Insurance Calculation and Premium Logic
Mobiloan automatically calculates and manages all insurance premiums as part of the quotation process. It ensures that insurance is charged fairly, proportionally, and in full compliance with product settings and regulatory limits.
There are two main types of cover that can apply:
Credit Life Insurance — the required protection that settles or reduces the loan balance if the borrower cannot repay due to death or certain life events.
Voluntary Life Insurance — optional cover that offers extra benefits (such as funeral or family support).
How the System Decides Which Insurance Applies ?
Every time a new loan quotation is created, the system looks at both the loan product setup and the insurance options selected on the quotation screen:
If the product or employer requires insurance, Credit Life is automatically applied.
If the borrower chooses optional insurance, Voluntary Life is added as well.
The system checks that each selected insurance product allows those cover types (for example, it must contain “credit_life” or “voluntary_life”.
It also validates that the loan amount falls within the insurance provider’s minimum and maximum limits. If the loan is too small or too large for that policy, the system warns the user or suggests removing it.
This automatic check means users don’t have to remember complex eligibility rules — the system does it for them.
Where Insurance Rates and Fees Come From?
Each insurance product connected to the loan has preset rules that define how premiums are calculated. These settings come directly from the insurer and are loaded into the system in the loan insurance setup
Insurance Setting
Purpose
Fixed Premium
A fixed amount charged every period (for example, R 10 per instalment).
Rate per R 1 000
A percentage‑based rate, e.g. “R 3.50 per R 1 000 insured per month.”
Coverage Base
Identifies what part of the loan is insured: just the loan capital or capital + initiation fee.
Minimum / Maximum Loan Size
Ensures the insurance only applies to the right loan sizes.
Pro‑Rata Option
Allows premiums to be reduced or increased in the first period depending on how many days that period covers.
How Premiums Are Calculated ?
When the insurance step runs, the application goes through a sequence of logical steps:
Determine the Base Amount to Insure
The system first decides what is being insured:
Just the loan amount, or
The loan amount plus initiation fee if the product says those fees must be covered.
This “insured amount” becomes the figure used in all percentage‑based calculations.
Identify the Type of Premium
Next, it checks whether the premium is a fixed fee or a rate‐based one:
Fixed Premium: a set amount per period (such as R 10 every month).
Rate Premium: a small charge per R 1 000 of the insured balance.
Adjust for Payment Frequency
Not every borrower pays monthly. Some repay weekly or fortnightly. The system therefore divides the monthly insurance rate by a frequency factor to make it fair:
Monthly → R 3.50 stays R 3.50
Fortnightly → R 3.50 ÷ 2.14 = R 1.64 per fortnight
Weekly → R 3.50 ÷ 4.29 = R 0.82 per week
Apply the Pro‑Rata First Period Adjustment
If the first repayment cycle is shorter or longer than a normal month, the app automatically reduces or increases the first premium in proportion to the days covered.
Example: If a loan runs 20 days between payout and the first instalment (instead of 30), the system multiplies the normal monthly premium by 20 / 30 = 0.67. Premiums therefore drop to 67 % of the usual rate — the borrower pays only for the days actually insured.
Apply VAT (Only If Needed)
Insurance premiums are generally VAT‑exempt in South Africa. For most products (Credit Life and Voluntary Life included), VAT is not applied. The system recognizes this automatically — only the service and initiation fees attract VAT.
Enforce Minimums and Maximums
The system cross‑checks every premium against the insurance product’s limits:
Minimum capital insured — ensures the loan is large enough for the product.
Maximum capital insured — prevents over‑coverage or disallowed risk amounts.
If a loan doesn’t meet these requirements, a warning message appears prompting the user to remove the insurance option.
Example: Insurance in Action
Scenario:
Loan Product: NCR Short Term
Loan Amount: R 1 000
Insurance Provider: GroupsRUS
Payout: 16 Oct 2025
First Instalment: 17 Nov 2025 (32 days later)
Credit Life Rate: R 3.50 per R 1 000 per month
Voluntary Life Fixed Premium: R 59.00 per month
First‑Period Factor: 1.07 (32 ÷ 30 = 1.07)
System Calculation:
Credit Life = (3.50 ÷ 1 000 × 1 000) × 1.07 = R 3.75
(After branch & insurer adjustments → rounded to R 5.18)
Voluntary = 59.00 × 1.07 = R 63.13 (band‑adjusted back to R 59.00) → Both values appear individually in the repayment schedule.
Result on the Repayment Table:
1
R 1 000.00
R 5.18
R 59.00
R 1 364.55
This transparency helps customers understand exactly what portion of their repayment is going toward insurance.
Group‑Based Insurers (Like GroupsRUS)
When the selected insurer is Groups RUS, the system applies extra logic to ensure the premiums follow that insurer’s unique rules:
Each branch or region may have different insurance products or rate bands.
The system checks the borrower’s branch ID, employment type, and loan amount, then loads the correct rate set from the insurer’s configuration file (meta‑rules).
Using those values, it recalculates both Credit Life and Voluntary Life premiums automatically.
After the repayment schedule is generated, it runs a second fine‑tuning step to align the premiums precisely with the final instalment values and insured benefits.
Everything happens behind the scenes, so users never need to select special options — selecting "GroupsRUS" is enough for the app to handle the rest.
Pro‑Rata Logic Across Insurance Calculations
The first‑period factor (determined earlier in the loan setup) affects more than interest and fees — it is applied consistently here too.
Shorter first period
20 days / 30 days = 0.67
Fee and premium reduced to 67 %
Borrower pays less
Longer first period
32 days / 30 days = 1.07
Fee and premium increased by 7 %
Borrower pays slightly more
This ensures borrowers only pay for the exact duration of cover.
The Insurance Module of the loan system automates insurance pricing from start to finish. It determines which cover applies, calculates premiums using built‑in insurer rules, applies pro‑rata adjustments for timing fairness, manages specialised group schemes like GroupsRUS, and enforces compliance automatically.
Borrowers and staff benefit from consistent, transparent insurance fees that reflect the exact loan size, repayment dates, and coverage period — all with zero manual calculation.
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