AAIS BUSINESSOWNERS POLICY RATING
CONSIDERATIONS
(May 2025)
The American Association of
Insurance Services (AAIS) Businessowners Policy's rating uses an established
formula and a specific rating methodology. Previously all rating has been based
on the property limit of insurance, but the 01 15 manual edition introduced
separate rating for liability exposure.
The classification table serves several
purposes. It begins on page 116 - Section Class 1 of the Businessowners
Multistate Manual. The most important thing is that it lists only eligible
classifications. If a classification is listed, the table then supplies a rate
group for each of the following:
It is also important to know if
the building is owner-occupied or tenant-occupied. A building is considered
owner-occupied if the building owner occupies at least 75% of it. Anything less
is treated as tenant-occupied. If the building has multiple occupancies, each
tenant's classification (combined with the total square foot area it occupies)
determines the buildings final classification.
Apartment buildings with offices
are still classified as apartment buildings if the office area is 15% or less
of the total square foot area. If the office area occupies more than 15% of the
building, the building is classified as an office building.
Apartment buildings that contain
offices, retail spaces, wholesale operations, service providers, or processing
facilities are classified based on the occupancy that has the largest square
footage. If all tenants occupy the same amount of space, the classification
assigned to the entire building will be that of the tenant with the
highest-rated occupancy classification.
Buildings with any type of
restaurant occupancy are rated as restaurants.
Buildings, other than apartments,
with retail, wholesale, service, or
processing occupancies are rated using the classification of the tenant with
the largest square footage. If all tenants occupy the same amount of space, the
classification assigned to the entire building will be that of the tenant with
the highest-rated occupancy classification.
External protection means the
risk's access to public protection. AAIS uses three classes: Protected,
Partially Protected, and Unprotected.
Buildings are within 1,000 feet
of a public fire hydrant and within five miles of a responding fire department.
Buildings are more than 1,000
feet from a public fire hydrant but are still within five miles of a responding
fire department.
Buildings do not meet either of
these criteria. They are more than 1,000 feet from a public fire hydrant and
more than five miles from a responding fire department.
The following are the six types
of construction:
Exterior walls are made of wood
or other combustible materials and can be combined with other materials.
Exterior walls are made of
masonry materials such as adobe, brick, concrete, gypsum block, etc. However,
the floors and roof are combustible.
Exterior walls, floors, and roof
are made of and supported by metal, asbestos, gypsum, or other non-combustible
materials.
Exterior walls are masonry
materials, as described in joisted masonry, but the floors and roof are metal
or other non-combustible materials.
Exterior walls, floors, and roof
are masonry or fire resistive with a fire resistant rating of one hour or more
but less than two hours.
NOTE: It appears AAIS may not have a
fire resistive rating and therefore the manual states to rate as fire
resistive.
Exterior walls, floors, and roof
are masonry or have a fire resistive rating of not less than two hours.
·
Mixed
construction
o
If the
exterior wall area is more than 1/3 combustible material, the construction type
is frame.
o
If the
exterior wall, roof, and floors are 2/3 or more non-combustible material, the
construction type is non-combustible.
o
If 2/3 or
more of the total wall area is masonry or fire resistive materials, and:
§ 2/3 or more of the total floor
and roof area is masonry or fire resistive materials, the construction type is
fire resistive or modified resistive; or,
§ 2/3 or more of the total floor and roof area are
non-combustible materials, the construction type is masonry non-combustible;
or,
§ 1/3 or more of the total floor
and roof area are combustible materials, the construction type is joisted
masonry.
The 01 15 edition of the AAIS BOP
Manual introduced a revised rating methodology. Previously, the rating process
for buildings and liability was combined into a single procedure. The new
methodology requires calculating the premium for buildings and business personal
property separately, followed by calculating the liability premium
independently. Finally, these two premiums are added together to determine the
total Businessowner's Policy (BOP) premium.
Rating begins after developing the
information above. All loss costs must be converted to rates using the
insurance company's loss cost multiplier before using them in the rating
formula.
