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2011 Health Meeting

June 13-15, 2011

Session #68 PD: Mortality Issues for

Group Life Insurance

William P. Sakel, ASA, MAAADavid Waddington, PMP

Moderator

Robert B. Hardin, FSA, MAAA, FCA

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Group Life Mortality

June 14th -- 4:00 to 5:15

Session 68

A Panel Discussion

Speakers

Bob Hardin FSA

Bill Sakel ASA

Dave Waddington PMP

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Agenda

Update from SOA Group Life

Experience Committee

One approach to creating a set

of Group Life Manual Rates

How to use census data to

answer questions important to

Group Life actuaries.

Experience Committee

Two products were produced in 2005/6

2005 Group Term Life Waiver of Premium

Table

2006 Group Term Life Experience Report

Committee was led by Sue Sames assisted

by John Bettano and Marty Loughlin plusanother almost 12 actuaries

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Krieger Table

The Krieger Table was the defacto WOP

table

Based on data from 12 companies

135,000 life years of experience

Published in the 1968 SOA Reports

Never presented to or adopted by NAIC

Used by most Group Life Insurers

The Historical Steps

In 2002 the need for two studies was

recognized:

Replace the Krieger Table

Update the last Group Life Experience Study

which was issued in 1994 base on 85-89 date

Data call were issued in 2002

Data submissions were in 2003 and 2004

Final reports were issued in 2006

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2005 Waiver Table

Data from 17 companies

750,000 life years (6 x Krieger)

Covered period form 1993 to 2002

Develops reserves of about 62% of Krieger

AAA formed a Group Term Life Waiver ofPremium working group

NAIC adopted guidelines in 2008Applies to individuals who becomedisabled on or after January 1, 2009

2006 Experience Table

Covered period 1999 to 2001

18,580,000 life years

Only raw data was reported with no

smoothing or other adjustments

Waiver Rate is incidence rate only

Primary source of information is in one oftwo Pivot Tables

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Pivot Table

Provides data by:

Individual Exposure vs. Self-Administered

Death, WOP, and AD&D

Gender

Central Age (17 and up)

SIC (two digit)

Lives Band (# of lives in group) Coverage type (basic, optional, and

supplemental) for AD&D only

Current Status

Starting to update the 2006 Experience

Table

Have decided not to update the 2005

Waiver Table at this time

Draft of data request completed

Vendor has been selected: Towers Watson

Data request will go out in early June

Hope to be done by end of 2012

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M or t a li ty Issues for Gro up Li feInsurance

Jun e 14 , 2011

4 :00 5 :15 pm

W ill iam P. Sakel, A.S.A., M .A.A.A.

Nat ion w ide Li fe Insurance Com pany

Overv iew of Agenda Review of 2006 Group Li fe Stu dy

In terpo late , Sm oot h and Com pare to Current

M odel ing resu l ts

Add it ion al Pr icing Considerat ions

Considerat ions of Implementat ion

Presentat ion Sum m ary

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Review of 200 6 Grou p Life St ud y

12 Com panies data f rom 1999 2001 covered per iod

Data included al l typ es: single em ployer, union, associat ionand M ET

Active Em ployee l ives by Age and Gend er

Key included Indiv idual ly b i l led data

Raw d ata, not smoo th ed, 5 year age brackets

Excluded Group s

Ret iree lives

Dependent coverage

Conversions Experience under Cont inuat ion of Coverage or port abi l i ty

M ass m arketed business

In t erpo late , Sm oo t h and Com pare In terpolate th e Group L ife factor IE and SA combined

Excel: 2nd Degree Polynom ials and 2 nd Differences

Excel 7 Inser t , Scat ter t ab le w i th only M arkers

Layout, Trendline, Trendline Opt ions

Polynom ial, display equ ation and R-squared values(Coef f ic ient of Determ inat ion)

ht tp: / /mathbi ts .com/mathbi ts / t isect ion/stat is t ics2/corre l

at ion.htm Sm oot h using First and Second Differences

Constru ct t he Comp leted Table

http://mathbits.com/mathbits/tisection/statistics2/correlhttp://mathbits.com/mathbits/tisection/statistics2/correl

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In terpo la t ion

Smooth ing

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M or t a li ty Table Com par ison

200 5 Gro u p Term Life W aiver Reser ve

Table Repo rt 03/ 2006 The Com m it tee rev iew ed raw exper ience

rates and sm oot hed th em to developgradu ated exper ience values, using 2nddegree po lynom ial t rend l ines and ot herspread sheet app l icatio n to ols in Excel, as w ellas som e m anual adjustm ents. In som e cases,

w e used t he s lop e of th e 1970 Table. Used current t ab le or o t her p ubl ished tab le

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Result s aft er Sm o o t hin g

Result s o f First Differ ences

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Result s o f t he Secon d Diff erences

