Mortality Improvement (GI & SI products)

[gods_dice2]

I am looking for info online (from the SOA, etc.) pertaining to mortality improvement assumptions specifically related to Guaranteed Issue Whole Life (and possibly Simplified Issue as well, but for now mainly focusing on GI).

I can’t seem to find much information, and I certainly can’t find any mortality improvement table specific to GI. Therefore, I’m at least trying to find info re: the relationship of GI mortality improvement to mortality improvement for typical underwritten life business (term for instance). We do have a life mortality improvement table developed by my company back in 2013, Right now, and we currently use this table for our Term Life improvement assumption. We are using 75% (flat factor applied) of this assumption for our GIWL product.

I could see arguments going both ways (i.e. I feel we could argue mortality improvement could be better OR worse for guaranteed issue vs. regularly underwritten products). For instance, on the one hand perhaps mortality improvement is not as good for people in the GI-market (i.e generally low-income people and therefore less access to improvements in medicine), but on the other hand maybe mortality improvement is better for them because people in poor health (people with cancer or other chronic illnesses) benefit relatively more than the general population from advancements in medicine.

Our issue age range is 50-80, so specifically this is older ages, low face amounts, final expense guaranteed issue product with a graded DB (110% ROP for death in the first 2 years).

Any thoughts or inputs on this would be greatly appreciated. I haven’t been able to find anything on this topic in my research (no tables, no insights, no research, nothing).

[Chuck Ritzke]

I think the difficulty in developing/using mortality improvement factors for GI is that GI mortality is likely very different from company to company (more so than underwritten) because things like variations in anti-selection probably highly overshadow any general improvements in mortality. Anti-selection is dependent upon how you market/distribute the product, your level of control over how it’s sold, the volume of business, where leads come from, etc. Maybe you could reflect meaningful improvements in the (far) out years, but probably not so much in the early years.

That said (while I haven’t looked), maybe you could get some general idea from limited underwriting tables that the SOA publishes, if you can find tables developed from different eras and compare. Another source could be your reinsurers.

[gods_dice2]

Really appreciate your response.  You make some great points about there being so many possibilities for variation with GIWL mortality improvement.  That’s a good idea about looking at Limited Underwriting tables from different eras and comparing.

One follow-up question regarding your statement here:

“Maybe you could reflect meaningful improvements in the (far) out years, but probably not so much in the early years.”

Are you referring to reflecting meaningful improvements over-and-above the improvement assumption we’d have for fully underwritten business, or no?  I don’t think that’s what you’re saying, but just wanted to clarify.  When you say “probably not so much in the early years,” it sounds like you’re saying you might expect little-to-no mortality improvement in early years for GIWL at all.  Do you perhaps have a hunch or reason to believe the GI population isn’t subject to any of the mortality improvement experienced by the general population and fully underwritten population?

Speaking of which… a thought I had was: for lack of more information, I was trying to think of a way to use the mortality improvement table developed by the SOA based on U.S. population mortality :

https://www.soa.org/resources/experience-studies/2020/mortality-improvement-scale-mp-2020/

This SOA table shows lower mortality improvement for older ages in general than the table developed by my company (the one from my company being based on fully underwritten business).  At the very least this does seem to prove that less underwriting means less mortality improvement, though I don’t know how linear that relationship is… but maybe there’s something I can do with these two tables.

The other thing that makes this tricky is mortality improvement tables (both from the SOA and the one developed by my company) are typically calendar-year tables, but of course anti-selection is a phenomenon related to policy-year.

 

[Chuck Ritzke]

With the caveat that I’m spit-balling ideas here, my thought on the out years goes like this.

When you think about GI sales, I think it generally consists of a group of initial “anti-selectors” that effect early year mortality and (a hopefully larger group of ) reasonable risks. I think in the early years the anti-selection overwhelms any possible mortality improvement. If less-than-healthy people have the opportunity to anti-select, they most likely will (which is why marketing/distribution is so important). But the further out you go, you are probably left with (or at least approach) the relatively “normal” risks, maybe somewhat less than population mortality.

So my thought is that they are probably reasonably subject somewhat to population mortality improvement. So not additional improvement, but just population improvement. Not sure how much the mortality in the out years has on profitability though without modeling it. A lot of the inforce is gone by then.

