Download Trends in mortality and pricing

Longevity in the 21st Century
Richard Willets
Longevity in the 21st Century
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Background
20th Century Trends
International Experience
Medical Advances
The Threat From Infectious Diseases
Projecting the Future
Implications
Longevity in the 21st Century
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Background
20th Century Trends
International Experience
Medical Advances
The Threat From Infectious Diseases
Projecting the Future
Implications
Background
• The UK Actuarial Profession established a
Working Party in 2003 to produce a review
paper on longevity trends
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Richard Willets (chairman)
Adrian Gallop
Tony Leandro
Joseph Lu
Angus Macdonald
Keith Miller
Stephen Richards
Neil Robjohns
John Ryan
Howard Waters
Background
• The paper “Longevity in the 21st Century” was
presented to the Faculty of Actuaries on 15 March
2004 and the Institute of Actuaries on 26 April
2004
• A separate paper “The cohort effect: insights
and explanations” (Richard Willets) was
presented at the same meetings
Background
• A Working Party of the Continuous Mortality
Investigation Bureau (C.M.I.B.) is considering the
issue of future mortality projection
• New projections are planned for 2005 to be used
with new “00” series tables
• This group published Working Paper 3 –
“Projecting future mortality – a discussion paper”
in March 2004
• A recent seminar at Staple Inn backed the call for
“measures of uncertainty” in projections
Longevity in the 21st Century
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Background
20th Century Trends
International Experience
Medical Advances
The Threat From Infectious Diseases
Projecting the Future
Implications
20th Century Trends
Reduction in the mortality rate for males aged 65-74
in the England & Wales population since 1901
• 20% fall between 1901 & 1969 (68 years)
Source: own calculations using O.N.S.
data
20th Century Trends
Reduction in the mortality rate for males aged 65-74
in the England & Wales population since 1901
• 20% fall between 1901 & 1969 (68 years)
• 20% fall between 1969 & 1986 (17 years)
Source: own calculations using O.N.S.
data
20th Century Trends
Reduction in the mortality rate for males aged 65-74
in the England & Wales population since 1901
• 20% fall between 1901 & 1969 (68 years)
• 20% fall between 1969 & 1986 (17 years)
• 20% fall between 1986 & 1996 (10 years)
Source: own calculations using O.N.S.
data
20th Century Trends
Reduction in the mortality rate for males aged 65-74
in the England & Wales population since 1901
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20%
20%
20%
20%
fall
fall
fall
fall
between
between
between
between
1901
1969
1986
1996
&
&
&
&
1969
1986
1996
2002
(68 years)
(17 years)
(10 years)
(6 years)
Source: own calculations using O.N.S.
data
20th Century Trends
At the beginning of the 21st Century we are observing
accelerating rates of improvement at older ages
Average annual rates of mortality improvement
for males in the population of England & Wales
Age group
60-69
70-79
80-89
1990 to 1994
3.0%
1.8%
1.1%
Note: “mortality improvement” is taken to
mean the % reduction in mortality rate
1994 to 1998
3.2%
2.3%
1.2%
1998 to 2002
3.9%
3.7%
2.5%
Source: own calculations using O.N.S.
data – trend lines fitted using log
linear regression
20th Century Trends
At the beginning of the 21st Century we are observing
accelerating rates of improvement at older ages
Average annual rates of mortality improvement
for females in the population of England & Wales
Age group
60-69
70-79
80-89
1990 to 1994
2.4%
1.0%
0.8%
Note: “mortality improvement” is taken to
mean the % reduction in mortality rate
1994 to 1998
2.5%
1.0%
0.4%
1998 to 2002
3.1%
3.0%
1.7%
Source: own calculations using O.N.S.
data – trend lines fitted using log
linear regression
20th Century Trends
Heart disease mortality is falling sharply
Heart disease deaths per 1,000,000 – males aged 60-69
in England & Wales
12,000
Period
1960-1970
1970-1980
1980-1990
1990-2000
10,000
8,000
“Premature death
from heart disease in
England could be
almost unheard of
within a decade”
6,000
4,000
2,000
0
1960
1970
1980
1990
2000
Reduction
-5%
-1%
20%
45%
Source: own calculations
using O.N.S. data
20th Century Trends
Mortality rates are falling in other causes
Deaths per 1,000,000 – males aged 60-69 in Eng & Wales
10,000
4,000
Cancer
9,000
3,000
8,000
2,000
7,000
1,000
6,000
1970
1980
1990
2000
0
1970
Stroke
Source:
own
calculations
using O.N.S.
