earnPremium: Earn premium at the policy level

In chiefmurph/ep: Calculate earned premium by policy

Description

Given a policy level data.frame with columns named writtenpremium, effectivedate, and expirationdate, and given an ascending sequence of 'asof' dates, this function will earn each policy's writtenpremium between the asof dates.

Usage

earnPremium(data, asof)

Arguments

data	a data.frame with columns named 'writtenpremium' (numeric), 'effectivedate', and 'expirationdate' (see "Details")
asof	a vector of "dates" (see "Details")

Details

'effectivedate' and 'expirationdate' can be any R class that represents "dates": e.g., POSIXt objects or Date objects. 'asof' should be of the same class.

The function uses linear interpolation to "earn" each policy's writtenpremium incrementally and proportionally across the asof dates. The term over which each policy's premium is earned is determined by its pair of effective and expiration dates. The denominator in the proportionality factor is the length of the policy term calculated as expirationdate - effectivedate. The units, therefore, depend on the class of the R object representing those dates. For example, if POSIXt, units = seconds; if Date, units = days.

Value

A matrix of incremental earned premium values, with one row per policy and one column per calendar period determined by successive pairs of 'asof' dates.

Warning

Beware! No checks are performed on the integrity of the inputs: neither the names or classes of the columns of 'data', nor whether 'asof' has the correct class and is in ascending order.

Note

The policy term must be completely determined by the instant coverage begins ('effectivedate') and the instant coverage ends ('expirationdate'). Therefore, if the "date" class utilized is equivalent to the instant a day begins (as are most R "date" objects), then effectivedate would correspond to the first day of coverage and expirationdate would correspond to the day after coverage ends.

Author(s)

Yours Truly

References

See, for example, www.riskheads.org/how-to-calculate-earned-premium-example/

Examples

policytable <- data.frame(
  writtenpremium = rep(1000, 4),
  effectivedate  = as.Date(c("2014-01-01", "2014-04-01", 
                             "2014-07-01", "2014-10-01")),
  expirationdate = as.Date(c("2015-01-01", "2015-04-01", 
                             "2015-07-01", "2015-10-01")))
quarterbegindates <- as.Date(c("2014-01-01", "2014-04-01", 
                               "2014-07-01", "2014-10-01", 
                               "2015-01-01"))
earnPremium(policytable, quarterbegindates)

chiefmurph/ep documentation built on May 13, 2019, 4:12 p.m.