Set up Minimum Earned Premium

Minimum Earned Premium (MEP), aka Minimum Retained Premium, is the smallest amount of money an insurance company is willing to accept for writing an insurance policy. A setting allows clients to define a minimum amount of earned premium.

Note: For a given cancelation date, if both the statically-configured MEP and a calendar-based MEP are available, then the highest of those two amounts is elected as the effective MEP.

Set up a static amount for Minimum Earned Premium

  1. Navigate to Settings > Modules > Policies.
  2. Select Edit under Policy Lifecycle.
  3. Select Yes in the Confirmation dialog box.
  4. Select a State.
  5. Navigate to Cancellations > Minimum Earned Premium.
  6. In the Amount Due box, type desired amount.

Set up a calendar based Minimum Earned Premium

If enabled, the system will follow the defined MEP number if the cancellation date is within the months defined.

  1. Navigate to Settings > Modules > Policies.
  2. Select Edit under Policy Lifecycle.
  3. Select Yes in the Confirmation dialog box.
  4. Select a State.
  5. Navigate to Cancellations > Minimum Percentage Collected by Calendar Date Range.
  6. Click the + next to Add Calendar.
  7. Select:
    • Initial Date
    • Final Date
    • MEP Percentage
  8. Repeat steps 6 and 7 to add additional Minimum Percentage Collected by Calendar Date.
Figure 1: The statically configured MEP with a calendar based MEP. 

Working with the start date

Typically, MEP can’t apply (calendar or static) to policies bound in the past because those policies do not include a form of MEP upon cancellation, which means legally they can’t charge MEP on those past policies. Only policies with inception date after a specified date should be subject to MEP calculation. All the other policies should simply go under 0 MEP.

Apply Minimum Earned Premium when canceling policies

If you set a policy to cancel immediately, you can select whether or not to apply the minimum earned premium. Minimum earned premium is the least amount of earned premium that an insurance carrier requires to insure a policy. If a policy is canceled early in the term before the actual earned premium has exceeded the minimum earned premium, the insurance carrier will keep the minimum earned premium and refund the unearned premium.

Note: To apply minimum earned premium when you set policies to cancel immediately, you must set up a static amount for minimum earned premium or set up a calendar based minimum earned premium. If you don’t set up a minimum earned premium, the Apply Minimum Earned Premium dropdown list won’t display in the Cancel Policy dialog box.

To apply minimum earned premium when you set a policy to cancel immediately:

  1. In the navigation, select Policies.
  2. On the Policies List screen, select a policy number to open a policy.
  3. Under the Additional Description box, select the Cancel Policy button to open the Cancel Policy dialog box.
  4. Form the Cancel When dropdown list, select Cancel Immediately.
  5. Form the Apply Minimum Earned Premium dropdown list, select Yes to apply minimum earned premium.

Note: By default, the Apply Minimum Earned Premium dropdown list is blank. You must select Yes or No from the Apply Minimum Earned Premium dropdown list to cancel the policy.