Cigna 2014 Annual Report Download - page 42

PART I
ITEM 1. Business
As measured by 2014 premiums and fees, group life insurance
Products and Services
constituted approximately 45% of this segment’s business.
Approximately 8,700 group life insurance policies covering over
Group Disability
6 million lives were in force as of December 31, 2014.
Long-term and short-term group disability insurance products
generally provide a fixed level of income to replace a portion of wages
Other Products and Services
lost because of disability. Group disability coverage is typically
employer-paid or a combination of employer and employee-paid, but We also offer personal accident insurance coverage, consisting
also may include coverage paid for entirely by employees. As part of primarily of accidental death and dismemberment and travel accident
our group disability insurance products, we also provide assistance to insurance to employers. Group accident insurance may be
employees in returning to work and assistance to their employers in employer-paid or employee-paid. In addition, we offer specialty
managing the cost of employee disability. We are an industry leader in insurance services that consist primarily of disability and life, accident,
helping employees return to work quickly, resulting in higher and hospital indemnity products to professional or trade associations
productivity and lower cost for employers and a better quality of life and financial institutions.
for their employees. We also provide a number of voluntary products and services that are
We seek to integrate our disability insurance products with other typically paid by the employee and offered at the employer’s worksite.
disability benefit programs, behavioral programs, medical programs, Our plans provide employers with administrative solutions designed
social security advocacy, and administration of federal and state to provide employers with a complete and simple way to manage their
Family and Medical Leave Act (FMLA) laws and other leave of benefits program. Recently, we have brought to market two additional
absence programs. We believe this integration provides our customers voluntary offerings – accidental injury insurance and critical illness
with increased efficiency and effectiveness in disability claims coverage. Both products provide additional dollar payouts to
management, enhances productivity and reduces overall costs to employees for unexpected accidents or more serious illnesses.
employers. This integration also provides early insight into employees
at risk for future disability claims. Coordinating the administration of
Pricing and Reinsurance
these disability programs with medical programs offered by our health
care business provides enhanced opportunities to influence outcomes, Premiums charged for disability and term life insurance products are
reduce the cost of both medical and disability events and improve the usually established in advance of the policy period and are generally
return to work rate. The benefits of this integrated approach also guaranteed for one to three years and selectively guaranteed for up to
include: five years; policies are generally subject to termination by the
policyholder or by the insurance company annually. Premium rates
using information from the health care and disability databases to reflect assumptions about future claims, expenses, credit risk,
help identify, treat and manage disabilities before they become investment returns and profit margins. These assumptions may be
chronic, longer in duration and more costly; and based in whole or in part on prior experience of the account or on a
proactively reaching out to assist employees suffering from a mental pool of accounts, depending on the group size and the statistical
health or chronic condition, either as a primary condition or as a credibility of the experience that varies by product.
result of another condition. Premiums for group universal life insurance products consist of
Our disability products and services are offered on a fully insured, mortality and administrative charges assessed against the
experience-rated and ASO basis, although most are fully insured. As policyholder’s fund balance. Interest credited and mortality charges
measured by 2014 premiums and fees, disability constituted for group universal life may be adjusted prospectively to reflect
approximately 49% of this segment’s business. Approximately 13,800 expected interest and mortality experience. Mortality charges are
insured disability policies covering over 7.5 million lives were in force subject to maximum guaranteed rates and interest credited on cash
as of December 31, 2014. values is subject to minimum guaranteed rates as stated in the policy.
The effectiveness of return to work programs and morbidity levels will
Group Life Insurance
impact the profitability of disability insurance products. Our previous
claim experience and industry data indicate a correlation between
Group life insurance products offered include term life and universal
disability claim incidence levels and economic conditions, with
life. Group term life insurance may be employer-paid basic life
submitted claims rising under adverse economic conditions, although
insurance, employee-paid supplemental life insurance or a
this impact is not clear. For life insurance products, the degree to
combination thereof. Group universal life insurance is an
which future experience deviates from mortality and expense
employee-paid, voluntary life insurance product in which the owner
assumptions also affects profitability.
may accumulate a cash value. The 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.
10 CIGNA CORPORATION - 2014 Form 10-K
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