The following words and terms, when used in this chapter,
have the following meanings, unless the context clearly indicates
otherwise:
Annual-claim cost-The net annual cost per
unit of benefit before the addition of expenses, including claim settlement
expenses, and a margin for profit or contingencies. For example, the annual
claim cost for a $100 monthly disability benefit, for a maximum disability
benefit period of 1 year, with an elimination period of 1 week, with respect to
a male at age 35, in a certain occupation might be $12, while the gross premium
for this benefit might be $18. The additional $6 would cover expenses and
profit or contingencies.
Claims accrued-The portion of claims
incurred on or prior to the valuation date which result in liability of the
insurer for the payment of benefits for medical services which have been
rendered on or prior to the valuation date, and for the payment of benefits for
days of hospitalization and days of disability which have occurred on or prior
to the valuation date, which the insurer has not paid as of the valuation date,
but for which it is liable, and will have to pay after the valuation date. This
liability is sometimes referred to as a liability for "accrued" benefits. A
claim reserve, which represents an estimate of this accrued claim liability,
shall be established.
Claims reported-A claim that has been
incurred on or prior to the valuation date is considered as a reported claim
for annual statement purposes if the date the claim is reported to the insurer
is on or prior to the valuation date.
Claims unaccrued-The portion of claims
incurred on or prior to the valuation date which result in liability of the
insurer for the payment of benefits for medical services expected to be
rendered after the valuation date, and for benefits expected to be payable for
days of hospitalization and days of disability occurring after the valuation
date. This liability is sometimes referred to as a liability for unaccrued
benefits. A claim reserve, which represents an estimate of the unaccrued claim
payments expected to be made, which may or may not be discounted with interest,
shall be established.
Claims unreported-A claim incurred on or
prior to the valuation date is considered as an unreported claim for annual
statement purposes if the insurer has not been informed of the claim on or
before the valuation date.
Commissioner-The Insurance Commissioner of
the Commonwealth.
Credit insurance-Insurance which falls
within the regulatory scope of the Model Act for the Regulation of Credit Life
Insurance and Credit Accident and Health Insurance (40 P.S. §§
1007.1-1007.15).
Date of disablement-The earliest date the
insured is considered as being disabled under the definition of disability in
the contract, based on a doctor's evaluation or other evidence. Normally this
date will coincide with the start of an elimination period.
Department-The Insurance Department of the
Commonwealth.
Elimination period-A specified number of
days, weeks or months starting at the beginning of each period of loss, during
which no benefits are payable.
Gross premium-The amount of premium charged
by the insurer, which includes the net premium based on claim-cost for the
risk, together with loading for expenses, profit or contingencies.
Group insurance-The term includes blanket
insurance and other forms of group insurance.
Group long-term care insurance-A long-term
care insurance policy that is delivered or issued for delivery in this
Commonwealth and issued to one or more employers or labor organizations, or to
a trust or to the trustees of a fund established by one or more employers or
labor organizations, or a combination thereof, for employees or former
employees or a combination thereof or for members or former members or a
combination thereof, of the labor organizations.
Group long-term disability income contract-A
group contract providing group disability income coverage with a maximum
benefit duration longer than 2 years that is based on a group pricing
structure. The term does not include any of the following:
(i) Group short-term disability (coverage
with benefit periods of 2 years or less in maximum duration).
(ii) Voluntary group disability income
coverage that is priced on an individual risk structure and generally sold in
the workplace.
Level premium-A premium calculated to remain
unchanged throughout either the lifetime of the policy, or for some shorter
projected period of years. The premium need not be guaranteed; in which case,
although it is calculated to remain level, it may be changed if any of the
assumptions on which it was based are revised at a later time. The annual claim
costs are expected to increase each year and the insurer, instead of charging
premiums that correspondingly increase each year, charges a premium calculated
to remain level for a period of years or for the lifetime of the contract. In
this case the benefit portion of the premium is more than needed to provide for
the cost of benefits during the earlier years of the policy and less than the
actual cost in the later years. The building of a prospective contract reserve
is a natural result of level premiums.
