It is nearly impossible to attend any industry conference that doesn’t have at least one session on the subject of older age mortality (defined as issue ages 70 and above for purposes of this article).
Why all the attention? Without a doubt, it is difficult to estimate older age mortality, but the real story lies in the many factors that complicate understanding mortality rates at older ages.
An often-mentioned reason for not being comfortable with older age mortality is lack of industry experience. That may seem odd to casual observers, as life insurance has been sold in the United States for more than 200 years. However, several recent changes have placed emphasis on fully underwritten policies issued at older ages.
First, there are simply more people at older ages than ever before.
Second, secondary guarantee universal life (SGUL) insurance products have only become popular in the last 10 years. This product provides permanent coverage with low premiums (relative to whole life) and low cash values. It places an emphasis on death protection (and is popular in the older issue-age market for planning purposes). By comparison, a WL policy and most accumulation UL policies focus on higher-premium funding and have large cash values at older ages, resulting in a very small net amount at risk.
Another factor is the recent and rapid expansion of the life settlement market and premium financing as a sales strategy. Most insurers selling competitive SGULs at older issue ages have seen a dramatic increase in percentages of sales at these ages.
These factors help explain the spotlight on older age mortality, but they do not explain the difficulty of estimating older age mortality, other than acknowledging that the older age market has experienced recent rapid expansion.
Changes in underwriting throughout the years have made it difficult to understand the slope of the mortality table or how mortality rates change with increasing age. More recent mortality tables have shown a steeper slope in mortality over the first 20 years. However, some insurers flatten out the slope, believing some of the steepness was created by underwriting advances and increases in underwriting classes.
As underwriting continues to evolve, it will have an ever-larger effect on mortality; the challenge is compounded by the difficulty of gathering sufficient company experience within an underwriting era.