Society of Actuaries Annual Meeting

8/14/2019 Society of Actuaries Annual Meeting

1/26

Society of Actuaries

Annual Meeting

Disability and Group Life Experience Studies:

What Have We Learned?

Results of IDEC StudyRobert Beal

Consulting Actuary, Milliman, Inc

SOA Study Parameters

Study Period: 1990-1999

Approximately 80%+ of industry experience represented

Results measured relative to 85 CIDA

Incidence and Terminations studied separately.

Most results measured in terms of indemnity.

Whats new? Data from all 12 contributors

Analysis by contract type: A&S, OE, DBO Analysis by occupation

Termination experience by diagnosis

Total Disability vs. Total & Residual

SOA 2004 New York Annual Meeting - 132OF, Disability and Group Life Experience Studies: What Have We Learned?


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Major Lessons From the SOA DI Study1. Significant improvement trend in claim incidence

over the 10 years.

2. Blue/grey occ classes have had much more favorableexperience relative to 85 CIDA than the whitecollar/professional occ classes.

3. Substantial claim incidence improvements in businessissued 1996+.

4. Wide disparity of incidence results by occupation,particularly in Occ Class 1.

Major Lessons From the SOA DI Study

5. Excellent incidence from executives/managers,

accountants, engineers and teachers.

6. Poor incidence from physicians, dentists, nurses,

insurance agents, stockbrokers, chiropractors,

podiatrists.

7. Medical occs have had improving incidence only in thelast few years.

8. Lifetime benefits have major impact on claim incidence.



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9. CA has uniformly worse experience though positive

signs in 1996+ issue years.

10. FL has poor experience in white collar EP >=90+.

11. Multi-life does not always have lower incidence than

single life.

12. Claim termination experience has been more difficult

to improve.


13. Longer BPs decrease claim termination rates.

14. COLA decreases claim termination rates.

15. Significant differences in claim terminations by

diagnoses.

16. Residual benefits product somewhat lower claimterminations.



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Claim Incidence Experience

by Contract Type

119%DBO

63%OE

102%A&S

Overall Claim Incidence Results - % 85 CIDA

1990 - 1999

50%

60%

70%

80%

90%

100%

110%

120%

130%

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

Occ CI 1

Occ CI 2-4

Claim Incidence TrendsA&S Experience

Key Reasons for Improving Incidence Trend:

Tighter underwriting & contracts

Favorable economy

% 85 CIDA by Calendar Year



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Claim Incidence Trends

by Year of Issue and Policy Year

0%

20%

40%

60%

80%

100%

120%

140%

160%

Year

1

Year

2

Year

3

Year

4

Year

5

Years6

-10

Years11+

Prior to 1990

1990-92

1993-95

1996 & Later

ALL

Observations:

Prior to 1990 issues incidence is higher than more recent years

1996 & later still looks exceptional

Significant increase after year 2 (contestable period)

General decreasing trend after year 5

A&S - % 85 CIDA Occ Class 1

Claim Incidence Trendsby Year of Issue and Policy Year

0%

20%

40%

60%

80%

100%

Year

1

Year

2

Year

3

Yea

r4

Year

5

Years6-10

Years11+

Prior to 1990

1990-92

1993-95

1996 & Later

ALL

Observations:

Differences arent as significant among issue year groups

Relatively small differences by policy year

Similar decreasing trend after year 5

A&S - % 85 CIDA Occ Classes 2-4



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Claim Incidence Trends

by Key Occupations

140%

150%

160%

170%

180%

190%

200%

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

Medical Occs

Phys/Surg

Observations:

1993-94 increase in incidence

Recently returning to 1990-92 level

Medical Occupations in Class 1 Incidence by Year

Percent of 85 CIDA

Claim Incidence Trendsby Key Occupations

0%

20%

40%

60%

80%

100%

120%

140%

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

All Non-Med Occs

Exec/Mngrs

Observation:

