Keeping Pace with Social and Demographic Changes of an Aging Population...

You Have to be Fast on Your Feet

The impact of social and demographic changes is far reaching. Creativity with regard to building new products is key to keeping pace with these changes.

By Diane Mcgovern and Sue Reitz

The topic of social and demographic changes has been included in the Emerging Issues Advisory Committee's screening because changes in demographics and social norms can directly impact products offered and how they are distributed by the life insurance industry. Changes in demographics can also impact pricing and underwriting refinements within the industry.

Resources Used

Major resources used for collecting data on social and demographic changes were industry periodicals, the 2000 Census, Ameristat.com and the National Bureau of Economic Research. We also looked at various university sites where population studies are done, the American Society on Aging, Demographic Age magazine, the World Health Organization, Seniorsource.com and additional government and media Web sites.

Basic Demographic Issues Considered for Review

Research was focused on the United States, although some data on other countries was uncovered that could have a bearing on where U.S. demographics may be headed.

A high level scan was done on data relating to the birth rate and mortality rates. We were particularly interested in mortality from obesity and a discussion of our findings to date are included in this report. Following is a list of important mortality topics that need more research:

• Impact of drug resistant bacteria.
• Epidemics/pandemics.
• Improvements in medical care.
• Impact of changes in pharmacology.
• Access to medical care.
• Genetic research.
• Mortality by age segment.

Scanning was also conducted regarding the older age population (see following discussion). Important additional topics relating to the size of various age and ethnic groups going forward will include:

• Immigration and possibly emigration.
• Distribution of wealth and income.
• Changes in the labor force.

Specific Findings on Obesity

It is difficult to miss coverage of the obesity epidemic in the popular media. Given that life insurance is typically underwritten based on the assumption that obese individuals are greater mortality risks, further exploration of the topic was called for.

First of all, what is obesity? Merriam–Webster Online defines obesity as "a condition characterized by excessive bodily fat." The Centers for Disease Control and Prevention (CDC) go a bit further by defining obesity as "having a very high amount of body fat in relation to lean body mass or body mass index (BMI) of 30 or higher." The BMI calculation is fairly simple, ((Weight in pounds / (Height in inches)2)*703.

In fact, most studies on obesity use the BMI criteria. This can lead to a bit of a controversy since BMI is an imperfect measurement of obesity. Individuals who are "large–boned" with a lot of muscle mass (e.g., body builders) may measure as obese on the BMI scale even though they have a low percent of body fat. Unfortunately, percent body fat, while a better measure for obesity than BMI, is difficult to obtain for general population studies whereas the input items for the BMI calculation are very easy to obtain. Furthermore, while arguments on the deficiencies of BMI as a measurement tool have merit in individual circumstances, they have less merit in a population study. In other words, unless someone can point to evidence that there has been an increase in the percentage of large–boned bodybuilders in the general population, we can safely assume that an increase in the percent of the population with a BMI greater than 30 represents an increase in obesity.

So, is there an obesity epidemic? There certainly is strong evidence that obesity rates are rapidly rising. Since 1985 the CDC has been collecting data from the states through the Behavioral Risk Factor Surveillance System (BRFSS.) Their data on obesity are shown for select years in Chart 1.

The skeptical among us might say, "Since the population is aging and people put on weight as they age, of course the population is gaining weight." However, the National Center for Health Statistics (NCHS) performs a periodic National Health and Nutrition Examination Survey (NHANES) and the age–adjusted results of these surveys show a clear upward trend in obesity. (see Chart 2)

Another strong indication that the increase in U.S. obesity rates is not related to the aging of the population is the dramatic increase in obesity in children. (See Chart 3)

What are the implications of this obesity epidemic for life actuaries? Our primary concern is the impact of obesity on mortality. Historically, obese individuals have been considered poor mortality risks. In fact, most standard and simplified issue underwriting will either remove obese individuals from the risk pool or charge additional premium to cover the additional mortality risk. One could consider that rising rates of obesity would only be a problem for guaranteed issue policies or for group life insurance. One could, until one realizes that the likelihood of an individual becoming obese after becoming insured is much greater than it used to be.

So, what exactly, is the impact of obesity on mortality? According to the CDC, obese individuals are at increased risk for the following conditions:

• Hypertension.
• Dyslipidemia (for example, high total cholesterol or high levels of triglycerides).
• Type 2 diabetes.
• Coronary heart disease.
• Stroke.
• Gallbladder disease.
• Osteoarthritis.
• Sleep apnea and respiratory problems.
• Some cancers (endometrial, breast and colon).

Many of these conditions are real killers. In light of all this, one would expect that increased rates of obesity would lead directly to increased rates of mortality. Paradoxically, the opposite has happened; general population mortality rates have steadily improved over the period in which obesity rates have increased.

