The Canadian Institute of Actuaries (CIA) has published new research intended to fill a gap in the research available for assessing conversion risk when individuals convert group life insurance coverage into individual policies. Written by the CIA’s past president, actuarial researcher and CIA fellow, Bob Howard, the research conducted and resulting mortality table constructed is a first in Canada.
“The research provides actuaries with a dedicated, industry-wide basis for pricing, valuation and the assessment of conversion risk,” the CIA states in an announcement about the publication’s release. “While group conversion lives have long been recognized as having mortality patterns that differ significantly from traditionally underwritten individual insurance policies, no publicly available Canadian mortality table has previously been available for this segment.”
The research draws from CIA group conversion data spanning 2016 to 2024. Supplementary files accompanying the report allow actuaries to review, replicate and adapt elements of the approach for future research and practice applications, they add.
“The publication is expected to support greater consistency across the industry, reduce reliance on proprietary, low-volume datasets and encourage further research into conversion behaviour and mortality experience in Canada,” they write.
In the report, GC2020: Mortality Table for Group Conversions, it is noted that although the CIA’s study does not contain a large group conversion dataset, the dataset was large enough to develop a new table. They add that no individual Canadian company has enough data to support the construction of a group conversion table.
“The new table, GC2020, is intended for use in calculating the cost of conversion from group to individual life insurance and for the valuation of in-force policies that resulted from group conversion,” the report states. It adds that the effect of self-selection in the group conversion experience is much greater than company selection in the normal underwriting process.
The report also encourages modifications relevant to the companies using the research. For example, they point out that most companies will find the use of smoker, non-smoker and smoking unknown classifications are appropriate for their businesses.
“However, companies that offer smoker rates by default will want to consider the rates for all smoking classifications combined,” they write. “In some cases, GC2020 may be appropriate without modification, but actuaries should consider whether their circumstances warrant a modification of the table.”
