Claim Reserve Run-Out Studies: The Method and Its Application to Long-Term Accident and Health Product Reserve Adequacy Test

When talking about valuation in the United States, people have a feeling that it is all about government prescription. To regulatory authorities, the insurance company is acting like a naughty first-grader who resists doing homework with the excuse of not getting enough instructions. Then, the government/teacher comes up with a clear solution: use this interest rate, use that mortality table, apply such a method, and then just subtract one value from another. The valuation requirement appears crystal clear for most insurance products.

For long-term accident and health (A&H) products, e.g., individual disability income (IDI), however, it is not the case.