Recent Australian insured lives mortality: a review of the Actuaries Institute/FSC Lump Sum Investigation

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Recent Australian insured lives mortality:

a review of the Actuaries Institute/FSC 2004-2008 Lump Sum Investigation

Bridget Browne

Life Insurance in Australia

• 21 insurers, 7 reinsurers, total assets $246bn • Savings vs risk products

• Risk events covered: death, serious illness • Risk events covered: death, serious illness

(trauma), temporary or permanent disablement

• Lump sum risk premium growth appx 9%pa • Net premium to 30/6/13 of $5.7bn

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Overview of report and contents

• Graduation Taskforce of the Australian Actuaries Institute

• Original data collected by Financial • Original data collected by Financial

Services Council and KPMG

• Mortality tables produced by sex, age, smoker status (incl aggregate)

• Death and disability – only consider Death Only and Death with Rider tables here

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Scope

• Lump Sum not income stream • Individual not Group

• Reviewable term & riders, not Traditional • Reviewable term & riders, not Traditional • Standard lives not “sub-standard” or “rated” • Dimensions: sex, age, smoker status,

duration of policy

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Data and adjustment

• Period 31/12/03 to 31/12/08 (5 cal years) • Claim status Admitted, Pending, Denied • Adjustment for IBNR (claims not yet

• Adjustment for IBNR (claims not yet notified) and ultimate result for Pending

• Age definition: age last (ie attained) as last policy anniversary

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Death Only by Policy Count - Exposure

and Claims for Males and Females

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Death Only by Amounts - Exposure

and Claims for Males and Females

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Death w Rider by Policy Count –

Exposure and Claims for Males & Females

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Death w Rider by Amount –

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Key figures

Table 1 - Total Exposure & Claims, Males and Females by product type and measure

Male Female

Total Exposure

Death Only – Policy Count 3 337 311 2 343 240

11 Death Only – Policy Count 3 337 311 2 343 240 Death Only – Dollar Amount $1 003 bn $543 bn Death with Rider – Policy Count 2 272 646 1 673 707 Death with Rider – Dollar Amount $798 bn $431 bn Total Claims

Death Only – Policy Count 6,277 2,631

Death Only – Dollar Amount $1 367 m $391 m

Death with Rider – Policy Count 1,437 514

Death with Rider – Dollar Amount $423 m $109 m

Key figures

Average Sum Insured Male Female

Death Only – Exposure $300 518 $231 777

Death Only – Claims $218 835 $148 927

Death with Rider – Exposure $351 003 $257 538

Table 2 – Average Sum Insured for Males and Females, Exposure & Claims

Death with Rider – Exposure $351 003 $257 538

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Key rates and ratios

Claim rates per 1 000 (Claims/Exposure x 1 000)

Male Female Female/Male

Death Only – Policy Count 1.88 1.12 60%

Table 3 - Female Total Exposure and Claims as a percentage of Male by product type and measure

Death Only – Dollar Amount 1.36 0.72 53%

Ratio 72% 64%

Death with Rider – Policy Count 0.63 0.30 49% Death with Rider – Dollar Amount 0.53 0.25 48%

Ratio 84% 83%

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Table naming convention

Codes Meaning

DO or DR Death Only or Death with Rider M or F Male or Female

N, S or A Non-smoker, Smoker or Aggregate N, S or A Non-smoker, Smoker or Aggregate 04-08 Years of exposure

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Non-smoker tables – log scale

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Smoker vs Non Smoker

2.5 3 3.5 DOFS04-08/ DOFN04-08 DRFS04-08/ DRFN04-08 DOMS04-08/ DOMN04-08 DRMS04-08/ DRMN04-08 CIA97-04 Male S/N CIA97-04 Female S/N 0 0.5 1 1.5 2 0 2 4 6 8 ₁0 ₁2 ₁4 ₁6 ₁8 ₂0 ₂2 ₂4 ₂6 ₂8 ₃0 ₃2 ₃4 ₃6 ₃8 ₄0 ₄2 ₄4 ₄6 ₄8 ₅0 2₅ ₅4 ₅6 ₅8 ₆0 ₆2 ₆4 ₆6 ₆8 ₇0 ₇2 ₇4 6₇ ₇8 ₈0 ₈2 ₈4 ₈6 8₈ ₉0 ₉2 ₉4 ₉6 ₉8 1…

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Table fit to data

20% 40% 60% 80% 100% 120% 140% 160% 180% 200% DOMA04-08 Count DOFA04-08 Count DOMA04-08 Amount DOFA04-08 Amount 17 0% 20% 0% 20% 40% 60% 80% 100% 120% 140% 160% 180% 200% DRMA04-08 Count DRFA04-08 Count DRMA04-08 Amount DRFA04-08 Amount

