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T R A N S A C T I O N S O F S O C I E T Y O F A C T U A R I E S1 9 9 3 9 4 R E P O R T S

R E P O R T O F T H E D IR E C T R E S P O N S EP E R S I S T E N C Y A N D M O R T A L I T Y T A S K F O R C E 1M O R T A L I T Y A N D P E R S I S T E N C Y E X P E R I E N C E

O F D I R E C T M A R K E T E D L IF E A N DS U P P L E M E N T A L H E A L T H C O N T R A C T SB E T W E E N 1 99 0 A N D 1 99 2

1. IN I-RODUCT~ONTh is r ep o r t p r e sen t s co m p le te r e su l t s t ? ;o m th e s tu d y u n d e r t ak en d u r in g

1 9 9 3 a n d 1 9 9 4 b y t h e D i r e c t R e s p o n s e P e r s i s t e n c y a n d M o r t a l i t y T a s kF o r c e . T h e t a s k f o r c e w a s a s s e m b l e d t o s t u d y m o r t a l i t y a n d p e r s i s t e n c yex p e r i en c e o f direc~ m ark e ted l i fe an d su p p lem en ta l h ea l th co n t r ac t s . I n th isrepor t , da ta fo r d i rec t resp ons e p rod ucts a~:e p res en te d in th ree c a tegor ies :(1 ) Pe r s i s t en cy ex p e r i en ce o n l i f e an d su p p lem en ta l h ea l th p ro d u c t s(2 ) Mo r ta l i t y ex p e r i en ce o n u n d e rwr i t t en t e rm p ro d u c t s(3 ) M o r ta l i t y ex p e r i en ce o n g u a ran teed iSSLle, g r ad ed d ea th b en e f i t p ro d u c t s .A B a c k g r o u n d

T h e p e r i o d o f s t u @ c o v e r e d p o l i c y e x p o s u r e s b e t w e e n 1 9 9 0 an d 1 9 9 2,a l th o u g h o n e c o m p a n y s d a t a th a t c o v e r e d 1 9 8 9 - 1 9 9 1 w e r e i n c l u d e d i n t h es tu d y . Th e d a ta were sep a ra t ed b y p ro d u c t t y p e , a s d e f in ed in th e n ex t sec -t io n , an d a l so b y a n u m b er o f ad d i tio n a l ca t eg o r i e s a s fo l lo ws :o P o l i c y D u r a t i o n Fo r p e r s i s t en cy , d u ra t io n s 1 th ro u g h 5 w ere o b ta in ed

sep a ra t e ly an d d u ra t io n s 6 th ro u g h 1 0 were co m b in ed , a s we re d u ra t io n s1 1+ . Fo r m o r ta l i t y , d u ra t io n s 1 th ro u g h 1 0 w ere o b ta in e d sep a ra t e ly an dd u r a to n s 1 1 + w e r e c o m b i n e d .

o D i s t r i b u t i o n M e t h o d S o l i c i t a t i o n c o n d u c t e d u s i n g v a r i o u s c o m b i n a t i o n so f t e l ev i s io n , m a i l, an d t e l ep h o n e .e B i l l i n g M e t h o d Wh eth e r th e p ro d u c t i s b i l l ed d i r ec t ly , t h ro u g h c r ed i t c a rd

fo l lo win g t e l em ark e t so l i c i t a t io n , t h ro u g h c r ed i t c a rd fo l lo win g o th e r so -l i c i t a t io n , o r t h o u g h an o th e r au to m a ted d ev ice su ch a s p ro - au th o r i zedch eck s .

~Ed Mohoric (Chairperson), Warren Cohen, Dick DL~.tton, Kim Johnson, Robert Makohoniuk, CarlMeier, Mike Shmnrak, Harvey Waite, Doug Wolfe, and Pare Leonard (SOA star0.

