Ins 3.15(4)(b)(b) A company may submit any other risk or class of risks, subject to approval by the commissioner, which it believes is properly eligible for blanket accident and health insurance. Ins 3.15(5)(a)(a) Surgical benefit provisions or schedules shall provide that the benefit for any covered surgical procedure not specifically listed in the schedule and not excluded by the provisions of the policy shall be determined by the company on a basis consistent with the benefit provided for a comparable listed procedure. Ins 3.15(5)(b)(b) A policy which contains any provision under which the claimant may elect one benefit in lieu of another shall not limit to a specified period the time within which election may be made. Ins 3.15 HistoryHistory: Cr. Register, March, 1958, no. 27, eff. 4-1-58; am. (4) (a), cr. (5), Register, November, 1959, No. 47, eff. 12-1-59; am. (1), (3) and (4) (a), Register, October, 1961, No. 70, eff. 11-1-61; am. (4) (a), Register, April, 1963, No. 88, eff. 5-1-63; am. (4) (a), Register, June, 1963, No. 90, eff. 7-1-63; am. (4) (a), Register, October, 1963, No. 94, eff. 11-1-63; am. (4) (a), Register, August, 1964, No. 104, eff. 9-1-64; am. (4) (a), Register, August, 1968, No. 152, eff. 9-1-68; am. (4) (a), Register, March, 1969, No. 159, eff. 4-1-69; am. (4) (a), Register, August, 1970, No. 176, eff. 9-1-70; am. (4) (a), renum. (5) to be (5) (a), and cr. (b), Register, June, 1971, No. 186, eff. 7-1-71; emerg. am. (1), (3) and (4) (a), eff. 6-22-76; am. (1), (3) and (4) (a), Register, September, 1976, No. 249, eff. 10-1-76; r. (2), Register, January, 1980, No. 289, eff. 2-1-80; am. (1), Register, September, 1986, No. 369, eff. 10-1-86; corrections to (4) made under s. 13.93 (2m) (b) 5. and 7., Stats., Register, April, 1992, No. 436; CR 23-059: am. (4) (a) 15., cr. (4) (a) 16. Register June 2024 No. 822, eff. 7-1-24; correction in (4) (a) 1. to 15. made under s. 35.17, Stats., Register June 2024 No. 822. Ins 3.17Ins 3.17 Reserves for accident and sickness insurance policies. Ins 3.17(1)(1) Purpose. This section establishes required minimum standards under ch. 623, Stats., for claim, premium and contract reserves of insurers writing accident and sickness insurance policies. Ins 3.17(2)(2) Scope. This section applies to any insurer, including a fraternal benefit society, issuing a policy providing individual or group accident and sickness insurance coverages as classified under s. Ins 6.75 (1) (c) or (2) (c). This section does not apply to credit insurance as classified under s. Ins 6.75 (1) (c) 1. or (2) (c) 1. Ins 3.17(3)(a)(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. Ins 3.17 NoteNote: 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.
Ins 3.17(3)(b)(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. Ins 3.17 NoteNote: 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.
Ins 3.17(3)(c)(c) “Claims incurred” means a claim for which the insurer has become obligated to make payment, on or prior to the valuation date. Ins 3.17(3)(d)(d) “Claims reported” means those claims that have been incurred on or prior to the valuation date of which the insurer has been informed, on or prior to the valuation date. Ins 3.17 NoteNote: These claims are considered as reported claims for annual statement purposes.
Ins 3.17(3)(e)(e) “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. Ins 3.17 NoteNote: 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.
Ins 3.17(3)(f)(f) “Claims unreported” means those claims that have been incurred on or prior to the valuation date of which the insurer has not been informed, on or prior to the valuation date. Ins 3.17 NoteNote: These claims are considered as unreported claims for annual statement purposes.
Ins 3.17(3)(g)(g) “Date of disablement” means the earliest date on which the insured is considered as being disabled under the definition of disability in the contract, based on a physician’s evaluation or other evidence. Ins 3.17(3)(h)(h) “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. Ins 3.17(3)(i)(i) “Gross premium” means the amount of premium charged by the insurer. It includes the net premium, based on claim cost, for the risk together with any loading for expenses, profit or contingencies. Ins 3.17(3)(k)(k) “Individual insurance” includes franchise insurance. Ins 3.17(3)(L)(L) “Level premium” means a premium calculated to remain unchanged throughout either the lifetime of the policy, or for some shorter projected period of years. Ins 3.17 NoteNote: The level 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.