data
1980
1990
2000
20th Century Trends
• Future projections should be grounded in
as good an understanding of the past as
possible
• The paper focuses on “five key forces”
currently shaping the pattern of mortality
change
20th Century Trends
• The paper focuses on “five key forces” currently
shaping the pattern of mortality change:− The UK “cohort effect”
− The “ageing of mortality improvement”
− Past patterns of cigarette smoking
− Increased uncertainty at younger ages
− Widening social-economic class differentials
The UK “cohort effect”
Rate of mortality improvement by age group
and decade – females in England & Wales
1960s
4.0%
1970s
1980s
3.0%
1990s
2.0%
1.0%
0.0%
25-29
Source: own calculations
using O.N.S. figures
35-39
45-49
55-59
age group
65-69
75-79
85+
The UK “cohort effect”
Rate of mortality improvement by age group
and decade – females in England & Wales
the “cohort effect”
4.0%
1960s
1970s
1980s
3.0%
1990s
2.0%
1.0%
0.0%
25-29
Source: own calculations
using O.N.S. figures
35-39
45-49
55-59
age group
65-69
75-79
85+
The UK “cohort effect”
Rate of mortality improvement by age group and
decade – males in England & Wales
the “cohort effect”
4.0%
1960s
1970s
1980s
3.0%
1990s
2.0%
1.0%
0.0%
25-29
Source: own calculations
using O.N.S. figures
35-39
45-49
55-59
age group
65-69
75-79
85+
The UK “cohort effect”
Mortality projections
• Faster improvements have been observed for the
UK generation born 1925-1945 – centred on 1931
• This feature has been explicitly allowed for in
G.A.D. mortality projections since the 1990s
• In 2002 the C.M.I.B. published a paper which
described a similar effect in insurance and
pensioner data – centred on 1926
• The C.M.I.B. published three “interim” projections
which allowed for this feature (known as the “short”,
“medium” and “long” cohort projections)
The UK “cohort effect”
Impact of year of birth in a model of mortality change
for males in the population of England & Wales
2.0%
Addition to
average annual 1.5%
rate of
improvement due
to year of birth 1.0%
0.5%
0.0%
1900
1910
1920
1930
-0.5%
Source: own
calculations
using O.N.S.
figures
-1.0%
-1.5%
Year of birth
1940
1950
The UK “cohort effect”
Impact of year of birth in a model of lung cancer
mortality change for males in the population of E&W
3.0%
Addition to
average annual
2.0%
rate of
improvement due
to year of birth
1.0%
0.0%
1900
1910
1920
1930
-1.0%
-2.0%
Source: own
calculations
using O.N.S.
figures
-3.0%
Year of birth
1940
1950
The UK “cohort effect”
Female cumulative constant
tar cigarette consumption
(CCTCC) by age and central
year of birth, UK
Rate of lung cancer mortality for
females in England & Wales by
year of birth
0.3%
Age group
0.2%
50-54
55-59
60-64
65-69
0.2%
70-74
75-79
80-84
0.1%
0.1%
0.0%
1870 1880 1890 1900 1910 1920 1930 1940 1950
Sources: O.N.S. & Lee et al (1993)
The UK “cohort effect”
Impact of year of birth in a model of heart disease
mortality change for males in the population of E&W
3.0%
Addition to
average annual 2.0%
rate of
improvement due
to year of birth
1.0%
0.0%
1900
1910
1920
1930
-1.0%
-2.0%
Source: own
calculations
using O.N.S.
figures
-3.0%
Year of birth
1940
1950
The UK “cohort effect”
Impact of year of birth in a model of mortality change
for males in the population of E&W
3.0%
lung cancer
heart disease
Addition to
average annual
2.0%
rate of
improvement due
to year of birth
1.0%
0.0%
1900
1910
1920
1930
-1.0%
-2.0%
Source: own
calculations
using O.N.S.
figures
-3.0%
Year of birth
1940
1950
The UK “cohort effect”
Impact of year of birth in a model of mortality change
for males in the population of England & Wales
2.0%
Second cohort due to a
wider range of factors
First cohort
largely due
to trends in
smoking
Addition to
average annual 1.5%
rate of
improvement due
to year of birth 1.0%
0.5%
0.0%
1900
1910
1920
1930
-0.5%
Source: own
calculations
using O.N.S.
figures
-1.0%
-1.5%
Year of birth
1940
1950
The UK “cohort effect”
Research in other fields
• Researchers in a range of disciplines believe that
people born in different generations are likely to
experience different health characteristics in later
life
• In epidemiology a “life course” approach to
understanding disease trends has developed
“…a degree of anticipation is possible within
lifetimes…through those things which make an
imprint on life at one point, and which are carried
forward on into later life.”
