| (a) Definitions. The following words and terms, when used in this section, shall have the following meanings, unless the context clearly indicates otherwise. (1) Basis of premium--Premiums shall be computed on the total remuneration paid or payable by the insured for services of employees covered by the policy as defined in Texas Basic Manual of Rules, Classifications and Experience Rating Plan for Workers' Compensation and Employers' Liability Insurance, Rule V. (2) Classification codes--Classification codes group employers into classifications so that each class reflects the exposure common to those employers. Classification codes are listed in the Texas Basic Manual of Rules, Classifications and Experience Rating Plan for Workers' Compensation and Employers' Liability Insurance. (3) Deductible credit--The amount by which the modified premium is reduced as a result of the
policyholder's election of a deductible option. The deductible credit shall be applied according to Texas Basic Manual of Rules, Classifications and Experience Rating Plan for Workers' Compensation and Employers' Liability Insurance, Rule XIX. (4) Dividends paid to policyholders--Dividends paid to policyholders are a return of part of the premium paid for a policy issued on a participating basis. (5) Expense constant--An expense constant is a premium charge which applies to a policy in addition to the premium. It covers issuing, recording and auditing expenses related to the policy. It is a flat charge and is not subject to premium discount, experience rating or retrospective rating adjustment. (6) Modified premium--The modified premium is obtained by multiplying the insured's premium times the modifier (i.e., Modified Premium = Premium x Modifier). (7) Modifier--A modifier adjusts the
premium upward or downward. The modifier must be calculated in accordance with Texas Basic Manual of Rules, Classifications and Experience Rating Plan for Workers' Compensation and §VII, Employers' Liability Insurance. The insured and the insurance company may negotiate the calculated modifier downward in accordance with §V, Texas Experience Rating Plan. (8) Premium--The premium is determined by multiplying the basis of premium by the rate for each classification of employee, adjusted by any other charges that may be applicable, as provided for in the Texas Basic Manual of Rules, Classifications and Experience Rating Plan for Workers' Compensation and Employers' Liability Insurance (i.e., Premium = (Basis of premium x Rate) +/- Other charges). (9) Premium discount--A premium discount is a reduction of the premium based on the economies of scale related to the size of the policy. A retrospectively rated policy
includes premium discount in rating factors rather than as a separate item. (10) Rate--The rate is the amount of premium for each $100 of payroll for each classification of employee. (11) Remuneration--Remuneration is money or substitutes for money. (12) Retrospectively rated policies--Retrospectively rated policies are policies for which the final premium is based on losses incurred during the policy period. The final premium is not determined until either all claims are closed or the pre-selected maximum has been reached. (13) Return premium--Return premium is the portion of a premium which is returned to the insured as a result of cancellation, rate adjustment, or a calculation that an advance premium was in excess of the actual premium. (14) Standard premium--The premium before the application of premium discount. It is obtained by subtracting the deductible credit from the modified
premium (i.e., Standard premium = Modified premium - Deductible credit). (b) Gross premiums. (1) For policies issued with an effective date prior to September 1, 1993, gross premiums shall be computed in the following manner: Standard Premium less Premium Discount plus Expense Constant less Return Premium less Dividends Paid on that direct business (i.e., Gross Premiums = (Standard Premium - Premium Discount + Expense Constant - Return Premium) - Dividends Paid). (2) For policies issued with an effective date on or after September 1, 1993, gross premiums shall be computed in the following manner: Standard Premium less Premium Discount plus Expense Constant plus Deductible Credit less Return Premium less Dividends Paid on that direct business (i.e., Gross Premium = (Standard Premium - Premium Discount + Expense Constant + Deductible Credit - Return Premium) - Dividends Paid). (c) Retrospectively rated
policies. Any adjustments made to retrospectively rated policies are to be treated as premiums written in the year of the adjustment for the purpose of computing gross workers' compensation premiums. (d) This section applies to licensed insurers only. The tax base for certified self-insurers is defined by the Labor Code, §407.104.
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