Premium Optimization Mode

A new parameter has been added to the Premium Calculator to specify the premium optimization mode. This mode can be either Monthly or Annual.

The effect of this parameter is to determine how the Premium Calculator solves for minimum premium payments. The previous behaviour of ClariNet LS was Annual optimization – it targets the threshold AV/CSV at the end of each policy year. If you specify Monthly, it will target the threshold AV/CSV at the end of each policy monthiversary.

Comparison

Annual

In this example, the Policy Date is 28-June. You can see that the modal monthly premium is set to $12,256 at the start of the 2018 policy year such that AV/CSV is zero at the end of that policy year. This leads to a small AV/CSV which declines to zero over the year.

Monthly

With monthly optimization, a smaller premium payment of $11,307 is made on 28-June-2017 to target zero AV/CSV at the end of that month. There follow payments of $12,356 each month to pay the loads during that period to target zero at the end of each month.