Ch 3 Life tables, underwriting, an intro to mortality analysis Flashcards
assessment method of funding
protection offered for specified period of time and necessary money to fund plan was raised by assessing each member an equal amount in advance.
annual mortality rates
tabulated by age, sex and other factors
dx
interval deaths, number of deaths occurring during interval
qx
interval probability of death
probability of death during interval
px
interval probability of survival
probability of survival during interval
x
specified period of time, interval
Ex
exposure during an interval (person X years)
persons exposed to risk dying X duration of interval exposure
lx
number individuals alive at beginning of interval exposed to risk of dying
qx
deaths / exposure
interval mortality rate, calculated by dividing # deaths occurring during interval by corresponding exposure
qx = dx/Ex
edrx
interval excess death rate
future values of fixed death benefit affected by?
inflation
-erodes future value
-claim occurring in future has less financial impact than shortly after policy issue. projected death claims are discounted for interest anticipated to be earned on investment
growth of secondary markets (viatical/elder life settlement) threaten?
to reduce policy lapse rates
-adversely affecting profitability
-pricing assumptions discount future death claims for anticipated lapse rates, premiums paid to that time & accumulated interest, no longer exposed to risk of claim w/lapse
-keeping policies in force, potential to overestimate lapse rates when setting pricing assumptions leading to underestimation of actual mortality experience
Population life table
tabulating death rates for large segments of population w/o regard to individual health, socioeconomic status or employment status
-segmented by sex, race, residence
-avg mortality rates across large segments of gen. pop
period life table (current)
tabulating death rates for particular period of time for individuals of different ages at time mortality data was collected
-1-3 yrs
-depicts death rates for large # of birth cohorts (groups)
cohort life table
tabulating year-to-year death rates for group (cohort) of individuals born around same time
-limits: only historical, does not predict future rates
types:
select & ultimate (basic)
annuity
group life
pension life
standard & ordinary
disabled life
basic table (select and ultimate, standard or better rates)
used to price life insurance products
-tabulating death rates for individuals who purchased insurance at standard or better rates
-subdivided by tobacco use and by select and ultimate periods
-higher proportions from higher socioeconomic groups and lower proportions of disabled/ill health
-non-tobacco select mortality rates substantially lower
select factors
scalar factors applied to life tables to reduce mortality rates to levels thought to be attractive to potential life insurance buyers while maintaining achievable mortality goals through the combination of target market selection, underwriting, and anticipated secular (gen. pop) mortality improvements
select period
period from policy issue to time at which the effect of underwriting has been assumed to no longer be effective in selecting standard or better risks from amount pool of insured persons
-20-25 yrs
-select portion of basic table is cohort life table
ultimate period
period after select during which effect of underwriting is assumed to no longer be effective in selecting standard or better risks from entire pool of insured persons
-beyond 20-25 yrs
-ultimate portion represents period life table
individual annuity tables
tabulating mortality rates of individuals who have purchased annuities
-lowest mortality rates
group life tables
aggregate life tables, little to no underwriting
-rates on par w/ slightly higher than individual select and ultimate tables
-requirement to be actively employed
social security/pension life tables
higher mortality rates close to but less than population
-rates of those actively employed at some time
-requirement be eligible for social security or pensions
standard & ordinary tables
collective aggregate insured lives table in which select and ultimate rates are combined to arrive at collective rates for each age, thus ignoring effect of selection resulting from underwriting
-rates higher than basic select and ultimate
-CSO table
-mortality on par w/ pension tables
disabled lives table
mortality rates of persons no longer able to work due to disability
-rates higher than general population