Note 8. Policy Benefits and Claims

12 Months Ended

Dec. 31, 2013

Notes

Note 8. Policy Benefits and Claims

 Note 8.                        Policy Benefits and Claims

Summarized below are the changes in the liability for policy benefits and claims for the periods indicated (in thousands).

		2013		2012		2011
Balance at beginning of year	$	194,480	$	192,987	$	197,968
Less: reinsurance recoverable		78,629		83,137		82,724
Net balance at beginning of year		115,851		109,850		115,244
Amount assumed		15,384		-		-
Amount incurred, related to:
Current year		324,040		213,818		197,705
Prior years		(3,230)		(8,908)		(7,492)
Total incurred		320,810		204,910		190,213
Amount paid, related to:
Current year		207,315		130,386		123,702
Prior years		79,748		68,523		71,905
Total paid		287,063		198,909		195,607
Net balance at end of year		164,982		115,851		109,850
Plus:  reinsurance recoverable		72,772		78,629		83,137
Balance at end of year	$	237,754	$	194,480	$	192,987

The preceding schedule reflects:  (i) the due and unpaid; (ii) claims in the course of settlement; (iii) estimated incurred but not reported reserves; and (iv) the present value of amounts not yet due on claims. The incurred and paid data above reflects all activity for the year. The overall net favorable development of $3,230,000 in 2013 related to prior years consists of favorable developments of $4,269,000 in the group disability reserves and $1,069,000 in other individual accident and health reserves partially offset by an unfavorable developments of $2,000,000 in Medical Stop-Loss reserves and $108,000 in the Fully Insured Health reserves. The net favorable development in 2012 for prior years of $8,908,000 is primarily the result of $2,968,000 of net favorable developments in Medical Stop-Loss reserves, $375,000 in the Fully Insured Health reserves, $4,508,000 in the group disability reserves and $1,057,000 in all other reserves. The net favorable development in 2011 for prior years of $7,492,000 is primarily the result of $2,622,000 of net favorable developments in Medical Stop-Loss reserves, $2,276,000 in the Fully Insured Health reserves, $2,397,000 in the group disability reserves and $197,000 in all other reserves.

These changes in reserve estimates are generally the result of on-going analysis of recent loss development trends.  Medical stop-loss business is excess coverage with a short duration. Predicting ultimate claims and estimating reserves in medical stop-loss is especially complicated due to the “excess of loss” nature of these products with very high deductibles applying to specific claims on any individual claimant and in the aggregate for a given group. Fluctuations in results for specific coverage are primarily due to the severity and frequency of individual claims. Due to the short-term nature of medical stop-loss, redundancies and deficiencies will typically emerge during the following year rather than over a number of years.