Handling long term policies in SIBRO
Understanding and accurately recording long-term policies is crucial for maintaining IRDA compliance and ensuring precise financial reporting. This article will guide you through the correct procedures for handling long-term policies in SIBRO.
What is a Long-Term Policy?
A long-term policy refers to an insurance policy where the coverage period exceeds one year.
IRDA Guidelines for Long-Term Non-Life Insurance Policies
According to the latest IRDA guidelines, for Long term Non Life insurance policies, the premium should be accounted and commissions shoud be disbursed on an annual basis.
As per the latest IRDA (Insurance Regulatory and Development Authority) guidelines, for long-term non-life insurance policies:
- Premium accounting must be done on an annual basis.
- Commissions should also be disbursed yearly, aligned with the recognized premium for each policy year.
Example: Premium and Commission Breakdown
For instance, if a 3-year insurance policy has a total premium of ₹60,000, the premium recognition and commission payout would be structured as follows:
Policy Year | GWP Recognition | Illustrative commission rate | Commission due |
|---|---|---|---|
Year 1 | 20000 | 15% | 3000 |
Year 2 | 20000 | 15% | 3000 |
Year 3 | 20000 | 15% | 3000 |
Policy Document Reference
The screenshot below displays a long-term policy document, where the year-wise premium breakdown is clearly visible.
Recording Long-Term Policies in SIBRO
The "Long-Term Policy" option in SIBRO appears only for policies with a coverage period exceeding one year.
Steps to Record a Long-Term Policy:
- Policy Entry:
- When entering a policy with a duration greater than 1 year, the system will prompt: "Long-Term Policy: Yes or No?"
- By default, this is set to "No." You must manually change it to "Yes."
- Yearly Premium Details:
- Once selected as "Yes," the system will display the subsequent year-wise premium breakdown.
- Review the details and save the entry.
- Premium Entry Guidelines:
- In the original policy premium section, enter only the first year’s premium.
- Do not input the total premium for the entire policy period.
When we changed the policy period to 3 years, system pormpted Long-Term Policy: Yes or No? When we selected Yes, the system displayed the subsequent year-wise premium breakdown. Review the details and save.
What is happening in SIBRO?
SIBRO already has the concept of Installments. Installments feature help us record premium in installments for life policies, certain corporate policies etc. For handling long term policies, we have improved this installments feature. The year-wise premium breakdown of a long term policy is nothing but a paid installment of that policy.