As Smalltox is (among other things) a rate and contribution management tool, its primary objective is to ensure the collection of these contributions and their distribution to the entities for which the manager collects them (insurer, broker, assistance provider, subscribing association, etc.).
Priority reporting is therefore naturally focused on the management of “pennies”, and therefore the accounting of cash receipts and the corresponding contributions.
Indeed, the accountant’s first role is to justify his bank, i.e. to identify what is coming in and what is going out of the bank account by means of an appropriate accounting entry.
This means managing bank accounts (512), third-party accounts (class 4, which are owed to other people), expense accounts (class 6) for what it costs, and income accounts (class 7) for what it earns.
So, from the insurer’s point of view, we’re counting earned (i.e. cashed) premiums here.
This is true for the standard chart of accounts used by managers.
However, insurers have a special chart of accounts (Chart of accounts specific to insurance and capitalization. (Articles A343-1 to Annex art A343-1 (al 3)) of the French Insurance Code. ).
I’ll skip the specific numbering and go straight to the account we’re interested in here: class 7 :
VII.-Class 7
1. The products of insurance companies are in principle technical products.
However, non-technical income and exceptional income are recorded in accounts 75 and 77 under the same conditions as non-technical expenses and exceptional expenses in accounts 65 and 67 (see VI above).
Class 7 . – Products
70 Bonus
700 Bonus Life (direct business) ::
7000 Periodic bonus issued.
7001 Single bonus issued.
7002 Cancellations.
7004 Change in unwritten earned premiums.
702 Non-life bonus (direct business) :
7020 Bonus written.
7022 Cancellations.
7023 Bonus rebates.
7024 Change in unwritten earned bonus.
7025 Change in bonus to be cancelled.
This list immediately shows that there is no earned premium account. In the insurers’ accounts, it’s premium written less cancellations. The pennies that come in and go out are indeed linked to earned premiums, and it’s in relation to these that they reconcile their bank, but they still need to write something right in the written premium boxes, because their commitments are calculated in relation to this, and it therefore has a major influence on their allocated capital, solvency margins and so on. Their own official reporting also depends on these written premiums.
Basically, written premiums that have been called are those that have reached their due date and for which payment has been requested from the customer, either by direct debit or by sending a call for assessment.
Most written bonus called are included in earned (cashed) bonus, since most customers pay in the same month. And in the particular case of direct debits, rejections can also occur in the same month or the following month.
This gives the insurer a very good approximation of the called bonus, since it is very close to the earned bonus.
The problem arises on the uncalled bonus, i.e. that which runs from next month to the end of the year.
Until now, like most other management tools, Smalltox provided only an approximate view of uncalled written bonus, which the insurer had to estimate on the basis of stock files rather than precise accounting flow exports.
In order to provide our insurance partners with perfectly accurate reporting on bonus written, we have developed specific reports on issue flows.
In this reporting, which covers a period chosen by the partner insurer, we write all the bonus flows written up to the next maturity date for each contract concerned, created over the chosen period.
This therefore concerns new contracts, renewal schedules generated over the period and schedules on amendments or changes in status (termination, reduction, buy-back, no effect), whether positive or negative.
As a result, the insurer simply records positive premiums as written premiums and negative bonus as cancellations. He can then easily reconcile cashed and rejected bonus with the classic cashing slip, and know the balance of bonus called but not cashed. The result is much more accurate issue accounting, better control of commitments and activity, and improved official reporting.