Ins 3.17 NoteGenerally, 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.
Ins 3.17(3)(m)(m) “Modal premium” means the premium paid on a contract based on a premium term which could be annual, semiannual, quarterly, monthly, or weekly. Ins 3.17 NoteNote: Thus if the annual premium is $100 and if, instead, monthly premiums of $9 are paid then the modal premium is $9.
Ins 3.17(3)(n)(n) “Negative reserve” means a negative terminal reserve value due to the values of the benefits decreasing with advancing age or duration. Ins 3.17(3)(o)(o) “Preliminary term reserve method” means the 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 reserve 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. Ins 3.17(3)(p)(p) “Present value of amounts not yet due on claims” means the reserve for claims unaccrued which may be discounted at interest. Ins 3.17(3)(q)(q) “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. Ins 3.17 NoteNote: An insurer under its contracts promises benefits which result in:
Ins 3.17 NoteOn claims incurred, 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; or
Ins 3.17 NoteClaims which are expected to be incurred after the valuation date. Any present liability of the insurer for these future claims should be provided for by the establishment of contract reserves and unearned premium reserves.
Ins 3.17(3)(r)(r) “Terminal reserve” means the reserve at the end of the contract year which is the present value of benefits expected to be incurred after that contract year minus the present value of future valuation net premiums. Ins 3.17(3)(s)(s) “Unearned premium reserve” means that portion of the premium paid or due to the insurer which is applicable to the period of coverage extending beyond the valuation date. Ins 3.17 NoteNote: 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.
Ins 3.17(3)(t)(t) “Valuation net modal premium” means 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. Ins 3.17(4)(4) Reserves in excess of minimum reserve standards. An insurer subject to this section may determine that the adequacy of its accident and sickness reserves requires reserves in excess of the minimum standards specified in this section. The insurer shall hold and consider the excess reserves as its minimum reserves. Ins 3.17(5)(a)(a) With respect to any block of contracts, or with respect to an insurer’s accident and sickness business as a whole, a prospective gross premium valuation is the ultimate test of reserve adequacy as of a given valuation date. The gross premium valuation shall take into account, for contracts in force, in a claims status, or in a continuation of benefits status on the valuation date, the present value as of the valuation date adjusted for future premium increases reasonably expected to be put into effect, of: Ins 3.17(5)(b)(b) The insurer shall perform a gross premium valuation whenever a significant doubt exists as to reserve adequacy with respect to any major block of contracts, or with respect to the insurer’s accident and sickness business as a whole. In the event inadequacy is found to exist, the insurer shall make immediate loss recognition and restore the reserves to adequacy. The insurer shall hold adequate reserves, inclusive of claim, premium and contract reserves, if any, with respect to all contracts, regardless of whether contract reserves are required for the contracts under these standards. Ins 3.17(5)(c)(c) Whenever minimum reserves, as defined in these standards, exceed reserve requirements as determined by a prospective gross premium valuation, the minimum reserves remain the minimum requirement under these standards. Ins 3.17(6)(a)1.1. Claim reserves are required for all incurred but unpaid claims on all accident and sickness insurance policies; Ins 3.17(6)(a)2.2. Appropriate claim expense reserves are required with respect to the estimated expense of settlement of all incurred but unpaid claims; and Ins 3.17(6)(a)3.3. The insurer shall test reserves for prior valuation years for adequacy and reasonableness along the lines of claim run-off schedules in accordance with the statutory financial statement including consideration of any residual unpaid liability. Ins 3.17(6)(b)(b) Except as provided in par. (bm), minimum standards for claim reserves are as follows: Ins 3.17(6)(b)1.a.a. The maximum interest rate for claim reserves is specified in Appendix A; Ins 3.17(6)(b)1.b.b. Minimum standards with respect to morbidity are those specified in Appendix A; except that, at the option of the insurer, for claims with a duration from date of disablement of less than two years, the insurer may base the reserves on the insurer’s experience, if the experience is