Which formula represents manual premium calculation?

Which formula represents manual premium calculation?

• A. Payroll / 100 x classification factor
• B. Governing class code
• C. D-ratio
• D. Actual losses

Answer: (A)

Manual premium calculation is based on how much payroll an employer has and the rate assigned to their operations. Rates in workers’ compensation are set per $100 of payroll, so you convert the payroll into units of $100 and multiply by the classification rate. In other words, base premium = (payroll ÷ 100) × classification rate (or factor). After this base amount, adjustments like experience modification, credits, or surcharges can change the final premium. Governing class code is about which rate applies, not the calculation itself. D-ratio and actual losses relate to loss experience or claims and are used in other rating scenarios, not the basic manual premium formula. For example, if payroll is 500,000 and the class rate is 2.50 per $100, the base premium is (500,000 ÷ 100) × 2.50 = 5,000 × 2.50 = 12,500.

Manual premium calculation is based on how much payroll an employer has and the rate assigned to their operations. Rates in workers’ compensation are set per $100 of payroll, so you convert the payroll into units of $100 and multiply by the classification rate. In other words, base premium = (payroll ÷ 100) × classification rate (or factor). After this base amount, adjustments like experience modification, credits, or surcharges can change the final premium.

Governing class code is about which rate applies, not the calculation itself. D-ratio and actual losses relate to loss experience or claims and are used in other rating scenarios, not the basic manual premium formula. For example, if payroll is 500,000 and the class rate is 2.50 per $100, the base premium is (500,000 ÷ 100) × 2.50 = 5,000 × 2.50 = 12,500.