Overlapping effective policy periods and rate-as-of date in rate book

Rate books can have overlapping effective policy periods.

How can overlapping effective policy periods occur? Within the rate book’s effective period, typing errors in the rate table may be discovered or last-minute regulatory changes may arise. These changes require an update to rate tables in already-activated rate books.

When there are overlapping effective policy periods, why does the rate book selection process not automatically select the replacement or most recently activated rate book? In many cases, regulations require that an insurer retain the same set of rates used at issuance for any subsequent policy changes. And in many cases, regulations only allow a rate change at renewal. As a result, any policies bound prior to the replacement rate book being activated would, in most cases, continue to use the original rate book for policy changes. New business or renewals with effective date later than the replacement rate book effective date applies rates defined in the replacement rate book. In the case of a policy change, the policy rate-as-of date is initially set to the calendar date/time that a policy was initially rated. This behavior ensures that subsequent transactions retrieve the same rate book. The rate-as-of date can be modified to allow flexibility in the rate book to use for the transaction.

For example:

• Rate Book v1 is effective 1/1/2020 and activated 10/15/2019 so that it is available for 1/1/2020 renewals which begin processing 11/1/2019.
• On 11/15/2019, Policy A effective 1/15/2020 is rated and bound. Rate Book v1 is used, and the rate-as-of date is 11/15/2019.
• On 12/1/2019, Rate Book v2 with updated 2020 rates is introduced. Rate Book v2 is also effective 1/1/2020 but activated 12/1/2019.
• On 12/15/2019, Policy B effective 1/15/2020 is rated and bound. Rate Book v2 is used, and the rate-as-of date is 12/15/2019.
• If both Policy A and Policy B were endorsed effective 2/1/2020, Policy A uses Rate Book v1 and Policy B uses Rate Book v2.
• By using the rule referenced above (use rate book with highest activation date before the policy rate-as-of date):
  • Policy A (rate as of date = 11/15/2019) picks up Rate Book v1 (activation date = 10/15/2019) and NOT Rate Book v2 (activation date = 12/1/2019).
  • Policy B (rate-as-of date = 12/15/2019) picks up Rate Book v2 (activation date = 12/1/2019).

The default behavior of policy rate-as-of date is as follows:

• Rate-as-of date is at the policy period level.
• Rate-as-of date is set to the current date/time whenever a new term (submission, renewal, rewrite) is rated and is read-only. At bind/issue, this date represents the last date that the new term was rated.
• For policy changes, the system does not update the rate-as-of date, so the date defaults to the date set at issuance. However, for policy changes, a user can modify the rate-as-of date to deliberately re-rate a particular policy change (or in bulk) with a new rate book. The user must have appropriate permissions.

  In the example, you can to force Policy A to be re-rated with Rate Book v2. Simply initiate a policy change with the same effective date as the policy and change the rate-as-of date to later than 12/1/2019.

You can configure the policy rate-as-of date to meet other business requirements.