How is a change to outstanding policies reflected on a policy?
The outstanding rate change can be reflected on a policy in two different ways. One option applicable for all policies is that the exposures may be split as of the date of the rate change. The full value of the rate change is then applied to the premium earned after the rate change. A second option, applicable for one-year policies covering operations that are not seasonal in nature, is to use the ratio method. In this option, the total manual premium is adjusted by a factor that varies by policy expiration date. This table of outstanding rate change values is published in the R.C. Bulletin announcing the rate change. Contact the Audit Department for additional information concerning the application of outstanding rate changes.
