October 11, 2012
Motor Vehicle Records and All-Cause Mortality
Mark S. Dion FALU FLMIVice President Underwriting Rules Development and EducationUS Facultative UnderwritingRGA
Historically low cost and readily accessible Routine requirements vs. order for cause after a disclosure Scored by points
Not identical to states point system Points adjusted by severity of the infraction and time since conviction Often only one violation is assigned points if multiple infractions for a given day Usually concerned about recent activity, often last 3 years only Sum up the number of points, enter the table, assign the flat extra
Flat extras assigned to cover additional risk Age & Gender differences
Motor Vehicle ReportsCurrent underwriting practices - a quick review
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DUI & DWI Reckless driving Moving violations Accidents Suspensions Medical history Other external cause death risk “Scoff laws”
What underwriters watch for
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Major, minor, accidents, and suspensions
Newer focus Poor equipment maintenance, lapse risks, risky behavior? Inattentive driving, texting, phone calls Seat belt use and risk taking behavior
Interaction with other courts, some exclusivity Often the only insight to interactions with law enforcement And various court systems License is suspended, no apparent violations, why suspended?
Taxes Child support Criminal activity Other?
All cause mortality, not simply accident profile DUI triggers a different type of underwriting investigation If they aren’t paying their taxes or child support, what risks do they represent?
Beyond traditional use
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Looking beyond the rating table
We don’t necessarily know what individuals were stopped for Pleads State variations in severity and application of tickets, sanctions, fines
and suspensions Variations in retention of records Some insights to other court actions through Administrative
Withdrawals and Suspensions “The agent says the suspension was for failure to pay child support…”
If a person is stopped and ticketed for multiple violations are they different than someone who only gets one ticket?
And the biggest challenge… where is our empirical evidence? So now we move on to the RGA-LexisNexis MVR Mortality Study
Some Challenges with the Art of Underwriting MVRs
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Structured information and codes don’t tell the whole story
RGA LexisNexis Mortality Study
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RGA Re approached LexisNexis about doing a joint study• Saw need for a large-scale MVR Life Protective Value Study• LexisNexis is one of the largest providers of MVR records to the
insurance industry
LexisNexis provided the data Random sample of 7.4 million MVR requests made from 2006-2010 Nearly all automobile insurance applicants Approximately 73,000 deaths were identified using the SSMDF
Data included: MVR request date Basic demographic data of the applicant (gender, birth month/year) Motor vehicle infractions and dates of infractions LexisNexis proprietary Standard Violation Codes (SVCs) Month/year of death for deceased individuals
Background Information
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Goal of Study: Quantify the additional mortality risk of applicants with adverse driving history and assess the protective value of Motor Vehicle Records (MVR’s) in life underwriting
RGA assigned a severity to each violation. “Major” violations include: Alcohol or substance related infractions Excessive Speeding (> 30 mph above speed limit) Suspended, withdrawn, revoked, surrendered or cancelled drivers license Failure to provide proof of financial responsibility Failure to appear in court Reckless or negligent driving
Mortality Study Study Period 2007-2010 Expected mortality based on most recent U.S. Population Life Table Results are relative mortality differentials based on study A/E’s Includes all-cause mortality
Background Information (con’t.)
Significant mortality differences found for those with “major” motor vehicle violations relative to aggregate levels (true across ages and gender)
Mortality increases as the number of violations (regardless of the type of violation) increase
Mortality increases as the number of “major” violations increase Prevalence of “major” violations varies significantly by age Overall, the extra mortality risk present is probably better
represented by a mortality multiple (i.e., table rating) rather than a flat extra mortality load.
MVRs likely provide positive protective value across a wide spectrum of ages at relatively low face amounts.
Significant Findings of the Study
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Age and Amount Requirements for MVR’s
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Age 15 Age 25 Age 35 Age 45 Age 55 Age 65 Age 75 Age 85$25,000 5% 33% 24% 11% 9% 18% 34% 38%$50,000 4% 37% 29% 12% 10% 20% 38% 43%$100,000 7% 64% 53% 32% 28% 36% 54% 62%$250,000 10% 74% 64% 45% 38% 49% 66% 74%$500,000 11% 81% 75% 60% 57% 66% 78% 79%
$1,000,000 18% 92% 87% 68% 62% 74% 88% 88%$2,000,000 22% 98% 96% 92% 91% 94% 94% 98%$5,000,000 23% 100% 98% 96% 96% 96% 98% 100%$10,000,000 24% 100% 100% 98% 98% 96% 98% 100%
>$10,000,000 24% 100% 100% 98% 98% 96% 98% 100%
0%-15% 15%-30% 30%-45% 45%-60% 60%-75% 75%-99% 100%Legend:
Results by MVR Severity
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0%
50%
100%
150%
200%
250%
CleanRecord
MinorViolations
MajorViolations
Rel
ativ
e M
orta
lity
61%26%
13%
Clean Record Minor ViolationsMajor Violations
Results by MVR Severity and Age
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0%
50%
100%
150%
200%
250%
Rel
ativ
e M
orta
lity
