Disability Claim Costs

Question 1

Disability Claim Costs

LTD Sources of Data

Answer 1

• Insurer Studies
  
  • CY/Incurred Year LR Studies
  • A/E Claim Incidence and Claim Termination Studies
• External Studies
  
  • SOA 2008/2012 GLTD Experience Table

Question 2

Disability Claim Costs

CY Loss Ratio Study (Formula, Adv/Disadv)

Answer 2

Incurred Claims = Paid Claims + Change in Claim Reserves

• Adv = Close to financials
• DisAdv = Not best picture of historical trend

Question 3

Disability Claim Costs

Incurred Year Loss Ratio Study (Formula, Adv/Disadv)

Answer 3

Incurred Claims = { PV(Claim to Date)+ Current Claim Reserve } All discounted to year of incurral

• Adv = Better historical trend
• DisAdv = Close to financials

Question 4

Disability Claim Costs

Claim Cost Formula

Answer 4

= Incidence Rate SUM(Benefit * Continuance * Discount Factor)

Question 5

Disability Claim Costs

Adjustments for Plan Variations (LTD)

Answer 5

• Benefit %
• Max/Min Benefit
• EP and Benefit Period
• Disability definition
• Offsets (SS, pension, part time work)
• Limits (mental disorders, substance abuse)
• Optional Features (Survivor benefits, COLA)
• UW Variations (preexisting conditions, at-work requirements)

Question 6

Disability Claim Costs

LTD Benefit Taxation

Answer 6

• Taxable if plan is paid with pre-tax dollars
• Non-taxable if plans are paid with after-tax dollars

Question 7

Disability Claim Costs

Adjustments for Group Characteristics

Answer 7

• Age/Gender
• Occupation
• Industry
• Average Earnings per EE
• Area
• Size of Group

Question 8

Disability Claim Costs

Misc. Factors Affecting LTD Claim Costs

Answer 8

• Economic cycle
• Distribution system
• Catastrophic risks

Question 9

Disability Claim Costs

STD Adjustments to Experience Studies

Answer 9

• Marketing Strategy
• Distribution
• UW
• Claim Administration
• Smooth/Graduate data
• Maternity costs