Project Summary

This project summary was prepared on 18 November 2018 by Bruce Wayne.

Background

We have been investigating improvements in health and general living conditions in Cohortico. We
have modelled the effect of these improvements on the life expectancy of Cohortico pensioners
reaching age 65 over the next ten years. We also modelled the impact of influenza pandemics on life
expectancy.

Data

A student of the Community of Cohortico Actuaries provided us with a crude life table that they had
constructed. The life table was based on the experience of male pensioners. The data on which the
life table is based was provided by the Cohortican Insurance Bureau. The Bureau covers
approximately 80% of the insurance market in Cohortico.

The crude life table consisted of a column of ages from 65 to 120 and a column of the number of
pensioners alive at that age. A visual inspection led to the discovery of some anomalies in the crude
life table. These anomalies included missing values and instances where the number of pensioners
alive at an age was higher than at the previous age. These anomalies were corrected by taking the
average of the number of pensioners alive at the ages immediately before and after the anomaly.
This assumes that the deaths that occurred between the two ages either side of the anomaly
occurred roughly halfway through the period between them.

The corrected life table is shown below.

Life table
10000
9000
8000
7000
6000
lx 5000
4000
3000
2000
1000
0
65 67 69 71 73 75 77 79 81 83 85 87 89 91 93 95 97 99 101103105107109111113115117119
Age

The line graph appears to be a reasonable shape and smooth enough to not require any graduation.
Approach

The team determined improvement factors to apply to the base mortality rates derived from the
crude mortality rates. These improvement factors were based on a base adjustment, set at 1% and
an age-related adjustment as well as a calendar year adjustment. The age-related and calendar year
adjustments used are shown in the tables below.

Age-related adjustments Calendar years adjustments

Age (x) Adjustment Age (x) Adjustment
65–67 +1.75% 2008–2009 –0.00%
68–74 +1.50% 2010–2019 –0.20%
75–79 +1.25% 2020–2029 –0.40%
80–89 +1.00% 2030–2039 –0.60%
90–99 +0.75% 2040–2049 –0.80%
100+ +0.50% 2050+ –1.00%

The age-related adjustments table shows the adjustment that applies to each age band. The
calendar year adjustments table shows the improvement over the year. These were combined to
give improvement factors, zx, n where x is age and n is calendar year.

The projected mortality rates were determined by applying (1 - zx, n) to the previous year’s mortality
rates. Rates were projected for the years 2009 to 2018 inclusive.

From the projected mortality rates the curtate expectation of life in each calendar year was
calculated.

The projected rates were then adjusted to allow for the impact of influenza pandemics. Research
into influenzae pandemics determined that they occur on average every ten years and do not affect
mortality in the years after they occur. The impact of the pandemics is predicted to be a tenfold
increase in mortality rates in the year of occurrence. The next pandemic is predicted to occur in
2010.
Results/Conclusions

The graph below shows the expected impact of mortality improvements on the curtate expectation
of life of pensioners in Cohortico.

Curtate expectation of llife

18.50

18.00

17.50

ex 17.00

16.50

16.00

15.50
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
Year

The expected future lifetime of pensioners is expected to increase steadily over the years 2008 to
2018. This will likely mean increased costs for pension funds as pensioners live for longer. This may
lead to an increase in the size of pension fund contributions to make up for this expected cost.

The impact that an influenzas pandemic will have is shown in the graph below.

Curtate expectation of llife

20.00
18.00
16.00
14.00
12.00
ex 10.00
8.00
6.00
4.00
2.00
0.00
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
Year

The influenza pandemic has a very big impact on expected future lifetime. In 2010 it drops to 25% of
the 2009 value.
Next steps

Data

The results above may not apply to females as the data is from the experience of male pensioners.
May be necessary to try and get data for females. May also need to consider whether gender can be
used as a rating factor for pension contributions as well as the split between males and females who
take up pensions.

Parameters

The impact of the influenza pandemic at a factor of ten may need to be investigated as it has a
significant effect on the expected future lifetime. Whether this affects future lifetime in later years
needs to be investigated as it may be reasonable to assume that such an impactful pandemic will
affect mortality in later years.

Model

More sophisticated models should be considered. The influenza pandemic can be modelled
stochastically. This may be more realistic than the current modelling.