Liability for Unpaid Claims and Claim Adjustment Expenses

The following tables present undiscounted information about incurred and paid claims development as of December 31, 2018, net of reinsurance, as well as cumulative claim frequency and the total of incurred-but-not-reported liabilities plus expected development on reported claims included within the net incurred claims amounts. This information is presented in the aggregate for all short-duration contracts, due to the commonality of claims characteristics. The tables reflect three years of information because historically over 99% of incurred losses have been paid within three years of the accident period.

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 Year Ended December 31,
	2018			2017
Policy liabilities and unpaid claims balance as of January 1,	$	112,003		$	103,391
Less : liabilities of policy-holder accounts balances, gross	(15,474		)	(17,417		)
Less : non-insurance warranty benefit claim liabilities	(58		)	(91		)
Gross liabilities for unpaid losses and loss adjustment expenses	96,471			85,883
Less : reinsurance recoverable on unpaid losses - short duration	(73,778		)	(63,112		)
Less : other lines, gross	(224		)	(208		)
Net balance as of January 1, short duration	22,469			22,563

Incurred (short duration) related to:
Current year	129,352			103,306
Prior years	2,509			3,347
Total incurred	131,861			106,653

Paid (short duration) related to:
Current year	105,740			84,493
Prior years	20,975			22,254
Total paid	126,715			106,747

Net balance as of December 31, short duration	27,615			22,469
Plus : reinsurance recoverable on unpaid losses - short duration	90,016			73,778
Plus : other lines, gross	227			224
Gross liabilities for unpaid losses and loss adjustment expenses	117,858			96,471
Plus : liabilities of policy-holder accounts balances, gross	13,659			15,474
Plus : non-insurance warranty benefit claim liabilities	94			58
Policy liabilities and unpaid claims balance as of December 31,	$	131,611		$	112,003

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



	Year Ended December 31,
	2018		2017		2016
Short duration incurred	$	131,861	$	106,653	$	82,579
Other lines incurred	124		123		277
Unallocated loss adjustment expense	2,867		1,763		2,094
Total losses incurred	$	134,852	$	108,539	$	84,950

For the year ended December 31, 2018, the Company’s specialty insurance business experienced an increase in prior year case development of $2,509 primarily from its non-standard auto business.

For the year ended December 31, 2017, the Company’s specialty insurance business experienced an increase in prior year case development of $3,347. This included $2,345 in non-standard auto and $1,466 in warranty. This development was partially offset by favorable development in its credit lines of business. The warranty and credit lines of business are primarily in retrospective commission arrangements that minimally impact the operating income of the Company.

Incurred and Paid Development

The following table presents information about incurred and paid loss development and average claim duration as of December 31, 2018, net of reinsurance, as well as cumulative claim frequency and the total of incurred-but-not-reported liabilities plus expected development on reported claims included within the net incurred claims amounts. The cumulative number of reported claims represents open claims, claims closed with payment, and claims closed without payment. It does not include an estimated count of unreported claims. The number of claims is measured by claim event. The Company considers a claim that does not result in a liability as a claim closed without payment.



Incurred Losses and Allocated Loss Adjustment Expenses, Net of Reinsurance							As of December 31, 2018
	For the Years Ended December 31,						Total of Incurred-but-Not-Reported Liabilities Plus Expected Development of Reported Claims		Cumulative Number of Reported Claims
Accident Year	2016		2017		2018
2016	$	84,178	$	87,290	$	87,993	$	474	256
2017			103,306		104,898		$	1,749	322
2018					129,352		$	19,005	316
			Total		$	322,243

Cumulative Paid Losses and Allocated Loss Adjustment Expenses, Net of Reinsurance
	For the Years Ended December 31,
Accident Year	2016		2017		2018
2016	$	62,989	$	84,185	$	86,531
2017			84,493		102,620
2018					105,740
			Total		$	294,891
All outstanding liabilities before 2016, net of reinsurance					263
Liabilities for loss and loss adjustment expenses, net of reinsurance					$	27,615

Duration

The following table presents supplementary information about average historical claims duration as of December 31, 2018 for short duration contracts:



Average Annual Percentage Payout of Incurred Claims by Age, Net of Reinsurance
Years	1	2	3
Short duration	78.0%	20.0%	2.0%

Reconciliation of Reserves to Balance Sheet

The following table presents a reconciliation of net outstanding liabilities for unpaid loss and loss adjustment expenses of short-duration contracts to the consolidated balance sheet value of policy liabilities and unpaid claims:



	As of December 31,
	2018
Net outstanding liabilities:
Short duration	$	27,615
Insurance lines other than short-duration	32
Total liabilities for unpaid losses and loss adjustment expenses, net of reinsurance	27,647

Reinsurance recoverable on unpaid losses and loss adjustment expenses:
Short duration	90,016
Other insurance lines	195
Total reinsurance recoverable on unpaid losses and loss adjustment expenses	90,211

Total gross liability for unpaid losses and loss adjustment expenses	117,858
Liabilities of policy-holder accounts balances, gross	13,659
Non-insurance warranty benefit claim liabilities	94
Total policy liabilities and unpaid claims	$	131,611