Liability for Future Policy Benefits and Unpaid Claims Disclosure [Text Block]

12 Months Ended

Dec. 31, 2019

Notes

Liability for Future Policy Benefits and Unpaid Claims Disclosure

Note 11.Policy Benefits and Claims    Policy benefits and claims is the liability for unpaid loss and loss adjustment expenses. It is comprised of unpaid claims and estimated IBNR reserves. Summarized below are the changes in the total liability for policy benefits and claims for the periods indicated (in thousands).

		2019		2018
Balance at beginning of year	$	160,115	$	168,683
Less: reinsurance recoverable		38,122		42,136
Net balance at beginning of year		121,993		126,547
Amount incurred, related to:
Current year		196,124		166,899
Prior years		(20,294)		(19,907)
Total incurred		175,830		146,992
Amount paid, related to:
Current year		115,319		97,168
Prior years		54,695		54,378
Total paid		170,014		151,546
Net balance at end of year		127,809		121,993
Plus:  reinsurance recoverable		36,993		38,122
Balance at end of year	$	164,802	$	160,115

Since unpaid loss and loss adjustment expenses are estimates, actual losses incurred may be more or less than the Company’s previously developed estimates and is referred to as either unfavorable or favorable development, respectively. The overall net favorable development of $20,294,000 in 2019 related

to prior years consists of favorable developments of $5,879,000 in Specialty Health reserves, $11,681,000 in the group disability reserves, $2,449,000 in the other individual life, annuities and other reserves, and $285,000 in Medical Stop-Loss reserves. Specialty Health net favorable development occurred primarily in the short-term medical and occupational accident lines of business.  Group Disability net favorable development was primarily due to DBL and group LTD lines of business. LTD business experienced better than expected claim development in terms of duration and net payments. The net favorable development of the DBL line is mainly due to favorable adjustments to prior year premium refund reserves in addition to better than expected claims experience. The overall net favorable development of $19,907,000 in 2018 related to prior years consists of favorable developments of $10,716,000 in the Specialty Health reserves, $6,332,000 in group disability reserves, $2,575,000 in the group term life, other life, annuities and other reserves, and $284,000 in Medical Stop-Loss reserves. Specialty Health had net favorable development primarily from: (i) the release of reserves due to emerging favorable experience on hospital indemnity plan business written in 2017 on increased sales volume of this product; (ii) short-term medical business as inventory levels decreased during 2018 and paid claim activity was below the levels anticipated; and, (iii) favorable development in other lines of Specialty Health business.

Specialty Health Segment

The following tables provide undiscounted information about net incurred and paid claims development by accident year for significant short-duration contract liabilities for policy benefits and claims in our Specialty Health segment. All amounts are shown net of reinsurance. In addition, the tables present the total IBNR plus expected development on reported claims by accident year and the cumulative number of reported claims (in thousands, except number of reported claims). Refer to Note 1 for information on the methods we use to estimate IBNR plus expected development, as well as changes to those methodologies and assumptions. Five years of claims development data is presented for lines that are included in our Specialty Health segment since a majority of the claims are fully developed in that time. Certain information about incurred and paid claims is presented as supplementary information and unaudited where indicated.

Specialty Health Segment –Claims Development
									December 31, 2019
		Incurred Claims and Claim Adjustment Expenses, Net of Reinsurance							Incurred But	Cumulative
		For the years ended December 31,							Not Reported	Number of
Accident		2015	2016	2017	2018				Plus Expected	Reported
Year		(unaudited)	(unaudited)	(unaudited)	(unaudited)		2019		Development	Claims
										(Actual)
2015	$	104,497	100,988	101,241	100,642	$	101,260	$	293	467,232
2016			85,426	86,446	86,244		85,399		1,161	538,382
2017				87,070	77,214		77,194		1,275	628,748
2018					74,652		69,206		4,259	661,819
2019							82,926		33,257	537,636
Total						$	415,985

Specialty Health Segment –Claims Development
	Cumulative Paid Claims and Claim Adjustment Expenses, Net of Reinsurance
	For the years ended December 31,
Accident			2015	2016	2017	2018
Year			(unaudited)	(unaudited)	(unaudited)	(unaudited)		2019
2015		$	70,090	94,757	97,603	99,364	$	100,967
2016				45,454	78,611	82,983		84,238
2017					49,289	73,667		75,918
2018						46,574		64,947
2019								49,670
Total							$	375,740
Outstanding policy benefits and claims payable before 2015, net of reinsurance								266
Total policy benefits and claims, net of reinsurance							$	40,511

The claim frequency information consists of the count of claims submitted. Each claim was counted as one claim whether or not multiple claim lines were submitted with that claim, and each claim was counted whether or not it resulted in a liability.  For those portions of business that did not have claim records readily available, a reasonable count assumption was made based on a comparison to the known records of a similar business type. Cumulative claim count information is not a precise tool for calculating claim severity. Factors, such as changes in provider billing practices, the mix of services, benefit designs or processing systems could impact this type of analysis. The Company does not necessarily use the cumulative number of reported claims disclosed above in its claims analysis but has provided this information to comply with accounting standards.

