What is a composite rating in insurance?
The composite rating is used as a streamlined method of determining the premium cost of an insurance policy. Instead of assigning a rate to each risk insured on the policy, a single rate is used for all risks.Class CodesInsurance policy premiums are based upon the nature of the risk insured and the volume of each risk. The type of risk is assigned a category known as a class code and an individual policy for a organization may incorporate several class codes.RatesEach insurance class code is assigned a cost or rate based upon the corresponding risk. For example, an employer may employ both office and field staff. The office staff will be assigned a different class code than the field staff, which has a more costly class code.PremiumThe insurance premium is generated by multiplying the exposure in each class code by the rate for each class code. Exposure can be expressed in revenue dollars or payroll or some other objectively measurable figure.Composite RatingTo simplify the rating proc
