Advanced Search

Last Name First Name Company Name City Advanced Search

Actuary of the Future Education & Research Entrepreneurial Actuaries Financial Reporting Futurism Health International Investment Joint Risk Management Long-Term Care Insurance Management & Personal Marketing & Distribution Pension Product Development Reinsurance Smaller Insurance Company Taxation Technology

Research

Experience Studies in Individual Life

Canadian Mortality Improvement (RFP)

Subject: Development of Mortality Improvement Scale (or Scales) to Incorporate Mortality Improvement into Product Analysis and Reserving for All Appropriate Products of Canadian Life Insurance Companies

1. Background

In the United States, improving mortality has been a consideration for payout annuities ever since the publication of Projection Scale A as part of the Annuity Table for 1949. For life insurance, mortality improvement was taken into account between the experience period and the table date for both the 1980 and 2001 CSO Mortality Tables. In Canada, the formal projection scales used for annuities were scales developed in the United States. For life insurance, no projection scales were used in deriving the official mortality table but actuaries were allowed to develop their own scale to project their mortality experience up to the valuation date.

However, in either country, there has been no formal method of incorporating future mortality improvement into life insurance processes. This issue has been raised informally in the United States in the Product Development Section Council of the Society of Actuaries (SOA) and more formally in Canada within the Committee on Life Insurance Financial Reporting (CLIFR) of the Canadian Institute of Actuaries (CIA).

2. Research Objective

The ultimate result of this work will be the incorporation of mortality improvement into product analysis and reserving for all appropriate products of Canadian life insurance companies. The objective of this project is the creation of one or more mortality improvement scales for these products. The researcher will also assist CLIFR in determining margins for adverse deviations appropriate for financial reporting in Canada. Such margins would take account of the uncertainty of the assumptions used in determining the recommended mortality improvement scales.

The basis for this work will be existing actuarial, public pension and population data from Canada and the United States. It will include determination of whether there is a general pattern of mortality improvement that pertains to all appropriate life insurance company products, or whether separate patterns need to be so used for different products. It will also include recommendations on how mortality improvement should be monitored in the Canadian environment in the future.

3. Additional Details

SOA staff, with the assistance of CLIFR and the Committee on Expected Experience of the CIA, will ensure that Canadian data is available for this project. Similarly, SOA staff, with the assistance of experience committees of the SOA and other pertinent committees, will ensure that American data is available for this project. This will include actuarial data on all products, public pension and population data in both cases. Additionally, other pertinent data that is readily available, e.g., from the British Institute of Actuaries, will be made available for this project.

Quantification of patterns of mortality improvement will be based primarily on historical data. However, the research must also consider how good a predictor of future patterns these historical patterns are. This will require an appreciation and further investigation of the factors that are affecting trends in mortality. It will also require the incorporation of any emerging trends that will impact patterns of mortality improvement.

It is expected that the numeric values reflecting mortality improvement will vary by attained age and gender. It is possible that they will also vary by smoking status, (with appropriate distinctions for products that make a distinction by smoking status and those that do not). The ultimate implementation of this work will make distinctions between life insurance and annuities and between individual and group coverages. It will also reflect the different levels of underwriting that might be in effect for different product lines and the selection effects of this underwriting. The extent to which these distinctions need to be incorporated in a base scale of mortality improvement is one of the facets of this project. It is not expected that a distinction will be needed at a product level. However, the project, to the extent practical, should also address this issue.

The SOA has initially allocated $15,000.00 for this project. Cost will be one of the factors considered in selecting the successful proposal, but not the only one. BCOR and CLIFR are committed to a successful completion of this project on a reasonable basis.

4. Additional Background

At a later date, but somewhat in parallel with this project, a project to examine mortality improvement in the United States will be undertaken. This project may have two distinct phases, a more exhaustive data collection effort and an analysis effort (similar to basic analysis effort required by this RFP). Lessons and information revealed in the project of this RFP may be valuable for this second project. The successful bidder with respect to this RFP may also bid on the second project.

5. Schedule

Proposals must be received no later than May 24, 2004. The proposal to be funded will be selected no later than June 11, 2004. The Board Committee on Research (BCOR) of the Society of Actuaries in conjunction with CLIFR will select the proposal to be funded after their review and evaluation.

