Choose the best answers for the following questions
1. Which of the following statements is true?
A. Loss costs for fleets are always lower
B. Loss costs for fleets are sometimes lower
C. Loss costs for fleets are the same as non-fleets
D. Loss costs for fleets are sometimes higher
E. Loss costs for fleets are always higher
2. How often does a truck need to go beyond a 50-mile radius to no longer be considered as local?
A. One day a week
B. 3 times in a week
C. Outside a 50-mile radius more than 25% of the time
D. Outside a 50-mile radius more than 50% of the time
3. Radius of operations is measured by
A. The distance shown by Google Maps from the daily garaging location to the furthers point traveled in a day
B. The distance measured in a straight line to the furthest point in a day
C. The distance measured in a straight line in the furthest distance from one location to the next during the day
D. The distance shown by Google Maps for the furthest location from one location to the next during the day
4. When is a Business Auto Policy auditable?
A. Business Auto Policies are not auditable
B. Only when it composite rated.
C. Only Hired-Auto costs are audited
D. Always unless the company waives audit provisions.
5. Which of the following is considered a fleet according to ISO rating rules?
A. An owner operator who owns 3 Extra-heavy Truck Tractors and pays $21,000 in premium
B. A contractor who operates 2 pickup trucks, 2 truck tractors, 2 trailers use to haul 2 pieces of mobile equipment that are covered under the general liability policy
C. A plumbing contractor who operates 4 vans and pays $8,200 in premium
D. A law firm that provides a company car to each one it’s 7 partners.
Now the answers!
Number 1! The correct answer is C. While ISO does segregate coding fleets from non-fleets, the base or manual loss costs are the same. Fleets have other rating methodologies and modifications available to them such as experience rating which compares the insured’s loss history to what is expected. In addition, there are scheduled rating plans which enable underwriters to increase or decrease manual premiums based on individual risk characteristics.
Number 2! The most correct answer is A, one day a week. I say the most correct answer because ISO does not actually specify the number or frequency a vehicle need to go beyond the radius. They simply use the descriptor of “regularly used.” The predominant qualifier I have see is if they go outside the 50-mile radius at least one day a week, they are no longer local use. But the definition may vary between companies and perhaps even between underwriters. Given that Business Auto Policies are auditable, it makes sense you know the rules the carrier, underwriter, or premium auditor will apply to avoid any post policy period surprises!
Number 3! The answer is B, the distance measured in a straight line to the furthest point in a day. That means “as the crow flies,” taking out the various twists, turns, and jig-jaws. One precautionary note is I believe local use is over-used in many areas. For example, a contractor who works throughout the greater Phoenix, Arizona area most likely is an intermediate radius. From one corner of Maricopa County to the other, we are looking at close to 100 miles. I’m sure there are many local geographic territories that present a similar exposure.
Number 4! The correct answer is D! It is a common misconception that auto policies are not audited. It is clearly stated in the policy conditions “The estimated premium for this Coverage Form is based on the exposures you told us you would have when this policy began. We will compute the final premium due when we determine your actual exposures.” This applies to owned, non-owned and hired vehicles.
Number 5! The answer is D!. The only requirement for fleet status is the insured have more than 5 self-propelled vehicles. ISO excludes self-propelled equipment that is insured under the General Liability Policy. Fleet status is one of the primary qualifiers for both experience and scheduled rating programs.
If you scored less than 4 out of 5, you may want to brush up on your business auto rating skills. One good source to do so is offered by Kaplan University. It is self-taught and qualifies for CE credits in most states.