Experience Studies
Experience Studies in Individual Life
Frequently Asked Questions – Preferred Mortality Study
What is the preferred valuation mortality study?
The preferred valuation mortality study is an extension of the SOA's individual life experience
study to obtain data on, and report experience on, policies issued under the preferred underwriting paradigm.
Why is the study being implemented?
This study will support the development of new standards for the valuation of products
reflecting various levels of preferred mortality. The SOA and the AAA are responding to a request by the NAIC
through the LHATF to develop such new standards. The LHATF in turn was responding to the insurance industry's
concern about the current reserve standards for low mortality preferred products. The intention is to better reflect
preferred mortality in life insurance liabilities while still assuring adequate protection for policyholders and
investors.
What is different about this mortality study?
Currently, valuation mortality table underwriting classifications are separated into
smoking/tobacco and nonsmoking/nontobacco classifications. Insurers are now offering additional levels of preferred
classifications, with definitions that vary by insurer. This study will be the first industry–wide effort to
review insurers’ underwriting classifications and reflect this additional information in the resulting
mortality tables.
Who should participate in the study?
It would be ideal if all companies issuing individual life insurance on a preferred basis
participated.
Is this effort supported by others?
Yes. This is truly a profession–wide and industry–wide initiative. Participation and
support is coming from the NAIC, the AAA (American Academy of Actuaries) and the ACLI (American Council of Life
Insurers).
How does this study have the potential to benefit actuaries?
This is a unique opportunity for actuaries to demonstrate their "marketplace relevance"
and to broaden their participation in the reflection of mortality risks in the bottom line of insurance
organizations.
When will the study begin and what is the timeframe?
The initial call for data was placed in mid–June and companies were requested to submit
data by September 30. However, quality data submissions will be accepted through the end of the year. Submitted data
will be processed and analyzed over the next year. A report will be released in October 2006.
What happens after the experience study is complete?
The completed experience table will be smoothed to form the Valuation Basic Table. Once the
Valuation Basic Table is complete, the American Academy of Actuaries will add loadings to produce the Valuation
Table.
Concurrent with the mortality table, there is work to be done on the regulatory side. More
information about this effort will be available soon.
How do I submit data?
Details on submitting data are on the Society's web site under Life Insurance/ Experience
Studies. Please note that a Minimal Data Contribution form has been provided that specifically addresses the needs
of the preferred valuation mortality study. Data may be submitted in any reasonable form if it makes it easier for a
company to contribute.
How do I comment on the preferred valuation mortality study?
We are very interested in receiving input from members and other parties about this special life
experience study. You can send your questions and comments to Jack Luff,
Experience Studies Actuary, at 847.706.3571.
How do I find out more?
Find out more about the work of
the Preferred Mortality Project Oversight Group.