While more long-standing issues including the recruitment of new sales talent and the aging of the existing field force create a background against which today’s industry operates, recent research conducted by LIMRA and McKinsey and Company examines additional issues that have emerged and merit attention. Ultimately, these new developments present opportunities for organizations that, if leveraged appropriately, can set them apart from the competition.

Actuaries view the term “mortality improvement” in a special way. In fact, the term sometimes takes on a life of its own as opposed to understanding exactly how it should be viewed in the setting of the overall mortality assumption.

The Society of Actuaries’ Committee on Life Insurance Research, the Committee on Knowledge Extension Research, and the Product Development Section announce the release of a new report that provides an overview and analysis of the mortality models, theories and trends contained in the papers presented at the past four international Living to 100 symposia. Authored by Jennifer Haid, Michael Chan and Christopher Raham of Ernst & Young, this paper offers an overview of the technical materials related to data sources, validation techniques, and methodologies used by practitioners to develop mortality estimates for present and future periods. A summary of discussions regarding business, policy and social implications of increased longevity is also included.

As the life insurance and annuity industries move toward model-based approaches to reserve and capital valuation (MBV), actuarial models are increasing in complexity and sophistication while the imperative to avoid modeling errors is also increasing. In the new environment, the high reliance that companies and regulatory agencies will place on model results will require a well developed and maintained control system to assure the quality of all models and supporting processes.

How can stochastic modeling be used to better understand the risks in long-term care insurance (LTCI)? How can predictive modeling be used to better understand the latest trends in, and to better manage, claims? How are long-term care (LTC) companies managing their investment risk in the current historically low-interest-rate environment? These are some of the topics that will be discussed in this session. This session will focus on the current hot topics in LTCI and how they may affect the product development.

A presentation by Jason Rickard (Vice President, Hannover Life Re) and Llord Spencer (Vice President, Hannover Life Re) to the Actuaries' Club of the Southwest Spring 2012 Meeting (Dallas, TX, June 29, 2012)

If you could find out when you were going to die, would you want to know? Groundbreaking research done within the last year aims to tell patients exactly that, with a test to determine how long you have left to live poised to hit markets in Britain.

What are the requirements of a modern actuarial environment, and what technologies can help insurers meet current and future modeling needs?

Estimating future trends in mortality plays a significant part in life
(re)insurers’ product development and portfolio valuation. Like other business metrics, there are many ways to study and view mortality trends.

The Society of Actuaries (SOA) has undertaken research to uncover the differences in mortality expectations between life insurance, annuity and pension products at older issue ages, and to increase awareness of potential impacts that these differences may have on managing the risk assumed for various financial services products in the United States.

The actuarial Profession in india has witnessed a sea change in the decade after insurance liberalization. it has gone from being described as a “moribund profession” to being a “dynamic and lucrative” one.

Presentations for the SOA 2011 Annual Meeting & Exhibit, held October 16-19, 2011 in Chicago, IL. have been made available at the SOA website.

This Milliman Insight paper provides an actuarial view of high cost patients and how their incurred medical costs are allocated between the health plan and the member. We present the cost burden high cost patients incur under less generous coverage as well as actuarially equivalent benefit design changes that can protect high cost patients. The authors chose to define high cost or catastrophic patients as those who incur over $100,000 in allowed medical claim costs in a year. This paper was commissioned by Genentech, Inc.

Dynamic lapse behavior is an important factor in variable annuity (VA) pricing and valuation. A company can regularly collect lapse data to form the basis for data mining, which can lead to fundamental insights on policy lapse behavior.

This paper describes the principles of data mining, using a realistic illustrative example, and explores the issues of data credibility, relevance, and formula fitting.

Members of an American Academy of Actuaries (AAA) work group say any new life expectancy projection guidelines should go through a formal Actuarial Standards Board development process.

