Simfuni runs both a billing cycle, which always starts from the policy anniversary date, and a payment cycle, which is the same length of time but may not fall on the same dates as the billing cycle. It's common for a payment cycle to end up out of sync with the billing cycle; this may be because the policyholder chose a later payment date when the policy was issued, or because at some stage during the policy lifecycle they've changed their payment day or frequency.
Simfuni calculates premiums annually. When a policy quote is being created, Simfuni will calculate the annual premium and divide it equally to get the premium instalment amounts; 52 payments for weekly, 26 payments for fortnightly, and 12 payments for monthly. This is why there is no overhang at the end of the year - all 365 days are accounted for, regardless of the payment frequency.
At the start of each policy term Simfuni calculates the billing cycle and premium instalment amount for every available payment frequency, and then continues to maintain this record of alternative billing cycles for each payment frequency throughout the policy term, even those that weren't selected. This is what allows a policyholder to open the "Change payment frequency" functionality and immediately see accurate instalment amounts for all the other available payment frequencies.
To avoid double billing a policyholder for a few days' worth of premiums, when changing payment frequency and selecting the first payment date the policyholder must choose a date that is after the current billing cycle has finished. The available dates are not based on the billing dates of the payment frequency they're swapping from, but the billing dates of the payment frequency they're swapping to.
Sarah is issued her policy on the 2nd of January and initially chooses to pay monthly starting on the 4th of January. After a month Sarah decides that she wants to switch to fortnightly payments (for more information on why she might not be allowed to switch payment frequencies, see this article).
When the policy was issued on January 2nd, all the available instalment amounts and their associated billing dates were calculated and have since been maintained in the background. This means that when Sarah wants to change payment frequency:
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She opens the payment functionality to change her payment frequency. The system can see where she's up to in her current billing cycle.
- Sarah choses a new payment frequency from the options available; she selects fortnightly.
- The system swaps the billing cycle from monthly to fortnightly.
- It calculates the next allowed payment date - this date is based on the fortnightly billing dates Sarah is changing to, not the monthly billing dates she's changing from.
- The first new payment date must occur after this date, and the system disables any dates before this to prevent Sarah from being double billed.
- Once the change is confirmed the system puts the payment frequency swap into force, and Sarah's upcoming payments are updated.