policy year

Designated or identified by the calendar year in which the policy becomes effective. The policy year is a special accounting unit, unique to the insurance business, corresponding somewhat to the cost accounting unit, such as a particular job, order, or contract, used in manufacturing and contracting. This method is used for developing exact loss costs and loss ratios, as only by this statistical method can losses under a selected group of policies be related to the exposure and premiums for such policies.