"State" reference

[LuciP-TIGIC]

We are going through a system conversion and in doing so we need clarification on what "state" code or reference should be used with regards to the state pages and Schedule T. It looks like per the instructions, that Jurisdiction state should be used. However, there has been discussion on our end that we believe we have been reporting on Risk state. Would you be able to let me know what the interpretation is regarding each "state" reference? Also, does benefit state and payroll state contribute to these exhibits as well?

[BarryW]

The regulators give preparers a fair amount of lattitude in allocating premium to states in the State Pages and in Schedule T.

For example the Annual Statement Instructions indicate that on the State Pages reporting entities may estimate premiums by formula using countrywide ratios to allocate premium.

On Schedule T companies may allocate premium to the various states for individual life policies using the residence of the policyowner, the insured or the payer.

Generally, allocation of premium for group life insurance contracts is based on the "Rule of 500". For groups with 500 or more members, the premium is allocated by the residence or employment location of each group member. For groups with less than 500 members, the premium may be allocated to the state where the majority of the group members reside or work or to the state where the contract was issued or delivered.

Individual and group health contracts essentially have the same requirements, although with group health contracts, reporting entities may follow the "Rule of 500" or allocate premium to the state in which the contract was issued.

The Annual Statement Instructions indicate that whatever method is selected, it must be applied consistently. Also the method used to allocate premium is disclosed in a note at the bottom of Schedule T

[LuciP-TIGIC]

Unfortunately, we have run-off companies and Premium is very minimal if not zero. I was mostly concerned with the losses and making sure that those are presented correctly. Is there any guidance on that?

[BarryW]

I would first consider how the premium was allocated (when you were receiving premium). That essentially allocates the policy and benefits & expenses would follow the policy.

If you no longer receive premium (and you don't know how the premium was allocated when you were getting premium), I believe I would allocate based on the state in which the policy was issued.

The primary purpose of the State Page is for each state regulator to have some idea of the business written in their state and the primary purpose of Schedule T is to disclose premium by state.