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Flexible Use of Mortality Tables in China

Flexible Use of Mortality Tables in China. Peter Luk CEO, Plan-B Consulting Limited peterluk@peterluk.com. Theme. China’s life insurance market is huge at the moment, anticipating fast growth for the next decade or two. Reliable mortality tables are essential. 8 Problems to face.

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Flexible Use of Mortality Tables in China

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  1. Flexible Use of Mortality Tables in China Peter Luk CEO, Plan-B Consulting Limited peterluk@peterluk.com

  2. Theme • China’s life insurance market is huge at the moment, anticipating fast growth for the next decade or two. • Reliable mortality tables are essential.

  3. 8 Problems to face

  4. Problem # 1 • Current tables are out of date

  5. Problem # 2 • Need different tables for different purposes a) Population tables b) Group insurance tables c) Individual insurance tables d) Annuitant tables

  6. Problem #3 • Current tables data from group insurance

  7. Problem #4 • Using wrong tables could have disastrous consequences. • Equitable Life in UK

  8. Problem #5 • Vast mortality differences between regions

  9. Problem #6 • Underwriting practice can make a difference.

  10. Problem #7 • “One table for all” won’t work.

  11. Problem #8 • Many of these problems will stay with us forever no matter what we do. • This is a big big problem.

  12. Solution #1 • Do not guarantee annuity rates. • To do so could lead a company to bankruptcy if scientists find a cure for cancer.

  13. Solution #2 - use of credibility theory to adjust a currently-in-use mortality table • Fast and effective • Simple – anybody can use • Applicable to any situation, any time • Not perfect, but a vast improvement over the unadjusted table

  14. Example • Company uses CL1 table (q). • Expected total deaths = 600 (E) • Actual total deaths = 360 (A) • m = A/E = 0.6 • Z = 0.03 sqrt(E) or 1,whichever is smaller = 0.735 • q’ = [1 – 0.735 (1 – 0.6)] q = 0.706 q

  15. Notes • For internal use, not for regulatory filing • For conservatism – add 5% for insurance, minus 5% for annuity • Disregard “accuracy” for individual ages – this would be an impossible task • Introduction from - “Foundations of Casualty Actuarial Science, 4th edition, 2001 by Casualty Actuarial Society”

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