Loss Control Services – Best Practice

ABP0005 – Risk Rating Process

Purpose

To provide field associates clarity on how to utilize the new risk rating process when completing an
ALPS report. This will promote quality and consistency of our risk evaluations across the region.

Overview

The Risk Rating System is designed to provide Loss Control, Underwriting and combined leadership a
stratified evaluation system for risks. This process incorporates the objective and subjective elements of
risk assessment to provide underwriting a consistent depiction of risk quality. Each line of business
should be assessed using the following:

 A Control/Exposure Rating from a 4 point scale that incorporates control quality,

recommendation feasibility and potential for compliance (management attitude). For definitions
see Appendix A.

How to utilize the ratings with ALPS

1) Download requests into ALPS

2) On the risk report cover page identify the new Evaluation section and complete the
following steps:

a. Remove the overall risk grade once the report template is moved from ALPS
to Word.

b. Select the ratings per line of coverage evaluated. Focus on the 1-4 numerical
ratings since ALPS does not reflect the WRO risk rating names as identified
in this Best Practice.

3) In the Evaluation Narrative section provide a synopsis of the exposures and controls
for each line of coverage evaluated and include the following:

a. Identify the exposure/control rating using the 4-point scale (Unsatisfactory,

Satisfactory with Recommendations, Satisfactory, Superior).

This document is for internal use only and should not be distributed outside of the Nationwide organization.
ABP0005 – Risk Rating Process (Continued)

b. Support the exposure/control rating with a brief description of the most

prominent and significant exposures and the most impactful controls.
c. If applicable, discuss the recommendations that could influence a change in
rating as well as feasibility.
Please note that an evaluation narrative is not needed for the Overall Risk Rating since
it is a direct reflection of the Lines of Coverage Ratings.

4) In Word, complete the following steps to replace the system generated ratings:
a. Overwrite the 4-point control rating using the WRO terminology for each
line of coverage rated.

Before (system generated)

After (with changes)

This information is for internal purposes only and should not be distributed outside of Nationwide Insurance
ABP0005 – Risk Rating Process (Continued)

Appendix A

1 - Unsatisfactory

The Unsatisfactory rating is for an account that is clearly well below acceptable criteria
including physical conditions and/or management's attitude towards controlling loss
exposures. No number of recommendations could reform the account to acceptable
levels. The Unsatisfactory rating is also reserved for hazards that create any level of
exposure that is considered inherently uncontrollable. See Exposure Guidelines for
examples of risks that fit into this category.

After a discussion with Underwriting and LC Leadership the following might result
from a risk with an Unsatisfactory rating.

1. The Underwriter will continue to pursue the risk and price for the identified
Undesirable risk characteristics. In this case a full assessment is still required
with recommendations. If coverage is bound, then the Underwriter is
responsible for communicating the recommendations.
2. The Underwriter decides to provide an insurance solution but not for the
Undesirable line of coverage. In this case the report should reflect this decision
in the underwriting comments and the Undesirable Characteristics should be
outlined in the Evaluation Narrative of the report with no further analysis in
the report supplements.
3. The Underwriter decides not to pursue the account at all based on the
Undesirable characteristics in which case the abbreviated Undesirable Risk
Report can be utilized.

2 – Satisfactory with Recommendations

The Satisfactory with Recommendations rating is for an account that is currently

unsatisfactory for coverage with existing physical conditions and/or management
controls in place. However, this account can achieve a Satisfactory grading with
confirmed compliance to mandatory recommendations.

This information is for internal purposes only and should not be distributed outside of Nationwide Insurance
ABP0005 – Risk Rating Process (Continued)

3 - Satisfactory

The Satisfactory rating is for an account that is satisfactory for insurance coverage
with adequate physical conditions and management controls in place to reduce losses.

4 - Exceptional

The Exceptional rating is for an account specifically demonstrating pride in ownership

and active risk management programs in place. Characteristics of this account would
include documented safety/risk management programs, active management involvement
in controlling risk, superior physical condition of buildings/equipment, and planned
capital investment in business operations.

Advisory recommendations can be issued to accounts graded Satisfactory or Superior.

When grading accounts in the field, any account that may seem to fall within the gap between
account grading levels should be placed into the lower of the grading criteria.

This information is for internal purposes only and should not be distributed outside of Nationwide Insurance