|
Business
Personal Property Premium |
|
|
Base Loss Cost Amount per $1,000/$500
deductible (State Table based on territory) |
Base Loss Cost Amount per $1,000/$500
deductible (State Table based on territory) |
|
X Insurance Company Loss Cost Multiplier |
X Insurance Company Loss Cost Multiplier |
|
X Subzone relativity (Subzone is found on State
Territory pages, but relativity is found in Multistate Table A) |
X Subzone relativity (Subzone is found on
State Territory pages, but relativity is found in Multistate Table A) |
|
X Protection Class Relativity (Multistate Table
B) |
X Protection Class Relativity (Multistate
Table B) |
|
X Construction Class Relativity (Multistate
Table C) |
X Construction Class Relativity (Multistate
table C) |
|
X Rate Group Relativity State level Table
D1 |
X Rate Group Relativity State level Table
D1 |
|
X All other
deductibles (Multistate Table 6.1) by amount of insurance and amount of deductible. OR Windstorm deductible (Multistate Table
6.2) by amount of insurance and amount
of deductible. Use Windstorm multiplier in lieu of the all
other deductible even though the all
other is required to be the same as the windstorm deductible. |
X All other
deductibles (Multistate Table 6.1) by amount of insurance and amount of deductible. Windstorm deductible (Multistate Table
6.2) by amount of insurance and amount
of deductible. Use Windstorm multiplier in lieu of the all
other deductible even though the all
other is required to be the same as the windstorm deductible. |
|
X Protective Device Factor |
X Protective Device Factor |
|
X Restaurant Modifications |
X Restaurant
Modifications |
|
X Actual Cash Value Factor |
X Actual Cash Value Factor |
|
Building Premium |
Business Personal Property Premium |
|
X Amount of Insurance Relativity (Multistate
Table G1) |
X Amount of Insurance Relativity (Multistate
Table G2) |
|
X Other factors such as peril exclusions,
other coverages, etc. |
X Other factors such as peril exclusions,
other coverages, etc. |
|
X Limit (per $1,000) |
X Limit (per $1,000) |
|
= Building Basic Premium |
= Business Personal Property Basic Premium |
|
Liability
Premium |
Final Businessowners Premium |
|
Base Amount per $1,000/$500 deductible
(State Table based on territory) |
Building
Basic Premium |
|
X Insurance Company Loss Cost Multiplier |
+ Business
Personal Property Basic Premium |
|
X Subzone relativity (Subzone is found on
State Territory pages, but relativity is found in Multistate Table A) |
+
Liability Basic Premium |
|
Rate Group relativity State level Table
D2 |
= Total Businessowners Basic Premium |
|
Increased Limit Relativity |
Credits
and debits may be applied, and premium for other coverage may be added. |
|
X Actual Cash Value Factor |
|
|
Other factors such as peril exclusions,
other coveages, etc. |
|
|
(Choose only 1) X Building Limit (per $1,000) if lessors
risk only X Restaurant Annual Sales (per $1,000) if
restaurant X Business Personal Property Limit (per
$1,000) if not restaurant |
|
|
+ Liability Basic Premium |
|
|
Example: Marissas
Lamps owns and occupies a joisted masonry building in territory 010, Subzone
14, that is a Partially Protected Protection Class. Her building limit is $250,000,
and her business personal property limit is $60,000. She purchases an AAIS Businessowners Special Policy with a $1,000
deductible and a $1,000,000 liability limit. The premium is developed for the
building, the business personal property and
the liability. All are then added together for a final premium. |
||
|
Building Premium |
Business Personal Property Premium |
|
|
$1.451
Building Base Loss Cost Amount |
$3.447
BPP Base Loss Cost Amount |
|
|
X
1.50 Insurance Company Loss Cost Multiplier |
X
1.50 Insurance Company Loss Cost Multiplier |
|
|
X
1.05 Subzone Relativity |
X
1.05 Subzone Relativity |
|
|
X
1.427 Protection Class Relativity |
X
1.427 Protection Class Relativity |
|
|
X
.825 Construction Relativity |
X
.825 Construction Relativity |
|
|
X
1.934 - Rate Group 15 |
X
2.449 - Rate Group 15 |
|
|
X
1.00 Protective Device Factor |
X
1.00 Protective Device Factor |
|
|
X
1.00 Actual Cash Value Factor |
X
1.00 Actual Cash Value Factor |
|
|
X
.970 Amount of Insurance Relativity |
X
.984 Amount of Insurance Relativity |
|
|
X
200,000 |
X
60,000 Limit |
|
|
X
.979 Deductible |
X
.979 Deductible |
|
|
=
$988 Building Basic Premium |
=
$905 BPP Basic Premium |
|
|
Liability Premium |
Final Businessowners
Premium |
|
|
.500
Liability Base Loss Cost Amount |
$988
Building Basic Premium |
|
|
X
1.50 Insurance Company Loss Cost Multiplier |
+
905 BPP Basic Premium |
|
|
X
1.00 Subzone Relativity |
+
168 Liability Basic Premium |
|
|
X
3.111 - Rate Group 7 |
|
|
|
X
1.20 Increased Limit Relativity |
|
|
|
X
1.00 Actual Cash Value Factor |
|
|
|
X
60,000 BPP Limit |
|
|
|
=
$168 Liability Basic Premium |
=
$2,061 Total Businessowners Basic Premium |
|