Calculation Period Based
This method of calculation for premiums, adjustments and applies when the amount configuration is for a calculation period. The system considers the amount for a calculation period when the amount interpretation setting on the premium schedule is 'Calculation Period'. In this method, the calculations are contained within the calculation period and that’s why the calculations over a period of time are never looked upon to determine any reconciliations.
The calculation logic for determining the amount is as described in the image below:
| Circumstances | Calculations |
|---|---|
Full Enrollment |
Configured Value |
Partial Enrollment - Partial Period Resolution Full Charge |
Configured Value |
Partial Enrollment - Partial Period Resolution Per Day |
Configured Value * # Enrolled Days/# Calculation Period Days |
Partial Enrollment - Partial Period Resolution No Charge |
No calculations |
The first step is to determine whether the policy enrollment is full or partial. For this, the system takes into account the overlap in time validity of the policy enrollment with the calculation period.
In case of the enrollment product premium, adjustment and surcharge calculations, the system checks if the policy enrollment product is fully or partially enrolled for the calculation period. Fully enrolled implies that the policy enrollment product is present for all the days in the calculation period for the calculation period segment in context.
In case of the add-on premium, the system checks if the policy add-on is fully or partially enrolled over the calculation period. This is because the add-ons have their own time validity.
Partial Period Resolution
The calculation for policy enrollment products that are only effective during part of the calculation period can be handled one of three ways. Which way, depends on a setting on the enrollment product record.
-
No Charge implies zero premium amount is charged for partial periods. In this scenario the calculation for the policy enrollment product is complete, as there is no premium to calculate.
-
Full Charge implies the premium is calculated as if the person or object was enrolled on the product for the full calculation period to which the calculation period segment in context belongs. The premium calculation continues with this assumption.
-
Per Day implies the system charges premium (surcharges, adjustments) only for the days that the person or object is enrolled. The system reduces the calculation results based on the number of days the person or object was enrolled, divided by the number of days over which the premium amount applies.
-
Enrolled Days Threshold implies that Full Charge is applied if the enrolled days threshold is met and that No Charge is applied if the enrolled days threshold is not met.
-
Split Periods implies the system uses splitter day of the period value to split calculation period in two parts, first part from start of calculation period till splitter day (inclusive) and second part starting from the day after splitter day till last day of the calculation period. Full Charge is applied if enrollment starts prior to or within the first part and/or enrollment ends in the second part. If enrollment starts in the second part and/or enrollment ends in the first part then No Charge is applied. If enrollment starts and ends in the same part, No Charge is applied.
The system charges the configured value if the person or object is 'fully enrolled'. Otherwise, it checks for the partial period resolution setting on the enrollment product. The configured value gets charged for the calculation period segment if the partial period resolution is 'Full Charge' otherwise the configured value is reduced by prorate factor for the number of days the person or objects is enrolled for but if the partial period resolution is set to 'No Charge' then the calculation process for the calculation period segment ends. The prorating factor is the number of days the person or object is enrolled divided by the number of days in the calculation period segment.
The amount distribution setting is not applicable under this method of calculation.
| Each calculation period below are identified as a single calculation period segment during the premium calculation process |
Example 1 - Policy With a Contract
Configuration
A policy enrollment for the enrollment product BASIC PLAN exists from Apr 1, 2019 - Nov 12, 2019. The contract period is from Jan 1, 2019 - Dec 31, 2019. The contract reference date is Jan 1, 2019.
