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Author Topic: Normal Anniversary Dates (NAD)  (Read 12342 times)
 
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« on: April 02, 2008, 12:46:42 PM »

Normal Anniversary Date (NAD)


The application of Normal Anniversary Dates on workers compensation policies affects the premiums to a degree that its importance should not be underestimated.
 
Any review of this subject must take into consideration the special rule applicable to experience rated policies.  This rule is known as the “Push-Up Rule” or the “90-day rule” and may be found in the You must login to view links.
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California Workers’ Compensation Experience Rating Plan – 1995, Section V, Application of Experience Modification, Rule 2, Application of Experience Modification to a Single Policy
. (NOTE: WCIRB links work only in IE or Netscape)

Say the original policy written 10-1-2007 to 10-1-2008 is canceled effective 12-1-2007, and is re-written for the period of 12-1-2007 to 12-1-2008.

Since the 12-1-2007 policy effective date of the re-written policy is within 3 months or less from the inception date of the original policy (10-1-2007) the “Push Up Rule” applies and there is no NAD on the 12-1-2007/08 policy.

Example where rates apply for 14 months:

         

The new policy must incept within 3 months of the preceding policy for the “Push Up Rule” to apply.  It should be noted that the 3 month period may exceed 90 days.  There is no need to count the days within any 3 month period to determine whether or not the “Push Up Rule” applies. A maximum of 15 months may apply.

If you believe that the “Push Up Rule” applies, yet the WCIRB instructs you to endorse an NAD, you may find that there is also coverage by another carrier.  If an insured has multiple policies with different policy periods, the policy with the largest EAP will “set” the NAD.  Each new policy has the potential of an NAD which is why it is important to determine what the prior policy period was.

Non-Experience Rated Risks:  The “Push Up Rule” does not apply to a policy which has not earned an experience modification.  ANY change in policy dates will create a new NAD on non-rated policies in California. 

Listed below are some of the ramifications resulting from the misapplication of an NAD:

  • Additional premium on Final Audits
    The Audit Department may prevent this if caught while processing interims or checking audits.  Policies on installments without checking audits are thus dangerous.  In some cases, a carrier may not become aware of an NAD until 6 to 8 weeks after expiration.  As a result of the Unit Stat, the WCIRB usually catches this and instructs the carrier to revise the Final Audit.  Billing additional premiums this many months after expiration may be deemed to be lower than a belly gunner on an Armadillo.
  • Renewal of Undesirable Risks
    An acceptable loss ratio may warrant the renewal of a policy.  A return premium may increase the loss ratio to a point of being undesirable.  If the correct premium had been known, the policy may have been handled differently.  An increase in premium may reduce the loss ratio.  Too bad, renewal declined!
  • Unnecessary Confusion among customers
    Agents and insureds have a hard time understanding this concept which is harder to explain if the insured was not renewed or sent an invoice months after policy expiration.  We thus observe another role for the Premium Audit Department.  To Wit: billing the correct premium so that an accurate policy loss ratio may be used in evaluating the acceptability of a customer.

Please note that the above information assumes that your California Insurer adopted the USRP in the carrier’s filing without change.

Also, the NAD procedure may not be used by all carriers in the case of Non-rated risks at carrier’s option.  Please ask your underwriting department about this.
« Last Edit: June 16, 2008, 09:25:00 PM by auditor1 » Logged
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