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Life Health > Life Insurance

Ask the expert: Life expectancy reports

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The question was: What does a life expectancy report entail and why are two such reports often needed for a single life settlement case?

The answer is: Life expectancy calculator companies prepare reports that estimate life expectancies. (In the trade, a life expectancy analysis is often referred to as an LE.)…

The LE report content is not standardized from company to company. Most reports contain demographic information which identifies:

  • the person evaluated;
  • the medical problems found in the review of the insured’s medical records, occasionally with ICD-10 (International Classification of Diseases, 10th Edition);
  • the amount of rating for each problem; and
  • the rating for the sum of the problems.

Many LE reports include the percent mortality which the medical problems represent, the date of the report, and the identification of the person responsible for the report.

Ultimately, a mortality load will be determined for the use in an actuarial valuation model to determine the percentage compared to standard mortality so that a probabilistic approach is used for determining life expectancy as well as pricing of the economic impact for doing a life settlement or other mortality based transaction.

Without knowing the amount of rating for the health problems identified, it’s difficult to compare the results of LEs on the same person which are calculated by a different rating company.

Most investors who are considering buying an existing policy require at least two separate LEs. If one LE company rates 75 debits for a cardiac condition and another company doesn’t rate anything for any cardiac condition, one of the companies has probably made an error either by overlooking a problem or rating too little for the problem. Depending on the age of the insured, the difference may result in months or years difference in survival–and premium payments….

Source: This is an excerpt from page 210 of Life Settlement Planning, a 2008 book in the Tools & Techniques series published by The National Underwriter Company, Cincinnati, Ohio, which also publishes Settlement Watch. The book is co-authored by: Stephan R. Leimberg, Caleb J. Callahan, Bryan T. Casey, James Magner, Barry Reed, Lawrence J. Rybka, and Paul A. Siegert. read more about this book


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