Set Up Surcharges
Learning Objectives
After completing this unit, you’ll be able to:
- Describe surcharge representation and calculation in Digital Insurance.
- Explain how surcharge rules determine when charges apply during quoting and policy servicing.
- Identify how surcharges are linked to products and components.
- Locate where surcharges appear in quotes and policy transactions.
Apply Surcharges to Insurance Products
After premiums are calculated, many insurance products include additional charges, such as state taxes or jurisdictional assessments. These charges are essential for producing a final, compliant cost of coverage.
Some are prorated if a policy is canceled early. Others are refundable or tied to specific regions. Regardless of type, they must be calculated consistently and itemized transparently for compliance and customer visibility.
Digital Insurance models these charges through a unified surcharge framework. In this unit, you explore how surcharges are defined, assigned, and evaluated during quoting and servicing.
While surcharge definitions support both taxes and fees during configuration, the runtime model currently applies only to taxes and other rate-based charges.
That means fee-type surcharges can be defined and assigned, but won't affect calculations during quoting or policy servicing.
Understand the Surcharge Model
In Digital Insurance, every charge applied after base pricing—whether a tax, a fee, or an adjustment—is represented as a surcharge.
Each surcharge is defined by four key properties.
Property |
Description |
|---|---|
Type |
Categorizes the charge as a Tax or Fee |
Calculation Type |
Defines how the value is determined |
Proratable |
Indicates whether the charge should scale with policy duration |
Refundable |
Determines whether the charge should be returned upon cancellation |
Surcharges can be simple, such as a flat percentage of premium, or complex, using conditional expressions based on product or customer data. Supported calculation types include:
-
Rate: A percentage applied to the premium.
-
Expression Set: A multistep formula or logic tree, similar to pricing procedures.
-
Amount: Flat values can be configured, though these are less common in taxation use cases.
Once configured, surcharge results appear on quotes and policy records as related Insurance Policy Surcharge records, itemized for billing and reporting.
To configure a surcharge for use in quoting or servicing:
-
Define the surcharge: Create the record with its type, value, and calculation methods.
-
Assign it to a product: Link the surcharge to the relevant root product or component.
-
Set conditions: Add rules to determine when the charge applies, based on attributes like region or vehicle type.
Together, these steps create a controlled, reusable surcharge structure that integrates seamlessly into quoting.
Surcharges in Action
Let’s rejoin Justus, the product admin at Cumulus Insurance, as he completes the pricing setup for the Auto Gold product. His task: Apply a mix of state-based premium taxes based on customer and product context.
Define the Surcharges
From the App Launcher, Justus navigates to Surcharges and clicks New. He creates four surcharges.
Name |
Surcharge Type |
Calculation Type |
Value |
|---|---|---|---|
California Sedan Tax |
Tax |
Rate |
2.8% |
California SUV Tax |
Tax |
Rate |
4% |
Los Angeles Noise Tax |
Tax |
Rate |
1.8% |
Auto Insurance Tax |
Tax |
Expression Set |
Conditional logic and formulas. |
Here’s the surcharge record for the California Sedan Tax, which uses a simple percentage rate.
This record shows how even a straightforward rate-based surcharge is fully defined with surcharge type, calculation type, and value, which in this case is a rate. Once created, it can be reused across products wherever the same condition applies.
Next, here’s the expression set used to calculate the Auto Insurance Tax.
This configuration demonstrates how surcharges can support complex logic. By layering steps and formulas, Justus ensures the tax is calculated accurately while keeping the logic transparent and version-controlled.
With these definitions in place, the surcharges are active and ready for assignment.
Assign Surcharges to Products
Justus links each surcharge to the Auto Gold product using a Product Tax Association. This object connects a surcharge record to a specific product or spec, ensuring the right tax logic can be applied at runtime.
He opens the Auto Gold record and navigates to the Product Surcharges tab. From there, he clicks Add Product Surcharge to launch the assignment flow.
For the Select Product step, he selects his Driver insured party spec, since it contains attributes like State and City that determine when surcharges apply.
Next, he selects the applicable surcharges for Auto Gold.
Once saved, the surcharges appear as rows on the Product Surcharges tab. Each is now associated with the Auto Gold product and ready to be evaluated during quoting.
Add Rules to Control When Surcharges Apply
With the surcharges assigned, Justus defines the conditions for when they’re triggered.
He starts by editing the California SUV Tax.
Each surcharge rule defines the conditions under which the charge applies.
For the California SUV Tax, the rule is simple: If the driver is in California and the vehicle type is SUV, the tax applies.
Justus repeats this process for the other surcharges, such as limiting the LA Noise Tax to drivers in Los Angeles zip codes.
Runtime Behavior
After everything is configured, Digital Insurance takes care of the rest. During quoting and policy servicing:
- All active surcharge rules are evaluated automatically.
- Applicable surcharges are added to the quote and itemized clearly by type and amount.
- Prorated or refundable charges are handled automatically at cancellation.
For example, a California resident with an SUV would see both the California SUV Tax and the Auto Insurance Tax applied. If the policy is canceled midterm, Digital Insurance prorates the charges and returns refundable amounts with no manual intervention required.
Wrap Up
With surcharges in place, Justus has completed the full product administration lifecycle for Auto Gold.
-
Structured product models define what’s sold and how it behaves.
-
Rules enforce eligibility, guide configuration, and manage approvals.
-
Pricing procedures calculate real-time premiums using reusable logic.
-
Surcharges capture taxes and regulatory adjustments.
Together, these layers form a complete foundation for quoting that is modular, transparent, and fully traceable from input to outcome. Every quote is governed by product design, pricing logic, and business rules, with no manual calculations required.
And the impact goes beyond quoting. These same components drive accuracy across the policy lifecycle, powering endorsements, renewals, cancellations, and servicing with the same consistency.
Now that you’ve explored Product Administration, you can dive deeper into key configuration details and see how these components support the full insurance lifecycle. To learn more, check out the Resources.