Premium records

Premium calculation

Written, earned, and unearned premiums are calculated on a daily basis. To determine the premium, divide the written premium by the number of days in the term.

Standard examples

  • A policy with a written premium of $365 earns $365/365 = $1.00 per day.
  • A policy with a written premium of $700 earns $700/365 = $1.9178 per day.
  • A policy with a written premium of $2,345 earns $2345/365 = $6.4246 per day.

Endorsement examples

For endorsements, BriteCore sums the daily earned premium for the number of days each respective coverage premium was in effect:

  • A policy has a $3000 premium for 280 days out of the term, which means for 280 days, the policy earned at the rate of $3000/365 = $8.2191 per day.
  • The premium is reduced to $2000 for the remaining 85 days, which means for 85 days, the policy earned at a rate of $2000/365 = $5.4794 per day.
  • Combine the two calculations to determine the pro-rata premium for the term: (($3000/365) x 280) + (($2000/365) x 85) = $2,767.12.

Premium records

Premium record calculations display for each day the policy is in force. These calculations are accessed on the Accounts Receivable screen of every policy.

Sequential written and earned premiums

Sequential premium calculations indicate how much written and earned premium the policy wrote or earned on a given calendar day.

Earned and unearned premium

The running total of earned and unearned premium on each calendar day.

Catch-up records

When a policy is issued after its effective date, the premium records must “catch up.” The first record is the sum of earned premium up to the date the policy was issued. For example, if the policy earns $1 per day but is issued 10 days after the effective date, the earned premium will show $10 of earned premium on its date of issuance.

End of term

At the end of the term, the following is true:

  • The written sequential and earned premium equals the written premium.
  • The unearned premium is 0.

Examples

New business

Figure 1: New business.

The following is true in the above example:

  • The policy has a written premium of $1,105 (written premium column)
  • As of 8/25/16, the policy earned $69.69 (earned premium column)
  • The policy is earning $3.03 per day (earned sequential column)
  • The unearned premium is decreasing by $3.03 per day (unearned premium column)
  • The policy was issued late as there is a “catch up” record on 8/15/16. Even though the policy earned $3.03 per day, it was issued 13 days after its effective date. As such, on the day it was issued (8/15/16), it had already earned $39.39 of premium.

Renewal business

Figure 2: Renewal business.

The following is true in the above example:

  • This policy renewed on 8/03/16 given the premium record row for that date. On that date, $650 worth of premium was written, an increase of $5 as indicated on the previous date’s row. Also, on the previous date’s row, the entire $655 of written premium was earned and the unearned premium was $0.
  • On the previous term, the policy earned $1.78/$1.79 per day (due to rounding). At renewal, the policy earned $1.81 per day.

Cancellation

Figure 3: Cancellation.

The following is true in the above example:

  • The policy canceled on 8/05/2016.
  • At cancellation, the written premium equals the earned premium. To balance those premiums, $1,324.71 in written premium was deducted.
  • At cancellation, the unearned premium is $0.