Valuation Overview

Valuation is the calculation of a policy’s worth.  Valuation is a process that calculates the policy’s current fund and deposit values. A policy that performs valuation calculations must be one that accumulates cash value, such as a Variable Annuity.  A policy such as Term Insurance does not accumulate cash value, so there is no value to calculate.  

The calculation of a policy’s value is determined by the type of funds it is comprised of.  A policy owner invests money in a policy by making deposits into specified fund(s).  The value of a policy depends on the amount and type of funds the policy owner has elected to purchase and how they perform in the market place.  The policy owner may remove money out of funds or transfer between funds, which will also affect the policy’s value. The movement of money in and out of a policy requires complex calculations and logic.  The OIPA system offers an agile environment that can support the various configuration permutations needed to manage a wide array of valuation requirements and fund types.

Simplified Valuation Diagram

When configuring valuation you need to consider the configuration of the following areas:

• Funds

• Allocations

• Transactions

• Assignments

• Any additional rules to enhance processing