Topics include:

• What Does the Future Hold for Underwriting?
• USA Health Reform: What USA Actuaries Can Learn from Experiences in Other Countries
• Enterprise Risk Management for a Health Insurer: Like Life, Like Casualty, or Something Completely Different? A Cross-Pollination of Thought
• Avoiding Statistical Pitfalls in Actuarial Work
• Actuarially Sound Rates vs State Budget Reality: What's an Actuary to do?
• The Economics of Obesity
• Mortality Issues for Group Life Insurance
• Disability Experience Studies

...and more.

Chronic obstructive pulmonary disease (COPD) is a disease that requires lifelong adherence to complicated drug therapy regimens. This claims-based analysis of COPD patients, published in Current Medical Research and Opinion, suggests less than optimal compliance with recommended drug therapy treatment for COPD patients based on Chronic Obstructive Lung Disease (GOLD) guidelines. This study further suggests that claims-data analyses provide reasonable aggregate distributions of COPD severity, which can be used by health plans and disease management programs to improve drug therapy management. Link to abstract of article from Informa Health Care.

Presentations for the 2011 Living to 100 Symposium, held January 5–7, in Orlando, FL.

Life Expectancy Providers, a group for companies in the longevity forecasting field, has released the first version of a best practices document.

The document provides definitions, formats and procedural guidelines concerning matters such as privacy, fraud, confidentiality, client reports and reports comparing actual to expected performance.

The document also provides guidelines for estimating incurred but not reported life claims.

In order to create a financially self-supporting healthcare exchange, a state needs to make a number of critical decisions, such as whether to make the exchange mandatory or voluntary and whether to merge the individual and small group markets. Each state will need to address its own priorities based on its own specific situation and healthcare environment. This article discusses the top 10 actuarial concerns surrounding the formation of a healthcare exchange.

Health status and life expectancy reflect a nation’s demographic, socioeconomic and public health conditions. One of the
ultimate goals of economic and social development is to achieve better health outcomes and improve overall population welfare. Equipped with proper tools and measures, a forward-thinking government may identify populations at risk, allocate resources appropriately, and design health and wellness intervention programs to achieve better outcomes.
(See Page 22 of the PDF below for the article)

Report on a joint study sponsored by LIMRA and The Society of Actuaries.

500 research articles on obesity and its relation to mortality and morbidity were reviewed, focusing primarily on papers published from January 1980 to June 2009. There is substantial evidence that obesity is a worldwide epidemic and that it has a significant negative impact on health, mortality and related costs. Overweight and obesity are associated with increased prevalence of diabetes, cardiovascular disease, hypertension and some cancers. There also is evidence that increased weight is associated with kidney disease, stroke, osteoarthritis and sleep apnea. Moreover, empirical studies report that obesity significantly increases the risk of death.

The results were used to estimate costs due to overweight and obesity in the United States and Canada. We estimate that total annual economic cost of overweight and obesity in the United States and Canada caused by medical costs, excess mortality and disability is approximately $300 billion in 2009.

The SOA Credit Insurance Experience Committee has completed their work on the 2009 Credit Life Mortality Study. This study covers a four-calendar year period, years 2003-2006. Death claims incurred during this four-year period and paid by the data collection date were included. The data was primarily collected during the summer and fall of 2008, which would allow a minimum of 18 months following date of death for a claim to be paid. The study was limited to single premium credit life insurance.

An actuarial firm has come out with software that insurers can use to help the National Association of Insurance Commissioners (NAIC) analyze a possible overhaul of reserve-setting methods.

Companies have now had several financial reporting cycles since the establishment of Actuarial Guideline XLIII (AG 43) in December 2009. Milliman's survey of the AG 43 implementation process for U.S. variable annuity companies shows a range of different implementation practices under the new statutory reserving requirement. This paper focuses largely on the product design and risk management implications of AG 43.

Can offering morbidly obese patients bariatric surgery as a covered procedure reduce their future health costs?

The Product Development Section Council and the Committee on Life Insurance Research of the Society of Actuaries engaged RGA Reinsurance Company to undertake a research project on level premium term life insurance products with a particular focus on the magnitude and impact of the "shock lapse" at the end of the level premium period.