M od el ing Resul t s Com pare to you r current t able to d eterm ine level

o f m or ta l it y im provement by age and gender M odeled b y Case level : High/ low ages, High/ low

fem ale content

Com pare the m ort ali ty d iscoun ts to you r currentund erw ri t ing discount s: market adjustm ent vs.r isk adjustm ent

Com pare resul ts using the new table to actu alsold cases to det erm ine levels for newunderw r i t ing d iscount s

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Add it ion al Pric ing Co nsiderat ion s Determine i f sta te f i l ing is required, develop actuar ia l memorandum and ra te manual W ill the table be used for Basic Group Term Life and/ or Volunt ary Group Term Life? Should Area factors be considered from cur rent experience? Shou ld SIC fact ors be revised? (Reinsur ers) AD&D factors were used d i rect ly f rom the 2006 Group L ife Study Retiree and early r etiree by age: Separate t able or load % Lives Band or SIC are used for case specific pr icing Dependent coverage (basic and voluntary)

Price spouse coverage using emp loyee rat es and ages Develop a separate table fo r spouse and use spouse age Use emp loyee age setback for females (3 or 5 years) (no t used for dom estic partn ers)

Waiver o f premium charges w ere added to the basic (no waiver) ra tes. Charges w eredeveloped from f i rst pr incip les: incidence x PV(claims) where incidence and t erminat ionfactors were taken from the 2005 SOA Waiver study.

Adjust the tab le to current t ime annual mor ta l i ty improvement(x)

Over 1% per year improvem ent varying by age and gender 2006 Table (2000) * (1- x)^ (2000 to m id year o f the guaranteed per iod)

Conversion costs to be in cluded Add a flat load o f x% to t he basic table (al l ages) or Add a conversion charge to t he claim experience at the t ime of r enew al , 4 age brackets

Con siderat ions o f Im plem entat ion Table(s) develo pm ent

DOI approval

Rater(s) chan ges

Algor i thm , Factors or b ot h

W eb, Intercom pany LAN, and/ or Spreadsheet

Input screens, edi ts and factor page

Billings Syste m (s) and Rate Renew al Syste m (s)

Testin g to insure results are corre ct and co nsisten t

across al l raters and system s

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Present at ion Sum m ary

Care shou ld be exercised in applyi ng th e results.

Stat e fi l ings, as require d

In te rpo la t ion and Sm ooth ing o f the m or ta l i ty factors to genera tegraduated exper ience values

Addit ional tables or factors

Retiree and Dependen t factors

Waiv er and Conversions costs

Standard Industry Code

Risk and M arket Adjustm ents (Underw ri t ing Discounts)

Testing and M ode ling Results in Rater(s) and System (s) Develop a M anagement Repor t tha t ident i f ies an t icipa ted mor t a l ity

im provem ents by age brackets and genders

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Mortality Data from the

U.S. Census Bureaus PopulationEstimates and Projections Programs

David Waddington

Chief, Population Projections Branch

Population Division, U.S. Census Bureau

Presentat ion Prepared for the Society of Actua r ies 2011 Heal th M eet ingBoston, M assachu setts, Jun e 13-15, 2011

This presentat ion is re leased to in for m interested part ies of ongoing w ork and to encourage d iscuss ion of w ork in progr ess.Any v iews expressed on s tat is t ica l , meth odological , technical , or operat ion al issues are those of t he author and no t necessari ly t hose of t he U.S. Census Bureau.

Outline Overview of the Population Estimates and

Projections Programs

Population Projections

Methodology and Assumptions

Historical and Projected Mortality Trends

Accessing and Using the Data

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Population Estimates(what we publish)

Population National, state, and county by age, sex, race, and

Hispanic origin

Incorporated place and minor civil division totals

Puerto Rico Commonwealth and municipios by ageand sex

Components of Change (births, deaths, migration) National by race and Hispanic origin

State, county, and Puerto Rico Commonwealth totals

Releases Annually

The Population Estimates are Produced Under a

Federal Mandate

U.S.C. Title 13, Section 181:

During the intervals between each census of

populationthe Secretary, to the extent feasible, should

annually produce and publish for each State, county,

and local unit of general purpose government which has

a population of fifty thousand or more, current data on

total population and population characteristics and, to

the extent feasible, shall biennially produce and publish

for other local units of general purpose governmentcurrent data on total population.

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Population ProjectionsPopulation

National by age, sex, race, and Hispanic origin

Components of Change Net international migration by age, sex, race and

Hispanic origin

Deaths by age, sex, race and Hispanic origin

Births by sex, race and Hispanic origin

Releases 2008 National Projections, using Census 2000

2009 4 national level analytic series, usingCensus 2000

2012 (planned) national, using Census 2010 base

0

500

2010 2015 2020 2025 2030 2035 2040 2045 2050

2008 Nationa l Projections High NIM Series Low NIM Series Cons tant N IM Series Zero NIM Series

Projections of Net International M igration for the United States: 2010 to 2050(In thousands)

NIM = Net International Migration

Source: U.S. Census Bureau, 2008 and 2009.

