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    Insurance IFRS Seminar Hong Kong, August 29-31, 2011 Bill Horbatt Session 41 Policyholder Assumptions Biometric Mortality Morbidity Behavioral Persistency Benefit Election Biometric subject to law of large numbers subject to trends subject to selection subject to other influences product type "back end" loads Distribution channel Setting Assumptions Sources of information Experience studies Industry Company University Research Judgment Extrapolation 5 Experience Studies Local actuarial or industry studies SOA International Experience Study Governmental (e.

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    Insurance IFRS Seminar Hong Kong, August 29-31, 2011 Bill Horbatt Session 41 Policyholder Assumptions Biometric Mortality Morbidity Behavioral Persistency Benefit Election Biometric subject to law of large numbers subject to trends subject to selection subject to other influences product type "back end" loads Distribution channel Setting Assumptions Sources of information Experience studies Industry Company University Research Judgment Extrapolation 5 Experience Studies Local actuarial or industry studies SOA International Experience Study Governmental (e.

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    48 views11 pages

    2011 HK Ifrs Horbatt 41

    Uploaded by

    Tanit Paochinda
    Insurance IFRS Seminar Hong Kong, August 29-31, 2011 Bill Horbatt Session 41 Policyholder Assumptions Biometric Mortality Morbidity Behavioral Persistency Benefit Election Biometric subject to law of large numbers subject to trends subject to selection subject to other influences product type "back end" loads Distribution channel Setting Assumptions Sources of information Experience studies Industry Company University Research Judgment Extrapolation 5 Experience Studies Local actuarial or industry studies SOA International Experience Study Governmental (e.

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    of 11

    International Financial Reporting for Insurers August 29-31, 2011 Hong Kong

    Policyholder Assumptions

    William Horbatt

    Policyholder P li h ld Assumptions
    Insurance IFRS Seminar Hong Kong, August 31, 2011 Bill Horbatt
    Session 41

    Policyholder Assumptions
    Biometric
    Mortality Morbidity

    Behavioral
    Persistency Benefit Election

    Biometric Assumptions
    Biometric
    Subject to law of large numbers Subject to trends Subject to selection

    Behavioral Assumptions
    Somewhat subject to law of large numbers Somewhat subject to selection Subject to other influences

    Product type
    Back end loads

    Distribution channel

    Setting Assumptions
    Sources of information
    Experience studies
    Industry Company

    University research Judgment

    Extrapolation
    5

    Experience Studies
    Local actuarial or industry studies SOA International Experience Study Governmental (e.g. WHO) Foreign Studies (SOA, LIMRA, etc.) University Research

    Country Mortality
    Mortality Rates (annual)
    100.00% 10.00% 1.00% 0.10% 0.01% 0.00% HK PH US VN

    Asia Selection
    Actual to Tabular Mortality (75-80 Ultimate) (75 80
    120% 100%

    80%

    60% PH 40% VN

    20%

    0% 1 2 3 4 5 6 7 8 9 10 Policy Year

    Conclusions
    Philippines
    Moderate selection

    Vietnam
    Moderate antiselection

    Persistency
    US Examples
    Life insurance versus Savings Savings (SPDA) product design

    Asia Examples
    Hong Kong Philippines Vietnam

    10

    US Example
    25%

    Surrender Rates

    20%

    15%

    SPDA 10% Life

    5%

    0% 1 2 3 4 5 6 7 8 9 10 Policy Year

    11

    US Decrements
    2002 4 2002-4 SPDA Activity

    Full Surrender Partial Surrender Annuitized Death or Disability No Activity

    12

    US Savings Product Design


    SPDA Surrender Charge Impact
    16.0% 14.0% 12.0% 10.0% 8.0% 6.0% 4.0% 4 0% 2.0% 0.0% 1 2 3 4 5 6 7 8 9 10 Policy Year SC No SC

    Lapse Rate

    13

    Other US SPDA Observations


    Age
    Little impact except periodic withdrawals during retirement

    Sex
    No impact

    Variable Annuity Fund Choices


    Lower lapses if over 25 funds available
    14

    US SPDA Observations continued


    Distribution Channel
    Stock broker highest lapses for Fixed

    Market
    16% 14% 12% 10% 8% 6% 4% 2% 0% Market higher than Contract

    Lapse Rate

    Lapse Rate

    Market equals Contract

    Market lower than Contract

    15

    Country Lapse Rates (Life)


    Lapse Rates
    25% 20%

    15% 1st Year 2+ Year 10%

    5%

    0% Hong Kong Philippines US Life Vietnam

    16

    References
    US Life Persistency y
    http://www.soa.org/research/experience-study/ind-life/persistency/2004-2005-indlife-persistency.a http://www.soa.org/research/experience-study/ind-life/persistency/2004-2005-indlife-persistency.aspx http://www.soa.org/research/experience-study/ind-life/mortality/int-internationalexperience-study.aspx experience-study aspx http://www.actuaries.org.hk/upload/File/ESR02-06.pdf

    US SPDA Persistency

    SOA International Experience Study

    Hong Kong Actuarial Society

    17

    Next Steps-Experience Studies


    Disadvantages of Experience Studies
    Expose competitive information Effort and Cost Assist regulators

    18

    Experience Study Advantages


    Expose market under pricing Efficiency of SOA IES Regulator intelligent decisions Facilitate dit F ilit t audits Improve reinsurance rates

    19

    SOA International Experience Study Asian participants


    Hong Kong Philippines Vietnam

    Contacts
    rstryker@soa.org horbatt@actmasol.com

    20

    10

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