The project was completed in two phases:

Phase 1 included a survey of the mortality and lapse assumptions used by actuaries for pricing and modeling level premium term products at the end of 2008. A copy of this report can be found here.

Phase 2 includes a study of the mortality and lapse experience of level premium term policies as they transition out of the level premium period. Participating companies were asked to supply policy level inforce and termination records so that experience results could be analyzed at a granular level including, but not limited to, age, gender, risk class, premium jump, and policy size.

This report, authored by Tim Rozar, Scott Rushing and Susan Willeat, presents the results of the Phase 2 study.

Companies have now had several financial reporting cycles since the establishment of Actuarial Guideline XLIII (AG 43) in December 2009. Milliman's survey of the AG 43 implementation process for U.S. variable annuity companies shows a range of different implementation practices under the new statutory reserving requirement. This paper focuses largely on the product design and risk management implications of AG 43.

Is your company considering implementing an automated system for underwriting life insurance? Don't miss the recently completed study sponsored by the Marketing and Distribution, Product Development and Reinsurance Sections, along with the Committee on Life Insurance Research, examining the role of automated underwriting systems in a number of companies.

The report, authored by Deloitte Consulting, addresses: How and why companies are using automation to make underwriting decisions; the impact of utilizing these systems on operational efficiency, sales and retention; the quality of risk selection produced by automated systems; cultural acceptance of increased automation in systems; and challenges insurers overcome to implement and maintain these systems.

If you do not have time to read the report, you can sign-up for the Nov. 3 webcast,in which research results will be presented.

Presentations from various sessions at ReFocus 2010, held on February 28-March 3, 2010, in Lake Las Vegas, NV.

Topics include:

• Managing Restoration of Benefits Provisions in LTCI Policies
• What are the Primary Risks that Face LTC Insurers When Issuing a Policy?
• Handling LTC Misestimation Risk

  ...and more.

Swiss Re on longevity funding issues and potential solutions.

Summary of the general approach to developing older age (issue ages 70+) mortality assumptions as promoted by Generali USA.

While traditional risk management coverages on group and individual life portfolios can be structured to make them affordable, in many instances to do so will mean the coverage will have conditions and limitations
which will make it an ineffective risk management tool. Because of this, today more and more companies are turning to AD Carve-Out reinsurance as a viable risk management solution.

When talking about valuation in the United States, people have a feeling that it is all about government prescription.

Several shifts are underway that will result in significant changes in the way that insurance companies use actuarial resources. An increase in qualified actuarial resources, and a need to move company actuaries into more strategic activities will offer opportunities that have previously been unavailable. The exact timing and pace of this change is uncertain, but the economics are so compelling that the author thinks it is not a question of if, but when, a new model will prevail.

The European Commission's draft technical specification for the fifth Solvency II Quantitative Impact Study (QIS5) indicates how the standard formula is likely to be set for QIS5. In order to determine how the new rules will affect solvency positions under the standard formula for Europe's life insurance market, Milliman analyzed the potential impact of QIS5 in several European markets: France, Ireland, Italy, the United Kingdom, Poland, Romania, and Slovakia.

Each year Full Disclosure surveys leading companies active in the whole life insurance marketplace. All data is current as of February 1, 2010, a period by which most insurers have declared their current dividend scales for the year.

This report features 29 policies, two more than last year. All of them are participating (dividend-paying), with the exception of a few guaranteed policies (see footnotes for details). Sections of this excerpt from our study cover current and guaranteed illustrated values, the industry’s only actual historical performance analysis, policy retirement income illustrations, and a narrative detailing what each policy’s fundamental design objectives are.

This article is intended to give a high level overview of the recent release of the update to the illustration practice notes. Guidance for illustration testing should be sought from the Illustration Model Regulations and Actuarial Standard of Practice (ASOP) 24, as well as review of the practice notes. (Begins on p. 22 of the February 2010 issue of Product Matters, the newsletter of the SOA's Product Development Section.

