Pro Rata Wheel

Use the Pro Rata Wheel to calculate either the Pro Rata or Short Rate unearned factor on a cancelled policy. Refer to the insurance company and your agency’s guidelines to determine the method you should use for calculating return premiums.

Accessing the Pro Rata Wheel

Using the Pro Rata Wheel

See the How the Pro Rata Wheel Calculates the Factors and the Pro Rata Wheel Fields sections of this topic for additional information.

With the Pro Rata Wheel data entry form open, select the Pro Rata (default) option or the Short Rate option to calculate the earned and unearned premium.
If theShort Rateoption is selected, enter the short rateFactor. The default is 0.900 but can be changed.
Verify or enter the following policy information: (See the Pro Rata Wheel Fields section of this topic for more information.)
Effective Date
Expiration Date
Cancellation Date
Full Term Premium

Click Calculate. The system calculates the following:
Unearned Factor
Return Premium
Earned Factor
Earned Premium

How the Pro Rata Wheel Calculates the Factors

Calculating the Unearned Factor

The Pro Rata Wheel calculates based on a 365-day year. It does not adjust for leap year. The following calculations determine the unearned factor:

If....	Then....
Pro Rata selected for an Annual policy term.	(The number of days from the cancellation date to the expiration date of the policy)/365 = Unearned Factor
Pro Rata selected for a Semi-annual policy term.	(The number of days from the cancellation date to the expiration date of the policy)/183 = Unearned Factor.
Short Rate selected for an Annual policy term.	(The number of days from the cancellation date to the expiration date of the policy)/365 x Short Rate Factor = Unearned Factor. 0.900 is the default Short Rate Factor, but can be changed.
Short Rate selected for a Semi-annual policy term.	(The number of days from the cancellation date to the expiration date of the policy)/183 x Short Rate Factor = Unearned Factor. 0.900 is the default Short Rate Factor, but can be changed.

Calculating the Earned Factor

The Pro Rata Wheel calculates based on a 365-day year. It does not adjust for leap year. The following calculations determine the earned factor:

If....	Then....
Pro Rata selected for an Annual policy term.	(Number of days from the effective date to cancellation date of the policy)/365 = Earned Factor
Pro Rata selected for a Semi-annual policy term.	(Number of days from the effective date to cancellation date of the policy)/183 = Earned Factor.
Short Rate selected for an Annual policy term.	1.0 - Unearned Factor = Earned Factor.
Short Rate selected for a Semi-annual policy term.	1.0 - Unearned Factor=Earned Factor.

Pro Rata Wheel Fields

For information on the earned and unearned calculations, see How the Pro Rata Wheel Calculates the Factors in this topic.

Option/Field	What is this?
Pro Rata	Select the method you want to use to calculate the factors and premiums. Refer to the insurance company and your agency’s guidelines to determine the method you should use for calculating return premiums.
Short Rate
Factor	The penalty factor used with the Short Rate method. The default is 0.900 (90%), but you can enter another percentage. The Factor field is not available if Pro Rata is selected since it is used for Short Rate only.
Effective Date	Enter the effective and expiration date of the policy you want to cancel. If you choose the Pro Rata Wheel with a policy open, this information fills from the policy.
Expiration Date
Cancellation date	Enter the date when the policy cancellation is effective. If you choose the Pro Rata Wheel with a policy open, the greatest endorsement effective date defaults to this field, but can be changed.
Full Term Premium	Enter the premium for the full policy term (six months, annual), including endorsements. If you choose the Pro Rata Wheel with a policy open and this information is in the policy, then it fills from the policy.
Unearned Factor	Calculated by AMS360. This factor represents the unearned period of time, from the cancellation date to the policy expiration date.
Return Premium	Calculated by AMS360. This equals the unearned factor multiplied by the full term premium.
Earned Factor	Calculated by AMS360. This factor represents the period from the policy effective date to the policy cancellation date.
Earned Premium	Calculated by AMS360. This equals the full term premium multiplied by the earned factor.

What's Next?

Do you need to create a Cancellation Request/Policy Release? See eForms Manager for more information. Do you need to enter the Cancellation? See Cancel Policy for more information.