Organization, Consolidation, Basis of Presentation, Business Description and Accounting Policies [Text Block]: Revenue from Contract with Customer (Policies)

12 Months Ended

Dec. 31, 2020

Policies

Revenue from Contract with Customer

Fee income includes fees and commissions for various sales, marketing and administrative services provided by the IHC Agencies and lead generation company. Revenue is recognized as these services are performed in an amount that reflects the consideration we expect to be entitled to in exchange for these services.

The Company utilizes the following five-step approach to recognize revenue from contracts with customers:

(1)identification of the contract, or contracts, with a customer; 

(2)identification of the performance obligation in the contract; 

(3)determination of the transaction price; 

(4)allocation of the transaction price to the performance obligations in the contract; and 

(5)recognition of revenue when, or as, we satisfy a performance obligation. 

Commission revenues result from the sales of certain policies by the IHC Agencies on behalf of multiple unaffiliated insurance carriers. The Company has identified the unaffiliated insurance carriers as its customers. Increased sales of products to these unaffiliated insurance carriers began in 2020 as a result of new contracts with the carriers and increased distribution channels. A significant portion of our

commission revenues are recorded at a point in time based on expected constrained LTV that represent expected commissions to be received over the lifetime of the policies sold. These policies primarily consist of senior products, such as Medicare Advantage, Medicare Part D prescription drug plans and Medicare Supplement plans, as well as ACA plans and small group stop-loss. Commission rates are agreed to in advance with the relevant insurance carrier and vary by carrier and policy type. Other commission revenues are recorded over a period of time commensurate with the performance of certain policy retention and renewal services.

Constrained LTV commissions are recorded at a point in time upon the issuance of a policy by the unaffiliated insurance carrier. It is at this point the performance obligation is considered satisfied. No significant additional performance obligation occurs with renewal of the initial policy. IHC records substantially all of the anticipated revenue from these policies on this date, adjusted for certain expected constraints. Various factors are analyzed to estimate the constrained LTV commissions. These include, but are not limited to, commission rates, carrier mix, contract amendments and terminations, estimated average plan durations, cancellations and non-renewals. After our initial estimates and constraints are made, the Company reassesses its estimates and constraints at the end of each reporting period. We recognize any material impact of changes to commission revenue in the period when the changes are made to the assumptions we use to calculate constrained LTV or previously estimated constrained LTV already recognized as revenue.

Revenues for administrative services, such as premium collections, client services and claims processing, all considered to be a single performance obligation, are recognized over time as these services are performed. One of our agencies administers a block of pet business for an unaffiliated pet insurer that is in run-off and, until its sale in June 2020, another one of our agencies administered occupational accident plans including injured-on-duty accident plans and employer liability plans, and self-funded workers’ compensation plans. The Company has identified the unaffiliated insurance carriers as its customers. Some payments are received monthly or quarterly over the underlying policy period which is shorter than the life of the administrative period. A portion of these payments, in addition to any payments that are received as a lump-sum in advance, are recorded as deferred revenues and recognized in income over the life of the administrative contracts.

Revenues for marketing services, primarily STM, Fixed Indemnity Limited Benefit and other ancillary policies, are recognized over time. The Company has identified the unaffiliated insurance carriers as its customers. The Company receives fees for these marketing services each month based on a flat fee times monthly enrollment figures.

Revenues for the use of our INSX cloud-based enrollment platform are recognized over time. This platform enables brokers and agents to quote and enroll consumers in ACA plans as well as ancillary health products. In this case, the independent brokers and agents are the customers and they are charged a monthly fee for the right to use the hosted cloud software. Amounts received in advance (annual or quarterly) are recorded as deferred revenues and recognized in income over the life of the contract.

Certain IHC subsidiaries earn fees for various lead and referral services. Each service has one performance obligation which is satisfied at a point in time when a lead is transferred to the customer or a referral results in a completed application. The Company has identified the unaffiliated insurance carriers as its customer. All prices are specified in the applicable contract.

IHC Agencies also earn fees from policyholders for: (i) the convenience of paying for pet premiums in installments or by credit card; and (ii) the submission of online application or enrollment forms for various products. These fees are earned, and simultaneously received, from the policyholder/applicant at the point in time premium payments are made or online applications/enrollments are submitted.