Professor Michael Wadsworth (1991)
The UK “cohort effect”
Possible causes of the UK “cohort effect”
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Patterns of cigarette consumption
World War II
Birth rates
Diet
Welfare State
The ageing of mortality improvement
The ages experiencing the most rapid change have
shifted upwards
4.0%
1911-1960
Rate of
mortality
improvement
3.0%
2.0%
1.0%
0.0%
20-24
Source: own calculations
using O.N.S. data for
males in England & Wales
30-34
40-44
Age Group
50-54
60-64
70-74
80-84
The ageing of mortality improvement
The ages experiencing the most rapid change have
shifted upwards
4.0%
1911-1960
Rate of
mortality
improvement
3.0%
1960-2001
2.0%
1.0%
0.0%
20-24
Source: own calculations
using O.N.S. data for
males in England & Wales
30-34
40-44
Age Group
50-54
60-64
70-74
80-84
Cigarette smoking
Trends in cigarette consumption
• Consumption of cigarettes in the UK has been
falling since the 1960s
• Smoking prevalence rates stabilised in the 1990s
• The impact on mortality trends is difficult to
quantify because of the enduring nature of the
damage caused by cigarette smoking
• Smoking patterns have certainly contributed
towards the cohort effect
• Reduction in cigarette smoking may account for a
half to a third of recent improvements at some ages
Uncertainty at younger ages
Increased uncertainty at younger ages
• In the 1980s and 1990s improvements in healthrelated causes were offset by deteriorations in a
range of different causes, notably:− AIDS
− Drug & alcohol abuse
− Liver disease
− Violent deaths
− Accidental deaths (other than motor vehicle)
Uncertainty at younger ages
Mortality rates for men aged 20-39 in England &
Wales as a % of rate in 1989
450%
drug & alcohol abuse
400%
350%
300%
liver disease
Together these causes now
account for 12% of all
deaths for this age group
250%
200%
150%
100%
1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001
Source: own calculations using O.N.S. data for males in England & Wales
Uncertainty at younger ages
Average annual rate of mortality improvement, males aged
20-39, England & Wales, 7 year rolling averages
11%
20-24
9%
25-29
30-34
7%
35-39
5%
3%
1%
-1%
-3%
1950
1955
1960
1965
1970
1975
1980
1985
Central year
Source: own calculations using O.N.S. data for males in England & Wales
1990
1995
Uncertainty at younger ages
Average annual rates of mortality improvement for
the population of England & Wales – 1977 to 2002
year of birth
1900-1924
1925-1947
1948-1970
males
1.6%
2.8%
-0.4%
females
1.1%
2.4%
0.6%
Source: own calculations using O.N.S.
figures - improvement rates for all ages
between 20 and 89 have been used.
Widening socio-economic class differentials
Differential in life expectancy at age 65 between manual and
non-manual classes, England & Wales, 1972-99
Difference
between nonmanual and
manual
(years)
2.4
male
2.2
female
2.0
1.8
1.6
1.4
1.2
1.0
0.8
0.6
1972-76 1977-81 1982-86
1987-91 1992-96 1997-99
Year
Source: own calculations using O.N.S. data for males in England & Wales
Widening socio-economic class differentials
Average annual rate of mortality improvement for males in the
population of England & Wales and in the C.M.I. dataset for
males with life assurance policies, 1961-1999
England & Wales population
3.0%
Rate of
improvement
(per annum)
CMI assured lives (smoothed)
2.5%
2.0%
1.5%
1.0%
0.5%
0.0%
40
45
50
55
60
65
Age
Source: own calculations using C.M.I.B. & O.N.S. data
70
75
80
85
Longevity in the 21st Century
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Background
20th Century Trends
International Experience
Medical Advances
The Threat From Infectious Diseases
Projecting the Future
Implications
International experience
U.K. mortality rates by age relative to an
“international average” from 23 developed countries
130%
males
females
120%
110%
100%
90%
80%
30
35
40
45
50
55
60
65
Age
Source: own calculations using W.H.O. data
70
75
80
85
90
95
International experience
Expectation of life (years) for males at age 65 for
selected countries in 2000
18
17
16
15
14
Source: own calculations using W.H.O. data
Ireland
Portugal
Germany
UK
Finland
Netherlands
Denmark
Austria
Belgium
Norway
Greece
Singapore
Canada
USA
Spain
Italy
New Zealand
Sweden
Australia
Switzerland
France
Japan
12
Israel
13
International experience
Pace of
mortality
improvement
for Japanese
females by
age and
calendar
year – shaded
area shows
where change
is most rapid
Age 85
Age 75
Age 65
Age 55
1960
1970
1980
1990
Source: own
calculations using
data from
www.mortality.org
International experience
Pace of
mortality
improvement
for Japanese
females by
age and
calendar
year – shaded
area shows
where change
is most rapid
Age 85
Age 75
Age 65
Age 55
1960
3.5% p.a.
