Masonry Magazine July 1965 Page. 5
Special Report:
On a subject matter of vital concern to every responsible mason contractor
INSURANCE FOR CONTRACTORS
By Walter T. Derk, Fred S. James & Co.
The Mason Contractors Association of America is pleased to present this Special Report on "Insurance For Contractors". It is a comprehensive guide to liability exposures common to the Construction Industry and the Insurance coverages available to protect against them. The Report will cover General Liability, Property Damage, Contractual Liability, Illinois Scaffolding Act, Automobile Liability and Workmen's Compensation. Make sure you read this and every part of this masonry feature.
Part VII
RETROSPECTIVE RATING
Guaranteed Cost Experience Rating Plans take into account the insured's premium-loss record over the last several years to arrive at a fixed renewal rate. Retrospective Rating does exactly the same thing, then goes one step further to determine the final premium for policies subject to the Plan, only after they expire. By adjusting the standard premium in direct relation to losses reported under those very policies, Retrospective Rating reflects more promptly and more closely the effect of such loss experience, good or bad.
Available as an option to Guaranteed Cost Plans, Retrospective Rating plans are extremely popular with classes of business developing sufficient premium under normal rating methods to make them workable. Recent refinements, particularly under Plan J, reduce the premium level required for such plans and bring minimum/maximum premium percentages down in a range acceptable to most businesses. Some contractors engaged in extra-hazardous work may find it difficult to buy insurance any other way, because there is a degree of protection for the company built into most plans, specifically, the difference between standard and maximum premiums. To explain how they work, we should first define some terms:
Manual Premium-The premium developed by manual rates applied to units of exposure; that is, payroll, contract cost, gross receipts or number of vehicles.
Standard Premium-Manual premiums plus credit or debit factors produced by Experience Rating Plans. In theory, the same premium developed under Guaranteed Cost Policies.
Basic Premium-A percentage of the standard premium retained by the company to cover acquisition costs, general administration, safety engineering, audit expenses, company profit, loss limitation charges, etc.
Incurred Losses Amounts paid and held in reserve by the insurance company, sometimes limited to maximum amounts chargeable because of any one claim or accident.
Loss Conversion Factor-A percentage loading added to incurred losses to cover claim adjustment expenses.
Tax Multiplier-A fixed percentage factor designed to cover premium taxes regulated by the individual states involved.
Minimum Premium-A percentage of the standard (continued on page 7)
This material is copyrighted by Walter T. Derk, 1963, and can not be reproduced in any manner without the written permission by both Mr. Derk and the MCAA.