Deciphering Longevity Assessment: Unveiling Macro-Longevity and Micro-Longevity Perspectives

In an effort to differentiate between cohort and large population mortality information that predominates most discussions about longevity, life expectancy and other life underwriting-related topics, we have used two different terms. We use the term macro-longevity to refer to information about life expectancy involving large groups of people, the population of the United States for example. We use the term micro-longevity when we talk about the life expectancy (LE) of an individual. However, these are merely labels we use to keep any discussion about longevity risk focused on the situation at hand. 

Using These Terms and Their Scope 

We do not use the terms macro-longevity (risk) and micro-longevity (risk) to describe or imply anything about our underwriting methodology or the data and information we use to develop our underwriting tools or conduct our life expectancy assessments. The information we use to inform our underwriting philosophy, develop our underwriting manual, and apply our underwriting methodology is vast and constantly growing. As we assess more and more lives over time, this body of work expands and we learn more and more about the macro and micro implications of our work. In addition, we often see the work product of our competitors and we are occasionally asked to explain our assessment relative to that of one or more competitors who have evaluated the same individual. However, we are never asked to explain our assessment when the mean life expectancy figure assigned to the insured as a result of our underwriting is shorter than that of a competitor. Only when our LE is longer are we questioned. (We assume our competitors get these questions too when their LEs are longer than ours or any other underwriting firm). 

Comparing Competitor Assessments 

The question we are most often asked is, simply put, “Why is your LE longer than this other underwriter’s?” Usually, when the question is first posed, we have no documentation or any information about what the other underwriting firm’s report says. We always ask for this information, because without it, we cannot compare and contrast our work product with anything other than the assertion that our LE is longer than someone else’s LE. Once we have both sides of the picture, we do the work of comparing our assessment with that of our competitor(s). 

The first thing we look for is the mortality rating applied to the insured by our competitor and the rating we applied. If they are the same (and it’s becoming increasingly rare that they are), and the LEs are different, we know that this is likely to be caused by a difference in the morality table used to calculate the LE figures themselves. In other words, if a given insured person is viewed by ISC and another underwriting firm as being impaired to the same degree (eg: both firms assigned a 200% mortality rating to the insured), and the LEs are different, the table is the most likely cause of the difference. (NOTE: There are underwriting firms out there touting the use of morality tables that are simply not suitable for use in the life settlement marketplace. Following these so-called “experts” can result in severe consequences). 

A Comprehensive Perspective 

If the mortality ratings are not the same between the reports, then we have to look for the other underwriter’s rationale, or some indication as to why they rated the insured the way they did. More often than not, there is no discernible correlation between the morality rating schemes used by various underwriters, and therefore, the differences between two LE reports are driven by significant differences in both the risk assessment methodology and the mortality tables used. When we look for the reason why another underwriter assessed the life differently than we did, we hope to see an indication as to what the other underwriter decided were the primary and secondary impairments, as well as other “comorbidities,” factors that might also be influencing the insured’s degree of impairment.  

However, what we find most often is a list of health issues using medical jargon, nothing more. Assuming the same medical records were used by us and the other underwriters, we can see where this list comes from, but the list itself tells us nothing about the underwriter’s “view” as to which of these issues is really driving the insured’s mortality rating. As a result, we can always explain why our assessment is what it is, but it is rare that we are able to explain why another underwriter’s view is different. Since it is always the case that we are asked about the difference only when our LE is longer, we assume the other underwriter is never asked by the client why their LE is shorter. (They may be, but we never are). Thus, the client cannot possibly understand the full context of our response, which we always provide. If the client really wants to know why two LEs are different, they have to ask the same question of both underwriters, and they need to be qualified to understand the responses they get. 

Chris Conway is Chief Development Officer at ISC Services