| Contract Details | |||
|---|---|---|---|
Start Date |
End Date |
Contact Reference Date |
|
Jan 1, 2019 |
Dec 31, 2019 |
Jan 1, 2019 |
|
Enrollment Details |
|||
Policy Enrollment |
Enrollment Product |
Start Date |
End Date |
W.Wright |
BASIC PLAN |
Apr 1, 2019 |
Nov 12, 2019 |
The default time periods are:
| Default Time Periods | ||
|---|---|---|
2019 -1 |
Jan 1, 2019 |
Jun 30, 2019 |
2019- 2 |
Jul 1, 2019 |
Dec 31, 2019 |
The calculation periods are:
| Alias | Start Date | End Date | CP Reference Date |
|---|---|---|---|
Jan'19 |
Jan 1, 2019 |
Jan 31, 2019 |
Jan 1, 2019 |
Feb'19 |
Feb 1, 2019 |
Feb 28, 2019 |
Feb 1, 2019 |
… |
… |
… |
… |
Dec'19 |
Dec 1, 2019 |
Dec 31, 2019 |
Dec 1, 2019 |
The premium schedule lines associated to BASIC PLAN are:
| Premium Schedule Lines | ||||
|---|---|---|---|---|
Default Time Period |
Age From |
Age To |
Gender |
Premium |
2019-1 |
- |
- |
- |
100 |
2019-2 |
- |
- |
- |
120 |
Calculations
The premium calculations for the policy enrollment product for the year 2019 is as below:
| Calculation Period | Premium Amount | Calculation |
|---|---|---|
Jan'19 |
90.32 |
100*(28/31) |
Feb'19 |
100 |
Premium Value |
… |
… |
… |
Oct'19 |
100 |
|
Nov'19 |
40 |
100*(12/30) |
Suppose the partial period setting on the enrollment product - BASIC PLAN is 'Per Day'. That’s why the segments of Jan and Nov are prorated to 100*(28/31) and 100*(12/30) respectively.
All calculation periods within the contract period refers the configurations as of the Contract Reference Date. Therefore, the selected default time period that applies for all the calculation periods is 2019-1. The premium amount that applies within the default time period 2019-1 is 100.00.
Example 2 - Policy Without a Contract
If premium configurations are the same as in the above example, then the following premium calculations for the person or object on a policy without a contract period hold true:
| Calculation Period | Premium Amount | Calculation |
|---|---|---|
Jan'19 |
90.32 |
100*(28/31) |
Feb'19 |
100 |
Premium Value for Default Time Period - 2019-1 |
… |
… |
|
June'19 |
100 |
|
|
|
Premium Value for Default Time Period - 2019-2 |
|
|
|
… |
… |
|
|
|
120*(12/30) |
The change in the charged amount from the calculation period July'19 onwards is because the setting on the calculation periods determines the reference date. In this example, every calculation period has its start date as the reference date and this date is considered as the reference date for evaluation of the configuration.
Premium calculation for the calculation period July'19 selects the default time period as 2019-2 and, therefore, the charged premium amount is 120.00.
Similarly, the applicable premium amounts for the calculation periods of Aug'19 up to Nov'19 is 120.00. The premium for Nov'19 is prorated to 120*(12/30).
Amount Recalculation
In this method, the calculations are contained within the calculation period, therefore, if a calculation period segment is part of the recalculation process, the applicable amount changes only if the new value applies.
Consider a policy enrollment product termination scenario to understand this.
A policy with a policy enrollment product from Jan 1, 2019 to Dec 31, 2019 has an applicable premium of 100 per calculation period. If the collection frequency is set to 12, then the premium calculation batch when executed with the input Calculation Period of Jan'19, results into the following calculations:
| Calculation Period | Premium |
|---|---|
Jan'19 |
100 |
Feb'19 |
100 |
Mar'19 |
100 |
April'19 |
100 |
May'19 |
100 |
June'19 |
100 |
July'19 |
100 |
Aug'19 |
100 |
Sep'19 |
100 |
Oct'19 |
100 |
Nov'19 |
100 |
Dec'19 |
100 |
However, if this policy is terminated on July 5, 2019, with the policy mutation having an effective date of Jan 1, 2019.
If the premium calculation batch executes with a look back date of Jan 1, 2019, then the calculation period Jan'19 onwards up to July'19 is re-calculated. If the applicable premium value of 100.00 per calculation period still holds true, the recalculation is
| Calculation Period | Premium |
|---|---|
Jan'19 |
100 |
Feb'19 |
100 |
Mar'19 |
100 |
April'19 |
100 |
May'19 |
100 |
June'19 |
100 |
July'19 |
100*(5/31) = 16.13 |
For the above scenario if the look back date is supposed to be Apr 1, 2019 and the mutation effective date is Jul 5,2019, then only the calculation period of July'19 is re-calculated as
| Calculation Period | Premium |
|---|---|
July'19 |
100*(5/31) = 16.13 |