Older consumers are buying more life insurance than they used to, and the life insurance industry needs to know more about the products those older consumers are buying and how the products should be priced.
Consultants at Tillinghast, Stamford, Conn., a unit of Towers Perrin Inc., New York, have presented those conclusions in the Tillinghast Older Age Mortality Study 2, an analysis of mortality experience data collected from 2003 to 2005 for older-age insureds at 29 life insurers.
The new study, TOAMS 2, follows up on an older-age mortality experience study that Tillinghast released in 2005.
Between 2000 and 2005, participating insurers’ exposure to mortality risk for insureds ages 75 and older increased significantly, and policies with issue ages over 70 account for 30% of UL sales premium volume at some insurers, according to Mike Taht, a Tillinghast principal.
The Tillinghast findings in TOAMS 2 agree with data from MIB Group Inc., Braintree, Mass., which suggest that life sales to consumers ages 60 and older increased 4.3% between 2006 and 2007, while sales to consumers ages 45 to 59 declined, Taht says.
Other Tillinghast study findings:
- Actual experience was better than predicted by the 2001 Valuation Basic Table. Older-age mortality experience for participating insurers fell to 74% of the 2001 VBT in TOAMS 2, from 78% of the 2001 VBT in the original TOAMS.
- Male mortality experience for the insureds in the new study was 51% of the rate predicted by the Society of Actuary 1975-1980 mortality tables. Female mortality experience was 71% of the SOA 75-80.
- Preferred nonsmoker mortality was 58% of the 2001 VBT by face amount; and 60% of the VBT by policy count.
- For level-term, 10-year business, mortality experience in policy years 11 through 15 was 215% of mortality in policy years 6 through 10. Mortality started to deteriorate in policy year 10, and that might be evidence of antiselection, Tillinghast consultants write.
Tillinghast says insurers can use the TOAMS 2 results to analyze a wide range of life insurance products, and to price products to reflect the growth of the life settlement industry.
To respond to investor-initiated life insurance and stranger-owned life insurance arrangements, insurers “must understand how policies would behave under that kind of program” and how policyholder behavior might differ if policies are kept in force, Taht says.
The shift “heightens the need for confidence and a strong point of view about what expected mortality is at older ages,” Taht says.
But Elinor Friedman, also a Tillinghast principal, says insurers should look at all data available when evaluating products, not ease up simply because actual mortality experience has been better than the 2001 VBT.