Manual, WCIP Section II, Rule 13). The year 2000 Servicing Carrier Performance Standards, part E.2.f also states that the carrier will pay the producer fee as premium is collected. The carrier is required to process and mail fee payments within 30 days from the date the policy or from receipt of premium.
NOTE: Any producer/agent may submit an assigned risk application for Indiana coverage. You do not need an Indiana agent's license. However, only licensed Indiana agents (either resident or nonresident license) receive commissions. The carrier will recognize the non-licensed agent as the agent-of-record on the account for all other purposes.
Agent Commission Includes Surcharge
The assigned risk surcharge applies to an assigned risk policy when the total modified premium is in excess of $2,500, effective January 1, 2003. Commission is paid on standard premium which includes the surcharge. The anniversary rate date rule does apply and will in some cases determine the application of the surcharge.
The Premium Algorithm Item Filing RM-W-8022 effective July 1, 2000 placed the assigned risk surcharge just below the standard premium line which would make you think it is not part of standard premium. So, we initiated Item Filing RM-01-IN-00 also effective July 1, 2000 to amend the algorithm for Indiana to place the surcharge just above the standard premium line.
The ICRB has always indicated that Indiana agents receive commission on the premium generated by the assigned risk surcharge since the surcharge is part of standard premium.
The Indiana WCIP application was revised in April 1992 to reflect the proper placement of the surcharge to premium and to indicate that the surcharge is part of standard premium. Note: Coal mine nonratable disease element is excluded from the surcharge since the element is for federal, not state coverage.
NCCI circular, RMSRC-93-7, issued March 23, 1993, shows the producer fee schedule that applies to a state and the premium base for calculation of producer fees. The chart indicates that producer fees are to be paid on assigned risk pricing programs unless an exception has been noted.
LSRP Exceptions - no commission
The Loss Sensitive Rating Plan does not pay commission for:
(refer to Item Filing 01-IN-94, page 5)