POLICY LIABILITIES

9 Months Ended

Sep. 30, 2020

Changes in the liability for unpaid policy claims were as follows:


	Three Months Ended September 30,					Nine Months Ended September 30,
(In millions)		2020		2019			2020		2019
Unpaid supplemental health claims, beginning of period		$	4,041	$	4,024		$	3,968	$	3,952
Less reinsurance recoverables		37		31			31		28
Net balance, beginning of period		4,004		3,993			3,937		3,924
Add claims incurred during the period related to:
Current year		1,780		1,806			5,354		5,415
Prior years		(105)		(134)			(408)		(437)
Total incurred		1,675		1,672			4,946		4,978
Less claims paid during the period on claims incurred during:
Current year		1,295		1,421			2,971		3,150
Prior years		249		220			1,811		1,794
Total paid		1,544		1,641			4,782		4,944
Effect of foreign exchange rate changes on unpaid claims		42		(3)			76		63
Net balance, end of period		4,177		4,021			4,177		4,021
Add reinsurance recoverables		40		31			40		31
Unpaid supplemental health claims, end of period		4,217		4,052			4,217		4,052
Unpaid life claims, end of period		759		689			759		689
Total liability for unpaid policy claims		$	4,976	$	4,741		$	4,976	$	4,741

The incurred claims development related to prior years reflects favorable claims experience compared to previous estimates. The favorable claims development of $408 million for the nine-month period ended September 30, 2020 comprises approximately $264 million from Japan, which represents approximately 65% of the total. Excluding the impact of foreign exchange of a gain of approximately $3 million from December 31, 2019 to September 30, 2020, the favorable claims development in Japan would have been approximately $261 million, representing approximately 64% of the total. The remainder of the favorable claims development related to prior years for the nine-month period ended September 30, 2020, reflects Aflac U.S. favorable claims experience compared to previous estimates, primarily in cancer and accident lines of business.

The Company has experienced continued favorable claim trends in 2020 for its core health products in Japan. The Company's experience in Japan related to the average length of stay in the hospital for cancer treatment has shown continued decline in the current period. In addition, cancer treatment patterns in Japan are continuing to be influenced by significant advances in early-detection techniques and by the increased use of pathological diagnosis rather than clinical exams. Additionally, follow-up radiation and chemotherapy treatments are occurring more often on an outpatient basis. Such changes in treatment not only increase the quality of life and initial outcomes for the patients, but also decrease the average length of each hospital stay, resulting in favorable claims development.

The decrease in current year incurred claims in 2020 primarily reflects a decrease in Aflac U.S. claims as a result of reduced accidents, wellness medical visits and routine procedures due to shelter-in-place orders and heightened social distancing due to COVID-19.