The following is supplementary information about the average historical policy claims duration for the Specialty Health segment as of December 31, 2019:

Average Annual Percentage Payout of Incurred Claims by Age, Net of Reinsurance (unaudited)
	Year 1	Year 2	Year 3	Year 4	Year 5
Specialty Health Segment	62.7%	30.3%	3.6%	1.6%	1.6%

The liability for policy benefits and claims associated with the Company’s health insurance lines are embedded within the Specialty Health segment. The table below summarizes the components of the change in the liability for policy benefits and claims that are specific to the health insurance claims that are included in our Specialty Health segment for the periods indicated (in thousands).

		Specialty Health Segment
		Health Insurance Claims
		2019		2018
Balance at beginning of year	$	26,068	$	32,904
Less: reinsurance recoverable		851		762
Net balance at beginning of year		25,217		32,142
Amount incurred, related to:
Current year		51,479		47,143
Prior years		(3,517)		(9,000)
Total incurred		47,962		38,143
Amount paid, related to:
Current year		25,738		24,422
Prior years		17,295		20,646
Total paid		43,033		45,068
Net balance at end of year		30,146		25,217
Plus:  reinsurance recoverable		1,113		851
Balance at end of year	$	31,259	$	26,068

The liability for the IBNR plus expected development on reported claims associated with the Company’s health insurance claims was $30,146,000 at December 31, 2019.

The incurred claims and claim adjustment expenses, net, for the 2013 accident year include the acquisition of $15,384,000 of disability policy benefits and claims liabilities from a Receivership.

Claim frequency information consists of the count of unique claims where a benefit has been paid, whether that benefit was paid for one month or multiple months.  Any claims where a benefit has not been paid are not in the count. Cumulative claim count information is not a precise tool for calculating claim severity. Changes in reinsurance and other factors, such as those described in Note 1, could impact this type of analysis with regards to our group disability business. The Company does not necessarily use the cumulative number of reported claims disclosed above in its claims analysis but has provided this information to comply with accounting standards.

Unpaid claim liabilities related to our group disability policies is presented at present value. The following is additional information on unpaid claims liabilities presented at present value (in thousands):

		Carrying Value of				Aggregate Amount
		Unpaid Claim Liabilities				of Discount
		December 31,				December 31
		2019		2018		2019		2018
Group disability	$	56,756	$	57,510	$	10,382	$	10,764

Discount rates for each of the years ended December 31, 2019 and 2018 ranged from 3% to 6%. Insurance benefits, claims and reserves on the Consolidated Statements of Income for the years ended December 31, 2019 and 2018 include the accretion of interest amounting to $1,524,000 and $1,617,000, respectively. 

The following is supplementary information about the average historical claims duration for our group disability business as of December 31, 2019:

Group Disability
Average Annual Percentage Payout of Incurred Claims by Age, Net of Reinsurance (unaudited)
Year 1	Year 2	Year 3	Year 4	Year 5	Year 6	Year 7	Year 8	Year 9	Year 10
17.6%	20.3%	6.7%	3.1%	2.1%	2.1%	1.6%	0.7%	0.3%	0.1%

The following table reconciles the above disclosures of undiscounted net incurred and paid claims development for significant short-duration contract liabilities to the liability for policy benefits and claims on the consolidated balance sheet (in thousands).

		December 31, 2019
Net outstanding balances:
Specialty Health Segment	$	40,511
DBL/PFL		22,774
Group disability		67,139
Other short-duration insurance lines		7,712
Policy benefits and claims, net of reinsurance		138,136
Reinsurance recoverable on unpaid claims:
Specialty Health Segment		1,717
DBL/PFL		664
Group disability		23,322
Other short-duration insurance lines		11,290
Reinsurance recoverable on unpaid claims		36,993
Insurance lines other than short-duration		55
Aggregate discount		(10,382)
Total policy benefit and claims	$	164,802