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Professional Indemnity - Endorsements

Endorsement Types

Common Mid-Term Changes

  1. Sum Insured Changes
  2. Increase coverage limit

  3. Decrease coverage limit

  4. Retroactive Date Adjustments

  5. Extend retroactive coverage

  6. Amend retroactive period

  7. Coverage Period Extensions

  8. Short-period extensions

  9. Policy period amendments

  10. Insured Details Updates

  11. Business name changes
  12. Address corrections

  13. Contact updates

  14. Coverage Modifications

  15. Add covered professionals
  16. Change geographic scope

  17. Adjust deductibles

  18. Cancellation

  19. Customer requested
  20. Non-payment
  21. Underwriting reasons

Premium Adjustments

How Endorsement Premiums Are Calculated

Endorsement premiums consider three factors:

  1. Time Factor
  2. Remaining policy period
  3. Days left vs. days elapsed

  4. Pro-rata based on time

  5. Coverage Factor

  6. Change in sum insured
  7. Change in number of professionals

  8. Change in revenue/turnover

  9. Risk Factor

  10. Change in professional category
  11. Addition of high-risk activities
  12. Geographic expansion

Formula: 

Endorsement Premium = Coverage Change × Time Factor × Risk Factor

Cancellation and Refunds

Refund Methods

1. Short-Period Rate Method

Used for early cancellations - non-proportional refund

Typical Rates: | Period | Premium Retained | Refund | |--------|------------------|--------| | 1 month | 25% | 75% | | 3 months | 50% | 50% | | 6 months | 75% | 25% | | 9+ months | 100% | 0% |

2. Pro-Rata Method

Used for mid-term cancellations - proportional refund

Formula: 

Refund = Annual Premium × (Days Remaining ÷ 365)

3. Minimum Retained Premium

  • Minimum amount kept regardless of timing
  • Covers administrative costs
  • Applied even on day-1 cancellations

Refund Processing Steps

  1. Cancellation request received
  2. Cancellation date confirmed
  3. Refund method determined
  4. Premium adjustment calculated
  5. Refund processed
  6. Commission reversed (if applicable)

Endorsement Workflow

Processing Steps

1. Initiation - Request received - Endorsement type selected - Reason documented

2. Data Entry - Changes entered - Effective date specified - Documents attached

3. Calculation - Premium impact calculated - Pro-rata factors applied - Additional charges added

4. Approval - Underwriter review (if needed) - Authorization obtained - Validations passed

5. Issuance - Endorsement document generated - Policy updated - Customer notified

Business Rules

Endorsement Restrictions

Timing Rules: - Retroactive endorsements may be restricted - Future-dated changes allowed - Effective date must be valid

Coverage Rules: - Maximum increase without underwriting review - Minimum retained premium on decreases - Geographic limitations apply

Approval Requirements: - Authority limits for underwriters - Referral rules for major changes - Documentation requirements

Endorsement Numbering

Endorsements are numbered sequentially: - Policy: ABC/2025/001 - First Endorsement: ABC/2025/001/E01 - Second Endorsement: ABC/2025/001/E02

Common Scenarios

Sum Insured Increase

Process: 1. Customer requests higher limit 2. Additional premium calculated pro-rata 3. Underwriting approval (if needed) 4. Endorsement issued 5. Additional premium charged

Retroactive Date Extension

Process: 1. Customer requests earlier retroactive date 2. Additional exposure years calculated 3. Additional premium charged 4. Underwriting review required 5. Endorsement issued if approved

Mid-Term Cancellation

Process: 1. Cancellation request received 2. Cancellation date confirmed 3. Refund calculated (short-period or pro-rata) 4. Commission clawback calculated 5. Refund processed 6. Cancellation endorsement issued

Commission Impact

On Additional Premium

  • Commission paid on additional premium
  • Same rate as original policy
  • Paid when premium collected

On Refunds

  • Commission clawed back proportionally
  • Broker refunds commission to insurer
  • Processed with refund

Next Steps