Liability for Unpaid Claims and Claim Adjustment Expenses

3 Months Ended

Mar. 31, 2024

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:


	Three Months Ended March 31,
	2024		2023
Policy liabilities and unpaid claims balance as of January 1,	$	844,848	$	567,193
Less: liabilities of policy-holder account balances, gross	(878)		(1,923)
Less: non-insurance warranty benefit claim liabilities	(2,103)		(140)
Gross liabilities for unpaid losses and loss adjustment expenses	841,867		565,130
Less: reinsurance recoverable on unpaid losses - short duration	(448,117)		(266,889)
Less: other lines, gross	(295)		(184)
Net balance as of January 1, short duration	393,455		298,057

Incurred (short duration) related to:
Current year	174,540		113,932
Prior years	773		328
Total incurred	175,313		114,260

Paid (short duration) related to:
Current year	31,010		33,742
Prior years	70,133		42,855
Total paid	101,143		76,597

Net balance as of March 31, short duration	467,625		335,720
Plus: reinsurance recoverable on unpaid losses - short duration	488,341		302,103
Plus: other lines, gross	171		180
Gross liabilities for unpaid losses and loss adjustment expenses	956,137		638,003
Plus: liabilities of policy-holder account balances, gross	600		1,686
Plus: non-insurance warranty benefit claim liabilities	5,682		119
Policy liabilities and unpaid claims balance as of March 31,	$	962,419	$	639,808

The following schedule reconciles the total amount of losses incurred on 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 March 31,
	2024		2023
Short duration incurred	$	175,313	$	114,260
Other lines incurred	(105)		(3)
Unallocated loss adjustment expenses	172		70
Total losses incurred	$	175,380	$	114,327

During the three months ended March 31, 2024, the Company experienced unfavorable prior year development of $773, primarily driven by higher-than-expected claims paid development in our commercial lines of business, primarily with a single partner.

During the three months ended March 31, 2023, the Company experienced unfavorable prior year development of $328, primarily as a result of higher-than-expected claim severity in 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.

The unfavorable prior year development of $773 in the three months ended March 31, 2024 represented 2.1% of our insurance business income before taxes of $36,811 and 0.2% of the opening net liability for losses and loss adjustment expenses of $393,455, as of January 1, 2024.

The unfavorable prior year development of $328 in the three months ended March 31, 2023 represented 1.7% of our insurance business income before taxes of $19,445, and 0.1% of the opening net liability for losses and loss adjustment expenses of $298,057, as of January 1, 2023.

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.