Task force posts disability table guideline draft

State regulators are still working on efforts to replace a table that shapes the group long-term disability (LTD) insurance industry, the 1987 Commissioners Group Disability Income Table.

The Health Actuarial Task Force, part of the National Association of Insurance Commissioners, has posted a new draft of the proposed Actuarial for Guideline for Group Long-Term Disability Insurance.

The Group Long-Term Disability Work Group, a unit of the American Academy of Actuaries, has been working with the NAIC to replace the 1987 table with the new 2012 Group Long-Term Disability Valuation Table.

The new table is based on data collected in 2008, and supporters say using it could help insurers fine-tune disability reserves and product prices. But a large insurer suggested about a year ago that one proposed approach to shifting to the new table would force it to add $200 million to its group LTD reserves.

One provision that has been particularly controversial has been a section that would determine when insurers must use data from the standard table, rather than data based on their own book of business.

In the current guideline draft — a revised version of a draft that was posted Oct. 3 — drafters say special rules would apply to claims for cases that have lasted for three or fewer months.

When actuaries were deciding how likely short-term claims were to terminate, or end due to a return to work, death or other event, the actuaries could use any estimated termination rates that they deemed appropriate.

For claims with a longer duration, an actuary who had enough company-specific experience could also use something other than numbers from the standard table.

The draft includes a formula that an actuary could use when determining 'M' — the minimum value for the company experience margin, or the extra value that the actuary would build in to the formula to adjust for the possibility that predictions about claims could be wrong.

"Adequacy tests and analysis of experience (sharpness of fluctuations, trends over the period of the termination rate study, changing claims practices, etc.) may indicate that a larger value of M may be more appropriate," according to the current draft. "If so, such a value is deemed appropriate."

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