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Canadian Institute of Actuaries. L’Institut canadien des actuaires. 2007 General Meeting Assemblée générale 2007 Montréal, Québec. T100 and UL LCOI Lapse Studies Results. Lloyd Milani Nikolai Serykh November 30, 2007. Agenda. UL LCOI Industry Pricing 2006 Munich Re Survey - PowerPoint PPT Presentation
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2007 General Meeting
Assemblée générale 2007
Montréal, Québec
2007 General Meeting
Assemblée générale 2007
Montréal, Québec
Canadian Institute
of Actuaries
Canadian Institute
of Actuaries
L’Institut canadien desactuaires
L’Institut canadien desactuaires
2007
Gen
eral
Mee
ting
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2007
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T100 and UL LCOI Lapse Studies ResultsT100 and UL LCOI
Lapse Studies Results
Lloyd Milani
Nikolai Serykh
November 30, 2007
2007
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AgendaAgenda
• UL LCOI Industry Pricing– 2006 Munich Re Survey
• Lapse Studies Highlights• Scope and Method• Results
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UL LCOI Industry PricingUL LCOI Industry Pricing
• 2006 Munich Re Survey– Sales and Funding– Lapse and Interest– Profit
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2007
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UL Level COI SalesUL Level COI Sales
2007
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2007
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UL Level COI Funding LevelUL Level COI Funding Level
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2007
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UL LCOI Pricing LapsesUL LCOI Pricing Lapses
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UL LCOI Lapse and InterestUL LCOI Lapse and Interest
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UL LCOI - ProfitabilityUL LCOI - Profitability
2007
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2007
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T100 and UL LCOI Lapse Study 2007
T100 and UL LCOI Lapse Study 2007
• Request for data - Beginning 2005• Enhanced Fields
– Cash Value– NAAR Pattern– UL Deposit
• Results Database
2007
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Working GroupWorking Group
• Nikolai Serykh• Elena Stoyanova
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Individual Life Subcommittee of the Research Committee
Individual Life Subcommittee of the Research Committee
• Lloyd Milani, Chairperson• Stephen Beal• Marc-Andre Belzil• William Brath• Emile Elefteriadis• Beth Fitzmaurice• Marc Tardif
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AgendaAgenda• UL LCOI Industry Pricing
– 2006 Munich Re Survey
• Lapse Studies Highlights• Scope and Method• Results
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Participating CompaniesParticipating Companies• AIG• Canada Life• Co-operators
Life• Desjardins• Empire Life
• Industrial Alliance• Manulife Financial• Standard Life• Sun Life• Transamerica Life• Wawanesa
Top 5 companies contribution to total
policy exposure:
97% for T100 86% for UL LCOI
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Highlights – T100 StudyHighlights – T100 Study• 1999-2004 Period• 92,587 lapses
– Duration 1-10 - 73,064 lapses– Duration 11-20 - 19,594 lapses– Duration 21-25 – 156 lapses
• Over 4.0 million policy exposures• Over 251 billion face amount exposure• Compared to 1999 T100 Lapse Study
– 204.5% of exposure by policy– 139.0% of exposure by face amount
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Highlights – UL LCOI StudyHighlights – UL LCOI Study• 2002-2004 Period• 103,049 lapses
– Duration 1-5 - 74,972 lapses– Duration 6-10 - 24,526 lapses– Duration 11-15 - 3,551 lapses
• Over 2.1 million policy exposures• Over 304 billion face amount exposure• Compared to 2003 UL LCOI Lapse
Study– 167.0% of exposure by policy– 149.0% of exposure by face amount
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MethodMethod
• Calendar year method• Exposure period as provided by
company without modification• Following Status codes included
– Active– Death– Lapsed and Surrendered
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ScopeScope
• Results by Number and by Face Amount• Durations 1-25 for T100 and 1-15 for UL
