Data indicates slight rise in mortality

Data from the Canadian Institute of Actuaries (CIA) contains two developments for actuaries: The first is mortality figures that appear to be on the climb. The second is a set of figures analyzing mortality when term life insurance products renew.

“I think you’ll find many actuaries will watch this pretty closely,” says Bob Howard, independent consultant to the CIA, when speaking about the increasing A/E ratio – actual deaths to expected deaths – which suggests that mortality could be on the climb.

Regarding the analysis where mortality associated with renewals is studied, he also says actuaries will be looking closely. “They’ll be comparing this with their own assumptions to see if, in fact, they have made the right call.” 

The CIA’s annual tome, this year titled the Canadian Individual Life Experience Updated to Policy Year 2021-2022 – Report, analyzes figures until the end of 2022.

Although the 2022 data would appear at a first glance to be older, Howard says it is collected into the first half of 2023 because deaths are not always reported right away. “We want to wait a few months after the calendar year ends before we collect the data. That way we don’t have too many late-reported deaths. If we miss one, we’ll pick it up the next year.” 

The in-depth analysis is the 73rd annual report of intercompany mortality experience. It draws on data submitted by seven companies, focusing on the most recent five policy years. “Approximately 70 per cent of Canadian individual life insurance is covered by this study,” it states. The report primarily discusses the experience of individuals’ life insurance policies and riders issued in Canada which require full underwriting.

“This is a study that we do every year. Things don’t change by a lot – a lot of the importance of the study is being able to say, yes, we understand these things and there are no big surprises,” Howard says. “It’s very comforting to get no surprises.” 

Mortality rates deteriorate with renewals 

When those with healthier lives have their policies re-underwritten, rather than pay increased rates at renewal time, it’s not a surprise, then, to see that mortality deteriorates for those who remain. Just how much those figures change by, however, was not something the Canadian Institute of Actuaries had measured in past iterations of the institute’s intercompany mortality experience report. With the 73rd annual edition, though, this is changing.

“It was done last year but not before that. This is something that I think a lot of actuaries will be taking a look at. They’ll be comparing this with their own assumptions to see if they’ve made the right call,” says Bob Howard. “The information was there but we hadn’t been accessing it before.” 

In studying renewable term products, the report finds that mortality rates almost double on renewal. “It’s an increase of more than 50 per cent by policies. The reason for that is that the healthier lives have departed and what we’re left with are the less healthy lives. That’s a significant finding,” Howard says. “It’s something that we would expect to see but until recently we hadn’t been able to quantify how much the mortality deteriorated for the renewal terms compared to the first term.” 

He adds that base policies are also shown separately from riders because some actuaries thought there might be a difference in mortality. “There is, but it’s not much of a difference,” he says. For policies under $100,000, meanwhile, the difference also is not as large, presumably because not many policies are sold with low face amounts, and those that are, tend to just pay the somewhat higher premiums at renewal time.

“If it’s a very small policy people may wonder if it’s worth the trouble of going through the hassle of being re-underwritten. They might just pay the higher premium,” Howard points out. “But if you’re talking about $500,000 or $1-million of insurance, it’s for sure worth the hassle.”