improvements at
age 55
1970
1980
1990
Source: own
calculations using
data from
www.mortality.org
International experience
Pace of
mortality
improvement
for Japanese
females by
age and
calendar
year – shaded
area shows
where change
is most rapid
Age 85
Age 75
Age 65
Age 55
1960
4.5% p.a.
improvements at
age 65
3.5% p.a.
improvements at
age 55
1970
1980
1990
Source: own
calculations using
data from
www.mortality.org
International experience
Pace of
mortality
improvement
for Japanese
females by
age and
calendar
year – shaded
area shows
where change
is most rapid
Age 85
4.25% p.a.
improvements at
age 75
Age 75
Age 65
Age 55
1960
4.5% p.a.
improvements at
age 65
3.5% p.a.
improvements at
age 55
1970
1980
1990
Source: own
calculations using
data from
www.mortality.org
International experience
4.0% p.a.
improvements at
age 85
Age 85
4.25% p.a.
improvements at
age 75
Age 75
Age 65
Age 55
1960
4.5% p.a.
improvements at
age 65
3.5% p.a.
improvements at
age 55
1970
1980
1990
Pace of
mortality
improvement
for Japanese
females by
age and
calendar
year – shaded
area shows
where change
is most rapid
Source: own
calculations using
data from
www.mortality.org
International experience
Ratio of average annual rate of improvement over last 10
years vs. previous 30 years – average based on 5 countries
(USA, England & Wales, France, Germany & Japan)
200%
Male
Female
180%
160%
140%
120%
100%
70
75
80
85
Age
Source: own calculations using data from www.mortality.org
90
95
100
Longevity in the 21st Century
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Background
20th Century Trends
International Experience
Medical Advances
The Threat From Infectious Diseases
Projecting the Future
Implications
Medical advances
The pace of scientific development
• The pace of scientific development appears to be
accelerating
• A substantial element of current improvements are
being driven by advances in medicine
• Improvements in heart disease mortality have been
partially caused by:• new medication, e.g. beta-blockers & statins
• new surgical interventions, e.g. CABG & angioplasty
• Improvements in cancer mortality have been
partially caused by:• advances in treatment
• improvements in detection
Medical advances
The pace of scientific development
• Will the accelerating pace of medical
advancement drive accelerating mortality
improvements?
• Two case studies are considered:• A ‘polypill’ to treat cardio-vascular disease
• Research into the ageing process
Medical advances
A ‘polypill’ to treat cardiovascular disease
• “The most important B.M.J. in 50 years.” (?)
• Proposal is for a single pill consisting of low doses of six
(off-patent) drugs already used to treat the risk factors of
cardiovascular disease
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a statin to reduce cholesterol
3 blood-pressure reducing drugs
folic acid
aspirin
• To be given to everyone over the age of 55
• Wald & Law (2003) claim it could reduce cardiovascular
disease by 80%
• It has been a controversial proposal but – at the very least
- shows how the role of preventative medicine could become
more important in the future
Medical advances
The ageing process
• It is generally considered that ageing is a “by-product” of
the evolutionary process
• However, gerontologists have differing views on the
potential of medicine to arrest the ageing process
• Some believe that human longevity could be extended
dramatically in the 21st Century
“… the possibilities of lengthening life appear
practically unlimited”
“… the only practical limit to human life span is the
limit of human technology”
“… the cure for ageing…is no longer science fiction”
Regelson (1996)
Rose (1996)
de Grey (2003)
Medical advances
Developments in anti-ageing research
• Telomerase
− Enzyme used to make human cells replicate indefinitely in vitro
• Gerentogenes
− Genes linked to longevity have been manipulated in experiments
with animals
• Hormone Therapies
− Hormones such as D.H.E.A. have been linked to ageing
• Caloric restriction
− Animal experimentation has shown a link between a diet low in
calories and increased lifespan. An ingredient of red wine –
resveratol – seems to mimic the age-enhancing effects of caloric
restriction.
