sigma 6/2018: Mortality improvement: understanding the past and framing the future
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A number of risk factors, which can be classified as either biomedical, behavioural or socio-economic, have a significant impact on mortality. The latest edition of sigma examines developments in mortality improvement and whether the recent signs that mortality rates are improving are temporary or permanent. The paper explores how technology can help improve longevity and addresses the implications of mortality improvements for insurers.
Mortality rates are declining
Excluding periods of war, life expectancy has steadily improved around the world for well over a century. In recent years, however, there are signs that the rate of improvement in mortality has slowed in a number of advanced countries. Since 2011, age-standardised mortality rates in the US, UK and Germany, while still declining, are doing so at a slower pace than in earlier decades. The slowdown across most countries has been more pronounced among older people and women.
Drivers of slowing mortality improvements
Cause-of-death statistics indicate that some of the recent slowdown in mortality improvement might reflect the lack of additional progress in treating major illnesses such as cardiovascular diseases. Worsening trends in circulatory-related disease have been a key influence on the slowdown. To the extent that these can be linked to behavioural factors, lifestyle choices regarding diet and physical exercise rather than smoking/alcohol consumption are increasingly the most obvious explanations.
Importance of targets in driving mortality
Differences in mortality between healthy sub-groups and the general population provide a lens through which to quantify potential, but as yet untapped, mortality gains. By defining such a sub-group (ie, target population), perhaps in terms of diet or blood pressure, policies can be directed towards closing the gap in mortality experience between the general population and that of the target group.
How technology can help improve longevity
The sigma study also emphasises that the future of healthcare has to be focused on identifying early signs and symptoms of disease, and attempting to prevent disease progression and overall poor health. Digital health tools like telemedicine and wearables can play an important role in driving future mortality improvement. These technologies not only improve access to care, but also encourage healthcare markets to compete for lower, more affordable options. A key challenge is how to encourage consumers to sustainably adopt new technology and change their unhealthy behaviour.
Implications for insurers and pension plans
For governments and private financial institutions that assume longevity risk on behalf of individuals, shifts in the underlying mortality trend are crucial as this risk cannot easily be diversified away.
Overly conservative pricing to cover the range of future mortality outcomes will make products such as annuities and life insurance unnecessarily expensive. At the same time, prematurely adjusting assumptions about underlying mortality trends will almost inevitably stretch insurers' balance sheets once the liabilities are ultimately re-rated to reflect revised life expectancy realities.