E.g., 3000 * 20 = 1,00,000/- Where 5000 is the maximum monthly contribution needed from a subscriber, 20 is the duration of the chitty in months and 1,00,000 is the maximum sum assured. The duration also equals the number of subscribers, as there must be (not more or less) one subscriber to receive the price money every month.

The chitty starts on an announced date, every subscriber comes together for the auction/lot. When there is more than one person willing to take this minimum sum, lots are conducted and the ‘Lucky subscriber’ gets the prize money for the month. If there is no person willing to take the minimum sum, then a reverse auction is conducted where subscribers open-bid for lower amounts; that is from 1,00,000 >> 90,000 >> 75,000, and so on. The person bidding the lowest sum gets the bid amount.

In both the cases the auction discount, that is the difference between the gross sum and auction amount, is equally distributed among subscribers or is deducted from their monthly premium. For example if the auction is settled on a sum of 75,000, then the auction discount of 25,000 (1,00,000 – 75,000) is divided by 20 (the total number of subscribers) and everyone gets a discount of 1000. The same practice is repeated every month and every subscriber gets a chance of receiving some money.