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

9 Months Ended

Sep. 30, 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 related to the Company’s short-duration contracts. Summarized below are the changes in the total liability for policy benefits and claims for the periods indicated (in thousands). Amounts incurred below do not include expenses for policy benefits and costs incurred for the Company’s life, annuity and other long-duration contracts. In addition, certain loss adjustment expenses related to short-duration contracts that are included in amounts incurred below are classified as selling general and administrative expenses on the Condensed Consolidated Statements of Income.

		Nine Months Ended September 30, 2020
		Specialty		DBL and		Group		All Other
		Health		PFL		Disability		Lines		Total
Balance at beginning of year	$	42,228	$	23,438	$	80,079	$	19,057	$	164,802
Less: reinsurance recoverable		1,717		664		23,322		11,290		36,993
Net balance at beginning of year		40,511		22,774		56,757		7,767		127,809
Amount incurred, related to:
Current year		67,352		62,204		26,865		15,494		171,915
Prior years		(4,009)		(3,467)		(2,998)		(3,284)		(13,758)
Total incurred		63,343		58,737		23,867		12,210		158,157
Amount paid, related to:
Current year		36,780		31,040		7,787		9,227		84,834
Prior years		25,554		18,974		15,630		2,256		62,414
Total paid		62,334		50,014		23,417		11,483		147,248
Net balance at end of period		41,520		31,497		57,207		8,494		138,718
Plus:  reinsurance recoverable		2,106		595		21,890		10,805		35,396
Balance at end of period	$	43,626	$	32,092	$	79,097	$	19,299	$	174,114

		Nine Months Ended September 30, 2019
		Specialty		DBL and		Group		All Other
		Health		PFL		Disability		Lines		Total
Balance at beginning of year	$	38,363	$	21,080	$	82,222	$	18,450	$	160,115
Less: reinsurance recoverable		1,335		719		24,712		11,356		38,122
Net balance at beginning of year		37,028		20,361		57,510		7,094		121,993
Amount incurred, related to:
Current year		61,866		48,594		22,957		12,521		145,938
Prior years		(4,370)		(6,424)		(3,699)		(1,457)		(15,950)
Total incurred		57,496		42,170		19,258		11,064		129,988
Amount paid, related to:
Current year		32,806		29,760		6,852		6,977		76,395
Prior years		21,873		13,772		12,623		3,058		51,326
Total paid		54,679		43,532		19,475		10,035		127,721
Net balance at end of period		39,845		18,999		57,293		8,123		124,260
Plus:  reinsurance recoverable		1,837		677		23,712		10,943		37,169
Balance at end of period	$	41,682	$	19,676	$	81,005	$	19,066	$	161,429

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.

Net favorable (unfavorable) development in the Specialty Health segment, as depicted in the tables above, is comprised of the following lines of business for the period indicated (in thousands):

		Nine Months Ended
		September 30,
Specialty Health segment:		2020		2019
Short-term Medical	$	1,001	$	471
Occupational Accident		1,075		1,921
Limited Medical		349		507
Critical Illness		429		269
Group Gap		575		98
Fixed Indemnity Limited Benefit		(626)		327
Pet		646		127
All other specialty health lines		560		650
Total Specialty Health segment	$	4,009	$	4,370

In 2020, net favorable development in the various lines of the Specialty Health segment shown above is primarily due to better than expected claim development. Unfavorable development in the Fixed Indemnity Limited Benefit line in 2020 is primarily due to higher than expected claim severity on a small number of policies. In 2019, favorable development in the occupational accident line, in run-off, is mainly due to some claims settling for amounts less than anticipated and due to a lower level of employer liability claims than anticipated in relation to historical levels. Net favorable development in the other lines of Specialty Health business in 2019 is primarily due to better than expected claim development.

In 2020, the net favorable development in the DBL and PFL business is mainly due to favorable premium refund reserve adjustments in the DBL line of business. In 2019, net favorable development is primarily due to favorable DBL claims experience.

In 2020, favorable development in the group disability business is primarily due to a reduction in the number of open claims and a reduction in the severity of new claims, specifically, new claims in the LTD line, partially offset by an increase in the overall frequency and severity of claims in the STD line. In 2019, favorable development in the group disability business is primarily due to better than expected claim development in terms of duration and net payments in the LTD business.

All other lines, primarily life and other individual health products and including our medical stop-loss business in run-off, experienced favorable development in 2020 and 2019 that is primarily related to the group term life business due to continued improvements in experience.

Included in the preceding rollforwards 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
		Nine Months Ended
		September 30,
		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		32,574		38,950
Prior years		(2,292)		(2,370)
Total incurred		30,282		36,580
Amount paid, related to:
Current year		14,610		15,630
Prior years		18,331		15,357
Total paid		32,941		30,987
Net balance at end of period		27,487		30,810
Plus:  reinsurance recoverable		2,106		919
Balance at end of period	$	29,593	$	31,729

The $27,487,000 net balance of the Company’s health insurance claims liability at September 30, 2020 shown in the table above is all IBNR plus expected development on reported claims.