For those in the habit of reviewing Property Worksheets attached to the Agency view of Frankenmuth Insurance Commercial Package policies, you may have noticed some recent changes. Policies with an effective date on or after 08/01/12 now display a transition factor (TRANS FTR) and a limit of insurance factor (LOI FTR). In addition, the Rate Group, Class Limit, and Theft Increment for Business Personal Property coverage have all been eliminated. These changes are a result of the ISO revision to its property rating algorithm.  

Having determined the probability of a total property loss decrease as the size of the property exposure increase, ISO has revised the rating algorithm to include a relativity factor based on the limit of insurance. From a very broad perspective, property coverage at a $50,000 limit, for example, would result in a higher relativity factor (due to a higher probability of total loss) than property at a $10,000,000 limit (reflecting a lower likelihood of total loss).

In an effort to mitigate the immediate premium impact, a transition factor will be applied to existing property coverage over a three to four year period (varies by state). Only property loss costs already on the policy before conversion to the new rating plan will be impacted by a transition factor.  A new location being added after 08/01/12 might be eligible for a limit of insurance factor, but would not be subject to transition (since it is not transitioning from the old plan).

Other than the modification to the worksheet you should notice little difference, and the rating change should be completely transparent to our insureds.