Premium Fields: Definitions and Calculations

This document defines each premium field in Applied Epic and explains how transactions and downloads can alter the values. For more on how individual transaction codes can alter the premium fields, please see Transaction Codes Used in Epic.

Basic Definitions

• Estimated Premium: Estimate of the final premium. Entered when you enter the policy.
• Annualized Premium: The total amount of premium for 12 months. Normally entered by transactions.
• Billed Premium: Total premium transacted or billed to the customer. You cannot edit this field.
• Downloaded Premium: Total premium downloaded by the carrier in the Daily Policy Download. You cannot edit this field.

Detailed Definitions

Estimated Premium

Enter the Estimated Premium when first entering the policy. You can enter estimated premiums for the entire policy and individual lines. The system does not check to make sure the two values match.

Downloads can affect the Estimated Premium field. When the system processes downloads, they can update the Estimated Premium field with information from the company. You need to configure downloads specifically to do this. Downloads do not affect the estimated commission; they cannot perform this calculation.

You can also have the system report when downloaded premium changes exceed a certain amount or percentage. If they do, an Exception report prints as part of the Communication report. This report compares the estimated premium to the full term amount sent in the download. This is a different amount than the Net Change amount normally displayed on the Communication report.

Only Download affects this field, allowing you to track the estimated premium from the carrier versus the actual premium.

When you perform the Renew action on a policy, the Annualized premium from the expiring policy is copied to the Estimated premium field of the renewal policy.

Annualized Premium

Epic calculates annualized premium according to formulas that account for the actual policy term and the transaction effective date.

Note: The system counts one year as 365 days, except in leap years, in which it counts 366 days.

Normally, transactions affect the Annual Premium field, based on your configuration. However, you can also override the value directly from the policy's detail screen. (You need appropriate security permissions to edit this value.)

Premiums for policy terms less than one week are not annualized.

The annualized premium/commission field does not allow negative premiums. Premiums calculated as negative amounts are saved as 0.00.

When you perform the Renew action on a policy, the Annualized premium from the expiring policy is copied to the Estimated premium field of the renewal policy.

Downloads can affect the Annualized Premium field. When the system processes downloads, they can update the Annualized Premium field with information from the company. You need to configure downloads specifically to do this. Downloads do not affect the annualized commission; they cannot perform this calculation.

Policy-Level Annualized Premium

This system holds annualized premium at the policy level. It should equal the sum of the annualized line premium(s). However, the system does not require or check for this.

The policy-level annualized premium can come from several sources:

• When the policy is entered, there is a field for annualized policy premium. It is usually revisable, and you can update it at any time.
• Transactions that replace annualized premium (most production items) or add to it (e.g., endorsement production items) change the annualized premium. The transaction must affect the policy level. (You can select this option when adding the transaction.
• Transactions that affect the line level add premium to both the line and the policy. If you are receiving DB Commission Download and select to update the Line level, it will also affect the Policy level.
• Renewals default the annualized policy premium to zero. Unlike the line level, the annualized policy premium does not default to last year’s amount.

The system does not verify that the sum of all lines equals the policy total. Inconsistently attaching transactions to the line level creates inaccuracies in your line book of business.

Most organizations enter all transactions associated either to the policy or to each individual line of business. Even if the transaction is associated to the policy level, the billing associate is allowed to split the premium and commission per line on the Commissions subtab.

This allows you to add the transaction to the policy as a whole, but track the premium at the line level for internal purposes. This generates a single receivable with multiple payables if each line has a different commission rate.

Line-Level Annualized Premium

The system also holds annualized premiums at the line level. You can enter different premiums for each line in the Servicing/Billing section of the policy. This value can come from several sources:

• You can enter it when entering the policy. You can enter a policy total and a premium for each line.
• After entering the policy (but before submitting), you can update the annualized line premium at any time.
• Transactions that replace annualized premium (most production items) or add to it (e.g., endorsement production items) change the annualized premium. The transaction must affect the line level. (You can select this when adding the transaction.)
• Renewals default the previous year's premium onto the new policy.

Billed Premium

The Billed Premium field is just a calculation; you cannot edit it. It totals all premium transactions for the policy or line. Transactions either add to the billed premium or have no effect on it. (For example, you can configure fees and taxes not to add to the billed premium.)

When you use the Renew action on a policy, the Annualized premium from the expiring policy is copied to the Estimated premium field of the renewing policy.