Consistent incidence improvement since 1990

Non-Medical Occupations in Class 1 Incidence by Year

Percent of 85 CIDA



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Impact of Lifetime Benefits

on Claim Incidence

0%

50%

100%

150%

200%

250%

Non-Med Occs Med Occs

No Lifetime

Lifetime

Average Incidence 1990-99

Percentage of 85 CIDA

Geographical Differences

In Claim Incidence

67%91%84%1996 & Later

101%154%145%1993-95

122%160%182%1990-92

140%212%198%Prior to 1990

OtherFLCAIssue YearEP 90 Days & Over

91%57%133%1996 & Later

97%84%133%1993-95

83%91%127%1990-92

92%106%129%Prior to 1990

OtherFLCAIssue Year

EP Under 90 Days

Occ Class 1 Percent of 85 CIDA



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Claim Incidence

Multi-life vs. Single-life

Multi/SingleMulti-life Single-life

82%

89%

85%

105%

163%

116%

86%

146%

99%

No Lifetime

Lifetime

Total

Elimination Periods 90 Days and Higher

105%

77%

100%

77%

97%

80%

81%

75%

80%

No Lifetime

Lifetime

Total

Elimination Periods Under 90 Days

Business Issued 1990 & Later

Percent of 85 CIDA

Observation:

Multi-life incidence is not always lower than single life

Multi-life best when EP >=90+, No Lifetime

Claim Termination Trendsby Calendar Year of Incurral

0%

20%

40%

60%

80%

100%

120%

Yea

r1

Yea

r2

Yea

r3

Year4

-5

Year6

-10

Years1

1+

Claim Duration

%8

5CIDA All

Pre-1990

1990-92

1993-95

1996 & Later

Reasons for no significant termination improvements:

More difficult claims

Lower incidence might mean avg claims with longer duration

A&S Claims 1990-99



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Claim Termination Experience

by Gender

0%

20%

40%

60%

80%

100%

120%

140%

160%

Year

1

Year

2

Year

3

Year

4-5

Year

6-1

0

Years11+

Claim Duration

%8

5CIDA

Male

Female

Observation:

Female termination experience sharply better than 85 CIDA after 2 years.

A&S Claims 1990-99

Percent 85 CIDA

Claim Termination Experienceby Benefit PeriodAverage Termination Experience (1990-99)

40%

60%80%

100%120%

140%160%180%200%

Year1

Year2

Year3

Year

4-5

Year6-1

0

Year

11+

Claim Duration

%8

5CIDA

Short BP

To 65-70

Lifetime



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Claim Termination Trends

Ultimate Claim Durations

1,27486%110%All Ages

3458%68%70+

6443%65%65-69

26859%75%60-64

29086%108%55-59

269108%130%50-54

219133%184%45-49

88129%187%40-44

38382%425%35-39

Number of TerminationsBy IndemnityBy CountAttained Age

Observations:

Long term termination rates converging to around 60% of 85 CIDA

Big impact on valuation of lifetime claims

Claim Duration 11+ by Attained AgePercent 85 CIDA

Claim Termination ExperienceBy Diagnoses(Part 1)

Benefit Periods = To Age 65-70 or Lifetime

20%

40%

60%

80%

100%

120%

Year

1

Year2

Year

3

Year

4-5

Year6

-10

Year

11+

Claim Duration

%8

5CIDA All Diagnoses

Back

Musculoskeletal

Other Injury



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Claim Termination Experience

By Diagnoses(Part 2)


20%

70%

120%

170%

220%

270%

320%

Year

1

Year

2

Year

3

Year

4-5

Year

6-10

Year

11+

Claim Duration

%8

5CIDA All Diagnoses

Cardiovascular

Cancer

Immunodef

Claim Termination ExperienceBy Diagnoses(Part 3)


0%

20%

40%

60%

80%

100%

120%

140%

Year

1

Year

2

Year

3

Year

4-5

Year

6-10

Year11+

Claim Duration

%8

5CIDA All Diagnoses

Mental

Nervous

Alcohol & Drugs



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Society of Actuaries

New York City Annual Meeting

October 26 - 28

Session 132 OF

Disability and Group Life Experience Studies:

What have we learned?