Longevity in the 21st Century
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Background
20th Century Trends
International Experience
Medical Advances
The Threat From Infectious Diseases
Projecting the Future
Implications
Infectious diseases
Infectious diseases are a growing threat
• Rapid global transport, especially air travel (e.g.
SARS)
• Increasing use of antibacterials in medicine &
veterinary science
• Potential advances in xenotransplantation
• Increasing industrialisation of food production
• Human behaviour (unprotected sex and drug use)
• Potential threat of bioterrorism
Infectious diseases
Examples of newly-recognised infectious diseases
Year
Microbe
Disease
1977
Ebola virus
1977
1983
Legionella
pneumophilia
HIV
Ebola haemmorrhagic
fever
Legionnaires disease
1996
TSE causing agent
New variant CJD
2003
SARS-CoV
SARS
AIDS
Infectious diseases
Newly reported HIV infections and HIV-related
deaths in the UK, 1987-2002
6,000
Newly-reported
HIV infections
5,000
HIV-related deaths
4,000
3,000
2,000
1,000
0
1987
1990
1993
1996
Year
Source: PHLS, HPA
1999
2002
Infectious diseases
Reported cases of MRSA in the UK, 1992-2002
6,000
5,000
4,000
3,000
2,000
1,000
0
1992
Source: HPA
1995
1998
Year
2001
Infectious diseases
General points
• Advances in medicine and international networking will
continue to help limit the effects of new diseases (SARS is a
good example)
• Arguably HIV is the only infectious agent to emerge in
recent decades to have a dramatic impact on global mortality.
• HIV remains a threat to health and mortality as well as the
global economy
• The potential threat of infectious diseases cannot be
disregarded
• As deaths from heart disease and cancer reduce in future
decades the relative impact of deaths from infectious diseases
may become more significant
Longevity in the 21st Century
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Background
20th Century Trends
International Experience
Medical Advances
The Threat From Infectious Diseases
Projecting the Future
Implications
Projecting the future
In the first few decades of the 21st Century it is
likely that mortality rates for elderly people in the
UK will improve at faster pace than ever before
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Projection of the UK cohort effect
Past patterns of smoking prevalence
A general “ageing” of mortality improvement
Accelerating medical advances
Rapid improvements in heart disease mortality
Potential for improvement at older ages is greatest
Projecting the future
Methods of mortality projection
There will be a much greater focus on quantifying
the uncertainty around future projections
Projecting the future
Significance of mortality assumptions
Annuity costs for a male retiring at age 65 in
2004 derived using a 5.0% interest rate
Mortality basis
PMA92u2004 [the FSA pension projection basis]
Cost relative to
PMA92u2004
-
PMA92mc [the “medium cohort” basis]
8%
“Benchmark A” [based on the assumption that
13%
improvements continue at their current pace]
Projecting the future
Significance of mortality assumptions
Pension costs for a male retiring at age 65 in
2019 derived using a 2.5% interest rate
Mortality basis
PA(90)-2 [the Minimum Funding Requirement basis]
Cost relative
to PA(90)-2
-
PMA92c2020
21%
PMA92mc [the “medium cohort” basis]
34%
“Benchmark A” [based on the assumption that
49%
improvements continue at their current pace]
Longevity in the 21st Century
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Background
20th Century Trends
International Experience
Medical Advances
The Threat From Infectious Diseases
Projecting the Future
Implications
Implications
General
• Likely future trends in mortality will have a
profound impact on all aspects of our society
• Inevitably people will remain in work for longer
“Ten years ago, global ageing barely registered
as a policy issue. Today… it is the focus of growing
concern among political and policy leaders
worldwide.”
Center for Strategic and International Studies (2003)
Implications
For life assurance companies
• Losses being declared on existing annuity books
• Increased reserves for GAOs
• Increased capital requirements (partially driven
by new FSA regulations)
• Increased focus on mortality issues from equity
analysts and ratings agencies
• Development of alternative annuity products and
use of additional rating factors
Taken together these factors may lead to
the continued worsening of annuity rates
Implications
For final salary pension schemes
• Increasing pressure (not least from equity
analysts) to disclose mortality assumptions
• Pressure to move towards more flexible
definitions of retirement age
• Increased buyout costs as closed schemes
mature and FSA regulations require insurers to
consider a greater range of adverse scenarios in
setting capital requirements
Implications
For the Actuarial Profession
• Increasing realisation that we have much to
learn from demographers, epidemiologists,
gerontologists, etc…
• Increasing realisation that we need to play our
part in the wider debate
Longevity in the 21st Century
Richard Willets