Professional Documents
Culture Documents
WHITE PAPER
IN
PROPERTY INSURANCE
AUTHOR:
REJI JOSE
reji.jose@wipro.com
REVIEWER:
RAJAKRISHNAN VENUGOPAL
rajakrishnan.venugopal@wipro.com
Abstract
Third Party Property Insurance premium billing was an implementation undertaken by Wipro for one of the leading US based insurance companies. During the course of the project, the Wipro team interacted closely with the customers business team to get an insight into the principles of business considered while billing a third party for the insurance premium. The intent of this document is to provide an introduction to the business aspects of third party billing. A high level picture of the processes involved in processing such policies is documented. The document also provides an understanding on how the processing of these policies is different from processing other property policies. The policy inception, statement processing and non-payment of premium have been briefed with the driving factors for business. This document has been prepared based on my interaction with the business team of a U.S. based insurance company. The business jargons, terminologies and business model may not be relevant to all the insurance companies. The idea behind the document was to provide a brief picture of how 3rd party billing works.
Table of Contents
1. Introduction.............................................................................................. 4 White Paper Third Party Billing in Property Insurance................................4
1.1 What is 3rd party billing?...........................................................................................................4 1.2 3rd parties - Classification.........................................................................................................4
2. Storage of 3rd Party Information..............................................................5 White Paper Third Party Billing in Property Insurance................................6 3. Premium Statement Generation...............................................................6
3.1 How much to Bill and When to Bill?.........................................................................................6 3.2 How to Bill?................................................................................................................................6
5. References................................................................................................ 9
WHITE PAPER
IN
PROPERTY INSURANCE
1.Introduction
1.1 What is 3rd party billing?
There are property insurance policies for which the premium is paid by someone other than the policyholder. These entities that pay the premium are called 3rd parties and such policies are called 3rd party billed policies. This usually happens when the policyholder borrows money from a financial institution to buy the property. The financial institution has to ensure that the property is insured. If the property is not insured, any damage to the property would be a risk to the financial institution as well. Hence, in these cases, the financial institutions have an interest in the property in addition to the policyholder.
1.2
WHITE PAPER
IN
PROPERTY INSURANCE
A property insurance policy can have multiple 3rd parties attached to it. Not all of the 3rd parties are payors. Only one of the 3rd party pays but the others have an interest in the property and would want to know details on the kind of insurance taken on the property, the payments made, the payments defaulted etc. The premium statement is, however, required to be sent only to the 3rd party who is the payor on the policy. This 3rd party can be changed by the policyholder depending on how, when and with whom the property is refinanced. Usually, it is the policy processing systems responsibility to maintain the 3rd party information on the policy. The system that generates the premium statement will have to interact with the policy processing system to get the latest information on the 3rd party policy before sending the statement.
WHITE PAPER
IN
PROPERTY INSURANCE
WHITE PAPER
IN
PROPERTY INSURANCE
As mentioned, the payments from 3rd parties can come in as regular customer payments (checks, etc.) or as an EDI sequential file. The Insurance Company should be able to support both these modes. And again EDI processing takes lesser time to process and, hence, it is an investment to have this infrastructure set up.
WHITE PAPER
IN
PROPERTY INSURANCE
held as an escrow. An escrow account is a trust account held in the borrowers name to pay obligations such as property taxes and insurance premiums. This being the case, the policyholder would have already paid the mortgage company the premium amount and should be the recipient of the refund. The service center, however, should have the option to direct the refund to the 3rd party if needed.
4.2 Non-payment
To give a background of the non-payment types, there are two types of nonpayment letters that can be sent out to the payor the Notice of Cancellation or the Notice of Expiration. A Notice of Cancellation is sent out to the payor when the payor has paid the renewal amount (policy is activated for the new term) but has missed paying one of the mid-term statements. These kinds of notices, upon non-payment, will follow a policy cancellation and a collection for the amount due. The policyholder is liable to pay for the period for which the payment was not received but the property was covered. A Notice of Expiration is sent out to the payor when the payor has not paid the renewal amount (policy is not activated for the new term). This could also mean that the policyholder does not want to continue the policy into the new term. These kinds of notices, upon non-payment, will follow a policy cancellation and the policyholder is not liable to pay for the period for which the payment was not received but the property was covered. When an NOC/NOE is being sent for a 3rd party billed policy or a policy that is not 3rd party billed but has 3rd parties attached to it, copied are to be sent to all the 3rd parties on the policy since all the 3rd parties have a financial interest in the property insured. In case, the 3rd party on the policy is an additional insured, the NOC/NOE being sent to the additional insured should have a coupon (to include while making the payment) similar to the one being sent to the policyholder. This is because the additional insured is an individual (versus an organization) and should be enabled to make a payment on the notice.
WHITE PAPER
IN
PROPERTY INSURANCE
Now is a payment is made on the NOC/NOE, the notices sent to the other 3rd parties have to be nullified or rescinded. A rescind letter will have to be sent to all the 3rd parties invalidating the notice. This will have to be done even for policy that are not 3rd party billed but has 3rd parties attached to it.
5.References
1.
Wikipedia (www.wikipedia.org)