– Total– Calendar Year– Sex and Joint– Smoking Status– Policy Size– Issue Age– Premium Frequency– Cash Value Availability (T100 only)
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T100 Lapse Study ResultsT100 Lapse Study Results• Total• Calendar Year• Sex and Joint• Smoking Status• Policy Size• Issue Age• Premium Frequency• Cash Value Availability• Comparison to
– 1999 Term-to-100 Lapse Study
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Term-to-100 StudyTerm-to-100 Study
Chart 1a - Composite Lapse Rates
0%
1%
2%
3%
4%
5%
6%
7%
8%
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20
Policy Year
By Number
By Amount
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T100 Study by Calendar YearT100 Study by Calendar YearChart 2b - Composite Lapse Rates by Calendar Year
(by Amount of Sum Assured)
0.0%
1.0%
2.0%
3.0%
4.0%
5.0%
6.0%
7.0%
8.0%
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20
Policy Year
1999
2004
1999-2004
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T100 Study by Sex and Joint Status
T100 Study by Sex and Joint Status
Chart 3b - Lapse Rates by Sex(by Amount of Sum Assured)
0.0%
1.0%
2.0%
3.0%
4.0%
5.0%
6.0%
7.0%
8.0%
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20
Policy Year
Male Single Female Single
Joint 1st Joint 2nd
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T100 Study by Smoking StatusT100 Study by Smoking Status
Chart 4b - Lapse Rates by Smoking Status (by Amount of Sum Assured)
0%
2%
4%
6%
8%
10%
12%
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20
Policy Year
Non-Smoker
Smoker
Aggregate
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T100 Study by Policy SizeT100 Study by Policy Size
Chart 5b - Lapse Rates by Policy Size (by Amount of Sum Assured)
0%
1%
2%
3%
4%
5%
6%
7%
8%
9%
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20
Policy Year
<$100K
$100K-249K
$250K+
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T100 Study by Issue AgeT100 Study by Issue Age
Chart 6b - Lapse Rates by Issue Age (by Amount of Sum Assured)
0%
1%
2%
3%
4%
5%
6%
7%
8%
9%
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20
Policy Year
25-34 35-44 45-54
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T100 Study by Premium Frequency
T100 Study by Premium Frequency
Chart 7b - Lapse Rates by Premium Frequency (by Amount of Sum Assured)
0%
1%
2%
3%
4%
5%
6%
7%
8%
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20
Policy Year
Non-Monthly
Monthly
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Term-to-100 Studyby Cash Value Availability (1)
Term-to-100 Studyby Cash Value Availability (1)
Chart 9b - Lapse Rates by Timing of Cash Value Availability(by Amount of Sum Assured)
0%
1%
2%
3%
4%
5%
6%
7%
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20
Policy Year
Available CV
No CV or CV in 5+ years
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Term-to-100 Studyby Cash Value Availability (2)
Term-to-100 Studyby Cash Value Availability (2)
Chart 9b - Lapse Rates by Timing of Cash Value Availability(by Amount of Sum Assured)
0%
1%
2%
3%
4%
5%
6%
7%
8%
9%
10%
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20
Policy Year
Available CV
No CV or CV in 5+ years
CV in next 5 Years
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Term-to-100 Study1999 vs 2007
Term-to-100 Study1999 vs 2007
• Composite Rates at Durations 1-15• 1999 vs 2007 without Cash Value
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T100 Study – 1999 vs 2007T100 Study – 1999 vs 2007
Chart 1c - Composite Lapse Rates(by Amount of Sum Assured)
0%
1%
2%
3%
4%
5%
6%
7%
8%
9%
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15
Policy Year
1999 Study 2007 Study
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T100 Study 1999 vs 2007 without Cash Value
T100 Study 1999 vs 2007 without Cash Value
Composite Lapse Rates(by Amount of Sum Assured)
0%
1%
2%
3%
4%
5%
6%
7%
8%
9%
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15
Policy Year
1999 Study
2007 Study wo CV
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UL LCOI Lapse Study ResultsUL LCOI Lapse Study Results
• Total• Policy Size• Comparison to
– 2003 UL LCOI Lapse Study– 2007 Term-to-100 Lapse Study– Munich Re Pricing Survey
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UL LCOI Lapse StudyUL LCOI Lapse Study
