Older Age Mortality And SGUL: It's Hard To Get The Combo Right

Recently, companies have considered several strategies that may further complicate the issue. These include tightening underwriting to have more competitive rates, simplifying underwriting to significantly reduce time to issue, and including cognitive underwriting at the older issue ages.

Companies also differ in how mortality expectations are affected by the wearing-out of preferred mortality. When preferred underwriting began, most insurers did not recognize that preferred status would gradually wear off. Subsequently, ratios of preferred non-tobacco mortality to standard non-tobacco mortality remained the same for all durations. But now, some companies are starting to recognize that some of the discount for being preferred starts to wear off in the later durations or at the older attained ages.

Companies also differ in their use of mortality improvement factors. Industry studies clearly show that mortality has been improving over the years. Studies have shown, however, that although mortality improvement differs by gender, underwriting classes and issue ages, not all companies using an improvement factor recognize the difference by category.

There is also a large difference in opinion among current researchers of mortality improvement. One camp is convinced that the obesity problem in the United States or human genetic limitations will minimize future improvement in mortality, while others point to continued medical and underwriting advancements that may actually cause mortality improvement to increase.

All of this means that insurance companies have well-founded reasons for any differences in opinion with regard to mortality expectations at the older ages.

Time will tell how these differences in opinion will play out. It is clear that the death benefit protection focus of SGUL products will leave them most vulnerable to actual mortality experience as it unfolds. That is a major reason why many insurers are reviewing their pricing for this product. A few have pulled their product at older ages; others have raised rates; and some have tightened underwriting and other factors affecting pricing assumptions to be more competitive at the older ages.

The only certainty, then, is continued uncertainty and a continuing evolution of SGUL premium rates as knowledge of older age mortality continues to evolve.

Keith Dall, FSA, MAAA, CLU, ChFC, is a consulting actuary with Milliman, Inc. in the Indianapolis office. Robert P. Stone, FSA, MAAA, is an actuary and consultant in the same Milliman office. Their respective e-mail addresses are: and .