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b e a p p r o p ; l a t e t o t r y t o s ~ l i t ~ e d a t a i n t o n a n y c a t e g o r i e s . A s s u c h , t h e d a t aa re s p l i t o n ly b y c r i t e r i a ~ h a t , ,/ e i ~ oL ~g ht w o u ld g iv e c re d ib l e r e s u l t s a . nd /o rt h a t p r e s e n t n e c c s s a 7y d i s t i n c t io n s i b r p e r s i s t e n c y a n d m o r t a l i t y a n a l y s i s . F o rm o ~ a l it }, ,, ;: e s u ks a~Te - ep o r ted b as ed o n ac tu a l - t o -ex p e c t e d (A/E ) r a t i o s r a t h e rthan abso lu te q , . ' s .B . ? r co d ~ z c~ 7 )# ~ es '

T he p ro du ct s iv . t i~is s t ud y ~:~-e spii~ {~to J ive b~-oacl ca te go rie s w ith sa m pl es u b c a t e g o r i c s i u th e m b b b e l o w , 7 0,7 t h e m o ~ 't al it y r e s u l t s o n l y t h e l i fe p r o d -u c t s a r e r e v i e w e d .

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D I R E C T R E S PO N S E P E R S I S TE N C Y A N D M O R T A L I T Y 125

G z n e r a l C a t e g o r y b b r e v i a t i o n I P l a nL i f e P r o d u c t s

T e r m A R T / R e n T e r m A n n u a l r e n ew a b l e t e rm a n d o t h er r e n ew a b l et e r mD e c T e r m D e c r e a s i n g t e r mG D B T e r m G r a d e d - d e a th - b e n e f it w h o l e l if eW h o l e L i f e W L W h o l e l if e ( l e v e l b e n e f it )

G D B W L G r a d e d - d e a th - b e n e fi t w h o l e l if eA H P r o d u c ts

I n d e m n i t y H I P H o s p i t a l i n d e m n i t y ( a ll c a u s e s )H A P H o s p i ta l i n d e m n i t y ( a c c id e n t o n l y )C a n c e r ( T an c e r i n d e m n i t yA c c i d e n t A D B / A D D A c c i d e n t a l d e a t h b e n e f it / ac c i d e nt a l d e a t ha n d d i s m e m b e r m e n tT r a v e l A C C T r a v e l a c c i d e n tM e d i c a r e S u p p l e m e n t M e d S u p p M e d i c a r e s u p p l e m e n t

C ContributorsQuestionnaires were sent to 26 companies believed or known to have

direct response business. Nine companies responded with contributions toeither the persistency or mortality study or both. These companies were:o Allstate Life Insurance Company American National Garden State) Life Insurance Company Colonial Penn Life Insurance Company Mutual of Omaha Insurance Company National Liberty/National Home Life Insurance Company North American Life Insurance Company Provident Mutual Continental American) Life Insurance Companyo Union Fidelity Life Insurance Companye USAA Life Insurance Company.In addition, two companies that were unable to complete the requisite formsfor the study sent collaborative data from their own pers istency or mortalitysystems for use in reviewing reasonableness o f results. However, these datawere in such a form that they could not be directly included in this study.

I I . P E R S I S T E N C Y E X P E R I E N C EThe analysis presents true persistency--as distinguished from lapse--

results, because we have analyzed total termination rates. These termination

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2 6 9 9 3 - 9 4 T A R E P O R T S

r a t e s i n c l u d e d e a d t s , e p i ; i e s , e n d c o n v e r s i o n s . : S -i v en t h e i b r m i n w h i c h c . . . . . . : r - - ' . . . . ~R e r s i s t e r c y i i il O r . t l] a [ ; u ~ v d a s @ % ,a i a ~ i e r o l~ , l i ]n 8 : ~',/%, c o H t r i b L i % t n g c o t Y t p a n i e s ;

t h e T a s k F o r e s b e l i e v e d ti~ at t h e r e s p o n s e s a n d d a t a w e n d b e t o o l i m i t e d i fa n a t t e m p t , :, .e r e m a d e ~:o 4 d t h e l a s t " : - ~ : n, o . : . 2 , o n e c o m p a n y k e p t i ts . . .. .. .~.:'"

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D I R E C T R E S P O N S E P E R S I S T E N C Y A N D M O R T A L I T Y 127

a t t a i n e d a g e o r b y d u r a t i o n s u c h a s f iv e - o r t e n - y e a r b a n d e d t e r m o r s te p -r a t e d t e r m . T h i s a l s o i n c l u d e s a n y s e l e c t a n d u l t i m a t e t e r m o r r e v e r t i b l e t e r m .T h e d u r a t i o n f o r t hi s p r o d u c t is m e a s u r e d f r o m t he o r i g i n a l i s s u e d a te n o tt h e r e n e w a l d a t e .

