2015 vbt table development 2015 ucs calculator · ucs • underwriting criteria score • rrr (at...

Copyright © 2015 by the American\ Academy of Actuaries. All Rights Reserved.

Joint American Academy of Actuaries Life Experience Committee and Society of Actuaries Preferred Mortality Oversight Group

Dieter Gaubatz, MAAA, FSA, FCIA

Chairperson, Underwriting Criteria Team

July 16, 2015

2015 VBT Table Development

2015 UCS calculator

Copyright © 2015 by the American Academy of Actuaries. All Rights Reserved. 2

Purpose of UCS calculator

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2015 VBT Relative Risk (RR) Tables

• Used in the calculation of VM-20 Prudent Estimate Mortality assumption for

Deterministic and Stochastic reserves

RRRs (Relative Risk Ratios)

• Used to determine which RR table to use for each risk class in structure

Underwriting Criteria Score (UCS)

• Used to determine the RRR


Definitions

RR(R)

• Relative Risk (Ratio)

• Mortality as % of average standard mortality for a specific characteristic cell

UCS

• Underwriting Criteria Score

• RRR (at issue) score for a particular risk class

• Standard is defined in comparison to sub-standard as determined by the

underwriting process

• A characteristic cell would normally be for a specific gender, smoking

status and issue age/duration

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Underwriting Criteria Score

How it fits into the process

2015 VBT

(NS – 10 RR tables)

50 60 70 80 90 110 150 100 125 175

Super Preferred Preferred Standard ? ?

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Blended

UCS Score

USC = RRR

Actual experience

Choosing a valuation RR table

Credible

Non-credible Partial credibility

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Output

Provide a single RRR per risk class to determine which table to use

Output Results

NT TB

NT Class RRR Prev RRR Prev TB Class

Super pref NT 72.0% 25.00% 83.0% 70.00% Pref TB

Pref NT 98.0% 40.00% 139.7% 30.00% Std TB

Std NT 122.3% 35.00%

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Score comparisons

Sample UCS Calculator Results

RRR score Prevalence

Risk class Risk class

4 NT risk classes

Co. P1 P2 P3 Std P1 P2 P3 Std

A 84.2% 100.4% 110.4% 155.7% 51.8% 28.7% 6.0% 13.6%

B 85.6% 117.8% 166.4% 194.9% 69.4% 21.4% 7.8% 1.1%

3 NT classes

Co. P1 P2 Std P1 P2 Std

C 77.5% 98.0% 142.8% 27.5% 55.4% 17.1%

D 89.2% 129.9% 169.7% 79.7% 13.8% 6.5%

E 85.1% 96.3% 119.0% 40.4% 23.2% 36.4%

F 82.5% 98.7% 130.6% 36.9% 36.7% 26.3%

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Highlights of version 2015

Act

ual

ex

per

ien

ce

Obtained from various sources

Ass

um

pti

on

str

uct

ure

s

More consistent with reality

Allows for recognition of “J” and “U” mortality relationships

Lo

gic

Reflects actual underlying KO and DC qualification logic

Ag

e ra

ng

e

Allows flexibility in age range definitions for all criteria

Def

ine

“sta

nd

ard

”

Company can use its own definition of standard (in context of standard vs. sub-standard)

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Enhancements

Output

Eliminate need for UCS to RRR

conversion

Inputs

Revised structure

Criteria expansion

Logic

Improved KO and DC

formulas

Assumptions

Revised structure

using RRRs and prevs

J/U curve RRR

assumptions

Data storage

Flexibility to add macros

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With the new UCS, the levels are based on actual math / science / research related to

each of the criterion. The prior approach was based on formulas and assumptions

developed using much more professional judgment.


0%

2%

4%

6%

8%

10%

12%

14%

0%

50%

100%

150%

200%

250%

300%

15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40

Prev

RRR

Prevalence

Assumption structure Body Mass Index (BMI)

Relative Risk %

BMI

RRRs and prevalences for

each range

Normal

substandard risks

Normal standard risks

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Assumptions

Source of data

Heritage Labs data

Large direct insurer

RGA/LexisNexis MVR study

Professional judgment

Reasonableness checks with

SOA experience

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Assumption cautions

Consistent with valuation needs

RRRs and prevelances are

portfolio averages,

not characteristic specific

Potential correlations among

assumption not evaluated

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Input changes

Criteria

Revised Structure

• Family history (coronary, cerebro)

• Personal medical (coronary, cerebro, mental/nervous)

• Debit Credit and Knockout inputs combined

• Flexible age banding

• Multiple input structure

• Conditional formatting

• Separate NS/SM input worksheets

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What’s next

Remaining work

Full report Web-based

chassis solution

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Thanks to:

Underwriting Criteria Team members

Jaron Arboleda (MIB

representative)

Jean-Marc Fix (actuary)

Kim Genik (underwriter)

Anna Hart (underwriter)

Carl Holowaty (MD)

Doug Ingle (underwriter)

Al Klein (actuary)

Peter Komsthoeft

(underwriter)

Ev Kunzelman (underwriter)

Kevin Larsen (actuary)

Jack Luff (SOA actuary)

Cynthia MacDonald

(SOA actuary)

Matt McLaughlin

(actuary)

Brad Roudebush (actuary)

David Winsemius

(MD)

David Wylde (actuary)

Dieter Gaubatz – chair

(actuary)

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2015 vbt table development 2015 ucs calculator · ucs • underwriting criteria score • rrr (at...

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