The SOA Health Section is pleased to make available a research report that describes the current state of Enterprise Risk Management practices for health organizations. The report was prepared by Max Rudolph of Rudolph Financial Consulting, LLC.

As an overhaul of financial services regulation is debated in Washington, the American Academy of Actuaries is throwing its support behind creation of a federal systemic risk regulator for the entire financial services sector.

Presentation from the SOA 2010 Life & Annuity Symposium, May 17-18, 2010.

We’ve all seen it—basic group life rates that look more like AD&D rates; rate guarantees periods that resemble a mortgage contract; liberal guarantee issue maximums; and plan maximums that are so high that no person in the group even comes close to qualifying for, and on and on.

Article in the Society of Actuaries Health Watch Newsletter - February 2010, starting on p. 28.

http://www.actuaries.org/calendar/calendar.cfm

The behavior-based approaches that aim to model the features of business portfolios more realistically also tend to increase modeling complexity and calculation time. A solution may lie in agent-based models, which can model complex behaviors by using very simple rules.

With the enactment of health care reform legislation yesterday, the American Academy of Actuaries said the successful implementation of this and forthcoming reconciliation legislation will require coordinated efforts to ensure that the regulatory development process accomplishes the intended goals of reform. The actuaries plan to work with regulatory authorities as they begin implementing reform legislation to meet its goals of increasing the availability and affordability of coverage, enhancing the quality of care, and addressing health spending growth. (American Academy of Actuaries)

A practical model to assess mortality deviation and thus ensure adequate risk capital in line with solvency requirements.

This paper has been prepared by The Actuarial Profession to explain how with-profits policies work. It considers traditional non-pensions endowment policies in some detail and examines the main differences between these and other types of policy.

What impact will volatility in future mortality assumptions have on the valuation of life contingent liabilities?

The Individual Life Experience Committee has completed their latest report on intercompany mortality experience by amount of insurance under standard individually underwritten issues. This study includes policy years 2005-07. Read the report and associated documents.

The LLMA has been established as a not-for-profit venture in order to promote a liquid traded market in longevity and mortality-related risk.

The LLMA’s founder members are: AXA, Deutsche Bank,
J.P. Morgan, Legal & General, Pension Corporation,
Prudential, RBS and Swiss Re.

The Society of Actuaries' Group Disability Insurance Experience Committee has completed their study of termination experience for the period 1997-2006.

Did you ever, in your wildest dreams, expect to spend your career in the insurance industry? That familiar question, posed to many attendees at various insurance conferences, often draws chuckles from respondents, as they scan the room looking for the few individuals who have sheepishly raised their hands.

(Updated) Milliman’s 2011 Interstate Compact Survey Report is a follow-up to its survey and report issued in October 2009. Both surveys examined company decisions to file—or not to file— through the Interstate Insurance Product Regulation Compact, which allows for approval of new product submissions in 60 days or less. The 2011 report details company filing decisions to date, as well as the experiences of companies that have filed submissions.

Insurers know well that using a consistent approach to managing and measuring diverse risk portfolios is an ERM essential that can help them make informed decisions about pricing, product strategy, capital budgeting and linking pay to performance. And yet most insurers use any number of measurements to gauge financial results across varied businesses.As part of Towers Perrin's ongoing series on embedding ERM in insurance, this new article sheds light on a consistent analytical framework that can be applied to an insurer's internal measurement and management system to align value assessment, risk and capital management.

A discussion among regulators of how a new guideline for reserving for variable annuities should be crafted included talk about how reliable stochastic scenarios are in assessing reserving needs of companies.

Article in the October/November issues of The Actuary magazine.

The Society of Actuaries International Experience Study (IES) initiative is in its seventh year. During that period, considerable progress has been made expanding experience studies into less developed parts of the world. This article (from the SOA International Section's August newsletter) presents the most recent preliminary results from Argentina, the Caribbean, the Philippines, Poland and Vietnam.

