Virginia Administrative Code › Title 14 - INSURANCE › Agency 5 - STATE CORPORATION COMMISSION, BUREAU OF INSURANCE › Chapter 320 - RULES ESTABLISHING MINIMUM RESERVE STANDARDS FOR INDIVIDUAL AND GROUP ACCIDENT AND SICKNESS INSURANCE CONTRACTS › Section 14VAC5-320-70:2 - APPENDIX B. GLOSSARY OF TECHNICAL TERMS USED

Current through Register Vol. 40, No. 24, July 15, 2024
As used in this valuation standard, the following terms have
				  the following meaning:
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 one
				  year, with an elimination period of one 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. That portion of claims incurred on or prior
				  to the valuation date which result in liability of the company 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 company 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, must be
				  established.
CLAIMS REPORTED. When a company has been informed that a
				  claim has been incurred, if the date reported is on or prior to the valuation
				  date, the claim is considered as a reported claim for annual statement
				  purposes.
CLAIMS UNACCRUED. That portion of claims incurred on or prior
				  to the valuation date which result in liability of the company 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), must be
				  established.
CLAIMS UNREPORTED. When a company has not been informed, on
				  or before the valuation date, concerning a claim that has been incurred on or
				  prior to the valuation date, the claim is considered as an unreported claim for
				  annual statement purposes.
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 any elimination period.
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 company.
				  It includes the net premium (based on claim-cost) for the risk, together with
				  any loading for expenses, profit or contingencies.
GROUP INSURANCE. The term group insurance includes blanket
				  insurance and franchise insurance and any other forms of group
				  insurance.
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.
Generally, the annual claim costs are expected to increase
				  each year and the company, 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. Any insurance policy or rider
				  advertised, marketed, offered or designed to provide coverage for not less than
				  12 consecutive months for each covered person on an expense incurred,
				  indemnity, prepaid or other basis; for one or more necessary or medically
				  necessary diagnostic, preventive, therapeutic, rehabilitative, maintenance or
				  personal care, mental health or substance abuse services provided in a setting
				  other than an acute care unit of a hospital. Such term also includes a policy
				  or rider which provides for payment of benefits based upon cognitive impairment
				  or the loss of functional capacity. Long-term care insurance may be issued by
				  insurers; fraternal benefit societies; health services plans; health
				  maintenance organizations; cooperative non-profit life benefit companies or
				  mutual assessment life, accident and sickness insurers or any similar
				  organization to the extent it is otherwise authorized to issue life or accident
				  and sickness insurance. Long-term care insurance shall not include any
				  insurance policy which is offered primarily to provide basic Medicare
				  supplemental coverage, basic hospital expense coverage, basic medical-surgical
				  expense coverage, hospital confinement indemnity coverage, major medical
				  expense coverage, disability income or related asset-protection coverage,
				  accident only coverage, specified disease or specified accident coverage, or
				  limited benefit health coverage.
MODAL PREMIUM. This refers to the premium paid on a contract
				  based on a premium term which could be annual, semi-annual, quarterly, monthly,
				  or weekly. Thus if the annual premium is $100 and if, instead, monthly premiums
				  of $9 are paid then the modal premium is $9.
NEGATIVE RESERVE. Normally the terminal reserve is a positive
				  value. However, if the values of the benefits are decreasing with advancing age
				  or duration it could be a negative value, called a negative reserve.
PRELIMINARY TERM RESERVE METHOD. Under this method of
				  valuation 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 such that the present value of all such premiums is equal to the
				  present value of all 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" (see definition), which may be discounted at
				  interest.
RESERVE. The term "reserve" is 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. A company under its contracts
				  promises benefits which result in:
1. Claims
				  which have been incurred, that is, for which the company has become obligated
				  to make payment, on or prior to the valuation date. On these claims, payments
				  expected to be made after the valuation date for accrued and unaccrued benefits
				  are liabilities of the company which should be provided for by establishing
				  claim reserves; or
2. Claims which
				  are expected to be incurred after the valuation date. Any present liability of
				  the company for these future claims should be provided for by the establishment
				  of contract reserves and unearned premium reserves.
TERMINAL RESERVE. This is the reserve at the end of a
					 contract year, and is defined as 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. This reserve 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. This is the modal fraction of
					 the valuation net annual premium that corresponds to the gross modal premium in
					 effect on any contract to which contract reserves apply. Thus if the mode of
					 payment in effect is quarterly, the valuation net modal premium is the
					 quarterly equivalent of the valuation net annual premium.