Policy Administration Formulas

• 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)

Daily prorata = 1/365 from the premium amount of a contract.

Monthly prorata = 1/12 from the premium amount of a contract.

 

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)

When calculating the premium that applies to an MTA, the system takes into account the following:

• The validity of the policy;

• The period that has not expired (uninsured period), most often equal to the validity of the MTA;

• The prorate that applies to the policy;

• The premium amount of the policy version on which the newly created MTA applies (this includes the impact from previously issued MTAs);

• The new premium amount prorated with the policy validity, calculated for the updated values coming from the new MTA;

• The difference in premium between the new MTA prorated with the uninsured period (not expired/MTA validity) and the premium from the existing version of the policy;

• The premium for the contract as resulting from the new MTA is the premium before the MTA and the difference in premium reflected in the bullet above.

 

The following calculations are used for MTA premium amounts:

• Policy Validity = policy end date - policy begin date

  Based on the prorata type, this returns either a number in days (for 1/365) or a number in months (for 1/12). For the 1/12 prorata, any started monthly period is considered a full month (e.g. for a policy validity of 2 months and 5 days, the policy validity used in this premium calculation is 3 months);

• Uninsured Period = MTA effective date - policy end date

  Based on the prorata type, this returns either a number in days (for 1/365) or a number in months (for 1/12). For the 1/12 prorata, any started monthly period is considered a full month (e.g. for a MTA validity of 1 months and 2 days, the uninsured period used in this premium calculation is 2 months);

• New Annual Premium Amount for the Validity Period = New Annual Premium Amount / Prorata of the policy * policy validity;

• Before MTA Premium Amount for the Validity Period = premium amount of the policy version on which the newly created MTA applies (includes impact from previously issued MTAs)

  For successive MTAs, this is equal to the new Annual Premium Amount for the Validity Period from the previous version;

• Premium Amount Difference for the Validity Period = New Annual Premium Amount for the Validity Period - before MTA Premium Amount for the Validity Period;

• Premium Amount Difference = premium Amount Difference for the Validity Period prorated to the uninsured period = premium Amount Difference for the Validity Period / policy Validity * uninsured Period;

• New Final Premium Amount = The premium for the MTA = Before MTA Premium Amount for the Validity Period + premium Amount Difference.

 

Example calculations:

Prorata =1/12

Policy validity = 8 months

Policy premium = 800 = before MTA Premium Amount for the Validity Period

After 3 months had passed an MTA is issued, resulting an uninsured period of 5 months. The MTA that gets a formula response for a premium of 2400. This translates into a new Annual Premium Amount for the Validity Period = 2400/12*8= 1600

Premium Amount Difference for the Validity Period = 1600 - 800 = 800

Premium Amount Difference = 800 / 8 * 5 = 500

New Final Premium Amount = 800 +500 = 1300

2 more months pass and a new MTA is issued, resulting in a uninsured period of 3 months. The Before MTA Premium Amount for the Validity Period = 1600 (New Annual Premium Amount for the Validity Period from previous version). The MTA gets a formula response for a premium of 3400. This translates into a new Annual Premium Amount for the Validity Period = 3600/12*8= 2400.

Premium Amount Difference for the Validity Period = 2400 - 1600 = 800

Premium Amount Difference = 800 / 8* 3 = 300

New Final Premium Amount = 1300 + 300 = 1600

The following calculations are used for the premium amounts after a policy MTA is cancelled.

• 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 parameter contains 2 types of prorata:

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

• Monthly prorata 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)

In the Master Policy entity, the noOfValidityMonths attribute represents the number of calendar months between the begin date and the end date of the Master Policy. It is calculated as per below:

No of validity months = Master Policy Begin Date - Master Policy End Date

 

The number of installments of the Master Policy (noOfInstallments attribute, numeric type) is calculated based on the attributes: number of validity months (calculated above) and payment frequency of the Master Policy.

Payment frequency	No of installments when v>-12 months	6<=v<12 months	v<6 months
annually	roundup(v/12;0)	N/A	N/A
semi-annually	roundup(v/6;0)	roundup(v/6;0)	N/A
quarterly	roundup(v/3;0)	roundup(v/3;0)	roundup(v/3;0)
monthly	v	v	v

Where:

• v = The number of validity months of the Master Policy (noOfValidityMonths);

• N/A = The system does not allow this combination.