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Life Health > Health Insurance

CSO Reserving Tables Questioned

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A building block in creating new actuarial tables that are used in reserving but also affect pricing got an O.K. from regulators after strong disagreement was raised about whether more work was needed.

And that uncertainty could delay the project for up to six months or more.

The Valuation Basic Table is a cornerstone for creating new Commissioners’ Ordinary Tables that determine reserving. Based upon how much reserving is needed, it is a factor in determining premium pricing.

The issue cuts to two needs: the need to speedily put new tables in place to replace what is generally agreed are arcane reserving tables and the need to “fairly” reflect reserving requirements.

During several meetings of regulators, actuaries and insurers, Larry Gorski, chief actuary with the Illinois insurance department, has said that differences in two sets of data used in creating the VBT need further examination. Gorski has raised concerns on a smoker/nonsmoker VBT and exclusion of mortality data from Bragg and Associates in Atlanta. (See NU, Oct. 29.)

Of concern to Gorksi is the fairness of the margins that are added for smoker rates compared with non-smoker rates.

Fairness is particularly appropriate in light of the issue of race-based premium pricing that is “very much a part of those discussions,” he added.

Gorski added that he strongly feels that the underlying Bragg data differed from the Society data and that it is necessary to gather as much information as possible to look at these differences.

There is a responsibility, he said, to develop tables that are acceptable to regulators and acceptable to the Internal Revenue Service for tax purposes.

Regulators voted to accept the VBT in a vote of 12-1 with one abstention. But if margins ultimately have to be modified, the project could be delayed by six months or more because actuaries at this time of the year typically are called upon to help prepare financial statements and year-end projections.

Reproduced from National Underwriter Life & Health/Financial Services Edition, November 5, 2001. Copyright 2001 by The National Underwriter Company in the serial publication. All rights reserved.Copyright in this article as an independent work may be held by the author.

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