Credibility Analysis for Mortality Experience Studies, Part 1 of 3

The bane of pricing actuaries is thier desire for more and more data in a preferred risk environment that is designed to produce fewer and fewer deaths. Previous mortality experience can be a reliable indicator of the future performance as long as one understands the potential variability in these future results. To that end, David N. Wylde, Research and Development Actuary, Transamerica Reinsurance, discusses the theory that actuaries often use to analyze the credibility of their mortality studies.

Part 2 says that contrary to common misunderstanding, the credibility assigned to a mortality study has nothing to do with quality of underwriting that went into its underlying business. Certainly the overall mortality rate is correlated with the distribution of risk factors including underwriting class, age, gender and even product type. However, it is the number of deaths in the experience study that determines the level of confidence placed in the overall study results.

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