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

3 Months Ended

Mar. 31, 2020

Notes

Liability for Future Policy Benefits and Unpaid Claims Disclosure

Note 10.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 incurred but not reported (“IBNR”) reserves. Summarized below are the changes in the total liability for policy benefits and claims for the periods indicated (in thousands).

		Three Months Ended
		March 31,
		2020		2019
Balance at beginning of year	$	164,802	$	160,115
Less: reinsurance recoverable		36,993		38,122
Net balance at beginning of year		127,809		121,993
Amount incurred, related to:
Current year		61,159		46,775
Prior years		(7,123)		(3,000)
Total incurred		54,036		43,775
Amount paid, related to:
Current year		14,168		12,658
Prior years		33,681		26,080
Total paid		47,849		38,738
Net balance at end of period		133,996		127,030
Plus:  reinsurance recoverable		36,840		37,880
Balance at end of period	$	170,836	$	164,910

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 $7,123,000 in 2020 related to prior years consists of favorable developments of $2,057,000 in Specialty Health reserves, $2,681,000 in the group disability reserves, and $2,385,000 in the other individual life, annuities and other reserves. Specialty Health net favorable development occurred primarily in the short term medical (“STM”), group gap, pets, fixed indemnity limited benefit and occupational accident lines of business.  Group Disability net favorable development was primarily due to favorable premium refund reserve adjustments in the DBL line of business partially offset by unfavorable development in the STD and LTD lines due to higher claims severity. The overall net favorable development of $3,000,000 in 2019 related to prior years consists of favorable developments of $1,510,000 in Specialty Health reserves, $1,369,000 in the group disability reserves, $121,000 in the other individual life, annuities and other reserves. Specialty Health net favorable development occurred primarily in the group gap, dental, pets, fixed indemnity limited benefit and occupational accident lines of business.  Group Disability net favorable development was primarily due to favorable claim experience in the DBL line of business.

Included in the preceding rollforward of the Company’s liability for policy benefits and claims are the policy benefits and claims activity associated with the Company’s health insurance lines. These 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 health insurance claims for the periods indicated (in thousands).

		Specialty Health Segment
		Health Insurance Claims
		Three Months Ended
		March 31,
		2020		2019
Balance at beginning of year	$	31,259	$	26,068
Less: reinsurance recoverable		1,113		851
Net balance at beginning of year		30,146		25,217
Amount incurred, related to:
Current year		13,316		13,416
Prior years		(1,597)		(930)
Total incurred		11,719		12,486
Amount paid, related to:
Current year		3,430		1,695
Prior years		11,723		8,398
Total paid		15,153		10,093
Net balance at end of period		26,712		27,610
Plus:  reinsurance recoverable		1,081		499
Balance at end of period	$	27,793	$	28,109

The liability for the IBNR plus expected development on reported claims associated with the Company’s health insurance claims is $26,712,000 at March 31, 2020.