NAIC Working on Group LTD Valuation Table

The actuaries are suggesting that regulators could provide detailed rules for setting termination assumptions, with the understanding that assumptions will be approved automatically if the prescribed formula is followed.

The appointed actuary should bear ultimate responsibility for maintaining reserve adequacy, the actuaries say.

Reserves should be higher than 100% of an insurer’s own claims experience, and they ought to be higher than 130% of what the valuation table shows the expected claims level to be, the actuaries say.

The table might be constructed to take into account the likelihood that insurers will more active managers of cases in the first two years an insured is collecting benefits, may change the definition of disability in years 3 through 5, and may be more passive about managing a case starting in the sixth year, the actuaries say.

The new table might have a 15% margin for error in the termination rates, compared with a margin of 10% for the old table, but the old table has extra built-in padding because recovery rates are significantly higher now than they were in 1987, the actuaries say.