For policies with 10+ GL classifications, 10+ locations, or 100+ autos, any agent knows the headaches involved with a complex schedule. Getting the schedule right in the first place, tracking changes, and then the audit – these all present challenges. Not only to the agent, but also for the insured business. In addition, at audit time the insured may question the applicability of a new class added, or costs or payrolls charged to a particular class. For manufacturers and contractors, this can be an especially brutal process.

A solution is to use composite rating, meant to simplify detailed and cumbersome rating. It is used most often for General Liability policies, which might contain dozens of classes and/or locations, using multiple exposure bases: area, cost, payroll, sales, number of employees, units, each, admissions. Multiple locations and multiple classes are combined into just one premium basis, usually sales.

Underwriting still must rate each class and location, so the premium remains the same. The benefit is that the rating is much easier for the insured to understand, and for the insured and carrier to audit.

Auto policies also use composite rating, including first party coverages. Similar to GL policies, composite rating simplifies tracking changes on a schedule.