Premium Calculations

In Socotra, you specify premium and commission values at the peril level with the rating plugin or an external rater. Generally, you supply price values on an annualized basis, allowing Socotra to assign a specific price for the peril characteristic’s coverage segment in accordance with Socotra’s time scaling methodology.

If you wish to assign an exact price for a coverage segment yourself, bypassing Socotra’s scaling, you can do so by supplying an exact value for the premium, technical premium, or commission.

You may want to specify exact amounts for situations like these:

  • Charge a flat dollar amount in certain situations

  • Apply special requirements for premium amounts, such as rounding to the nearest dollar or nickel

  • Scale by a different method than months, such as by days, or “360 day years”, etc.

  • Calculate month durations differently than the default calculation

  • Have the persisted rate to be different from the effective rate, such as in rounding operations

The tables below summarize the effects of these properties:

Premium

Values supplied

Effect

yearlyPremium

yearlyPremium is divided by 12 and stored on the monthPremium property. Socotra scales monthPremium to obtain a premium value for the segment, which is persisted as premium.

exactPremium

exactPremium is rounded and stored as premium. Socotra scales exactPremium to obtain a month premium value, which is persisted to monthPremium.

yearlyPremium and exactPremium

exactPremium is rounded and stored as premium. yearlyPremium is divided by 12 and stored as monthPremium.

Technical premium values (yearlyTechnicalPremium, exactTechnicalPremium) behave the same way.

Note

You can mix how each peril characteristics object is handled. For example, you could set exactPremium for one and yearlyPremium for another, and both for a third.

Commission

Values supplied

Effect

yearlyAmount

yearlyAmount is divided by 12 and stored on the amount property.

exactAmount

exactAmount is rounded and stored as amount.

yearlyAmount and exactAmount

exactAmount is rounded and stored as amount; yearlyAmount is ignored.