How PolicyCenter calculates earned premium

The earned premium calculation examines all financial transactions on the policy. The calculation checks a series of conditions, most of which are based on the calculation, or as-of, date. For reporting policies where EBUR may be included, it also uses the date of the last premium report period. The calculation evaluates a transaction as follows:

1. If the as-of date is prior to either the posted date or the written date of the transaction, then the earned amount for the transaction is 0.
2. Else if the amount type on the related cost is not premium, for example taxes or surcharges, then the earned amount for the transaction is 0.
3. Else if the transaction is to be accrued (ToBeAccrued is true), then:
   1. If the as-of date is after the expiration date of the transaction, then the whole transaction amount counts toward earned premium.
   2. Else if the as-of date is prior to the effective date of the transaction, then the earned amount for the transaction is 0.
   3. Else, the only other possibility is that the as-of date is between the transaction’s effective and expiration dates. The earned amount is calculated as a prorated portion based on the as-of date.
4. Else, the only transactions left are transactions that are not to be accrued (ToBeAccrued is false). These transactions are of two types:
   1. If the transaction is earned on the effective date of the policy, The whole transaction amount counts toward earned premium. Transactions for flat-rated costs are an example.
   2. Else if the transaction is for a cost that is subject to reporting, the transaction must meet both of the following criteria.

      1) The calculation includes EBUR.

      2) And the as-of date is after the date of the last premium reporting period.

      For these transactions, the earned amount is the prorated portion between the last premium report date and the as-of date.

See also

• Cost delegate