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Debit note is generated to clients after policy issuance to debit the client account for payments due, usually issued along with the invoice which is the actual bill.
Credit notes are issued by insurer to brokers to credit their accounts for their brokerage, and to reinsurers for their share of premium, and also to clients in case of refund.
When You relate Debit and Credit on underwriters parts, it simply indicates that when Premium received from Participant or insurer he inserts in Debit Portion whereas when any refund of Premium due to cancellation of policy is made they uses Credit portion.
Claim Payment is not relates to underwriting part so any payment made for claims is not related to underwriting part.
Simply it is as follows:-
A)- Account with broker
1- if you are charging premium to client
- Debit note (invoice) = Client
- Credit note = Broker
2- if you are refunding premium to client
- Debit note (invoice) = Broker
- Credit note = Client
B)- Account without broker (Direct)
1- if you are charging premium to client
- Debit note (invoice) = Client
2- if you are refunding premium to client
- Credit note = Client
Usually in General Insurance, when underwriter issues a policy, debit note is generated automatically, through system software. The Client's Account is debited, in case it is direct premium, and The Broker's/ Agent's Account is debited, in case it is premium through Broker/ Agent.
The concerned premium is credited to that department of premium, like Fire Premium/ Marine Premium/ Accident Premium.
Debt note is usually attached to the insurance policy to account for and charge the premium due from the insured.
Credit note is usually attached to the claim documents to account for the amount of the claim paid to the insured.
During the period of insurance debit and credit notes may be issued to account for any alterations or amendments to insurance policy and to charge accordingly for additional or refund premium.
Best wishes.
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