Note 8. Policy Benefits and Claims

12 Months Ended

Dec. 31, 2014

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).

		2014		2013		2012
Balance at beginning of year	$	237,754	$	194,480	$	192,987
Less: reinsurance recoverable		72,772		78,629		83,137
Net balance at beginning of year		164,982		115,851		109,850
Amount assumed		-		15,384		-
Amount incurred, related to:
Current year		303,973		324,040		213,818
Prior years		(4,552)		(3,230)		(8,908)
Total incurred		299,421		320,810		204,910
Amount paid, related to:
Current year		192,001		207,315		130,386
Prior years		114,130		79,748		68,523
Total paid		306,131		287,063		198,909
Net balance at end of year		158,272		164,982		115,851
Plus:  reinsurance recoverable		78,531		72,772		78,629
Balance at end of year	$	236,803	$	237,754	$	194,480

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 $4,552,000 in 2014 related to prior years consists of favorable developments of $3,830,000 in the group disability reserves, $448,000 in other individual accident and health reserves and $378,000 in the Fully Insured Health reserves partially offset by an unfavorable development of $104,000 in Medical Stop-Loss reserves. 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.

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.