Insurance policy or reinsurance treaty discussion documents for various catastrophic medical excess lines of business made available by the SOA Reinsurance Section Council.

This report presents the results of a survey conducted by the Society of Actuaries Mortality and Underwriting Survey Committee in July of 2008.

From the CDC's MMWR.

Despite the financial crisis, the ILS market has more than held its own and appears poised for further growth, says Towers-Perrin.

This monograph contains papers submitted and presented at the 2008 Enterprise Risk Management Symposium held April 14-16, 2008 in Chicago. It also includes additional research papers that were submitted and accepted for the 2008 ERM Symposium Call for Papers, but not presented. This was the third year in which a call for papers was issued in conjunction with the Symposium. The call for papers continues to showcase the latest in ERM thinking as well as present advances made in this arena.

The SOA's Preneed Experience Team is pleased to make available the following report by the Deloitte–UConn Actuarial Center examining preneed life insurance mortality experience. The report has been revised since its initial release to correct an error discovered in the Preneed Insurance Male Mortality Table per 1000. An Excel Spreadsheet of the Mortality Table shown in the report is also provided.

Despite the fact Solvency II in its current form will apply only to the European Union, North American insurers are encouraged to pay attention to the factors underlying its development. If, as anticipated, Solvency II leads to markedly lower capital charges for EU-based companies, then the Europeans will have a significant competitive advantage over North American companies.

The insurance industry is in the business of controlling threats to life. It has invented new mortality gadgets, and now it needs to control them properly despite today’s tough times.

PricewaterhouseCoopers shares research conducted by the Centre for the Study of Financial Innovation (CSFI). It questions insurers on three areas: current risks, future trends, and their preparedness to respond to the risk environment. With 403 insurers and industry observers responding from 39 countries at a difficult time for financial services, they see significant change in how risks are perceived and prioritised.

Presentation at ReFocus 2009.

After rapid growth in recent years, the insurance industry in China is pausing to catch its breath. Mei Dong, Wendy Lai, and Xiaokai Shi describe the changes in the industry, at regulators, and in the Chinese workforce, and suggest how foreign insurers can meet the challenges and take advantage of the opportunities in this time of transition.

The object of these annual Milliman studies is to estimate overhead expense for the ordinary life line of business. Using information available from statutory annual statements (insurance issued and in force) as well as unit expense factors developed for these studies, variable expense for policy issue and maintenance was imputed for each company. Overhead expense was defined as the excess of general insurance expense over the imputed variable expense. Commission and agency-related expenses were excluded from the studies, while marketing and developmental expenses incurred in the home office were included.

Changes to estimates could be more than 20% in some cases: As if facing a worldwide economic crisis weren’t enough, life settlement investors have found out in recent months that insureds are going to live longer than was previously thought.

Milliman experts reveal the status of newly developed valuation bases applicable to IFRS 4 phase II, MCEV principles, and Solvency II, and help insurers maintain consistency among these various methods of risk reporting.

A group in the United States working for state insurance regulators has green-lighted several proposals submitted by the life-insurance industry in recent weeks aimed at lowering insurers' capital and reserve requirements, the Wall Street Journal reports.

Review of Robert N. Butler, M.D.'s book by Heather Jerbi in Contingencies.

Explores the difficulties in analysing and handling Child CI claims and look at how providers generally manage their risks via benefit design.

This paper presents a model for analyzing the impact of underwriting cycles on an insurer’s surplus. The model allows the insurer to vary its security loading in response to the cycles, with a strategy parameter that indicates the extent to which the insurer follows the loading which prevails in the market. The insurer’s claim rate is also allowed to vary to reflect exposure changes that result from the insurer’s strategy.

Presentation from SOA Annual Meeting in Orlando, October 2008.

Presentation from SOA Annual Meeting in Orlando, October 2008.

http://www.soa.org/files/pdf/2008-orlando-annual-40.pdf

Presentation at the SOA Annual Meeting & Exhibit, October 2008.

Presentation from SOA Annual Meeting in Orlando, October 2008.

