Close Menu
    What's Hot

    Morrisons Retirement Saver Plan Completes Bulk Purchase Annuity Buy-In With Aviva

    28 May 2025

    Yellow Pages Limited Purchases Group Annuity Contracts From BMO Life Assurance Company

    22 May 2025

    Life ILS Conference 2025

    20 May 2025
    Facebook X (Twitter) Instagram
    Instagram LinkedIn X (Twitter)
    Life Risk News
    • Home
    • Features

      New Data Shows the Extent to Which American Seniors Are Missing Out by Lapsing or Surrendering their Life Insurance Policy

      14 May 2025

      Buy-Ins To Buy-Outs Appear Stalled As Deal Complexity, Administration Resources Pose Obstacles

      14 May 2025

      Is Servicing an Overlooked Source of Life Settlement Alpha?

      14 May 2025

      Q&A: Shelly Beard, Managing Director, WTW

      14 May 2025

      Longevity Tech to Emerge as Distinct Sub-Sector of Venture Capital Market?

      14 May 2025
    • Commentary

      UK Life Insurers to Benefit from Robust Bulk Annuity Market in 2025

      14 May 2025

      The Power of Uncorrelated Diversification During Market Volatility

      14 May 2025

      Overseeing BPA Growth Safely

      14 May 2025

      Could Climate Change Cause the Buy-In Market To Collapse?

      10 April 2025

      ICS vs Solvency II: Comparing Risk Corrections for Illiquid Liabilities

      10 April 2025
    • Events
    • Magazine
    • News

      Morrisons Retirement Saver Plan Completes Bulk Purchase Annuity Buy-In With Aviva

      28 May 2025

      Yellow Pages Limited Purchases Group Annuity Contracts From BMO Life Assurance Company

      22 May 2025

      Andrew Limited Pension and Life Assurance Plan Completes Bulk Annuity Transaction With Aviva

      15 May 2025

      Life Insurance Settlement Association Publishes Latest Market Data Collection Survey Results

      13 May 2025

      UK Aggregate Defined Benefit Pension Fund Surplus Down Again in April

      12 May 2025
    Subscribe
    Life Risk News
    Home » LE Mortality Tables and Underwriting

    LE Mortality Tables and Underwriting

    Commentary 12 July 2023Traci DavisBy Traci Davis
    Twitter LinkedIn Email
    Share
    Twitter LinkedIn Email

    As long as there has been a life settlement market, there has been disagreement over the ‘best’ or appropriate mortality tables for determining life expectancy. The subject has been the source of countless white papers, articles, and verbal sparring during industry panel discussions between actuaries, underwriters, and researchers representing Life Expectancy Provider (LEP) firms. As an underwriting professional, I always come back to what I have always felt to be a relevant stance, which is: “You can have the best mortality table in the business, but if the risk assessment applied by the underwriter is incorrect, the output from the table is going to be worthless.”

    Historically, the relationship between actuarial and underwriting professionals has been symbiotic on the life insurance side. We develop our work in the same ecosystem, and both professions’ decisions will affect each other’s assumptions. However, it is critical to distinguish that actuarial philosophy is based on mathematical theory, based on large homogenous data populations. In contrast, the underwriting philosophy is based on health impairments with unique factors reflected at an individual applicant or insured level. So, when actuarial assumptions do not come to fruition, there is a deep dive into how the individualised risks, with shared components, were underwritten. These typically cause changes reflected in the mortality tables. Essentially, the underwriting process drives mortality table changes and outcomes.

    Consider the following: actuaries live in a world of large numbers. They typically relate it to ‘if we start with 1,000 lives’ when they break down examples. However, underwriters, while understanding that debit and credit methodology takes the law of large numbers into account, we live in a world of assessing the individual in front of us and all of the aspects of the risk that may be relative to the impairment but also unique to that individual. 

    For example, when you take the broad category of coronary artery disease, actuarial science (for developing appropriate outcomes relative to the risk) will start with the Framingham heart study out of MA (circa 1948). Framingham has been a serial decade study of individuals and their family members tracking specific cardiac risk factors over generations, starting with over 5,200 original participants. This study works well, from the diversity, population size, and duration (years of study time) for actuarial science, to determine, with reasonable certainty, the mortality impact of specific risk factors for developing disease and stability (or progression) of disease over time. This insight into crucial risk components is incorporated into underwriting manuals that guide the underwriter in capturing all relative risk factors the same way for every cardiac risk. However, the studies, the actuarial science, and the manual do not provide insight into the nuance of each risk. Meaning the data will indicate in broad terms a potential outcome. Still, the information underwriters develop on applicants or insureds is not purely broad-based impairment data; it is very specific to that individual.

    What does this intersection of actuarial science versus underwriting do? Suppose you are an underwriter that ‘underwrites by the book’ and applies what an underwriting manual suggests without considering the unique factors of the individual. In that case, there is a high probability that you will over or under-assess the risk (by applying too many or too few debits or credits). Then, when using that outcome in the actuarial table, which could be the most relevant table for the population of risk being assessed, the estimated life expectancy may be useless in pinpointing the risk.

