What is a step rate?
As previously explained, claims-made policies insure you only if you’re insured both on the date the incident happened and on the date you report it to your carrier. Usually, there is a delay between when the incident happens and when it is ultimately discovered and reported. This delay typically is at least one year, sometimes many years. For this reason, you are at less risk of reporting a claim to a carrier during your early years of coverage with that carrier, and this is why your premiums are much lower during that time. During the first year, you are insured only for those cases that occur and are reported during your first year of coverage. Since the likelihood of your having such a claim is minimal, your premium is at the lowest level during this first year. In the second year, your exposure is greater and your premium higher because coverage is for claims reported in the second year for incidents occurring during either the first or second year. This progression of upward prem
