Auto Physical Damage Rating

New rating system for auto physical damage coverage system

LMCIT created a new rating method for auto physical damage coverage. It went into effect for property/casualty coverages renewing on or after Nov. 15, 2017.

New rating system allocates premiums more equitably

LMCIT’s core values include fairness and equity in how costs are spread among members. The auto physical damage coverage was evaluated in 2017, and while enough premium was being generated to pay members’ losses, the system of allocating premiums to members that generate most of the actual loss dollars showed room for improvement.

The new rating system better aligns premium and loss costs by vehicle class. For example, the new model will tend to shift premiums toward members with a proportionatelyChart of Premium and Loss Cost Allocation Comparison for Vehicles, 2004-2014 higher number of police vehicles and away from members with a proportionately higher number of fire department vehicles (the recent evaluation showed that the old rating method undercharged for police vehicles and overcharged for fire department vehicles).

Transition to the new system will not create premium shock increases

The new rating system will reallocate premium costs among members to some extent, meaning auto physical damage premiums will increase for some members and decrease for others. In recognition of this concern, a transition mechanism is in place to avoid shock increases for individual members. The plan caps the immediate effects the new system has on auto physical damage premium calculations, as follows:

  1. No member’s total property/casualty premium can increase more than 15 percent because of the auto physical damage rating method change; and
  2. No member’s auto physical damage premium can increase more than 100 percent because of the auto physical damage rating method change.

If the premium increase appears to be more than anticipated, please contact your assigned underwriter. LMCIT staff can offer various options, such as increasing deductible amounts, to lower the impact.