Cancellation policy transaction

A cancellation policy transaction is the process of voiding a policy while it is in force. Initiated either by the insurer or the policyholder, it results in the policy:

  • Being canceled
  • Remaining in force because the cancellation was rescinded

An example of a cancellation policy transaction is when the policyholder does not pay the premium, so the insurer begins the cancellation process. The policyholder receives notice of a pending cancellation in the mail, contacts the producer, and explains that there was a billing mix-up and sends another payment to the producer. The policy was in the process of being canceled but had not completed cancellation. Upon receipt of payment, the insurer rescinds the cancellation, and PolicyCenter withdraws the cancellation.

Another example of cancellation is when the insurer cancels the policy. The insurer issues a liability policy to a restaurant for two locations with 10% liquor sales. An audit reveals that the restaurant actually has four locations with 80% liquor sales. The insurer begins the cancellation process and, after a set number of days, the policy is canceled.

The insured can initiate a cancellation. For example, the insured calls to cancel their businessowners policy because they are no longer in business.

A cancellation can be generated and rescinded automatically. For example, a billing system can initiate a cancellation for non-payment of premiums or rescind a cancellation after receiving payment.

A canceled policy can be reinstated. For more information, see Reinstatement policy transactions.

Note: In PolicyCenter, the user interface uses the term policy transaction to refer to submissions, policy changes, and other policy transactions. Policy transactions are implemented as jobs in the data model, and referred to as jobs in PCF files, Gosu classes, and other configuration files. Therefore, the configuration documentation refers to policy transactions as jobs.

See also

Overview

A policy cancellation ends the policy contract. A flat cancellation cancels the policy as of the policy effective date and voids the contract. Other cancellations are effective after the policy effective date but prior to the policy expiration date. The contract ends midterm.

A cancellation policy transaction can be started either manually through the policy file or programmatically. The selected source and reason determine if premium will be calculated pro rata or with penalties. The selected source and reason also determine the date on which the policy cancellation completes.

The source of a cancellation can be either the insured or the insurer. You can configure the cancellation reasons based on your business needs. In the default configuration, some of the reasons for cancellation by insured are:

  • Policy not taken
  • Out-of-business

In the default configuration, some of the reasons for cancellation by the insurer are:

  • Fraud
  • Failure to comply with terms and conditions
  • Underwriting reasons
  • Policy to be rewritten or replaced by company
  • Or more commonly, non-payment

The source, reason, and effective date affect the premium calculation method. Premium calculation methods are:

  • Pro rata – The insurer bills the policyholder for the time that the policy that was already in effect.
  • Short rate – The insurer charges the policyholder a penalty in addition to the pro rata amount.
  • Flat – The insurer refunds the total amount of the policy.