Calculating Compensation: Examples
Example 1: How is the time remaining calc'd? date of loss is may so that prem has earned in mar, apr earned two months, 10 months remaining, or if its based on wind up order date then its earned in mar, apr, may, jun so earned 4 months, 8 momths remaining but 0.583 remaining is 7/12, how did we earn 5 months?
Example 2: in the case where the insured gets an amount advanced, do we assume the deductible was already applied in the advance and why arent we returned part of the unearned premium?
Comments
Example 1:I also think the Excel formula used is wrong as it uses the month numbers from Expiration date and winding up order. But expiration date is still a full month to be earned so it should be 8/12 instead of 7/12.
Example 1: The policy was effective 2021-03-01, and the winding-up order was made 2021-07-01. The amount of time earned was 4 months (March, April, May, June). This leaves 8/12 months unearned. Good catch, I will have this adjusted.
Example 2: This question can be better clarified. When completing this question, I would assume that the amount advanced to the insurer included the unearned premium return (1400), and the remaining amount (520,933 - 1400 = 519,533) is what they received from the insurance company for the loss indemnification. This would be net of the deductible. The question intentionally gave extraneous information, but could be answered in other ways assuming assumptions are stated.
Do the limits need to be taken into account in example 2?
For example, at the current HO limit of 530k, would the insured not be entitled to the entire additional amount?
Hello,
Not sure if I am looking at the same problem as you. Is the example 2 referring to the excel file Problem 2 or the example 2 in the wiki? Not sure I am matching up with the numbers up top.
However, yes whether its to calculate the recovery amount (from recoverable loss), it is good to consider the limit. Only thing however, is the other case of "calculating additional compensation". The source doesn't seem to mention that it's capped at the limit here (what the insured can get advanced) and also in regards to additional payment, it seems it can go over - as example 2 in the wiki shows. I took a look at the source material as well and nothing there so I think, in the first case of calculating recovery amount, yes limit should be considered, the 2nd case of additional payment from liquidator, it seems not (can get additional recoveries over limit as long as claim amount > limit).
Let me know if still any further questions - thanks