Liability for Unpaid Claims and Claim Adjustment Expenses

9 Months Ended

Sep. 30, 2022

Liability for Unpaid Claims and Claim Adjustment Expenses

Roll forward of Claim Liability

The following table presents the activity in the net liability for unpaid losses and allocated loss adjustment expenses of short duration contracts for the following periods:


	For the Nine Months Ended September 30,
	2022		2021
Policy liabilities and unpaid claims balance as of January 1,	$	331,703	$	233,438
Less: liabilities of policy-holder account balances, gross	(801)		(5,419)
Less: non-insurance warranty benefit claim liabilities	(10,785)		(30,664)
Gross liabilities for unpaid losses and loss adjustment expenses	320,117		197,355
Less: reinsurance recoverable on unpaid losses - short duration	(165,129)		(113,163)
Less: other lines, gross	(576)		(247)
Net balance as of January 1, short duration	154,412		83,945

Incurred (short duration) related to:
Current year	265,277		176,644
Prior years	(2,205)		3,866
Total incurred	263,072		180,510

Paid (short duration) related to:
Current year	138,274		116,175
Prior years	18,436		6,379
Total paid	156,710		122,554

Net balance as of September 30, short duration	260,774		141,901
Plus: reinsurance recoverable on unpaid losses - short duration	248,418		154,513
Plus: other lines, gross	157		397
Gross liabilities for unpaid losses and loss adjustment expenses	509,349		296,811
Plus: liabilities of policy-holder account balances, gross	2,715		1,690
Plus: non-insurance warranty benefit claim liabilities	860		15,113
Policy liabilities and unpaid claims balance as of September 30,	$	512,924	$	313,614

The following schedule reconciles the total short duration contracts per the table above to the amount of total losses incurred as presented in the condensed consolidated statements of operations, excluding the amount for member benefit claims:


	Three Months Ended September 30,				Nine Months Ended September 30,
	2022		2021		2022		2021
Short duration incurred	$	97,501	$	61,061	$	263,072	$	180,510
Other lines incurred	(36)		10		327		55
Unallocated loss adjustment expenses	362		181		657		679
Total losses incurred	$	97,827	$	61,252	$	264,056	$	181,244

During the nine months ended September 30, 2022, and 2021, the Company experienced a decrease in prior year development of $2,205, primarily as a result of lower-than-expected claim severity in its commercial lines business.

During the nine months ended September 30, 2021, the Company experienced an increase in prior year development of $3,866, primarily as a result of higher-than-expected claim severity from business written by a small group of producers of our personal and commercial lines of business.

Management considers the prior year development for each of these years to be insignificant when considered in the context of our annual earned premiums, net as well as our net losses and loss adjustment expenses and member benefit claims expenses. We analyze our development on a quarterly basis and given the short duration nature of our products, favorable or

adverse development emerges quickly and allows for timely reserve strengthening, if necessary, or modifications to our product pricing or offerings.

Based upon our internal analysis and our review of the statement of actuarial opinions provided by our actuarial consultants, we believe that the amounts recorded for policy liabilities and unpaid claims reasonably represent the amount necessary to pay all claims and related expenses which may arise from incidents that have occurred as of the balance sheet date.