LTD Experience Committee Recent Analysis Update

2

LTD Experience Committee

Participating Companies

AIG/American General Lafayette Life

American United Life Insurance Co. Liberty Mutual

Anthem Life Insurance Company MetLife Ins. Co.

Assurant Mutual of Omaha Insurance Co.

CIGNA Group Insurance Principal Financial Group

CNA Insurance Co Prudential Financial

Florida Combined Life Reliance Standard Life Ins. Co.

Genworth Safeco Insurance Co.Guardian Life Insurance Co. Standard Insurance Co.

Hartford Life Insurance Co States West

Jefferson Pilot Financial UnumProvident Corp.



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3


Experience Committee Members

Edd Bailey - Assurant Paul Hitchcox - ULR

Warren Cohen - Relaince Standard Rick Leavitt - Smith Group

Tom Corcoran - Tillinghast Allen Livingood - UnumProvident

Peter Doucette - Hartford Jack Luff - SOA

Pat Fay - MassMutual Roger Martin - UnumProvident, Chairman

Deb Fredricks - MetLife Chuck Meintel - JHA

Steve Garf ield - Standard Eric Poirier - UnumProvident

Ray Siwek - Prudential

Special thanks to Todd Fuhs and Steve Atkins as prior

committee members

Independent Vendor: Solucient Perry Beals, Julia Havey

4


Committee Focus Paid claim termination study with separate analysis of

recoveries, mortality, benefit maximums, and settlements.

Timeline

Initial data request sent out summer of 2003. Initial data analysis, mapping and

validation during the winter and spring of 2004. Resubmission for several

companies in Spring of 2004.

Present initial review 2004 SOA annual meeting.

Distribute detailed results of initial review to participating companies - Fall 2004.

Develop Experience Report and Experience table 2005.

Consider valuation table implications 2006.



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5


Profile of Initial Review 19 companies participating.

More than 1.7 million claims submitted with more than 1.0 million currently in

experience study.

Not all data submitted by each company was in sufficient detail to be included in

this initial review most notable exclusion was by calendar year.

25 million months of claim exposure over 10+ calendar years.

Dampening factors will be applied to reduce the influence of those companies

supplying the largest exposures.

Initial variables reviewed include age, gender, elimination period, duration,

diagnosis of claim, definition of disability, and gross benefit amount.

Analysis of raw recovery and death rates along with actual to expected ratiosrelative to Table95A (t95a).

