Performance Pricing Policy

Caddie Contractor Performance Measurement Policy

Purpose:
This policy outlines the framework for evaluating the performance of contractors enrolled in the Caddie program, based on their loss ratio performance. The objective is to ensure fair and credible assessment, aligning contractors' pricing with their performance metrics over time.

Eligibility for Performance Evaluation:
Contractors must be active participants in the Caddie program for a minimum of two years before any adjustments to their performance multiplier are considered. This period allows for the accumulation of sufficient data to credibly assess performance, mitigating potential inaccuracies due to limited data.

Performance Multiplier Adjustment:
While the standard guideline requires a two-year activity period within the Caddie program for performance multiplier adjustments, exceptions may occur at Caddie's discretion based on internal assessments. Any early adjustments will adhere to the structured guidelines but remain internal until officially published.

Loss Ratio Measurement:

  1. Frequency: The loss ratio will be evaluated annually after the initial two-year participation in the Caddie program.

  2. Methodology: The loss ratio is calculated using the formula: (Paid Claim Amount + Incurred But Not Reported (IBNR) Amount) / Earned Reserve. Trends will be monitored, and discussions with contractors will be initiated as necessary based on observed trends.

  3. Data Alignment: Methodology and data sources for IBNR and earnings will be discussed to ensure alignment in reporting.

Performance Categories and Multipliers:

  • Good Performer: Multiplier of 0.80 for loss ratios ≤ 80% (Term 5 and less contracts) or ≤ 70% (Terms 6+).

  • Positive Performer: Multiplier of 0.90 for loss ratios ≤ 90% (Term 5 and less) or 71-80% (Terms 6+).

  • Average Performer: Multiplier of 1.00 for loss ratios ≤ 100% (Term 5 and less) or 81-90% (Terms 6+).

  • Negative Performer: Multiplier of 1.25 for loss ratios ≤ 125% (Term 5 and less) or 91-100% (Terms 6+).

  • Poor Performer: Multiplier of 1.50 for loss ratios > 150% (Term 5 and less) or > 101% (Terms 6+).

Communication and Transparency:
Caddie commits to maintaining open lines of communication with contractors regarding performance assessments. Constructive feedback and support will be provided to help contractors improve their metrics where necessary.

Review and Amendments:
This policy is subject to review and amendments to adapt to evolving business needs, regulatory requirements, and industry standards. Contractors will be notified of any significant changes to the policy or evaluation methodology.