Finely Calibrating the Right Allocation System for Your Business
Premium allocation systems provide formal, yet versatile mechanisms in which insurance premiums, fees and other charges are allocated among participants in an equitable manner. A robust yet flexible allocation system can result in all parties being satisfied that they have been dealt with fairly.
Our Experience Produces the Correct Methodology
Establishing the appropriate methodology is the most important part of the process and it is important that the participants understand and offer commitment to their “buy-in”
Willis has produced a model which has been used for a number of major clients. Through our experience we can provide guidance on how best to calibrate the model, which factors and weightings to use in allocating the premium (and/or other charges) and the impact that each of the might have.
Once an initial allocation has been produced, caps can be applied to restrict the movement (up or down) on the expiring premium. This capping will produce either a surplus or deficit allocation and therefore the model includes a series of Iterations which allocates the remainder (+ or -) until the best allocation has been produced.
Audit Trails and Incentives
In addition to providing a clear audit trail for transfer pricing purposes, a good premium allocation model can also provide a clear incentive for participants to improve their risk management.
Willis can help in the following areas:
- Establishing the methodology
- Designing the model
- Project managing the process
- Undertaking the premium allocation for you
- Increased control over charges
- Consistency over time
- Improved efficiency
- Risk management incentive
- Improved internal cash flow
- Improved relationships
- Supports transfer pricing principles