Mortality Heterogeneity and Systematic Mortality Improvement

35 Pages Posted: 10 Dec 2015

See all articles by Mengyi Xu

Mengyi Xu

UNSW Sydney; University of New South Wales (UNSW) - ARC Centre of Excellence in Population Ageing Research (CEPAR)

Michael Sherris

University of New South Wales - ARC Centre of Excellence in Population Ageing Research and School of Risk and Actuarial Studies; UNSW Australia Business School

Ramona Meyricke

UNSW Australia Business School, School of Risk & Actuarial Studies; CEPAR, University of New South Wales; Swiss Re, Australia

Date Written: December 1, 2015

Abstract

Insurers and pension funds provide life annuities and pensions that are impacted by both aggregate mortality improvement and individual mortality heterogeneity. Aggregate population mortality trends have shown significant improvement over long periods of time. Individual mortality heterogeneity arises from differing risk characteristics across individuals. This paper assesses the extent that systematic mortality improvement varies with individual risk characteristics. To do this, a Lee-Carter model is used to assess if mortality improvement varies for groups of individuals with similar risk characteristics along with an individual mortality model that allows for heterogeneity with time trends to assess systematic risk. Data from the U.S. Health and Retirement Study (HRS) is used since this provides longitudinal, individual level data. Our results are highly relevant to life insurers, pension funds and regulators assessing the future impact of improvement trends in mortality on their premiums and liabilities. Mortality trends differ across individuals reflecting the different risk factors and particularly the prevalence of different diseases such as high blood pressure, cancer and heart problems. Models that are based on aggregate population level trends and differing only by gender and age are not adequate in quantifying mortality trends and risks.

Keywords: mortality improvement, mortality heterogeneity, longitudinal data, stochastic mortality models, marginal models

JEL Classification: C23, G22, G32

Suggested Citation

Xu, Mengyi and Sherris, Michael and Meyricke, Ramona, Mortality Heterogeneity and Systematic Mortality Improvement (December 1, 2015). UNSW Business School Research Paper No. 2015ACTL23. Available at SSRN: https://ssrn.com/abstract=2701650 or http://dx.doi.org/10.2139/ssrn.2701650

Mengyi Xu (Contact Author)

UNSW Sydney ( email )

Level 3
223 Anzac PDE
Sydney, New South Wales NSW 2052
Australia

University of New South Wales (UNSW) - ARC Centre of Excellence in Population Ageing Research (CEPAR) ( email )

Level 3
223 Anzac PDE
Sydney, New South Wales NSW 2052
Australia

Michael Sherris

University of New South Wales - ARC Centre of Excellence in Population Ageing Research and School of Risk and Actuarial Studies ( email )

UNSW Business School
Risk and Actuarial Studies
Sydney, NSW 2052
Australia
+61 2 9385 2333 (Phone)
+61 2 9385 1883 (Fax)

HOME PAGE: http://www.asb.unsw.edu.au/schools/Pages/MichaelSherris.aspx

UNSW Australia Business School ( email )

Sydney, NSW 2052
Australia

Ramona Meyricke

UNSW Australia Business School, School of Risk & Actuarial Studies ( email )

Room 2058 South Wing 2nd Floor
Quadrangle building, Kensington Campus
Sydney, NSW 2052
Australia

CEPAR, University of New South Wales ( email )

Level 6, Central Lobby (enter via East Lobby)
Australian School of Business Building
Sydney, New South Wales NSW 2052
Australia

Swiss Re, Australia ( email )

363 George St
Sydney, NSW 2000
Australia

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