New York Codes, Rules and Regulations
Title 11 - INSURANCE
Chapter IV - Financial Condition Of Insurer and Reports to Superintendent
Subchapter B - Life Insurers
Part 94 - Valuation Of Individual And Group Accident And Health Insurance Reserves
Section 94.3 - Definitions

(a) Annual claim cost means 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.

(b) Claims accrued means that 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, must be established.

(c) Claims reported means that, when an insurer 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.

(d) Claims unaccrued means that 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), must be established.

(e) Claims unreported means that, when an insurer 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.

(f) Date of disablement means 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.

(g) Elimination period means a specified number of days, weeks, or months starting at the beginning of each period of loss, during which no benefits are payable.

(h) Gross premium means the amount of premium charged by the insurer, including the net premium (based on claim-cost) for the risk, together with any loading for expenses, profit or contingencies.

(i) Group insurance means blanket insurance, franchise insurance and any other form of group insurance. For purposes of reserves, franchise insurance is treated as individual insurance.

(j) Group long-term disability income contract means a contract that is based on a group pricing structure and provides group disability income coverage with a maximum benefit duration of longer than two years and does not include such a contract with a maximum benefit duration of two years or less or such a contract that is priced on an individual risk structure.

(k) Level premium means 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 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.

(l) Long-term care insurance means 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 services, provided in a setting other than an acute care unit of a hospital. The term includes group and individual annuities and life insurance policies or riders that provide directly or supplement long-term care insurance. Long-term care insurance also includes a policy or rider that provides for payment of benefits based upon cognitive impairment or the loss of functional capacity. The term shall also include qualified long-term insurance contracts. Long-term care insurance shall not include any insurance policy that 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 or related asset-protection coverage, accident-only coverage, specified disease or specified accident coverage, or limited benefit health coverage. With regard to life insurance, long- term care insurance does not include life insurance policies that accelerate the death benefit specifically for one or more of the qualifying events of terminal illness, medical conditions requiring extraordinary intervention or permanent institutional confinement, and that provide a lien against the policy or the option of a lump-sum payment for those benefits, and where neither the benefits nor the eligibility for the benefits is conditioned upon the receipt of long-term care. Long-term care also includes those policies, riders, or certificates covered by sections 52.12 and 52.13 of this Title (Regulation 62).

(m) Modal premium means 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 $120 and if, instead, monthly premiums of $10 are paid, then the modal premium is $10.

(n) 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.

(o) Preliminary term reserve method means a method of valuation 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 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.

(p) Present value of amounts not yet due on claims means the reserve for claims unaccrued (as defined in subdivision [d] of this section), which may be discounted at interest.

(q) Rating block means a grouping of contracts determined by the valuation actuary based on common characteristics filed with the superintendent, such as a policy form or forms having similar benefit designs.

(r) Reserve includes 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 contracts promises benefits, which result in:

(s) Terminal reserve means the reserve at the end of a contract year, and is the present value of benefits expected to be incurred after that contract year minus the present value of future valuation net premiums.

(t) Unearned premium reserve values that portion of the premium paid or due to the insurer that is applicable to the period of coverage extending beyond the valuation date. Thus, if an annual premium of $120 was paid on November 1st, $20 would be earned as of December 31st 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.

(u) Valuation net modal premium 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.

(v) Worksite disability policy means an individual short-term disability policy that is sold at the worksite through employer-sponsored enrollment, covers normal pregnancy, and has a benefit period not exceeding 24 months; but does not include a policy providing business overhead expense coverage, disability buyout coverage, or key person disability insurance.