6


Recovery Rate - Company Distribution

0.01%

0.10%

1.00%

10.00%

100.00%

1-67-

12

13-18

19-24

25-30

31-36

37-42

43-48

49-54

55-60

61-66

67-72

73-78

79-84 96 10

8120

132

144

156

168

180

192

20421

622

8

240+

Claim Duration

TerminationRate

Min 25%-ile Median 75%-ile Max



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7


Mix comparison to Table95a

Age Mix Comparison

4%

10%

16%

22%


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9


Death Rate

0.0%

0.2%

0.4%

0.6%

0.8%

1.0%

1.2%

1.4%

4 16 28 40 52 64 76

Monthly Claim Duration

TerminationRate

Actual Death

Expected Death - t95a

10


Industry Termination Summary

96%

114%

141%

79% 77% 82% 79%85% 88% 87% 83%

96%

102%

114%

73%

141%

110%

108%

160%

103%

131%

79%

102%

84%

97%

50%

100%

150%

200%

1-3 mo 4-6 mo 7-9 mo 10-12

mo

Yr 2 Yr 3 Yr 4 Yr 5-7 Yr 8-10 Yr 11-

14

Yr 15+ All

Claim Duration

%t95a

A/E Recovery A/E Death 'Combined' A/E



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11


Claim Termination Trends by EP 90

106% 107% 105%94%

120%

106%117%

78% 81% 82%

103%92% 96% 95% 96%

109%

114%

138%112%

90%87%

88%

103%

50%

100%

150%

200%

4-6 mo 7-9 mo 10-12

mo

Yr 2 Yr 3 Yr 4 Yr 5-7 Yr 8-

10

Yr 11-

14

Yr 15+ All

Claim Duration

%t

95a

A/E Recovery A/E Death

'Combined' A/E

12


Claim Termination Trends by EP 180

123% 123%117%

108%

149%157%

73%78% 78%

95%

81% 84% 82% 80%

97%

81%

133% 133%

130% 127%

182%

65%

107%

50%

100%

150%

200%

4-6 mo 7-9 mo 10-12mo

Yr 2 Yr 3 Yr 4 Yr 5-7 Yr 8-10

Yr 11-14

Yr 15+ All

Claim Duration

%t

95a


'Combined' A/E



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13


Male Claim Termination by Duration

63%

95%

116% 115%121% 116%

95%

196%

77% 74%

89%

77% 76% 79% 77% 78%

109%

158%

154%151%

73%66% 72%

96% 96%

50%

75%

100%

125%

150%

175%

200%

1-3

mo

4-6

mo

7-9

mo

10-12

mo

Yr 2 Yr 3 Yr 4 Year

5-7

Yr 8-

10

Yr 11-

14

Yr 15+ All

Claim Duration

%t

95a


14


Female Claim Termination by Duration

96%

107%

119%109%

100% 101%

100%112%110%

76%

104%

128%131% 129%

87%82%

86%

121%

96% 94%94%114%

88%

92%

98.4%

50%

75%

100%

125%

150%

175%

200%

1-3

mo

4-6

mo

7-9

mo

10-12

mo

Yr 2 Yr 3 Yr 4 Yr 5-7 Yr 8-

10

Yr 11-

14

Yr 15+ All

Claim Duration

%t

95a




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15


Claim Terminations by Diagnosis

104%

361%

264%

89%

25%

50%

75%

100%

125%

150%

01 06 11 02 03 04 05 07 08 09 10 12 13 U 95-oth

Category

%t

95a-Recover

0%

100%

200%

300%

400%

%t

95a-Death


% Cat # Description % Cat # Description

0.9% 1 Maternity or Pregnancy/Childbirth

7.0% 6 Mental Nervous 25.1% 8 Muscoloskeletal/Connective Tissue1.9% 11 Aids/HIV 3.6% 9 Other

1.6% 2 Reproductive/Urinary Disease 3.4% 10 Respiratory

2.0% 3 Digestive 12.8% 12

Nervous System & Sense Organ,

Infectious/Parasitic

9.4% 4 Injury/Poisioning 17.4% 13 Circulatory

7.2% 5 Neoplasms 3.0% U Unknown

4.8% 7 Emergent Disabling Conditions 90 .2% 95-o th

All categories except 1, 6, & 11 are

mapped to t95a all-oth diagnosis cat

Diagnosis Category

16


Recovery Rates by Calendar Year & Duration

0.0%

0.5%

1.0%

1.5%

2.0%

2.5%

90-92 93-95 1996 1997 1998 1999 2000 2001 2002

Calendar Year

Term

inationRate-Yrs>1

0%

1%

2%

3%

4%

5%

6%

7%

8%

Term

ination

RateYr1

Yr 2 Yr 3 Yr 4 All Yr 1



20/26

17


Death Rates by Calendar Year & Duration

0.25%

0.50%

0.75%

1.00%

90-92 93-95 1996 1997 1998 1999 2000 2001 2002

Calendar Year

TerminationRate

Yr 1 Yr 2 Yr 3 Yr 4 All



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October 27, 2004

Susan R. Sames

Tillinghast

2004 Towers Perrin

Session 132

Disabi l i ty and Group Li fe Exper ienc e Studies:

What Have We Learned?

