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Should a new individual disability table split employer business?

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Actuaries and others have given a proposed update of the U.S. individual disability insurance valuation table good reviews. The Health Actuarial Task Force, part of the National Association of Insurance Commissioners (NAIC), released the 2013 Individual Disability Income Valuation Tables Exposure Comments draft in December.

The task force used insurance company experience data collected from 1990 to 2007 to create the draft. They hope to replace the current table, the 1985 Commissioners’ Individual Disability A Table (1985 CIDA) and the Commissioners’ Individual Disability C Table (1985 CIDC). The 1985 tables are based on data gathered in the 1970s.

See also: Actuaries call for new individual disability valuation table

Insurers use the tables to set reserve levels for individual disability insurance policies and calculate prices.

The people who commented on the new draft focused mainly on technical concerns and requests that the drafters clarify some parts. Two actuaries who commented — Tracy Koch and Michael Streck — praised the draft but suggested that the drafters ought to distinguish between different types of employer-sponsored individual disability insurance.

Koch and Streck said the table ought to include separate modifiers for guaranteed standard issue business and fully underwritten multi-life business. An issuer of guaranteed standard issue coverage typically charges more for the insurance but agrees to take all applicants from a specified group without considering their medical history. 

“Fully underwritten multi-life business has better experience,” Koch and Streck wrote in a comment letter.

If insurers started using the draft table as is, they could end up setting reserves too low for guaranteed standard issue programs, and especially for voluntary guaranteed standard issue programs that let workers in a group choose whether to apply and pay for coverage, the actuaries said.

Koch and Streck said regulators should consider distinguishing between underwritten individual disability purchased through an employer-sponsored program, employer-paid individual guaranteed standard issue coverage, and voluntary, employee-paid individual guaranteed standard issue coverage purchased through an employer-sponsored program.

Koch and Streck also asked table drafters to think about distinguishing between different types of medical professionals, rather than creating a single medical professional category.

“Chiropractors and nurses are a much different risk than pediatricians and allergists,” the actuaries said. “Specialists doing invasive procedures are a different risk than those primarily doing office visits. This is evident when looking at how companies assign the various medical occupations to classes for pricing purposes. If there is going to be a separate standard for medical, it seems that there should be more than one class.” 


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