The Health Actuarial Task Force has pushed a big group long-term disability (LTD) project another step closer to completion.
The task force, an arm of the National Association of Insurance Commissioners (NAIC), Kansas City, Mo., has posted a Group LTD Valuation Table Report and an discussion draft of a proposed Group LTD Valuation Table on its section of the NAIC’s website.
To calculate the amount of reserves that an insurer should set aside to back group LTD benefits payments, an actuary needs to know when the stream of payments might end, or terminate, either because the claimant has recovered or the claimant has died.
A new group LTD valuation table would provide updated data that actuaries could use to determine group LTD claim termination assumptions, the table drafters say.
Unlike the table now in use, the 1987 Commissioners Group Disability Table, the new table would break group LTD claim termination information down by diagnosis, and the new table also would include an adjustment to reflect steady increases in the number of years that group LTD claimants can expect to live, drafters say.
The current version of the table “does not vary by diagnosis and combines recoveries and deaths into one termination rate,” the drafters say. “[An] experience study showed that diagnosis is a significant variable in claim recovery rates. Separate recovery and death terminations allow for more precise reserves.”
The Society of Actuaries (SOA), Schaumburg, Ill., began the work needed to update the valuation reserves by gathering data on 680,000 group LTD claims that ended from 1997 to 2006.
In May 2011, actuaries at the SOA and the American Academy of Actuaries, Washington, began to work on using the experience study to create a new valuable table.
The Health Actuarial Task Force heard an update on the AAA and SOA members’ work on the project in August, at the NAIC’s summer meeting in Atlanta.