Group Life Experience Committee Update

Towers Perrin

2

Group L i fe Exper ience Commit tee Members

PrincipalReg Yoder

Beneficial LifeChris SvedinFort DearbornJohn Schwegel

GuardianKari Powell

UnumProvidentGary Piccolo

PrudentialRocco Mariano

MJL AssociatesMarty Loughlin

MetLifeMarissa Limjoco

DeWeese ConsultingCharlie DeWeese

PrudentialJohn Bettano

MassMutualJay Barriss

SOAJack Luff

TillinghastSue Sames, Chair

Special thanks to Karen Edgerton and Ray Biondi as prior members of the Committee

Independent Vendor: Solucient



22/26

3

Group Li fe Exper ienc e Comm it tee has been

w ork ing on tw o stud ies s imul taneously

Mortality Study Incidence study to support pricing (and possible update to IRS

Table I rates)

Measures death, waiver and accidental death and

dismemberment (AD&D) claims vs. insurance exposure for

group life plans

Waiver Reserve Study; a.k.a, Update to Krieger

Claim termination study to support valuation (and pricing)

Measures deaths and recoveries vs. exposed group life waiver

claims

4

Timel ine for both exper ience s tud ies

2002

Design study and issue call for data

2003

Receive and review submissions

2004:

Audit data

Some down time while IDI and LTD were worked on

Next Steps

Resolve remaining data issues (2004)Distribute detailed results of initial review to participating

companies (through early 2005)

Release study results (early to mid 2005)

Consider waiver valuation table implications (late 2005 - 2006)



23/26

5

Morta l i ty Study is a t data aud i t s t age

Identifying and resolving data issuesComplex structure due to linking multiple files; e.g., group data,

individual exposure, self-administered exposure, and claims for

basic, optional, and accidental death and dismemberment

Nearly 20 companies submitted data

Key issues include:

Few companies submitted self-administered data

Many companies had difficulty providing waiver provision data

Relatively little data on AD&D

Dampening factors will be applied to largest contributor

6

Data St ruc t ure for Mor ta l i ty Study

Lives and volume information was collected for

Claims (death, waiver, AD&D) and

Exposure (individual versus self-administered)

across the following parameters:

gender

age

waiver provision (e.g., lifetime, no waiver)

type of coverage (e.g., basic, supplemental, optional)

group size

group effective date

SIC code



24/26

7

Sample p ivot t ab le for mor ta l i ty s t udy

The mortality study will have the following views for variouscombinations of those parameters:

REPORT LAYOUT

Deaths Waiver

Exposure Claims Rate A/E Claims Rate A/E

Central Age

17

22

27

32

37

42

47

52

57

62

Subtotal 17-62

67

72

77

8287

92

Subtotal 67 and Above

Total

8

Waiver Study is a lso a t data aud i t s tage

Waiver study was less complex, only one file per participating

company

23 companies submitted data

Two separate databases following Kriegers format:

1. Select period claim durations up through ten years

Age at disability and length of disability

2. Ultimate period

Claim durations beyond ten years by attained age

Key issues include:

Truncating exposure period appropriately, e.g., company may

have submitted exposure that covers all 10 years but really

has claims and recoveries for only the past five years.

Addressing impact of systems changes and clean-up efforts



25/26

9

Data Struc ture for Waiver Study

Lives and volume information was collected for each claim

for the following parameters:

gender

age at disability

duration of disability

attained age

termination reason, e.g., death, recovery, expiration of benefits

10

Sample p ivot t ab le format for se lec t per iodREPORT LAYOUT

By Age at Disablement


26/26

11

Sample p ivot t ab le format for u l t imat e per iod

REPORT LAYOUT

Rate of Expected (Krieger) Rate of Actual/Expected

Exposure Recovery Death Expiry Total Recovery Death Total Recovery Death

Central Age

17

22

27

32

37

42

47

52

57

62

67

72

77

82

87

92

12

What have w e learned?

Our initial strategy was to allow for more flexibility in

the structure of the submission to increase

participation

Having a tighter structure would have made the

linking much easier

Data audit process has been time consuming

Increasingly difficult for companies to commit

resources; however, the industry is very interested in

the results.

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