§ 84a.3. Definitions.
The following words and terms, when used in this chapter, have the following meanings, unless the context clearly indicates otherwise:
Annual-claim costThe 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 accruedThe 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 reportedA 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 unaccruedThe 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 unreportedA 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.
CommissionerThe Insurance Commissioner of the Commonwealth.
Credit insuranceInsurance 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. § § 1007.11007.15).
Date of disablementThe earliest date the insured is considered as being disabled under the definition of disability in the contract, based on a doctors evaluation or other evidence. Normally this date will coincide with the start of an elimination period.
DepartmentThe Insurance Department of the Commonwealth.
Elimination periodA specified number of days, weeks or months starting at the beginning of each period of loss, during which no benefits are payable.
Gross premiumThe 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 insuranceThe term includes blanket insurance and other forms of group insurance.
Group long-term care insuranceA 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 contractA 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 premiumA 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 insuranceAn 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 premiumThe 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 reserveA terminal reserve which is a negative value.
Operative dateThe 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 methodA 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 claimsThe reserve for claims unaccrued, which may be discounted at interest.
Rating blockA grouping of contracts based on common characteristics, such as a policy form or forms having similar benefit designs.
ReserveThe 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 reserveThe 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 reserveThe 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 premiumThe 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 policiesIndividual 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.
The provisions of this § 84a.3 amended under sections 206, 506, 1501 and 1502 of The Administrative Code of 1929 (71 P.S. § § 66, 186, 411 and 412); sections 301.1 and 311.1 of The Insurance Department Act of 1921 (40 P.S. § § 71.1 and 93); and 40 Pa.C.S. § 7124(c)(1) and (2).
The provisions of this § 84a.3 amended September 17, 1999, effective September 18, 1999, 29 Pa.B. 4864; amended July 14, 2006, effective January 1, 2007, 36 Pa.B. 3367; amended October 22, 2021, effective October 23, 2021, 51 Pa.B. 6600. Immediately preceding text appears at serial pages (320423) to (320426).
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