You also want to consider your renewal lapse rate experience. High lapse rates implies more anti-selection.

[gods_dice2]

Again: very much appreciate your responses!  You are definitely right about anti-selection w/ this product and the importance therefore of marketing/distribution.

Unfortunately I couldn’t find any Limited Underwriting tables aside from the one from the 2008 VBT :-/ So I can’t compare different eras.

We do account for anti-selection in our mortality assumption.  We have seen the phenomenon in our actual experience and have baked it into our qx assumption.  Now, I’ll admit: I don’t know if I fully grasp your concept of anti-selectors overwhelming mortality improvement (but I would definitely like to understand your thinking on that).  Wouldn’t the anti-selectors themselves also experience mortality improvement, even in the early years, or am I missing thinking about something?  I mean, GI buyers are definitely the worst of the worst in terms of their general health compared to the rest of the population– hence why they can’t get underwritten for a fully underwritten (or even simplified issue) policy and have to buy GI.  But couldn’t we say that even the people today in poor health are still likely to live longer than individuals who were in poor health, say, 30 years ago?  And wouldn’t that indicate improvement?  My point being: couldn’t we say basically “a rising tide lifts all boats” in the field of medical advancement?  Or is that an incorrect assumption?

It just occurred to me: it might be worth it to look at what the majority CODs for our GI policies and then research and see if the average lifespan for those specific conditions has increased at all over the years.  What do you think of that?  (Similar to you I’m definitely just spit-balling here of course.)

Whenever I think of mortality improvement, I think of medical advancement.  It seems, possibly, people who buy GI are more likely to have chronic illnesses and chronic conditions in general, and advancements in medicine typically target treating and/or curing common illnesses/conditions, so that’s why I was thinking GI people might benefit more from medical advancements than the average person.  Maybe: am I missing an aspect of mortality improvement other than medical advancement that is key to this discussion?

Now thinking about it, I also am thinking that, because these are low-income individuals mostly, and individuals needing greater-than-average medical attention, the age 65+ issue ages (and issue ages close to 65) might benefit relatively more from Medicare (and SS) than the under-65 group (the difference relative to other products and the general population that is).

We do have a high first-year lapse rate by the way (~38%)  and we do mostly sell through Brokerage, although we do have good monitoring in place with the goal of getting rid of the agents that sell business with the worst mortality and even worst lapse experience.

Much of this post is just me thinking out loud, and I definitely appreciate any insights you may have in any way/shape/form.  That said, my main question I think was: why do you think the anti-selection would overwhelm any mortality improvement?  If we account for anti-selection in our qx assumption, why couldn’t we also assume that poor-health anti-selectors would be subject to mortality improvement in the same way the rest of the population is (even in early years)?  What am I missing here?

[Chuck Ritzke]

Still spit-balling – I definitely could be wrong…

But I’m thinking, based on the big bump in mortality rates often observed in the first 3-5 years, that the anti-selectors are more so critical/terminal than chronic illness. The latter I’d agree could be materially affected by mortality improvement. My thinking is that the causes of mortality improvement (short of some major cure for cancer, etc) is generally something that more so emerges gradually over time and primarily affects people before or at the early stages of illness or even “pre-illness” compared to somebody who is at the later stages of disease. Of course there would be some improvement (eg drugs that extend life, etc). But I’m guessing that improvement comes more from avoiding illnesses and early detection more so than curing/treating them at critical stages.

My “overwhelming” thought is due to the size of the big bump in early years.  Even if non-anti-selectors have improvement, it is overwhelmed when measuring early year claims as a % of total mortality rates. The good news (if your company sells enough to be credible) is that you may be able to detect improvement in the early years as you study early year mortality. If not credible, maybe your reinsurers have opinions on that.

[Tom Taylor]

Those are good points Gods_dice, and Chuck’s response is very valid as well.  I’ll add two other points that may argue against improvement in the early years:

1.  Today’s anti-selectors may not have better results than in earlier years because the best of them will no longer need to anti-select due to more effective treatments for their impairments.

2. There may be more people needing to anti-select than before because they’re still alive; their illnesses would have already killed them in earlier years.

[Author]

Posts