Policyholder Services

What is a step rate?

Claims made and reported policies insure you only if you’re insured both on the date the claim is first made against you and on the date you report it to your carrier and the incident upon which the claim is based occurs on or after your retroactive date. 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 (if your retroactive date is the same as your policy inception date). 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 continues until you reach the mature rate.

What is meant by a “mature” rate?

At some point in time, all potential claims arising from services rendered during the first year of coverage should (theoretically) be reported already.  This point in time is referred to as the mature year.  Because the exposure levels off, premiums level off as well.   OMIC policies reach maturity in five years.  (Note that premiums may also increase or decrease due to OMIC’s overall loss experience.)

Will I start out at a first year step the first year I join OMIC?

Not necessarily.  Your step rate is determined by your retroactive date.  If you are beginning practice for the first time, transferring from an occurrence policy, or purchasing a tail from your prior carrier, you will join OMIC at a first year step.  However, if you obtain prior acts coverage from OMIC, your policy will be rated at whatever step you would be at had you been insured with us all along. If you have been insured under a claims made policy for more than four years and purchase prior acts coverage from OMIC, you will most likely be rated at the “mature” (fifth year) rate.

What is the difference between a rate increase and a step increase?

A rate increase is an increase in the base premium needed to offset increases in the frequency or severity of loss trends. (Similarly, decreases in the frequency or severity of loss trends may result in rate decreases.) It is OMIC’s objective to maintain rate stability over the long term and to implement increases only when necessary.

Step increases, as explained earlier, are increases in premium due to the accumulation of exposures to loss over a given time period and are a natural progression of the claims made and reported policy. Step increases are based on the normal reporting patterns of claims and occur regardless of the severity or frequency of claims. It is possible that you may experience a rate increase or decrease in the same year that you experience a step increase.