    Based on life settlement-specific information noted in various articles, white papers, and presentations I ingest weekly, I have yet to see anything that focuses on the underwriting of the risk and how it impacts the mortality outcomes. Instead, most of the information is a continued argument over which table is best; Social security population being more relevant than insured lives tables, not sharing mortality tables because it is the ‘secret sauce’ of the process, layers of different tables to fit the risk, etc.

    While actuarial science is critical and has a place in developing appropriate tables based on the unique factors of the population being underwritten, underwriting is where the discussion should focus, even if you are working with a LEP that establishes all outcomes on the table. If you do not understand the underwriting methodology or philosophy, and you are not being provided that insight by the LEPs you are working with (assuming you are speaking with someone that is a professional and certified Actuary or a Certified Underwriting Professional), it is to be expected that the outcomes seen in the block of business you are managing will be not what you thought you’d see.

    Traci E. Davis, Certified FALU, FLMI, ACS is Chief Customer Whisperer, Chief Underwriter at Valkyrie Limited


    Any views expressed in this article are those of the author(s) and do not necessarily reflect the views of Life Risk News or its publisher, the European Life Settlement Association

    2023 - July Life Settlements Longevity and Mortality Trends Longevity Risk Volume 2 Issue 7 - July 2023
    Share. Twitter LinkedIn Email

    Related Posts

    UK Life Insurers to Benefit from Robust Bulk Annuity Market in 2025

    14 May 2025

    The Power of Uncorrelated Diversification During Market Volatility

    14 May 2025

    Overseeing BPA Growth Safely

    14 May 2025

    Could Climate Change Cause the Buy-In Market To Collapse?

    10 April 2025

    Comments are closed.

    Most Popular

    New Data Shows the Extent to Which American Seniors Are Missing Out by Lapsing or Surrendering their Life Insurance Policy

    14 May 2025

    Buy-Ins To Buy-Outs Appear Stalled As Deal Complexity, Administration Resources Pose Obstacles

    14 May 2025

    Is Servicing an Overlooked Source of Life Settlement Alpha?

    14 May 2025

    UK Life Insurers to Benefit from Robust Bulk Annuity Market in 2025

    14 May 2025
    Ad

    Your trusted source for capital markets participation in Life Risk

    X (Twitter) Instagram LinkedIn
    Life Risk
    • About Life Risk News
    • Get In Touch
    • Our Team
    • Copyright Notice
    • Terms and Conditions
    • Privacy Policy
    • Sitemap
    Coverage
    • Home
    • Features
    • Events
    • Commentary
    Subscribe

    Type above and press Enter to search. Press Esc to cancel.

    We use cookies on our website to give you the most relevant experience by remembering your preferences and repeat visits. By clicking “Accept All”, you consent to the use of ALL the cookies. However, you may visit "Cookie Settings" to provide a controlled consent.
    Cookie SettingsAccept All
    Manage consent

    Privacy Overview

    This website uses cookies to improve your experience while you navigate through the website. Out of these, the cookies that are categorized as necessary are stored on your browser as they are essential for the working of basic functionalities of the website. We also use third-party cookies that help us analyze and understand how you use this website. These cookies will be stored in your browser only with your consent. You also have the option to opt-out of these cookies. But opting out of some of these cookies may affect your browsing experience.
    Necessary
    Always Enabled
    Necessary cookies are absolutely essential for the website to function properly. These cookies ensure basic functionalities and security features of the website, anonymously.
    CookieDurationDescription
    cookielawinfo-checkbox-analytics11 monthsThis cookie is set by GDPR Cookie Consent plugin. The cookie is used to store the user consent for the cookies in the category "Analytics".
    cookielawinfo-checkbox-functional11 monthsThe cookie is set by GDPR cookie consent to record the user consent for the cookies in the category "Functional".
    cookielawinfo-checkbox-necessary11 monthsThis cookie is set by GDPR Cookie Consent plugin. The cookies is used to store the user consent for the cookies in the category "Necessary".
    cookielawinfo-checkbox-others11 monthsThis cookie is set by GDPR Cookie Consent plugin. The cookie is used to store the user consent for the cookies in the category "Other.
    cookielawinfo-checkbox-performance11 monthsThis cookie is set by GDPR Cookie Consent plugin. The cookie is used to store the user consent for the cookies in the category "Performance".
    viewed_cookie_policy11 monthsThe cookie is set by the GDPR Cookie Consent plugin and is used to store whether or not user has consented to the use of cookies. It does not store any personal data.
    Functional
    Functional cookies help to perform certain functionalities like sharing the content of the website on social media platforms, collect feedbacks, and other third-party features.
    Performance
    Performance cookies are used to understand and analyze the key performance indexes of the website which helps in delivering a better user experience for the visitors.
    Analytics
    Analytical cookies are used to understand how visitors interact with the website. These cookies help provide information on metrics the number of visitors, bounce rate, traffic source, etc.
    Advertisement
    Advertisement cookies are used to provide visitors with relevant ads and marketing campaigns. These cookies track visitors across websites and collect information to provide customized ads.
    Others
    Other uncategorized cookies are those that are being analyzed and have not been classified into a category as yet.
    SAVE & ACCEPT