Cigna 2011 Annual Report Download - page 33

11CIGNA CORPORATION2011 Form10K
PARTI
ITEM 1 Business
E. Disability and Life
Cigna’s Disability and Life segment (“Cigna Disability and Life”)
provides the following insurance products and their related services:
group long-term and short-term disability insurance, group life insurance
and accident and specialty insurance. ese products and services are
provided by subsidiaries of Cigna Corporation. Cigna Disability and
Life markets products in all 50states, the District of Columbia, Puerto
Rico, the U.S. Virgin Islands and Canada.
Principal Products and Services
Disability
Long-term and short-term disability insurance products and services
generally provide a xed level of income to replace a portion of wages lost
because of disability. Cigna Disability and Life also provides assistance
to employees in returning to work and assistance to their employers in
managing the cost of employee disability. Group disability coverage is
typically employer-paid or a combination of employer and employee-
paid, but may also include coverage paid for entirely by employees.
Cigna Disability and Life is an industry leader in returning employees
to work quickly, resulting in higher productivity and lower cost for
employers and a better quality of life for their employees. Cigna
Disability and Life’s disability insurance products may be integrated
with other disability benet programs, behavioral programs, medical
programs, social security advocacy, and leave of absence administration.
Cigna believes this integration provides customers with increased
eciency and eectiveness in disability claims management, enhances
productivity and reduces overall costs to employers. Coordinating
the administration of Cigna Disability and Life’s disability and Cigna
HealthCare’s medical programs provides enhanced opportunities to
inuence outcomes, reduce the cost of both medical and disability
events and improve the return to work rate. Examples of the benets
of this integrated approach (for which Cigna may receive fees) include:
• the use of information from the Cigna HealthCare and Cigna Disability
and Life databases to help identify, treat and manage disabilities
before they become chronic, longer in duration and more costly; and
• proactive outreach from Cigna Behavioral Health to assist employees
suering from a mental health condition, either as a primary condition
or as a result of another condition.
As measured by 2011 premiums and fees, disability constituted
approximately 46% of Cigna Disability and Life’s business. Approximately
9,730insured disability policies covering approximately 5.8million
lives were outstanding as of December31,2011.
Life Insurance
Life insurance products oered by Cigna Disability and Life include
group term life and group universal life. Group term life insurance may
be employer-paid basic life insurance, employee-paid supplemental life
insurance or a combination thereof.
Group universal life insurance is a voluntary life insurance product in
which the owner may accumulate cash value. e cash value earns interest
at rates declared from time to time, subject to a minimum guaranteed
contracted rate, and may be borrowed, withdrawn, or, within certain
limits, used to fund future life insurance coverage.
As measured by 2011 premiums and fees, group life insurance constituted
approximately 45% of Cigna Disability and Life’s business. Approximately
5,500 group life insurance policies covering approximately 5.2million
lives were outstanding as of December31,2011.
Other Products and Services
Cigna Disability and Life oers personal accident insurance coverage,
which consists primarily of accidental death and dismemberment and
travel accident insurance to employers. Group accident insurance may
be employer-paid or employee-paid.
Cigna Disability and Life also oers specialty insurance services that
consist primarily of disability and life, accident, and hospital indemnity
products to professional or trade associations and nancial institutions.
Voluntary benets are those paid by the employee and are oered at the
employer’s worksite. Cigna Disability and Life plans provide employers,
among other services, exible enrollment options, list billing, medical
underwriting, and individual record keeping. Cigna Disability and
Life designed its voluntary oerings to oer employers a complete and
simple way to manage their benets, including personalized enrollment
communication and administration of the benets program.
In 2010, Cigna sold the workers’ compensation and case management
services previously provided through its Intracorp® subsidiary. For more
information on this sale, see “Acquisitions and Dispositions” in the
Introduction section of the MD&Abeginning on page34.
Financial information, including premiums and fees, is presented in the
Disability and Life section of the MD&A beginning on page48 and
in Note22 to Cigna’s Consolidated Financial Statements beginning
on page116 of this Form10-K.
Pricing, Reserves and Reinsurance
Cigna Disability and Life’s products and services are oered on a
fully insured, experience-rated and ASO basis. Under fully insured
arrangements, policyholders pay a xed premium and Cigna Disability
and Life bears the risk for claims and costs. Under experience-rated
funding arrangements, a premium that typically includes a margin to
partially protect against adverse claim uctuations is determined at
the beginning of the policy period. Cigna Disability and Life generally
bears the risk if claims and expenses exceed this premium. If premiums
exceed claims and expenses, any surplus amount is generally rst
used to oset prior decits and is otherwise generally returned to the
policyholder if surplus exceeds minimum contractual levels. With
experience-rated insurance products, Cigna Disability and Life may
recover decits from margins in future years if the policy is renewed.
Under ASO arrangements, Cigna Disability and Life contracts with
groups sponsoring self-insured plans to administer claims and perform
other plan related services in return for service fees. e self-insured
plan sponsor is responsible for self funding all claims. e majority
of Cigna Disability and Life’s products and services are fully insured.
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