July 26, 2023
Return Premium vs. Cancellation:
When to File Which
Return Premium and Cancellation transactions are different and must be filed as such in SLIP based on the effective date of the transaction.
A quick rule of thumb is only to use Cancellation if a policy is terminated.
Return Premium
A return premium refers to the amount of money refunded to the policyholder by the insurance company when a change is made. This typically occurs when the policyholder pays the premium in advance, and material changes are made mid-term. The return premium is the unearned portion of the premium.
EXAMPLE
Suppose a policyholder pays $12,000 for a one-year commercial property policy covering four properties and sells one of the properties after six months. In that case, they will receive a return premium for the remaining six months. If the premium for the entire year was $12,000, the return premium might be $1,500.
Cancellation
On the other hand, a cancellation refers to the termination of an insurance policy by either the insured or the insurance company before its scheduled expiration date. It can be initiated by either party based on specific circumstances. Canceling a policy terminates all coverage. If the policyholder has paid in advance, any unearned premium is returned to the policyholder.
Causes for cancellation can include:
- Non-payment of premiums,
- Material misrepresentation during the application process,
- Change in risk or circumstances that increase the insurer's liability, or
- Non-compliance with policy conditions.
EXAMPLE
If a policyholder pays $12,000 for a one-year commercial property policy covering four properties, but after six months, one of the properties is deemed not compliant with OSHA standards. The policy will be canceled, and the $6,000 in unearned premium will be returned to the policyholder.
A return premium is the refund given to the policyholder when they make changes that reduce the insurer's liability before the policy term is complete, whereas a cancellation is the termination of the policy itself before its scheduled expiration date.
FSLSO Bulletin 2023-01
A new FSLSO bulletin was issued recently regarding the use of a third-party filing service to make filings and submit reports to FSLSO.
Surplus lines agents and insurers are not prohibited from using third-party filing services to submit reports on their behalf in the Surplus Lines Information Portal (SLIP) or XML Batch services. However, FSLSO does not approve or otherwise endorse any third-party filing service and does not enter into any special arrangements, considerations, or other agreements concerning any activities they undertake.
Third-party filers must create a SLIP account solely for their use on behalf of a licensed surplus lines agent and agree, either in writing or electronically, to the terms and conditions and non-disclosure agreement all other SLIP accountholders agree to.
Submissions made by a third-party filing service are subject to the same review process as all other submissions.
Surplus lines agents, insurers, and IPC filers remain responsible under all applicable laws, regulations, and procedures for the accuracy and timeliness of any filings submitted on its behalf. Surplus lines agents, insurers, and IPC filers are ultimately responsible for adequately addressing or correcting compliance issues, including payment of taxes, fees, and assessments.
Tampa Bay Customer Forum
Last week, the FSLSO team traveled to Clearwater, Florida, for the latest customer forum. We sincerely appreciate your participation.
More customer forums are coming in the future. If you have any thoughts or topics for discussion at the next event, send an email to publicinfo@fslso.com.
HEADLINES
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Remarkably, these aren’t future endeavors — they’re happening today. And they represent three emerging risks insurers should keep track of as they continue to develop.
State Publishes Property Insurance Emergency Rule
Authorized residential property carriers in Florida have two weeks to certify to the state that they are abiding by the new claims processing requirements that went into effect July 1.
Citizens Insurance Aims to Shed Nearly 200,000 Policies Amidst Rapid Growth Concerns
Citizens Property Insurance Corporation is working to depopulate by nearly 200,000 policy lines by the end of October, according to an industry notice issued by the Office of Insurance Regulation (OIR).
U.S. House Members Ask About Flood Insurance Prices but Still Get No Answers from FEMA
Federal Emergency Management Agency Administrator Deanne Criswell was set to discuss her agency's future on Thursday, but spent much of her time fielding complaints from U.S. House members.
www.fslso.com
Have questions? Contact us at 800.562.4496, option 1 or email Agent.Services@fslso.com.