A recent article in Scientific American titled "Obesity, An Overblown Epidemic?" focused on mortality associated with three obesity related conditions: heart disease, stroke and diabetes. In a nutshell, the article notes that as obesity rates have trended heavily upwards over the last 25 years, heart disease and stroke mortality rates have trended heavily downwards. This improvement was attributed to advances in medical care. Members of the EIAC also suspect that the decline in smoking and drinking over that same time period has contributed to the improvement decline in mortality due to stroke and heart disease. The article also notes that the diabetes mortality rate has trended upward right along with the obesity rate.

A possible solution to this seeming paradox between mortality rates and obesity rates is to remove the focus on obesity and look at something called Metabolic Syndrome. This syndrome is an emerging issue in the area of medical practice and so, is not well defined. Essentially, the idea is that an individual with one or more of a group of life threatening diseases is at greater risk for those conditions normally associated with obesity. This group of conditions typically includes high levels of abdominal fat, high cholesterol and high blood pressure. In other words, obese individuals who do not have Metabolic Syndrome may be better health risks than non–obese individuals who do have Metabolic Syndrome.

Yet one more obesity related consideration with respect to mortality, brought up by members of the EIAC, is impact on mortality of some drastic weight loss procedures, namely bariatric surgery, liposuction, weight loss drugs (e.g., Fen–phen and ephedra), fad diets and even eating disorders. Interestingly, the Journal of Insurance Medicine has published an article addressing the mortality impact of bariatric surgery. Their conclusion is that, over the long term, there is no excess mortality associated with the most common types of bariatric surgery.

Conclusion

Obesity is definitely on the rise, but there is a growing body of evidence that other underlying factors, closely associated with obesity, are the culprits in the substandard mortality typically associated with obesity.

Next Steps on the Obesity Question

As more and more of the population become obese, fewer and fewer individuals will qualify for policies with standard underwriting. It behooves actuaries to thoroughly understand the true underlying drivers of mortality. The Emerging Issues Advisory Committee will continue to monitor this topic.

Specific Findings on the Older Population

All data sources are in agreement that the populations of western countries will continue to age as we move further into the 21st century. Life expectancy at birth in 1900 was 48 years for men and 51 years for women. This changed to 66 and 72 years by 1950. By 2003 life expectancy had increased to 74 years and 80 years for men and women respectively. Projections for the year 2050 reach the ages of 80 and 84.

Many questions arise about what this will mean for our society in general, what it will mean for the older population (defined as 65+), and what it will mean for the oldest of the old (people 85+). Instead of measuring aging by how long people have lived so far, scientists are now factoring in "how long a person has to live." In many ways people today are acting younger than their parents did at the same age. How will this impact people's need for the products supplied by the life insurance industry?

Certainly the numbers of people in the older age groups will continue to increase. According to the 2000 census there are 35 million Americans aged 65+. The oldest of the old constitute 4.2 million or 1.5 percent of the total population. Centenarians are 50,000 strong. The U.S. Census Bureau projects over 86 million older Americans in 2050 and over 20 million oldest of the old. As for the centenarians—European researchers say that the number of centenarians in industrialized countries has doubled each decade since 1950. If we use that multiplier to project forward, we could easily have over 1.5 million Americans over 100 years old in the year 2050.

A big question is what will be the place of the older American in our evolving society? Current data suggests that the older population has a strong influence on our economy now and will likely continue as a powerful agent over the next decades. The 65+ group holds one–third of all corporate stock and one–third of all bonds. They are projected to hold one–half of these assets by 2040.

While they incorporate a wealthy segment of the population, older Americans also include a fairly large proportion of low–income people. Although the official poverty rate of those aged 65 and above fell from 35 percent to 10 percent between 1960 and 1995, Social Security still constitutes 90 percent of the income for one–third of this group. Poverty was once far more prevalent among the elderly than among other age groups, but today's elderly have a poverty rate similar to that of working–age adults and a much lower rate than that of children.

Changing longevity and levels of wealth is impacting how the older generation takes care of itself. In 1990, 5.1 percent resided in nursing homes. Now only 4.5 percent of 65+ people do. For the 85+ cohort, the comparable statistics are 24.5 percent and 18.2 percent. The rise in Continuing Care Retirement Communities and alternative living arrangements like ECHO housing (Elder Cottage Housing Opportunity), shared housing, and board and care arrangements indicate that the reliance on nursing homes is likely to continue to decrease.

The relationship of the older American with his and her descendants is also evolving. Many industrialized nations will soon have more grandparents than grandchildren. Family support for the elderly is eroding because of lower birth rates. And more than 400,000 Americans age 65+ are directly responsible for the care of their grandchildren.

Although we have just touched the surface with respect to collecting data on the older American, it is clear that in the next half century we can expect a healthier, wealthier and more active senior citizen. This group can be expected to continue to have a growing impact on the economy. The life insurance industry needs to be cognizant of the changes taking place in this cohort and needs to be creative in building new products that will fit with our evolving American lifestyle.

Diane McGovern is vice president, AIG. She can be contacted at diane.mcgovern@aig.com.

Sue Reitz is assistant VP and actuary for Illinois Mutual Life Insurance Company. She can be contacted at smreitz@illinoismutual.com.