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Old 10-14-2012, 06:51 PM
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Question Finance and Service Charges Not Included in Premium

I seem to recall, and I cannot for the life of me remember where I go this, that in some circumstances you can account for finance and service charges as interest income rather than as a separate thing. Is this true? I cannot find reference to it anywhere, but it seems like I learned it somewhere.

So if the premium is paid in installments and you tack on a finance charge, you can count that as interest expense IN SOME CIRCUMSTANCES. I feel like this might have been the case if the finance charge is a percent of premium rather than a flat rate, but I'm not sure.

In either case, I'm a little confused about how you account for finance & service charges. Is it just a separate line item in the income statement that doesn't enter into "Net Investment Gain / Loss" or "Net U/W Gain / Loss"? It's just its own thing?

Or are there cases where you might put it in with Investment Gain / Loss?

Edit: Found my answer here. I was wrong, but apparently I'm not the only one who thought this. I'm not sure where we all got it from.

Last edited by dan_4000; 10-14-2012 at 07:28 PM.. Reason: Found a potential answer
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Old 10-14-2012, 06:58 PM
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Not sure about the first part... but I don't think they affect U/W income... they affect other income... someone please confirm this?
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Old 10-14-2012, 07:00 PM
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Oh, right, that makes sense. I feel stupid.

Well I guess it's the first that I am mainly curious about. Are there times that it is included as interest income? Did I totally make that up?
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Old 10-14-2012, 07:16 PM
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I must be wrong. SSAP 53 states that flat fee service charges are to be recorded as Other Income. If the fee is refundable in the event that the insured cancels, then it's recorded as Written Premium, instead.

This is still going to bug the heck out of me, since I feel like I'm remembering this from SOMEWHERE. It's bothering me particularly because SSAP 53 specifies "FLAT FEE service charges," which leaves room for the weird rule I'm remembering.
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Old 10-15-2012, 02:33 PM
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iasa 10 states this is under other income.
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Old 10-15-2012, 03:02 PM
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Quote:
Originally Posted by jesusislord View Post
iasa 10 states this is under other income.
This.
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