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0

50

100

150

200

250

300

350

400

450

500

2010 2015 2020 2025 2030 2035 2040 2045 2050

2008 N ational Projections High NIM Series Low NIM Ser ies Constant NIM Ser ies Zero NIM Series

Projected Population for the United States: 2010 to 2050(In millions)

NIM = Net International Migration

Source: U.S. Census Bureau, 2008 and 2009.

75

88

102

114

129

150

8184

98

40

72

89

2010 2030 2050

0 to 17 years 18 to 44 years 45 to 64 years 65 years and over

Projected Population by Age for the United States: 2010 to 2050(In millions)

Source: U.S. Census Bureau, 2008.

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Net International Migration

Assumptions (projections)

Projected primarily using historical time series of data

on immigration of the foreign born (1972-2002)

Supplemented with cross-sectional data from Census

2000 (primarily for race/ethnicity assignments)

Projected for four groups based country-of-birth

Age and sex based on administrative records

Fertility Assumptions Time series analysis of vital statistics data from 1980-2003

Projected in two tiers Three large race/ethnic groups

Hispanic

Non-Hispanic Black alone

All other non-Hispanic

Detailed race within the big three groups(did not differentiate assumptions below the big three groups)

Fertility is projected to converge in 2100 nearreplacement level (2.1) for all groups

Assignment of race to births Race of potential mothers (women age 15-49)

Racial composition of men in the projected population Observed racial/ethnic makeup of families from Census 2000

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Mortality Assumptions

Time series analysis of vital statistics data from1984-2003

Projected in two tiers Three large race/ethnic groups

Hispanic

Non-Hispanic Black alone All other non-Hispanic

Detailed race within the big three groups

(did not differentiate assumptions below the big threegroups)

Mortality projected to converge for all race/ethnicgroups in 2075 (Male e0 = 83.8, Female e0= 87.8)

0

5

10

70

75

30

35

80

85

90

1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004

Male

Female

Li fe Expectancy at Bir th f or th e Uni ted Stat es: 1984 t o 2003

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Projections Mortality Assumptions

(projected life expectancy at birth)

YearHispanic

(any r ace)

Non-Hispanic

Black alon e

Non-Hispanic

al l o ther races

M ale Fem ale M ale Fem ale M ale Fem ale

2010 78.4 83.7 70.1 77.1 76.4 81.1

2030 80.2 85.0 74.8 80.9 78.7 83.2

2050 81.9 86.3 79.0 84.3 81.0 85.3

0

5

10

70

75

30

35

80

85

90

1984 1989 1994 1999 2004 2009 2014 2019 2024 2029 2034 2039 2044 2049

M ale

Female

Li fe Expectancy at Bir th f or th e Uni ted Stat es: 1984 t o 2050

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Where can you find the data?

Where can you find projections data?

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Where can you find projections data?

Summary Table Example (1)

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Summary Table Example (2)

Summary Table Example (3)

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Downloadable Files

File Layout Sample

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Downloadable File Example

Using the DataCombining the population and components,

you can calculate:

Survival rates

Life expectancy

Crude death rates

Age-sex-specific death rates

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Crude Death Rate (CDR)

Examples:

CDRdeaths

population mid period=

( )1000

CDR2030

3 316 342

370 297 901 373 503 674 21 000 8 92=

+

=, ,

( , , , , ) / , .

Age Specific Death Rate (ASDR)

ASDR age2030 5014 284

4 327 028 4 528 235 21 000 3 23,

,

( , , , , ) / , .

==

+

=

ASDR age2030 505153

2 174 749 2 278 777 21 000 2 31,

,

( , , , , ) / , .

==

+

=

ASDR age2030 509 131

2 152 279 2 249 458 21 000 4 15,

,

( , , , , ) / , .

==

+

=

Bot h Sexes

Fem ale

M ale

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0

50

10 0

15 0

20 0

25 0

30 0

35 0

40 0

45 0

0 5 1 0 15 20 2 5 3 0 35 40 4 5 50 55 6 0 6 5 70 75 8 0 85 90 9 5 100

ASDR

Ag e

ASDR - Fem ale

ASDR - M ale

Projected Age Specif ic Death Rates (ASDR): 2030

Note: ASDR per 1,000 populationSource: 2008 Nat ional Pro ject ions

National Center for Health Statistics

www.cdc.gov/nchs/deaths.htm

http://www.cdc.gov/nchs/deaths.htmhttp://www.cdc.gov/nchs/deaths.htm

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National Longitudinal Mortality Study

www.census.gov/did/www/nlms/index.html

Contact InformationDavid Waddington

Chief, Population Projections BranchPopulation DivisionU.S. Census Bureau

Office: 301-763-2428

Fax: 301-763-6636

E-mail: David.G.Waddington@census.gov

www.census.gov

http://www.census.gov/did/www/nlms/index.htmlmailto:David.G.Waddington@census.govhttp://www.census.gov/http://www.census.gov/mailto:David.G.Waddington@census.govhttp://www.census.gov/did/www/nlms/index.html