Anniversary Rating Date
An important concept in workers compensation insurance is the anniversary rating date. This article will explain what this date is and why it is important.
Classifications, Rules and Rates
The premium you pay for workers compensation insurance is largely determined by the classifications assigned to your business and the rate charged for each classification. Rates and classifications are governed by rules drafted by the NCCI or your state's rating organization.
These rules can affect your premium as well.
Classifications, rates and rules can change from time to time. Rates may go up or down. Classifications may be added, revised or deleted. New rules may be drafted or existing rules may change. When workers compensation rates, rules or classifications change, the changes may be reflected in your workers compensation policy on your anniversary rating date.
Usually the Same as Your Inception Date
The anniversary rating date is the same month and day as your policy inception date if you have had workers compensation coverage under a single policy for at least a full year. For example, suppose that you own a small company called Expert Electrical. Your employees are insured under a workers compensation policy. Your current policy began on January 1, 2016 and expires on January 1, 2017. Your company has been in business for several years and has purchased workers compensation coverage in each of those years.
Your previous policy was in effect from January 1, 2015 to January 1, 2016. January 1 is your anniversary rating date.
Suppose that your insurer (or your state bureau) reduces the workers compensation rate for electricians in your state by seven percent. The rate reduction takes effect on April 1, 2016.
Will your insurer amend your policy as of April 1 to apply the rate reduction? The answer is no. The new rate will be applied on your next anniversary rating date, January 1, 2017. The rate will be included when your policy is renewed for the January 1, 2017 to January 1, 2018 policy term.
When Dates May Differ
In some cases, your anniversary rating date may be different from your policy inception date. Here are some situations that can cause the dates to differ:
- Your policy has been cancelled midterm and replaced with a new policy
- You have experienced gaps in coverage
- You have multiple policies with difference effective dates
The following examples demonstrate how your anniversary rating date may be affected by a midterm cancellation or a gap in coverage.
Example: Midterm Cancellation
Suppose that your current workers compensation insurer is experiencing financial problems so you switch to another insurer. Your policy that began on January 1, 2016 is cancelled effective August 1, 2016. Your new insurer issues a policy for the period August 1, 2016 to August 1, 2017. Even though your policy dates have changed, your anniversary rating date remains the same (January 1) until your new policy expires (assuming it has been in effect for one full year).
The rate reduction that took effect on April 1, 2016 will not apply when your policy is rewritten on August 1, 2016. Rather, it will apply to your policy effective January 1, 2017 (your anniversary rating date). Your new insurer should amend your policy effective that date to reflect the lower workers compensation rate.
Your anniversary rating date will change to August 1 in 2017. On that date your policy will have been in effect for one year (August 1, 2016 to August 1, 2017). When your policy is renewed for the August 1, 2017 to August 1, 2018 policy period, it will reflect the rates, classifications and rules that are in effect on August 1, 2017.
Example: Gap in Coverage
Your anniversary rating date may vary from your inception date if there is a gap in your workers compensation coverage. For example, suppose that your company (Expert Electrical) has purchased a workers compensation policy for the period January 1, 2016 through January 1, 2017.
In late October of 2016 your insurer notifies you that it will not renew your policy when it expires because of your poor loss experience. After a diligent search on your behalf, your insurance agent finally secures coverage for you in your state's assigned risk plan. Your new policy begins on March 1, 2017 and expires on March 1, 2018.
You had a gap in coverage from January 1, 2017 until March 1, 2017. Thus, your anniversary rating date will remain January 1 until your new policy expires on March 1, 2018. If a classification change occurs on February 1 of 2017, the new classification will not be included in the policy that begins on March 1, 2017. Rather, the classification that applied on January 1, 2017 will be used. The new classification will be applied to your policy on your anniversary rating date (January 1, 2018).
When your new policy expires on March 1, 2018, your anniversary rating date will change to March 1. Your anniversary rating date will change because your new policy will have been in force for one year.
Not Applicable in Some States
Anniversary rating dates do not apply in some states. Examples are Alabama, West Virginia, Georgia, Illinois, Texas, Louisiana, Maine and New Mexico (this is not a complete list). If your business operates in one of these states, your policy will be subject to the rates, classifications and rules that are in effect on the date your policy begins. For example, if a rate change occurs on March 1, 2015 and your policy renews on April 1, 2015 your renewal policy should include the new rate.
Anniversary Rating Date Endorsement
How can you tell if your anniversary rating date differs from your policy effective date? If the dates are different, your policy should include an endorsement called the Anniversary Rating Date Endorsement. Your anniversary rating date should be listed in the endorsement.