Long-term care insurance-An insurance
contract advertised, marketed, offered or designed to provide coverage for at
least 12 consecutive months for each covered person on an expense incurred,
indemnity, prepaid or other basis; for functionally necessary or medically
necessary diagnostic, preventive, therapeutic, rehabilitative, maintenance or
personal care services, provided in a setting other than an acute care unit of
a hospital:
(i) The term includes a
policy or rider that provides for payment of benefits based upon cognitive
impairment or the loss of functional capacity.
(ii) The term does not include an insurance
contract which is offered primarily to provide basic Medicare supplement
coverage, basic hospital expense coverage, basic medical-surgical expense
coverage, hospital confinement indemnity coverage, major medical expense
coverage, disability income coverage, accident only coverage, specified disease
coverage or specified accident coverage.
Modal premium-The premium paid on a contract
based on a premium term that could be annual, semiannual, quarterly, monthly or
weekly. For example, if the annual premium is $100 and if, instead, monthly
premiums of $9 are paid the modal premium is $9.
Negative reserve-A terminal reserve which is
a negative value.
Operative date-The effective date of the
approval by the Commissioner for an insurer to use the 1980 CSO Mortality Table
to calculate nonforfeiture values and reserves for life insurance
contracts.
Preliminary term reserve method-A reserve
method under which the valuation net premium for each year falling within the
preliminary term period is exactly sufficient to cover the expected incurred
claims of that year, so that the terminal reserves will be zero at the end of
the year. As of the end of the preliminary term period, a new constant
valuation net premium, or stream of changing valuation premiums, becomes
applicable so that the present value of the net premiums is equal to the
present value of the claims expected to be incurred following the end of the
preliminary term period.
Present value of amounts not yet due on
claims-The reserve for claims unaccrued, which may be discounted at
interest.
Rating block-A grouping of contracts based
on common characteristics, such as a policy form or forms having similar
benefit designs.
Reserve-The term used to include all items
of benefit liability, whether in the nature of incurred claim liability or in
the nature of contract liability relating to future periods of coverage, and
whether the liability is accrued or unaccrued. An insurer under its contract
promises benefits which result in claims which have been incurred, that is, for
which the insurer has become obligated to make payment, on or prior to the
valuation date and in claims which are expected to be incurred after the
valuation date. For the incurred claims, payments expected to be made after the
valuation date for accrued and unaccrued benefits are liabilities of the
insurer which should be provided for by establishing claim reserves. For the
expected claims, present liability of the insurer for these future claims
should be provided for by the establishment of contract reserves and unearned
premium reserves.
Terminal reserve-The reserve at the end of a
contract year. It is the present value of benefits expected to be incurred
after that contract year minus the present value of future valuation net
premiums.
Unearned premium reserve-The reserve that
values that portion of the premium paid or due to the insurer which is
applicable to the period of coverage extending beyond the valuation date. Thus,
if an annual premium of $120 was paid on November 1, $20 would be earned as of
December 31 and the remaining $100 would be unearned. The unearned premium
reserve could be on a gross basis as in this example, or on a valuation net
premium basis.
Valuation net modal premium-The modal
fraction of the valuation net annual premium that corresponds to the gross
modal premium in effect on a contract to which contract reserves apply. For
example, if the mode of payment in effect is quarterly, the valuation net modal
premium is the quarterly equivalent of the valuation net annual premium.
Worksite disability policies-Individual
short-term disability policies that are sold at the worksite through
employer-sponsored enrollment, that cover normal pregnancy, and that have
benefit periods up to 24 months. The term does not include any of the
following:
(i) Personal disability
policies sold to an individual and not associated with employer-sponsored
enrollment.
(ii) Business overhead
expense, disability buyout, or key person policies, in whatever manner those
policies are sold.
