REINSTATE

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REINSTATE.PNG
Name Reinstate Overview
Shortcut REINSTATE
Area Policy
 

See the NOVUS Walkthrough Guide for further information.


Reinstatements apply to a given section on a policy and are calculated in policy currency. The program asks for the number of reinstatements; NOVUS regards these as ‘cycles’: there will be one more cycle than the number of reinstatements. The reason is that a policy with, for example, 3 reinstatements will support 4 total losses (or its equivalent as smaller claims) so the requirement is to monitor the progress of losses through 4 cycles. The final cycle is configured automatically by the system.

The capacity of the policy is dictated by the limits set up in the LIMITS program. A policy with a limit of 3M and 3 reinstatements will have a 12M capacity. Reinstatements will apply on paid claims up to 9M in the aggregate.

Field name Description
No: Reinstatement number
Cy: Reinstatement Cycle
Pwrt: Proportional with respect to time field. (Y/N). The reinstatement calculation will be moderated to take into account the remaining period on the policy. For example, if the field is set to ‘Y’, the reinstatement calculation for a loss occurring exactly midterm will be scaled to 50%.
Prem. This is a percentage to indicate the relationship of the calculated reinstatement premium to the original premium once all other factors have been taken into account. Enter 100% if the reinstatement premiums will be calculated at the same rate as the original M&D otherwise scale accordingly.
Brok: This is a percentage to indicate the relationship of the calculated brokerage rate on the reinstatement premium to the brokerage rate on the original premium. Enter 100% if the rate of brokerage on the reinstatement premiums is the same as that on the original M&D otherwise scale accordingly.
SL: Reinstatement cycles can be ranked by settlement date or loss date. Every reinstatement cycle must be the same – either ‘S’ or ‘L’. Enter 'S' if claims are to be ordered by date of settlement or 'L' if they are to be ordered by date of loss.
Cons% Percentage consumed. The system maintains this automatically as reinstatements are processed. Once the first reinstatement cycle reaches 100% the system will begin to consume reinstatement ‘capacity’ from the next cycle.


FOR THE SYSTEM TO WORK CORRECTLY. REINSTATEMENTS MUST BE CONFIGURED BEFORE ANY CLAIMS ARE ENTERED/CALCULATED.

Enter '1' for the first reinstatement and complete the configuration:-

Complete subsequent lines for each reinstatement and commit the configuration. The program will automatically build an extra cycle to control the processing of claims once the reinstatements have been exhausted. A policy with two reinstatements will have three reinstatement cycles providing a capacity of 3 total losses or any number of smaller claims aggregating to 3 total losses.


How it works

There are no additional steps for processing claims for a policy that has reinstatements vs. a policy that does not. The mathematics takes place as part of the ‘calculate’ stage within the claim entry program. If reinstatements apply then the results will be shown in the ‘Post to IBA’ program on the right-hand side of the screen the reinstatement premium calculation. If part-settlement is chosen, then this, in turn, will moderate the reinstatement premium calculation. The system will automatically create a separate transaction for the reinstatement premium or return premium.

Once the transactions have been posted check ETRAN that the transactions have worked as expected.

Other issues

The calculation is based on the original sums insured on the policy and the value of the original premium or M&D’s in conjunction with the claimed amount - which is effectively the sums insured being ‘settled’.

Changes made to a claim already processed can have a major impact on the reinstatements. This is less marked if the ranking of the claims is by settlement date as this ranking can never change. However, if the ranking is by date of loss and a second claim entered which pre-dates the first. This will necessitate a complete recalculation of the reinstatement situation.

In an extreme case, the second claim (in order of entry date, but the first in terms of the loss date), could result in no reinstatement premium applying to the first claim as the second effectively replaces the first. This ‘shunt’ is even more pronounced if the conditions of the cycles in question are different.

Where calculations span cycles this situation is shown in the Post to IBA program by setting out the calculations for each cycle separately. NOVUS handles this ‘shunt’ by advising the user at the time of the claim calculation that other claims are now in need of recalculation. The system does not do the recalculations automatically as user intervention is required.

If this situation is encountered, the claims in question must be recalculated and it would be wise to do this in order of date of loss, (This situation cannot arise if reinstatement is ranked by settlement date.) All claims which are in need of recalculation are flagged to prevent any further posting to the IBA until such time as the recalculation has been carried out.


Version History

v4.2.0 – Updated to latest version