6. Proposal

To facilitate the evaluation of proposals, the following information should be submitted:

1. Resumes of the researcher(s), including any support personnel expected to participate, indicating how their background, education, and experience bear on their qualifications to undertake the research. If more than one researcher is involved, a single individual should be designated as the lead researcher and primary contact. The person submitting the proposal must be authorized to speak on behalf of all the researchers as well as for the firm or institution on whose behalf the proposal is submitted.
2. An outline of the approach to be used, emphasizing issues that require special consideration. Details should be given regarding the techniques used, collateral material consulted, and possible limitations of the analysis. Also, the relevance of the findings to broader issues should be described.
3. Cost estimates for the components identified in Sections II and III, including computer time, salaries, manuscript preparation etc. Such estimates can be in the form of hourly rates, but in such cases, time estimates should also be included. Any guarantees as to total cost should be given and will be considered in the evaluation of the proposal. While cost will be a factor in the evaluation of the proposal, it will not necessarily be the decisive factor.
4. A schedule for completion of the research, identifying key dates or time frames.
5. Other related factors that give evidence of a proposer's capabilities to perform in a superior fashion should be detailed.

7. Selection Process

BCOR in conjunction with CLIFR is responsible for the proposal review, evaluation and the selection of the proposal to be funded. Jack Luff, Experience Studies Actuary at the SOA office, provides staff actuarial support. Input from other knowledgeable individuals also may be sought, but BCOR and CLIFR will make the final decision. The proposal evaluation will be based on the proposal as described in Sections II and III. Costs will be considered in relation to the proposed effort as well as in comparison to other proposals.

8. Notifications

If you intend to submit a proposal, please send notification by May 24, 2004 to:

Jack Luff, SOA Staff

Society of Actuaries

475 N. Martingale Road, Suite 600

Schaumburg, IL 60173–2226

ph: 847.706.3571

f: 847.706.3599

 

Only those who have made such notification will receive the distribution related to questions described in Section IX below.

9. Submission of Proposal

Any questions regarding this RFP should be directed to the following, who will involve additional personnel as needed:

Jack Luff, SOA Staff

Society of Actuaries

475 N. Martingale Road, Suite 600

Schaumburg, IL 60173–2226

ph: 847.706.3571

f: 847.706.3599

 

The deadline for questions is May 3, 2004. Responses to all questions will be communicated to all who have indicated their intention to respond to the RFP by May 10, 2004.

 

10. Submission of Proposal

Preferably, the proposal should be submitted electronically to Jack Luff at jluff@soa.org. Alternatively, it can be mailed to:

Jack Luff, SOA Staff

Society of Actuaries

475 N. Martingale Road, Suite 600

Schaumburg, IL 60173–2226

ph: 847.706.3571

f: 847.706.3599

 

Note: Proposals must be received no later than May 24, 2004.

 

11. Project Monitoring

BCOR and the SoA Experience Studies Actuary will be responsible for oversight of the progress of the research. A letter of agreement between the researcher and BCOR will specify the key dates, progress expectations and a payment schedule. Interim results from this work will be required. These will be reviewed by BCOR and CLIFR to ensure the successful completion of this work. If it is necessary to redirect the work, a supplementary agreement will be established.

12. Conditions

Although not expected, the Society of Actuaries reserves the right to not award a contract for this research. Reasons for not awarding a contract could include, but are not limited to, a lack of acceptable proposals or a finding that insufficient funds are available to proceed with a project of adequate size as to produce meaningful results. The Society of Actuaries also reserves the right to redirect the project as is deemed advisable.

The Society of Actuaries intends to copyright and publish the results of this research. The research will be considered work–for–hire and all rights thereto belong to the Society of Actuaries. However, appropriate credit will be given to the researcher(s).

If you intend to submit a proposal, please send notification by April 23, 2004 to:

 

Jack Luff, SOA Staff

Society of Actuaries

475 N. Martingale Road, Suite 600

Schaumburg, IL 60173–2226

ph: 847.706.3571

f: 847.706.3599