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Premium discounts and surcharges acknowledge risk differences between customers, reducing
premiums for customers without a history of repeated claims.
Experience discounts and surcharges are calculated using individual loss experience and the comparison to area losses. Crop Insurance calculates premium discounts and surcharges by comparing the claim received to the total premium (net of experience discount) paid by the producer and governments. When an increase in the number of losses is experienced, the discount is reduced and may even result in a surcharge.
The following crops and programs are excluded from all experience discount and surcharge calculations: caraway, coriander, dryland dry beans, Khorasan wheat, vegetables, wild rice, timothy hay, the Forage Diversification Option, the weather-based programs (Forage Rainfall Insurance Program, Annual Crop Weather Based Insurance Program, Corn Heat Unit Program), Establishment Benefit, Unseeded Acreage and Gopher Damage claims.
How your individual loss experience is used:
Your Indemnity |
Your Discount/Surcharge |
| No claim |
1.0 credits earned |
| Indemnity less than or equal to 20% of total net annual premium* |
0.5 credits earned |
| Indemnity greater than 20% but less than or equal to 100% of total net annual premium |
No change |
| Indemnity greater than 100% but less than or equal to 200% of total net annual premium |
1.0 debits earned |
| Indemnity greater than 200% of total net annual premium |
2.0 debits earned |
* Cumulative premium paid by the producer and governments
How the area loss experience is used:
Comparison to Area |
Your Discount/Surcharge |
| Highest risk customers – amongst the highest 10% of indemnity paid among claimants |
1.0 debits earned |
| High risk customers - amongst the next highest 10% of indemnity paid among claimants |
0.5 debits earned |
| Average risk customers |
No change |
| Low risk customer – you have no claim in a risk area where 60% of customers have received indemnity |
1.0 credits earned |
| Lowest risk customer – you have no claim in a risk area where 70% of customers have received indemnity |
2.0 credits earned |
The number of credits or debits earned will be added to your previous balance. Partial credits are rounded down. Accumulated credits or debits must achieve a complete step before the discount or surcharge is adjusted.
 |
Premium Discount Received |
 |
| Accumulated Credits |
0 |
1 |
2 |
3 |
4 |
5 |
6 |
7 |
8 |
9 |
10 to 13 |
| Discount % |
0 |
5 |
6 |
8 |
11 |
15 |
20 |
26 |
33 |
40 |
50 |
| Accumulated Debits |
0 |
-1 |
-2 |
-3 |
-4 |
-5 |
-6 |
-7 |
-8 |
-9 |
-10 to -13 |
| Surcharge % |
0 |
0 |
0 |
8 |
11 |
15 |
20 |
26 |
33 |
40 |
50 |
The maximum number of both debits and credits a customer can accumulate is 13. Customers with 13 credits cannot lose their 50 per cent discount based on one year’s indemnity. There is a one-year lag in this calculation; the indemnities you received in 2006 will impact your discount/surcharge in 2008. New contract holders will remain at zero following their first year of coverage due to this lag.
| Example |
Heading into 2006, you had 2 accumulated credits meaning you received a 6% premium discount.
- In 2005, your claim was less than 20% of the total premium paid and you earn 0.5 credits for a total of 2.5. Since partial credits are rounded down, you will remain at 2 credits or a 6% premium discount. Due to the one-year lag in the calculation, this value would appear on your Statement of Insurance for 2007.
- In 2006, your claim was greater than 200% of total premium paid, resulting in 2 debits against your balance of 2 credits. Your claim is then compared to the claims in the risk zone. Where you are among the highest 10% of indemnity in the area, one more debit would be applied resulting in a -1 accumulated debit. This then equates to a discount of zero, a value appearing on your Statement of Insurance for 2008 due to the one-year lag in the calculation.
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