Flashcards in Chapter 3 Deck (43)
How are mortality rates for different ages calculated?
1. observing the number of deaths, occuring in the population over a specified period of time and determinign the number of individuals exposed to the risk of dying during that interval.
How do you calculate the exposure?
expressed as the product of a number of individuals who are alive at the beginning of an itnerval who are exposed to the risk of dying and the duration over which that exposure takes place, usually years.
Expressed as: persons-years.
How is the interval mortality rate calculated?
dividing the number of detaths occuring during an interval by the corresponsing exposure.
Mortality rates are typically annual/quater-annual/semi-annual/dectorial?
Life insurance pricing is based on the monetary cost of death claims therefore many life insurance tables are based on what?
the monetary amounts of claims instead of the number of deaths and substitue the total monetary amount of insurance in force for exposure. Since this si the toal monetary sum that is "exposed" to the risk of being paid out as claims.
What will a pricing assumtion typically discount ?
1. future death claims for anticipated lapse rates
2 projected death claims for the interest anticipated to be earned on the investment
What are population of life stables?
based on death rates calculated for large segements of the population without regard to individual health, socioeconomic, or employment ststus.
- segemented by: race, sex, residence.
-large mortality rates across large segements of general population.
What are period life tables?
Death rates calculated from data collected over a relatively short period (1-3 years) and for that reason the data are most applicable to the middle of that period.
What is a Cohort (generation) life table?
reports the actual death rates for a group or cohort, of individuals born around the same time. The accuretly report the hx death rates for a birth cohort up to the time the table was created.
What are some examples of insured lives life tables.
1. select and ultimate
2. annuity tables
3. group life tables
4. pension life tables
5. STD and ordinary tables
6. disables life tables.
What are basic tables?
report the mortality of individuals who purchased life insurance at standard or better rates. death rates represent a select group of individuals having a great proportion of persons from higher socioecobomic groups and a lower proportion of disabled persons and those with ill health, when compared to general population.
Are basic tables subdivided at all?
yes, sometimes by SM hx.
True or false.
It is assumed u/w no longer converys a beneficial effect after 20-25 years issue date.,
Yes, however the beneficial effect of u/w and socioeconomic status ususal results in mortality rates below those for the general population.
Which tables are used by insurance companies to prioe life insurance products?
basic tables, and to be competitive companies further modify these tables by applying factors that reduce projected mortality rates to levels thought to be attractive to potential new policyholders while, remainin acheivable thorugh the combination of target market selection., iu/w, and secular mortality improvements.
What are individual annuity tables?
typically hae the lowest mortality rates of any insured, lives mortality tables.
- represent mortality expected for holders of annuity products that are known to attract healthy persons having the greatest longevity.
What are group tables?
aggregate life tables becauselittle, if any, individual u/w is done for group.
- mortality rates on par with a slighly high than individual select and ultimate tables.
What are social security or pension life tables?
typically have higher mortality rates that are close to, but somewhat less than, population rates because selection is limited to the requirements that persons eligible for social security or pensions must have been actively employed at some time.
What are standard and ordinary tables?
1990 CSO tables, and 2001 CSO tables- used by valuation actuaries to set policy reserves and determine cash values.
- more conservative.
What are disabled lives life tables?
reflect mortality rates of persons no longer able to work because of a disability.
- mortality rates somewhat higher than general population mortality rates.
What is one difference between the mortality rates in insured lives life tables, and the mortality rates in clinical mortality studies?
the former are typically based on the monetary value of policy amounts and claims, where as the latter are based on actual death rates.
What is a major difficulty encoutnered when converting clinical mortality rates into insured lives mortality ?
expectations stems from the difference between the characteristics of the populations in clinical studies and of those who purchased life insurance.
- it would be hazardous to assume that the mortality results derived from clinical studies can be translated directly into those that would been seen in an insurance population?
What are selections factors that are not calculated by populations entering clinical studies?
sex, socioeconomic status, risk factors, and comorbidities. Even age.
What are selection factors that are important selection criteria in many life insurance products?
age, sex, income, risl factors, comorbidities.
Life insurance is also priced differently by age, sex, tobacco.
there is one popular method used to reduce the effect that the basic underlying differences in two compred populations can have on the calculation of excess mortality risk.
Rather than directly comparing mortality rates from clinical studies to the mortality rates expected in an insured pop, the mortality rates observed in a clinical population having the impairement in question should first be compared to the mortality rates in another pop matched as closely as possible in other respects to the population with the impairement.
>>>>> Excesss death rate-
How is Excess death rate calculated?
using the relationship of observed to expected mortality, in which the expected mortality is the mortality rate in a comparison population closely matched ot the population having the imprement, except for the presence of the impairement itself.
What can you use an EDR (excess death rate) for?
1. calculate the amount of extra premium that must be charged on an annual basis to cover the excess mortality risk us.
2. can be compared to select insured live mortality rates to calculate a select relative mortality ration.
What is the purpose of base pricing assumptions for Life insurance products?
reflect the mortality expected for individuals who are in good health and who are free from impairments that would be expected to increase their risk of dying.
How do actuaries set substandard prices?
by modifying a basic mortality table, by multiplying the mortality rates in these tables by various factors reflecting market considerations and underwriting effectiveness. > results in aggregate standard prices
Offers of insurablity at substandard rates are commonly expressed in one of two ways. Name them
1. as an excess death rate (edr)
2. as a relative mortality ratio (rmr)