Attained Age
MajorViolations
MinorViolations
CleanRecord
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Prop
ortio
n
Attained Age
Major
Minor
Clean
Results by MVR Severity and Gender
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0%
50%
100%
150%
200%
250%
Male Female
Rel
ativ
e M
orta
lity
Gender
MajorViolations
MinorViolations
CleanRecord
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Male Female
Prop
ortio
n
Gender
Major
Minor
Clean
Results by Total Number of Violations
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0%
50%
100%
150%
200%
250%
0 1 2 3 4 5 6 7 8+R
elat
ive
Mor
talit
y
Number of Violations
61%17%
8%
5%3%
2%1%1% 2%
012345678+
Results by Number of Violations and Age
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0%
50%
100%
150%
200%
250%
Rel
ativ
e M
orta
lity
Attained Age
6+
2-5
0-1
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Prop
ortio
n
Attained Age
6+
2-5
0-1
Results by Number of Violations and Gender
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0%
50%
100%
150%
200%
250%
Male Female
Rel
ativ
e M
orta
lity
Gender
6+
2-5
0-1
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Male Female
Prop
ortio
n
Gender
6+
2-5
0-1
Results by Number of Major Violations
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0%
50%
100%
150%
200%
250%
1 2 3 4 5+
Clean Minor Major Violations
Rel
ativ
e M
orta
lity
Number of Violations
61%26%
6% 3%2%1%1%Clean Record
Minor Violations
1 Major Violation
2 Major Violations
3 Major Violations
4 Major Violations
5+ Major Violations
Phase 2 Preliminary Results
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Accident Violations
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0%
50%
100%
150%
200%
250%
Clean 0 1 2 3 4+R
elat
ive
Mor
talit
y
Number of Accident Violations
61%31%
7%
1%0%0%
Clean
0
1
2
3
4+
Suspensions / Revocations
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0%
50%
100%
150%
200%
250%
300%
350%
Clean 0 1 2 3 4 5+R
elat
ive
Mor
talit
y
Number of Suspensions / Revocations
61%
36%
2% 1% 0%0% 0%
Clean
0
1
2
3
4
5+
Drug / Alcohol Violations
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# ofDrug / Alc Viols 0-29 30-49 50-69 70+ Total
Clean 77.7% 86.5% 96.2% 99.5% 95.4%1+ 200.3% 224.7% 215.5% 138.3% 213.0%
Clean 77.7% 86.5% 96.2% 99.5% 95.4%1+ 202.9% 253.5% 221.7% 132.1% 226.6%
Clean 77.7% 86.5% 96.2% 99.5% 95.4%1+ 211.0% 260.3% 229.6% 131.8% 233.4%
Clean 77.7% 86.5% 96.2% 99.5% 95.4%1+ 236.0% 276.7% 237.5% 123.3% 244.8%
Last Year
Last 3 Years
Relative Mortality
Everything on Record
Last 2 Years
Protective Value Framework
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Basic Assumptions 10-year actuarial present value model 5.5% discount rate, 6% annual lapse rate Mortality = 100% of the 2008 VBT Select & Ultimate table
Mortality Savings = A * B * C * D where A = PV of death benefits expected to be paid for policy B = Relative mortality differential for those with “Major” violations vs. those without C = Prevalence of applicants with adverse or “Major” violations D = Exclusivity of information provided by MVR leading to adverse UW decision
Savings are then compared to the cost of the MVR
Protective Value Framework
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Break Even Face Amount Min face for mort savings to
exceed cost of the MVR Assumes $9 MVR and 25%
exclusivity Savings/Cost Ratio
Ratio of the mortality savings to the cost of the MVR
Assumes $9 MVR, $250,000 policy and 25% exclusivity
Required Exclusivity Min exclusivity required to
offer positive protective value Assumes $9 MVR and
$250,000 policy
Protective Value (con’t)
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25 72,427 3.5 7.2%35 81,563 3.1 8.2%45 39,651 6.3 4.0%55 22,883 10.9 2.3%65 17,929 13.9 1.8%75 17,080 14.6 1.7%85 9,386 26.6 0.9%25 214,631 1.2 21.5%35 137,527 1.8 13.8%45 77,715 3.2 7.8%55 44,382 5.6 4.4%65 45,638 5.5 4.6%75 32,322 7.7 3.2%85 11,438 21.9 1.1%
Mal
eFe
mal
e
IssueAge
RequiredExclusivityat $250,000
Savings/ CostRatio at$250,000
Break-EvenFace
Amount
The Underwriter’s Perspective
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Accidents (though prevalence is actually low) Criminal complaints (prevalence is low) Alcohol & drug related violations Unlicensed driver – includes driving while suspended or revoked Administrative withdrawals License suspended or revoked Reckless or careless driving Speeding in excess of 35 miles an hour over the limit
Major violations
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Descending order of significance for single violations
Our traditional approach of rating MVR by flat-extras is probably not the best method
Debits and credits, the mortality multiple, numeric rating system works well MVRs are not merely indicative of accident profiles, they are useful
in identifying all-cause mortality Consider the DUI, once it appears on an MVR, the case becomes an alcohol use
case On the upside elderly applicants with some degree of significant
MVR history show better than expected mortality Surrogate for cognitive testing anyone?
More than 3 major violations of any type suggests a moderate substandard rating is called for
Early results and some client validation suggests the rating can grade down over time, but not in less than 3 years
The Underwriter’s View
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Some take away points
Time-specific analysis Years since last violation, DUI, etc Number of violations in previous __ years
Violation specific analysis Past Accidents DUI/DWI Speeding Violations Moving Violations Administrative withdrawals
We’re open to discussion!
Next Steps?
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Thank you for your attention.
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