Table fit to data – Smoker/Non-Smoker

Actual/Expected Male Female

Death Only Count Amount Count Amount

Non Smoker 99% 90% 95% 87%

Smoker 101% 102% 101% 91%

Male Female

Death with Rider Count Amount Count Amount

Non Smoker 91% 91% 98% 96%

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Comparison with

Australian population mortality

0.10000 1.00000 0 5 1 0 1 5 2 0 2 5 3 0 3 5 4 0 4 5 5 0 5 5 6 0 6 5 7 0 7 5 8 0 8 5 9 0 9 5 1 0 0 DOFA04-08 DRFA04-08 ALTF05-07 0.10000 1.00000 0 5 ₁0 ₁5 ₂0 5₂ ₃0 ₃5 ₄0 ₄5 0₅ ₅5 ₆0 ₆5 ₇0 ₇5 ₈0 ₈5 ₉0 ₉5 1 0 0 DOMA04-08 DRMA04-08 ALTM05-07 19 0.00001 0.00010 0.00100 0.01000 0.00001 0.00010 0.00100 0.01000

Comparison with

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Comparison with

previous insured lives mortality

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Ratio of current to past mortality rates,

for insured lives and general population

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Life expectancy measures

Female ALTF95-97a ALTF05-07a IAF95-97a DOFA04-08 DOFN04-08 DOFS04-08

e20 62.0 64.1 64.3 64.8 65.2 61.1

e50 33.0 35.0 35.0 35.5 35.7 32.0

Male ALTM 95-97a ALTM 05-07a IAM 95-97a DOMA 04-08 DOMN 04-08 DOMS 04-08

23 Male ALTM 95-97a ALTM 05-07a IAM 95-97a DOMA 04-08 DOMN 04-08 DOMS 04-08

e20 56.5 59.7 59.8 61.7 62.3 56.6 e50 28.6 31.3 31.0 32.8 33.2 28.1 Female IAF9597a -ALTF95-97a DOFA0408 -ALTF05-07a Male IAM9597a -ALTM95-97a DOMA04-08 - ALTM05-07a e20 2.3 0.7 e20 3.2 2.1 e50 2.1 0.5 e50 2.4 1.4

Conclusion

• Changes in practice • Business mix changes

• Relaxation of u/w requirements • Relaxation of u/w requirements • Selective lapsation

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References

• AUSTRALIAN BUREAU OF STATISTICS. 2013. 3302.2 - Deaths, Australia, 2012 Table 2: Death rates 2002 to 2012 [Online]. [Accessed 16 Dec 2013].

• AUSTRALIAN GOVERNMENT ACTUARY 2009. Australian Life Tables 2005-07.

• AUSTRALIAN PRUDENTIAL REGULATION AUTHORITY (APRA) 2013a. Quarterly General Insurance Performance, June 2013. • AUSTRALIAN PRUDENTIAL REGULATION AUTHORITY (APRA) 2013b. Quarterly Life Insurance Performance, June 2013. • CONTINUOUS MORTALITY INVESTIGATION MORTALITY COMMITTEE 2006. CMI Working Paper 21 The Graduation of the

CMI 1999-2002 Mortality Experience: Final “00” Series Mortality Tables – Assured Lives. CMI 1999-2002 Mortality Experience: Final “00” Series Mortality Tables – Assured Lives.

• GRADUATION TASKFORCE 2012. Graduation of the 2004-2008 Lump Sum Investigation Data. Actuaries Institute.

• IAAUST MORTALITY COMMITTEE 2001. Institute of Actuaries of Australia Mortality Investigation IA95-97 M and F: Graduated Mortality Tables.

• INDIVIDUAL LIFE EXPERIENCE SUBCOMMITTEE. 2010. Construction of CIA9704 Mortality Tables for Canadian Individual

Insurance based on data from 1997 to 2004 [Online]. Canadian Institute of Actuaries. Available: http://www.cia-ica.ca/docs/default-source/2010/210028e.pdf[Accessed July 2013 from Society of Actuaries Mortality Table utility www.mort.org].

• SOCIETY OF ACTUARIES MORTALITY TASK FORCE 2001. Report Of The Individual Life Insurance Valuation Mortality Task Force, 2001 Valuation Basic Mortality Table.

• THE LIFE RISK INSURANCE COMMITTEE 2004. Report on the Lump Sum Experience Investigation 1998-99. • UNIVERSITY OF CALIFORNIA BERKELEY (USA) AND MAX PLANCK INSTITUTE FOR DEMOGRAPHIC RESEARCH

(GERMANY) Human Mortality Database.

Recent Australian insured lives mortality: a review of the Actuaries Institute/FSC Lump Sum Investigation