Policy Administration Transactions In Insurance

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National Association of Insurance Commissioners
(NAIC)
The National Association of Insurance
Commissioners (NAIC) is the U.S. standard-setting
and regulatory support organization created and
governed by the chief insurance regulators from the
50 states, the District of Columbia and five U.S.
territories. Through the NAIC, state insurance
regulators establish standards and best
practices, conduct peer review, and coordinate their
regulatory oversight.
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NAIC staff supports these efforts and represents the
collective views of state regulators domestically and
internationally. NAIC members, together with the
central resources of the NAIC, form the national
system of state-based insurance regulation in the
U.S. Its current president is Florida Insurance
Commissioner Kevin M. McCarty. The NAIC acts as a
forum for the creation of model laws and
regulations.

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Each state decides whether to pass each NAIC
model law or regulation, and each state may make
changes in the enactment process, but the models
are widely, albeit somewhat irregularly, adopted.
The NAIC also acts at the national level to advance
laws and policies supported by state insurance
regulators. The NAIC also is responsible for
creating the statutory accounting principles (SAP)
upon which insurance accounting is based

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SAP is often contrasted with Generally Accepted
Accounting Principles (GAAP) and is notable for its
very conservative valuation methods. Additionally
the NAIC promulgates the NAIC annual statement
which incorporates SAP and must be filed with
the department of insurance in every state in
which an insurance company writes business.

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Under-writing and Policy Issuance

Insurance underwriters evaluate the risk and
exposures of potential clients. They decide how
much coverage the client should receive, how
much they should pay for it, or whether even to
accept the risk and insure them. Underwriting
involves measuring risk exposure and determining
the premium that needs to be charged to insure
that risk.
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The function of the underwriter is to protect the
company's book of business from risks that they
feel will make a loss and issue insurance policies
at a premium that is commensurate with the
exposure presented by a risk. Each insurance
company has its own set of underwriting
guidelines to help the underwriter determine
whether or not the company should accept the
risk. The information used to evaluate the risk of
an applicant for insurance will depend on the
type of coverage involved.
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The underwriters may either decline the risk or
may provide a quotation in which the premiums
have been loaded or in which various exclusions
have been stipulated, which restrict the
circumstances under which a claim would be
paid. Depending on the type of insurance product
(line of business), insurance companies use
automated underwriting systems to encode these
rules, and reduce the amount of manual work in
processing quotations and policy issuance.
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Cancellations

Commonly used different calculation methods

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Factors affecting Cancellations of policies
Cancellation Date
The date a policy's coverage is cancelled prior to the normally
expiration date of a policy, often resulting in a return premium
owed to the insured.
Inception Date
The date a insurance policy's coverage is started. Also called
effective date or renewal date.
Policy Term
The period of time that an insurance policy provides coverage.
Most policies have a one year term (365 days) but many other
policies also have a 6 month term. Policy terms can be for any
length of time and can be for a short period when the period of risk
is also short. Policy terms can also be for a multi year period.
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Characterisation of premiums

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Premium finance

Premium Financing involves the lending of funds
to a person or company to cover the cost of an
insurance premium. Premium finance loans are
often provided by third party finance entity
known as a "Premium Financing Company";
however insurance companies and brokerages
occasionally provide premium financing services.

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To finance a premium, the individual or company
requesting insurance must sign a premium finance
agreement with the premium finance company.
The loan arrangement may last from one year to
the life of the policy. The premium finance
company then pays the insurance premium and
bills the individual or company, usually in monthly
installments, for the cost of the loan.

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Benefits of Premium finance

There are a number of benefits to financing an
insurance premium. These include:

 Eliminates the requirement for a large up-front
payment to an insurance company.
 Multiple insurance policies can be attached to a
single premium finance contract, allowing for a
single payment plan to cover all insurance
coverage.
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Renewals

A renewal is a new policy or a standard certificate
from an insurance company, stating that the
conditions of your old policy will stay in effect for a
specified period of time.
An insurance policy is issued for a limited
time, and, at the end of that period, the insurance
company renews the policy. Renewal dates are
important times for insurance companies and
policyholders.
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Renewal date
A renewal date is when a policy period expires and
a new policy period begins. Renewal dates
typically occur six months or one year after the
policy began or the last renewal date occurred.

