Similar to deferred policy acquisition costs, the Company defers sales inducements in the form of first year interest bonuses on annuity products that are directly related to the production of new business. These bonus interest charges are deferred and amortized using the same methodology and assumptions used to amortize other capitalized acquisition costs and the amortization is included in contract interest. In addition, deferred sales inducement balances are also reviewed periodically to ascertain whether actual experience has deviated significantly from that assumed (unlock) and are adjusted to reflect current policy lapse or termination rates, expense levels and credited rates on policies compared to anticipated experience (true-up). These adjustments, plus or minus, are included in contract interest expense. In the years ended December 31, 2015, 2014, and 2013 the Company recorded true-up adjustments of its deferred sales inducement balances resulting in additional contract interest expense of $3.9 million, $1.6 million and $0.8 million, respectively.
Life and policy benefits for a smaller block of business are subject to variation from period to period. Claim activity during 2015 was elevated compared to historical trends. While the number of incurred claims in 2015 declined 6% from the prior year, the average amount per claim increased from $16,600 to $22,600. The low face amount per claim reflects the older block of domestic life insurance policies sold which were final expense type products (i.e. purchased to cover funeral costs). The increase in the average face amount is due to the small addition of claims from recent policy sales which have higher face amounts of insurance coverage per policy. The Company's overall mortality experience for this segment is in line with pricing assumptions.
Operating expenses are allocated to lines of business based upon a functional cost analysis of the business activity giving rise to incurred expenses. As the Company's overall operating expense levels declined in 2015 from the prior year, operating expenses for this segment were lower.
Certain European countries have experienced varying degrees of financial stress. Risks from the continued debt crisis in Europe, while not as highly publicized recently compared to prior years, could continue to disrupt financial markets and have a detrimental impact on global conditions as well as on sovereign and non-sovereign obligations.The Company has no exposure to the sovereign debt of Portugal, Ireland, Italy, Greece or Spain. These countries in particular had been experiencing the more significant economic, fiscal and political strains that increase the likelihood of default for sovereign countries. Additionally, the Company has no exposure to the debt of financial institutions domiciled in these countries.
The fair value of derivative instruments presented in the Company’s consolidated financial statements totaling $38.4 million at December 31, 2015 and $114.3 million at December 31, 2014 pertain to notional policyholder account values of $3.3 billion and $3.2 billion at December 31, 2015 and 2014, respectively, electing interest credits based upon applicable market index performance.