Return premiums?

[DeaconMet]

How would anyone interpret the term return premiums in this sentence fragment:

a tax of six percent on the direct premiums, less return premiums and exclusive of sums collected to cover state or federal taxes, on surplus line insurance subject to tax transacted by the broker during the preceding calendar year as shown by the annual statement filed with the commissioner.

To me it seems to be claim payments; Am I correct?

[Stanley Milgram]

Originally Posted by DeaconMet

How would anyone interpret the term return premiums in this sentence fragment:

a tax of six percent on the direct premiums, less return premiums and exclusive of sums collected to cover state or federal taxes, on surplus line insurance subject to tax transacted by the broker during the preceding calendar year as shown by the annual statement filed with the commissioner.

To me it seems to be claim payments; Am I correct?

Jeez, sentences like that make me hate insurance.

No. It's not claim payments. I assume it refers to endorsements.

[the BS method]

yeesh.

'direct premiums less return premiums', i would think that's an awful way of saying earned premium.

[jerrytuttle]

Originally Posted by DeaconMet

How would anyone interpret the term return premiums in this sentence fragment:

a tax of six percent on the direct premiums, less return premiums and exclusive of sums collected to cover state or federal taxes, on surplus line insurance subject to tax transacted by the broker during the preceding calendar year as shown by the annual statement filed with the commissioner.

To me it seems to be claim payments; Am I correct?

Suppose the original premium were $100. If $5 were returned to the insured for any reason, such as a mid-term endorsement involving a reduction in coverage, then the tax is payable on the $95.

[JMO]

Jerry is right. So is Stanley. It's NOT claims, it's any sort of premium refund.

[MightySchoop]

I would assume it referred to commercial P&C lines with an audit, like Work Comp or some General Liability. The exposure base is something like payroll or sales and is not actually known until after the policy expires.

It's estimated up front and a premium set. If the premium audit shows an exposure base less than the estimate, a return premium is sent to the insured. No endorsement necessary.

[Brad Gile]

Originally Posted by MightySchoop

I would assume it referred to commercial P&C lines with an audit, like Work Comp or some General Liability. The exposure base is something like payroll or sales and is not actually known until after the policy expires.

It's estimated up front and a premium set. If the premium audit shows an exposure base less than the estimate, a return premium is sent to the insured. No endorsement necessary.

Actually, I believe that the term "return premium" is general and applies to all lines of insurance.

[JMO]

Originally Posted by Brad Gile

Actually, I believe that the term "return premium" is general and applies to all lines of insurance.

I agree. I've seen similar language for annuities, for example.

[Shaft]

Originally Posted by jerrytuttle

Suppose the original premium were $100. If $5 were returned to the insured for any reason, such as a mid-term endorsement involving a reduction in coverage, then the tax is payable on the $95.

Originally Posted by JMO

Jerry is right. So is Stanley. It's NOT claims, it's any sort of premium refund.

Agree with the above.

[California]

Originally Posted by DeaconMet

How would anyone interpret the term return premiums in this sentence fragment:

a tax of six percent on the direct premiums, less return premiums and exclusive of sums collected to cover state or federal taxes, on surplus line insurance subject to tax transacted by the broker during the preceding calendar year as shown by the annual statement filed with the commissioner.

To me it seems to be claim payments; Am I correct?

I will provide an example in a vacuum based upon an assumption. Actuaries like to make assumptions.

I buy a car and for some reason accept the credit insurance. A month later I come to my senses and ask for a refund of the unearned premium. What I get back is my return premium.