The fund finances claims arising from the guarantees of premiums due on commercial life insurance policies held by servicemen while they are in service and for 2 years after discharge (72 Stat. 487). The Government guarantees the repayment of any indebtedness not liquidated by the insured himself. Any payment by the Government on cases approved subsequent to October 6, 1942, creates a debt owed the Government by the insured. Administrative expenses are paid from the appropriation, General operating expenses. Budget program-Insurance program.-Claims paid on guaranteed premiums are made to commercial insurance companies in cases where the servicemen failed to make premium premium payments which were guaranteed by the Government. The activity of the fund is indicated in the following table: Financing. Payment of claims against this fund are financed from collections of claims receivable, revenue, and appropriations as needed. The last appropriation to this account was made in 1959 through Public Law 85-766. It is anticipated that present unobligated balances and additional income will fund this program only through 1965; therefore, an appropriation of $25 thousand will be required in 1966. Operating results and financial condition. The payment of refund claims has created expenses substantially in excess of the small revenue of the fund, thereby increasing the deficit to $1.9 million in 1964 with nominal losses continuing through 1966 with an estimated deficit of $2 million. Revenue, Expense, and Retained Earnings (in thousands of dollars) 14 Collection of claims receivable.. 11 11 Total Government equity.... 103 60 16 1965 1966 estimate estimate 610 22 Gross expenditures.. Applicable receipts.. 1,647 9.658 -2,873 -33,665 Under existing legislation, 1965.—A supplemental request will be made to transfer surplus retained earnings from the Veterans special term insurance fund to advance initial capital to the Veterans reopened insurance fund. This fund will finance payment of claims and administrative costs on nonparticipating insurance policies issued after April 30, 1965, and prior to May 4, 1966, under the three insurance programs (1) Veterans servicedisabled standard insurance, (2) Veterans service-disabled rated insurance, and (3) Non-service-disabled rated insurance established by provisions of the National Service Life Insurance Act of 1940, as amended (38) U.S.C. 725 (b) and (c)). Each program will be self-contained and premiums may be adjusted to insure that each is self-sustaining, as required by law. Separate accounting and actuarial records must be maintained for the three programs for the purpose of determining the actual program costs and to provide the basis for adjusting each program premium rate 7,528 independently. 9 3 5,690 Service-disabled standard insurance program. This program will finance payment of claims on policies issued to veterans with service-connected disabilities, but who are insurable according to the standards of good health established by the Administrator. The estimated number of policies and amount of insurance in force follows (dollars in thousands): 472 3. Non-service-disabled rated in surance: Death claims... 92 812 4. Interest to Treasury- 5. Payment to "General operating expenses" appropriation................ Net income, non-service-disabled rated 5,000 $43,000 Revenue.... Budget program (a) Death claims.-Payments to beneficiaries are expected to reach $812 thousand in 1966. The mortality rate will be exceptionally high because of Service charge program: the short average life expectancy of the insureds. Therefore, an incontestability clause will be included in the contracts to mitigate the otherwise uncontrollable initial capital impairment in this program. Financing. Payments are financed primarily from premium receipts and interest income from investments. Operating results and financial condition. It is expected that premium and interest income will be sufficient to pay death and disability claims and to set up necessary reserves. Service charge program.-Amounts collected from policyholders for administrative expenses are credited to this program. Payments are made to the appropriation, "General operating expenses," and to the General fund receipts in the Treasury for cash advances and interest. thereon. Budget program-1. Payment to "General operating expenses" appropriation. The administrative cost of issuing insurance policies, processing claims, and maintaining accounts is estimated to be $1,650 thousand in 1965, and $4 million in 1966. 2. Interest on loans payable (Treasury). The sum of $1,650 thousand is being advanced from the Veterans special term insurance fund as initial capital. This amount, with interest, must be repaid to the "General fund receipts" in the Treasury. The estimated interest payment in 1965 is $9 thousand and about $57 thousand in 1966. The principal will be repaid to the Treasury as soon as practicable. Financing. Operations will be financed from administrative cost premiums collected from policyholders. It is estimated that amounts collected through 1966 will be insufficient to cover the administrative costs. Collections in future years will be sufficient to repay borrowings and allow the program to operate on a self-sustaining basis. Deficit, end of year.........--- Assets: Net loss service charge program.... Net loss for the year. Analysis of deficit: Financial Condition (in thousands of dollars) |