Chart 1a - Composite Lapse Rates
0%
1%
2%
3%
4%
5%
6%
7%
8%
9%
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15
Policy Year
Laps
e R
ate
By Number
By Amount
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UL LCOI Lapse StudyPolicy Size
UL LCOI Lapse StudyPolicy Size
Chart 5b - Lapse Rates by Policy Size (by Amount of Sum Assured)
0%
2%
4%
6%
8%
10%
12%
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15
Policy Year
Laps
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ate
(by
Am
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<$100K
$100K-$249K
$250,000+
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UL LCOI Study – 2003 vs 2007UL LCOI Study – 2003 vs 2007
• Overall• Differences
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UL LCOI – 2003 vs 2007UL LCOI – 2003 vs 2007
Chart 1c - Composite Lapse Rates by Amount of Sum Assured
0%
1%
2%
3%
4%
5%
6%
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15
Policy Year
Laps
e R
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2003 Study
2007 Study
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UL LCOI Study – 2003 vs 2007Differences
UL LCOI Study – 2003 vs 2007Differences
• Different Study Periods:– 1997-2001 vs 2002-2004
• Shift in Participants Contribution• Change in Sample Demographic:
– Male = -0.8% Female = +5.6%– Joint 1st to Die = -1.2%– Joint 2nd to Die = -3.6%
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UL LCOI vs Term-to-100UL LCOI vs Term-to-100
• Composite Rates at Durations 1-15• Non-Smoker, Single, 100K+ Band,
Monthly Premium Mode
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UL LCOI vs Term-to-100UL LCOI vs Term-to-100Chart 1e - Composite Lapse Rates
by Amount of Sum Assured
0%
1%
2%
3%
4%
5%
6%
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15
Policy Year
T100 UL LCOI
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UL LCOI vs Term-to-100NS, Single, 100K+, Monthly ModeUL LCOI vs Term-to-100
NS, Single, 100K+, Monthly Mode
0.0%
1.0%
2.0%
3.0%
4.0%
5.0%
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15
Policy Year
La
ps
e R
ate
(b
y A
mt)
T100
UL LCOI
2007
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Munich Re Pricing SurveyMunich Re Pricing Survey
• 2002 Assumptions vs 1997-2001 Experience
• 2006 Assumptions vs 2002-2004 Experience
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2003 UL vs MRe Survey 2002Issue Age 25-35
2003 UL vs MRe Survey 2002Issue Age 25-35
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2007
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2007 UL vs MRe Survey 2006Issue Age 25-34 (1)
2007 UL vs MRe Survey 2006Issue Age 25-34 (1)
Pricing vs Valuation vs Experience
0%
1%
2%
3%
4%
5%
6%
7%
8%
9%
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20
Policy Year
Lap
se R
ate
(by
Am
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UL Study - IA 25-34Valuation - IA 30Pricing - IA 30
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2007 UL vs MRe Survey 2006Issue Age 25-34 (2)
2007 UL vs MRe Survey 2006Issue Age 25-34 (2)
Pricing vs Valuation vs Experience -NS, Single, 100K+, Monthly Premium Mode
0%
1%
2%
3%
4%
5%
6%
7%
8%
9%
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20
Policy Year
Lap
se R
ate
(by
Am
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UL Study - IA 25-34Valuation - IA 30Pricing - IA 30
2007
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2007ConclusionConclusion
• Careful with experience where exposure is limited
• Lapse Rates pattern are similar in both studies• T100 lapse rates are lower than UL LCOI
after duration 8• UL LCOI composite experience is in line
with average pricing and valuation assumptions
• Average pricing and valuation assumptions are generally higher than actual experience for UL Non-Smoker, Single, Band 100K+, Monthly Premium Mode
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2007LimitationsLimitations
• Not every company was able to contribute each experience year
• Basic Policies only• Limited Amount of Exposure• T100 Data
– Date of Cash Value on set– Premium Cease Date
• UL YRT COI changes to Level COI• Partial Lapses• Increasing Face Amount
2007
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2007QuestionsQuestions
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