Mortality

Key Developments During 2018

Current mortality trends

  • The CMI_2017 briefing note published in March 2018 commented that all users of the CMI tables expected that mortality improvements would continue, albeit at a slower rate. It also noted that the causes of the improvement slowdown seem to be due to longer term issues rather than short-term issues such as flu.
  • There is evidence of different effects when viewed by socio-economic group and there may also be variances between healthy and unhealthy lives. Some observers suggest that it is to do with the effects of austerity measures and others point to cohort effects. A recent study has shown a link between levels of deprivation and mortality with higher levels of deprivation showing adverse mortality.

Future mortality trends

  • Looking ahead there are drivers of change that may suggest that the level of improvement could continue to decline, and possibly even move to deterioration. For example, increasing obesity levels (including in childhood), increasing concern over sleep deprivation with proven links to Alzheimer’s, heart attacks and strokes, worries over antibiotic resistance and the spread of opioid addiction.
  • In contrast, advances in medical technology in relation to medical procedures, artificial organ transplants and the use of genetics to personalise medicine along with the increasing use of healthtech to support healthy lifestyle choices may reverse the recent trends. Technological advances can also result in improved health through improved monitoring and management of disease, earlier and more accurate diagnosis, although the management of the significantly higher levels of personal data used to underpin these advances can create a data privacy risk that needs to be managed. Another technological development affecting mortality is the introduction of e-cigarettes to replace traditional tobacco-based cigarettes. While the risk of e-cigarettes is claimed to be significantly lower than tobacco cigarettes, their effect on long-term health is still unknown
  • Climate-related risks to mortality are complex and can have both a positive and negative effect. Positive benefits could arise if actions taken to improve the environment lead to a healthier society e.g. actions to improve air quality such as reducing car usage could lead to healthier populations if they lead to increased walking and cycling. Harmful effects such as greater volatility in temperatures could impact on food production and lead to societal unrest or the emergence of new diseases. The deterioration of our eco-system (e.g. reduced biodiversity or plastic pollution) could also adversely affect mortality by impacting food production or contaminating the food-chain.

Actuarial considerations

  • Actuaries should ensure that any changes in mortality assumptions to reflect the emerging trends are appropriate for the portfolio that they are valuing and that they are not subject to undue commercial pressure to change assumptions too quickly. Changes in mortality experience and assumptions could also change the liability profile, and investment strategies based on a matching approach may need to be revisited.

Summary of 2017 Discussion and Actuarial Implications

  • The slowing pace of mortality improvements in the UK is a trend seen elsewhere in the world with lower mortality improvements seen in recent years in Canada, Ireland and the USA.
  • There is inherent uncertainty in assessing future mortality trends, and uncertainty remains as to whether the current emerging mortality data is a ‘blip’ or indicative of a long-term change in future mortality trends. There is a risk that there is insufficient understanding of the drivers for the change in experience at this time.
  • A key external driver of this risk is changing demographics. However, this is also influenced by political priorities, social care government spending, the varying impacts on different socio-economic groups and the potential impact of technology and climate change on future patterns of mortality and morbidity.
  • Whilst the reasons for the current changes in trend are not fully understood there is a risk that actuaries may make judgements in setting assumptions that are not reflective of the true underlying reasons for the observed change. Examples of assumptions where this issue is relevant are annuity and assurance pricing and reserving in life (re)insurance; pension scheme funding; longevity de-risking activity; and assessment of factors such as transfer values in pensions. While the risks may be lower in general insurance, there is still exposure through Periodic Payment Orders, and, for investment activity, there is a risk that there is an impact on duration matching.
  • To support users to make informed decisions, actuaries may need to consider the most effective ways to communicate the judgements made, the basis for these judgements and the level of risk and uncertainty in the assumptions. Consulting professionals in other relevant disciplines and deep interrogation of the data could help actuaries and users understand the reasons for the changes seen in mortality patterns.

Further Reading

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