Purpose
Renewal dates give both the insurance company
and the insured the opportunity to make any
necessary changes to the policy.
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Policy Changes
If the insurance company determines that the risk
posed by the policyholder has changed, it may
amend the policy, add restrictions or terminate
coverage.
Premium Changes
A change in risk may also trigger a premium
change at renewal. A policyholder who has not
filed any claims may see a premium
reduction, while a policyholder with several claims
may see an increase.
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Endorsements

Insurance policies can be changed and modified
by using a technique called endorsing a policy. A
policy endorsement can be done to change or
modify coverages, add or delete items from a
policy and modifies a current policy without
completely rewriting it. When an insurance policy
is endorsed the premium amount paid for the
policy can change.
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An insurance policy needs to be changed during
the policy term. When an insurance policy is
modified during the policy term it known as
endorsing a policy. A policy endorsement can be
made when a coverage limit needs to be changed
in order to increase or decrease the coverage
limit. An endorsement is a written document
attached to an insurance policy that modifies the
policy by changing the coverage afforded under
the policy. Also Known As:
Rider, addendum, attachment.
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An insurance endorsement is like a mini-policy that
is added to a current insurance policy to change
the original insurance policy terms and/or
coverages. Endorsements used in insurance
policies can differ depending on the insurance
company and the type of insurance the
endorsement is applied to. It is important to
understand what endorsements are available for a
policy along with how that endorsement can
change the current insurance policy.
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Reinstatement and Revival

Insurance policies are long term contracts involving
the insurance company and the policyholders. The
payment of the premium is spread over the
premium paying term which is designated by the
purchased policy.
Before the paying term is over, the policyholder
should be able to pay for the premium. However, if
the premium is not paid within the effective
time, the policy lapses.
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Basically, the insurance company will consider your
policy as ‘lapsed’ in the event that you’re not able
to make the premium payment on the designated
due date. Grace periods, which are typically 30-day
timeframes that come after the due date, are
provided by companies. If you are able to pay your
premium within the grace period, then you have
reinstated it. Reinstating your policy within the
grace period avoids further repercussions and your
contract won’t be terminated.
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However, as mentioned before, not being able to
pay within the grace period will cause the
company to declare your insurance policy as
‘lapsed’. There is still a chance for the policyholder
to revive his policy if the premiums have not been
paid for only several months (though this would
vary for different companies). This option would
mostly be more available for policyholders who
have been paying their premiums on time for
many years.
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It’s possible that the company may charge interest
when the circumstances call for it. If the time that
the policy has been in lapse is longer than
necessary, then the insurance company may
require to-date information from the
policyholders. This would mean that the company
wants to evaluate the level of risk that the
policyholder presents before putting the policy
back to its previous effectiveness

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Definition of 'Waiver Of Subrogation‘

A special type of endorsement on a property-
casualty insurance policy. The Waiver of
Subrogation prohibits the insurer from attempting
to seek restitution from a third party who causes
any kind of loss to the insured. This type of
arrangement is allowable under certain
circumstances where the insured could be held
liable for a claim that is paid.
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An example of Waiver of Subrogation can be seen
where a tenant rents an apartment from a
landlord and takes out a renter's insurance policy.
The landlord makes an agreement with the tenant
stating that the landlord will not hold the tenant
liable for any type of damage to the rental unit. If
damage occurs, the insurer could pay the claim to
the landlord and then come after the tenant for
the damage. But a Waiver of Subrogation would
prevent the insurer from being able to do this.
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Thank you for your attention
and wish you all the best

Policy Administration Transactions In Insurance

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