Mid Term Adjustments

The Policy Alteration functionality allows you to make changes to the active policies, according to the client's request. Thus, through this functionality, you can make various changes on the policy with different impacts such as changes in the existing coverage on the policy, changes in the type of payment, changes in the frequency of payment and more. Each change in the policy also generates a new version of the policy so that the information is up to date and correct, according to customer requirements. Also called mid-term adjustments, the Policy Alterations functionality has an impact on the value of the insurance premium, as through changes in coverage, the insurance premium may increase or decrease.

Types of Policy Updates

After registering the Mid Term Adjustment (MTA) request, the new policy version is displayed in a new tab, so the client can see the updated information.

After registering an MTA request by clicking the Register button, a new tab appears next to the first one containing the MTA request. The new tab displays the updated policy after MTA changes, showing the entire policy form, as it is for the Core Policy Admin module, and all the fields are read-only.

The displayed updated policy is the current policy version:

  • In Version Draft status for versioning before approving or declining the MTA request.

  • In Version Unapproved when declining the MTA status.

  • After approving the MTA request, the Approved policy version is displayed.

After registering an MTA request, the user can register or cancel it, either after performing the alterations on it and validating them, or before attempting to work on the request.

There are 2 buttons on the bottom of the page:

  • Register: This button is used to register the request and proceed with the MTA process.

  • Cancel: This button is used to cancel the request if the user has changed his mind.

Click the Register button to trigger the following actions:

  • The change policy request transitions from Draft to Registered.

  • All fields become read-only.

  • The Updated Policy tab becomes available displaying the entire form of the updated policy.

  • Core Policy Admin calculates the additional premium. For the discounted amount, a negative amount is displayed, as per the formula explained below.

  • The policy alteration type is determined. If at least one included alteration requires the issuance of an MTA, the value is MTA needed.

After updating a policy alteration request, the coverages on a policy by editing the Amount Insured, removing or adding new coverages, the impact in the premium is calculated sending a getPrices API to receive the new annual premium amount calculated for each coverage (item). The request is sent after the validation of each alteration type (Validate button).

The calculations are given below:

  • The additional coverage premium amount = (new annual premium - initial annual premium)/12* No. of uninsured months

  • Updated coverage premium amount = Initial premium amount * (12-No of uninsured months)/12 + The additional coverage premium amount

  • Additional policy premium amount = Sum (The additional coverage premium amounts)

  • Updated policy premium amount = Sum (Updated coverage premium amount)

The adjustments are made according to the new amount, the rest of the installments which are unpaid and having the status OnTime.

The rounding in case of inaccurate calculations is done at the first unpaid installment and without an issued statement.

For the following actions on an MTA request, the request is made in order to return the monthly premium amount:

  • Coverage addition;

  • Coverage removal;

  • Amount Insured edited;

  • Change frequency type.

An MTA user approves or declines an MTA request according to the client’s decision regarding the modifications on the policy.

Beside the displayed policy information, the Change Policy Request tab contains the Accepted or Declined buttons, which trigger specific status transitions.

Click the Accepted button to trigger the following actions:

  • The policy transitions from Registered to Accepted status.

  • The MTA No is updated from the first tab in the policy alteration summary.

  • The specific transition for policy versioning is made to Approved.

By clicking the Declined button, the following actions are triggered:

  • The policy transitions from the Registered to the Declined status.

  • The specific transition for policy versioning is made to Unapproved.

NOTE  The actions and the buttons are displayed only for the change policy requests in Registered status having displayed the Updated Policy tab, otherwise, the buttons are not visible and the actions not possible.

The Premium calculations made in the Policy Alteration processes take into consideration the type of pro rata which will be used in the calculations.

The type of pro rata is configured in the pro rata type insurance parameter.

The parameter contains 2 types of pro rata:

  • Daily pro rata as 1/365 from the premium amount of a contract;

  • Monthly pro rata as 1/12 from the premium amount of a contract.

Parameter location: Settings - Insurance parameters

Parameter name: Prorata type

Parameter code: PRT

Parameter type and value: Option set: either Daily or Monthly

For the premium adjustments, either the daily pro rata or the monthly pro rata can be chosen.

 

If Prorata type = daily

  • AdditionalCoveragePremiumAmount = (coverageNewPremium - initialPremiumAmount) / 365 * uninsuredPeriod

  • UpdatedCoveragePremiumAmount = initalPremiumAmount * (365 - uninsuredPeriod) / 365

  • FreqAdditionalCoveragePremiumAmount = (newPremiumAmount - initialPremiumAmount) / 365 * unisuredPeriod

  • FreqUpdatedCoveragePremiumAmount = (initialPremiumAmount * (365- uninsuredPeriod) / 365) + (newPremiumAmount / 365 * uninsuredPeriod)

 

If Prorata type = monthly

  • AdditionalCoveragePremiumAmount = (coverageNewPremium - initialPremiumAmount) / 12 * uninsuredPeriod

  • UpdatedCoveragePremiumAmount = initalPremiumAmount * (12 - uninsuredPeriod) / 12

  • FreqAdditionalCoveragePremiumAmount = (newPremiumAmount - initialPremiumAmount) / 12 * unisuredPeriod

  • FreqUpdatedCoveragePremiumAmount = (initialPremiumAmount * (12 - uninsuredPeriod) / 12) + (newPremiumAmount / 12 * uninsuredPeriod)

 

New variables are created at the Policy Alteration level:

  • uninsuredPeriodType = monthly/daily according to the pro rata type parameter set

  • uninsuredPeriod = calculated as number of months or number of days from Policy Begin Date to Policy End Date according to the uninsured period type set

  • coveredValidityType = monthly/daily according to the pro rata type parameter set

  • coveredValidityPeriod = calculated as number of months or number of days from Policy Begin Date to Policy End Date according to covered validity type set