A follow-up to the article originally published in the May 2006 edition of Product Matters!, the newsletter of the SOA Product Development Section.

• Life Reinsurance Data From The Munich American Survey
• Longevity: Mortality Improvement
• Solvency II—What It Means For Reinsurers
• Limited Medical Benefit Plans—What Insurance Companies, Employers And Reinsurers Need To Know
• Update In The Employer Stop Loss Medical Insurance Market
• Reinsurance Execs Predict Capital Channels Will Blur
• STOLI Poses Danger To Industry, Reinsurers Warned

...and more.

A discussion of the risks and opportunities that face the health discipline.

An actuary uses his skills and develops some new tones to put a face on racial disparities in his hometown.

Here's the latest information on principle–based approach from those in the know.

Paper by Rick Schurr, ASA, MAAA at the SOA Actuarial Practice Forum.

In today's marketplace, product pricing and responding to competitive forces are widely recognized as the most important challenges facing personal lines insurers. Price optimization approaches, which balance profit and sales volume while applying customer behavior and competitive analysis, are now being used by the financial services industry for long-term value creation — and becoming increasingly relevant to personal lines insurance.

http://www.towersperrin.com/tp/showdctmdoc.jsp?url=master_brand_2/global...

Efforts to estimate year-end insurer liabilities reveal a lot about exposure to the current credit crisis and the steps needed to fully address emerging exposures.

http://www.towersperrin.com/tp/showdctmdoc.jsp?country=global&url=Master...

Some researchers now believe that certain diseases can be postponed simply by slowing down the aging process, says this piece in Contingencies.

The VBT Team has completed their work on the 2008 VBT. The report below details this work and the values can be found in the accompanying appendices.

http://www.soa.org/research/individual-life/2008-vbt-report-tables.aspx

Handouts from the Living to 100: Survival to Advanced Ages International Symposium for sessions such as:

• Distinguishing Health Status For Advanced Ages - Faye S. Albert, John M. Bragg, James C. Brooks, Dr. Bob Gleeson, Steven K. Holland, Ashely Thomas
• Demographic Implications of Aging Populations Internationally - Robert L. Brown, Roberto Ham–Chande, Steven G. Prus, N. V. Subramanyan
• Quality of Life of Elderly - Beverly J. Orth, Anna M. Rappaport,Eric Stallard
  

There has been a period of major change in the reinsurance landscape including the demise of Annuity and Life Re and the elimination of a number of companies with weaker franchises or lack of commitment to the market. As recently as 2000, the life reinsurance market included Lincoln National, American United Life, ING Re, Allianz and Employers Re—all of which either have exited the life reinsurance market, says Stephen Irwin writing in the SOA's Reinsurance News.

Making the case for what is currently referred to as longevity insurance. In its purest form, such insurance would be purchased with a single premium payment at the time of retirement.

Risk pools contribute to the stability of modern society by providing ways for individuals to deal with many types of financial disaster. The numbers and statistical distributions that actuaries work with represent real people. Participants in the public and private risk pools that we help to design and manage are often unaware of our presence behind the scenes. (In fact, their eyes glaze over when we try to tell them what we do.) But whether they know it or not, they depend on us.

Life carriers struggle with the notion of hedging pandemic risk. If an outbreak does occur, the process for estimating losses and determining reserves is unclear. Capital approaches do not consider probabilistic tail scenario risks. Quite simply, managing pandemic risk is an effort mired in doubt, though the potential for a devastating, multibillion dollar, worldwide outbreak is real. Traditional risk transfer tools have only limited utility in covering pandemic exposure. However, the depth and flexibility of capital markets may provide a robust alternative to traditional reinsurance.

Enterprise risk management has reached a critical juncture as the demands of regulators, rating agencies and a more volatile market environment heighten the pressure on insurers to put risk considerations at the heart of their strategy and operations. Ever focused on risk and supporting insurers, PricewaterhouseCoopers has once more committed to a detailed exploration of risk in relation to insurers."