The Anniversary Rating Date Endorsement has been eliminated by the National Council on Compensation Insurance, NCCI, effective May 1, 2017. Please note this only applies for states where NCCI acts as the rating bureau.
Be aware that other Independent State Rating Bureaus will make their own decisions regarding the continued use or elimination of the ARD endorsement.
This complicated endorsement has caused nothing but confusion for many many years. As a matter of fact prior to this action by NCCI, these eight states had previously eliminated the use of that endorsement:
Alabama; Illinois, Georgia, Louisiana, Maine, New Mexico, West Virginia and Texas
The purpose of this policy endorsement, as outlined in more detail below, was to prevent an employer from cancelling their current workers compensation policy and turn around and secure another policy at a lower rate. You see, the ARD endorsement controlled the timing when rates on a work comp policy were to be applied.
As a simple example, say an employer had a policy that began 1-1-2014 and the rate per $100 of payroll for his class of business was $5.00 on 1-1-2014. Now consider that on 6-1-2014 the rate for the employers business dropped from $5.00 to $4.00. The employer would naturally want to be able to use that lower rate and would consider canceling the original 1-1-2014 policy and re-write the policy with a 6-1-2014 effective date. The ARD endorsement would prohibit the employer form gainging the lower rate by requiring the rates in effect at the original date of 1-1-2014 be used on re-written policy until the 1-1-2015 date passed. At that time the new rates could be applied to the policy.
With the elimination of the Anniversary Rating Date endorsement, the employer in our above example will be able to take advantage of the new lower rate when they switch their policy on 6-1-2014 and not have to wait till their normal, or Anniversary Rating Date.
Continue reading below for more information on how this policy endorsement had worked prior to its elimination.
An endorsement to a workers compensation policy that advises the insured that the premium, rates and experience rating modification factor may change on the anniversary rating date.
This endorsement was developed by the National Council on Compensation Insurance, NCCI and is used as form WC 00 04 02. Its basic purpose is to advise the workers compensation policyholder that their rates, experience modification factor and premiums are subject to being adjusted or changed at the renewal date or anniversary rating date, ARD. A little known fact, all rules, classifications and rates are applied at the anniversary rating date, not necessarily at the renewal date.
The allowed use and application of this endorsement is lined out in the NCCI Basic Manual. Simply stated this workers comp endorsement is added to a policy only when the normal anniversary rating date is different than the policy effective date. Whether changed due to a cancellation and rewrite or for some other reason such as cancel for non pay, you should only find this attached to a policy when these dates are different.
So keep in mind, the anniversary rating date endorsement is only attached to policies when the rating date is different from the renewal date. As an endorsement it modifies the policy terms and allows the insurance company to use the rates that were effective at the anniversary rating date rather than those effective at the renewal date. This endorsement is removed when the renewal date and anniversary date are again the same.