considered credible, or upon other assumptions designed to place a sound value on the liabilities; Ins 3.17(6)(b)1.c.c. For contracts with an elimination period, the insurer shall measure the duration of disablement as dating from the time that benefits would have begun to accrue had there been no elimination period. Ins 3.17(6)(b)2.a.a. The maximum interest rate for claim reserves is specified in Appendix A; Ins 3.17(6)(b)2.b.b. The insurer shall base the reserve on the insurer’s experience, if this experience is considered credible, or upon other assumptions designed to place a sound value on the liabilities; Ins 3.17(6)(bm)1.1. The minimum claim reserve standards for contracts issued prior to January 1, 2017, at the option of the insurer, shall be either the reserving requirements as set forth in par. (b), or the reserving requirements set forth in the National Association of Insurance Commissioners Accounting Practices and Procedures Manual, Appendix A-010. Ins 3.17(6)(bm)2.2. The minimum claim reserve standards for contracts issued on or after January 1, 2017, shall be the standards set forth in the National Association of Insurance Commissioners Valuation Manual as defined in s. 623.06 (1) (j), Stats. Ins 3.17(6)(c)1.1. The insurer may use any generally accepted or reasonable actuarial method or combination of methods to estimate all claim liabilities. Ins 3.17(6)(c)2.2. The methods used for estimating liabilities generally may be aggregate methods, or various reserve items may be separately valued. The insurer may also employ approximations based on groupings and averages. The insurer shall, however, determine adequacy of the claim reserves in the aggregate. Ins 3.17(7)(a)1.1. Unearned premium reserves are required for all contracts with respect to the period of coverage for which premiums, other than premiums paid in advance, have been paid beyond the date of valuation; Ins 3.17(7)(a)2.2. If premiums due and unpaid are carried as an asset, the insurer shall treat the premiums as premiums in force, subject to unearned premium reserve determination. The insurer shall carry as an offsetting liability the value of unpaid commissions, premium taxes, and the cost of collection associated with due and unpaid premiums; and Ins 3.17(7)(a)3.3. Insurers may appropriately discount to the valuation date the gross premiums paid in advance for a period of coverage commencing after the next premium due date which follows the date of valuation. The insurer shall hold this discounted premium either as a separate liability or as an addition to the unearned premium reserve which would otherwise be required as a minimum. Ins 3.17(7)(b)(b) Minimum standards for unearned premium reserves are as follows: Ins 3.17(7)(b)1.1. The minimum unearned premium reserve with respect to any contract is the pro rata unearned modal premium that applies to the premium period beyond the valuation date, with the premium determined on the basis of: Ins 3.17(7)(b)1.a.a. The valuation net modal premium on the contract reserve basis applying to the contract; or Ins 3.17(7)(b)1.b.b. The gross modal premium for the contract if no contract reserve applies. Ins 3.17(7)(b)2.2. However, the sum of the unearned premium and contract reserves for all contracts of the insurer subject to contract reserve requirements may not be less than the gross modal unearned premium reserve on all of the contracts, as of the date of valuation. To the extent not provided for elsewhere in this section, this reserve may not be less than the expected claims for the period beyond the valuation date represented by the unearned premium reserve. Ins 3.17(7)(c)1.1. In computing premium reserves, the insurer may employ suitable approximations and estimates; including, but not limited to, groupings, averages and aggregate estimation. Ins 3.17(7)(c)2.2. The insurer shall periodically test the approximations or estimates to determine their continuing adequacy and reliability. Ins 3.17(8)(a)1.1. Contract reserves are required, unless otherwise specified in subd. 2. for: Ins 3.17(8)(a)1.a.a. All individual and group contracts with which level premiums are used; or Ins 3.17(8)(a)1.b.b. All individual and group contracts with respect to which, due to the gross premium pricing structure at issue, the value of the future benefits at any time exceeds the value of any appropriate future valuation net premiums at that time. The insurer shall determine the values specified in this subparagraph on the basis specified in par. (b); Ins 3.17(8)(a)2.b.b. Contracts already in force on the effective date of these standards for which no contract reserve was required under the immediately preceding standards;
