Premium Adjustments
Premium adjustments reduce or increase the premium amount if their specified conditions are satisfied. It is possible to have multiple premium adjustments evaluated and applied in the same calculation.
Premium adjustments, like premium schedules, are re-usable configuration rules that have to be assigned to an enrollment product in order to apply. Group premium adjustments can be assigned to a group client, group account or group account product, in which case they apply to an enrollment product offered within that group client or group account.
A typical configuration can include multiple types of premium adjustments. For example, a premium adjustment reducing the premium may apply if the policyholder pays premium a year in advance, while another premium adjustment reducing the premium may apply if the policyholder has chosen a high deductible, and a third may apply if the policyholder enrolled through a group account.
Premium adjustments are set up as adjustment types with adjustment rules, like premium schedules with premium schedule lines. They can be seen as look-up tables, where each column represents a condition, and the last column represents the adjustment amount or percentage that applies if all the conditions in the preceding columns are met.
A single adjustment type can have multiple adjustment rules. For example, a policyholder may receive an increasing discount depending on how far ahead the policyholder pays premium. In other words, each available choice (pay 1 month, 3 months, 6 months or 12 months ahead) corresponds to a different discount percentage. Each adjustment rule represents one of these choices. The image below presents a model of such a discount.
During the premium calculation the system checks each adjustment type if it is applicable. To apply, the adjustment type has to be assigned to either the enrollment product or to the group account product, group account or group client of the policy’s group account. If the adjustment type applies, the system evaluates each adjustment rule under that type.
The system applies no more than one adjustment rule per adjustment type. If more than one adjustment rule would apply for the same adjustment type, the system raises a warning message during the calculation.
Assigned Adjustment
In order for an adjustment rule to be applied, the adjustment type has to be assigned to either an enrollment product or a group (through a group account product, group account or group client). It is possible to assign the same adjustment type to many enrollment products or groups (group account products, group accounts and group clients).
An adjustment type that is assigned to an enrollment product forces all adjustment rules under that type to be evaluated in premium calculations for that particular enrollment product. An adjustment type that is assigned to a group account product, group account or group client forces all group adjustment rules under that type to be evaluated in premium calculations for enrollment products under the group.
Enrollment products can have adjustment types assigned directly to the enrollment product itself as well as to the enrollment product under a group.
Premium calculation for a group account policy will evaluate the adjustment types for the enrollment product as well as for the group (group account product, group account and group client).
- Sequence
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The sequence of an assigned adjustment type controls the order in which the system applies adjustment types.
For adjustment types with the lowest sequence, the system uses the base premium of the product (plus add-on premiums if applicable) as the amount on which it calculates the adjusted amount.
For adjustment types with a higher sequence the system uses the output of the base premium plus lower sequence adjustment(s) as input.
Adjustment types with the same sequence calculate their adjustment on the same input amount.
In the case of multiple adjustment types for the enrollment product and multiple adjustments for the group, both series of adjustments are applied on the base premium independently. That is, the adjustments for the enrollment product are calculated on the base premium and the adjustments for the group are calculated on the base premium.
Assigning an ajdustment type to an enrollment product or group account product also allows the user to specify overriding adjustment values within the context of that enrollment product or group account product.