Premium balances is classified as the payment and agent’s balances in the course if collection; agent’s balances, premiums and repayment booked but deferred and not yet owed, it is also defined as bills receivable being taken for payment and accrued showed premiums.
Premium balances is also correlated with the terminology “agent’s balance”, which is being defined as the statement which showed the total sum of money payable to the agent by the insurance business company, according to the plan an individual has with the insurance industry company. It can also be considered as money, usually in the form of premiums which belong to the insurer but are somehow withheld by a particular agent.
Premium balances are those that are in less commissions which are payable thereon and thereby due from the brokers and agents.
In related studies regarding agent’s balances or uncollected payments, it include the balances due and demandable from the insurers’ brokers or agents, collectively referred to as the agents’ balances for the payment on policies written. It is also included the uncollected payment balances which result out from the premium transactions being held directly within the person insured. Assumed premiums that are receivable, net of expenses are also verified in the classification.
The non-admitted part of un-accumulated premiums is being determined on the following points:
a.) un-accumulated balance of agents in a plan by plan basis which will exceed 90 days past due are considered as non-admitted apart from any unearned premium, with the off-setting being allowed whenever stipulated in the policy between the insurer and agent.
b.) To the point that no correlated unearned premium, un-accumulated premiums balance more than ninety (90) days are non-admitted assets.
c.) whenever an installment payment is more than 90 days due, the total sum more than that of the ninety days in addition to the future installments which are being documented in the policy are considered as non-admitted assets. In addition to it, the amounts which are identified to be non-admitted assets accumulated subsequent to the time of the legal financial statements will not be utilized to adjust the non-admitted asset then calculated.
In one way or another, premium balances does represent a major section of the admitted benefits of the casualty and property industry with an approximate level at 9.3% at the end year 2001. And because of such significance, insurers aimed to maintain efficient collection processes, either throughout agents or some others. Ineffective accumulation may lead to extreme balances that might result into the lost of interest in income and much higher than anticipated due balances.
For instance like, if a certain company writes big business throughout its agents who accumulate premiums, such premium will be recorded normally in net payment. In such circumstance, either the intermediary or the insurer may prepare a recapitulation of the premiums and the commission operations, monthly between both parties, regularly called ‘account current”.
The existing account will be submitted to the business insurance company with the agreement that the shown balance will be reconciled within an arranged time.