Prior to codification, Statutory Accounting Practices (SAP) allowed recognition of premium by:

Question

Options

• Awhen processed
• Bwhen due
• Cwhen paid
• DAll of the above

• A
  14% (5)
• B
  3% (1)
• C
  8% (3)
• D
  76% (28)

Explanation

Option D is correct because prior to NAIC codification, Statutory Accounting Practices lacked a single uniform standard for premium recognition - different states and insurers could legitimately recognize premiums at any of the three points: when processed, when due, or when paid. This inconsistency across jurisdictions was precisely the problem that codification (effective 2001) aimed to solve by standardizing SAP.

Options A, B, and C are each individually incomplete rather than wrong - each describes a method that was permitted somewhere, but selecting any one alone incorrectly implies it was the only acceptable approach, which it wasn't. The pre-codification landscape was defined by this variation, not by any single rule.

Memory tip: Associate "pre-codification" with "pre-standardization." Before a uniform code existed, the answer to "how must premiums be recognized?" was effectively "it depends on the state" - meaning all methods were on the table. If codification fixed the inconsistency, then before it, the inconsistency (all of the above) was the reality.

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