Commercial Auto Rating; Class, Experience, & Schedule Rating
Businesses that routinely use vehicles for deliveries, transportation, or other business-related reasons, when it comes to auto policies, use class rating as that reflects the average probability of loss. As the amount of the premium rises, perhaps due to accidents, or merely expansion of the company fleet, it may then be eligible for experience rating, which is a technique that adjusts the client’s premium for the upcoming policy period based on the operation’s experience during the current period.
Schedule rating is used to modify the premium to better reflect other characteristics not ingrained in class rates, and often awards things such as training and selection of employees. Commercial Auto Rating can be very advantageous to companies with large fleets and little or no record of accidents or violations.
Vehicle usage is a large determining factor
Because there is a huge difference in risk between how one company may utilize vehicles from the way another might, vehicle usage then becomes a contributing factor. For example, employees driving to and from job sites as opposed to those using vehicles to haul goods, vehicle use now becomes an important factor in the rating process.
ISO has three types of vehicle use definitions. Vehicles used mainly to transport personnel and material to job sites (service use); vehicles used principally to make deliveries to households (retail use); and vehicles that fall outside of service or retail use classifications (commercial use). As an underwriter, we must understand the nature of the insured’s business in order to properly classify the vehicles being used.
Private passenger autos under a commercial auto policy are charged a flat fee for liability whereas trucks, tractors and trailers are classified and rated using four factors: vehicle weight and size, vehicle use, radius of operation and special industry classifications.
Obviously, depending on the class of the truck, the greater the exposures that may exist. For example, larger heavier trucks have a capacity to create greater damage than the threat that a smaller truck may impose, and therefore those larger trucks may present a higher loss risk. A Commercial Auto Rating System takes everything into account in order to provide the best rates possible.