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D e c r e a s i n g t e r m i n c lu d e s a n y t e r m p r o d u c t w h o s e f a c e a m o u n t d e c r e a s e sb y p r e d e f in e d a m o u n t s . T h i s w o u l d i n c lu d e b u t n o t b e l im i t e d t o m o r t g a g et e r m . T h e p r e m i u m f o r d e c r e a s i n g t e r m m a y o r r n a y n o t b e l e v e l .

G D B t e r m is a t e r m p r o d u c t t h a t f o r t h e f ir s t f e w y e a r s h a s a l i m i t e d d e a t hb e n e f i t f e a t u r e s u c h a s r e t u rn o f p r e m i u m a c c i d e n t o n l y o r l o w f a c e a m o u n t .T h e p r e m i u m m a y b e l e v e l o r i n c re a s in g ; t he f a c e a m o u n t m a y b e l e v e l o rm a y d e c r e a s e .

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B o t h t h e A R T / r e n e w a b l e t e r m ~m d t he G D B t e r m f e l l o w w h a t m a n yw o u l d c o n s i d e r a n o r m a l p a t t e r n o f i n c r e a s i n g p e r s i s t e n c y w i t h p o l i c y d u -r a t io n . P e r s i s t e n c y b v N s ~ :re o f t e n i n thee o w - t o m i d - 8 0 % ; s f r o m d u r a t i o n3 f o r w a r d . T h e g u a r a n t o e d :.s su e i D i 3 te n -n , h o w e v e L h a s a n i n it ia l p e r s i s t -e n c y t h a t i s m u c h l o w e r i ~ ~ so iie y y ea st ~ t h a n t h e u n d e r w r i t t e n A R T / r e n e w -ab le terns: 59. ~ ,,4 c o m p ar ed t~: 75 4 " e s p e c t i v e l y . D a m a f t e r d u r a t i o n 5 w e r eu n a v a i l a b l e % r b o t h o t h e s e N ' o d u c : s.

F o r d e c r e a s i n g t e r n % t h e r e i s a S i p i n p e r s i s t e n c y b e t w e e n p o l i c y y e a r s ]a n d 2 . T h i s m a y b e a r e a c t io n t o t h e d e c r e a s i n g b e n e f it s ; h o w e v e r , t h e e x a c ti e v N o f d e c r e a s e a n d p a t te r n o f d e c r e a s e t h a t u n d e r l ie t h e s e p r o d u c t s a r eu n c l e a r . A l s o , t h e ~ r s t - y e a r e x n o s u r e i b r ~ J ec r ea si ng t e r m w a s m u c h s m a l l e rt h a n t h e s e c o n d - y e a r e x p o s u r < a n d t h is d r o p m a y r e f l e c t d i f f e r e n t g r o u p s i nt h e s tu d y , in l a te r d u r a t i o n < t h e p o l i c y p e r s [ s t e n q / r a t e s c o n t i n u e to i m p r o v e ,m o v i n g w e i I i n to th e 9 0 % + r a n g e b y d u r a t io n i t .

F o r th e A h t T / r e n c w a b i e t e r m t h e r e is a n a p p a r e n t i n c o n s i s t e n c y b e t w e e nt h e f i rs t th r e e m o n t h s ~ ~ e s u ks a n d t h e l ~ rs t- y e ar r e s u lt . T h e e x p o s u r e f o r t h ef u l l f i r s t - y e a r d u r a t i o n i s m o r e t it a n d o u b l e t h e d a t a c a p t u r e d f o r th e f i r stt h r e e m o ~ t h s . T h i s im p l i e s t ha t t h e r e is s o m e n o n h o m o g e n e i t y o f e x p e r i e n c eam o n g t h e . . . . . ; v ,,~ .-Ol l[ o h ~ O ~ S .F i g u r e 2 su m m a r i z e s p e r s iK e n c y e x o e r b n c e i b r w h o l e l if e p r o d u ct s . G D Bw h o l e :ii6e i s a g u a r a n t e e d i s s u e w h o l e l i fe p r o d u c t t h a t i n t h e f ir s t f e wd u r a t i o n s h a s a l i m i t e d d e a t h b e n e f i t f e a t u r e s u c h a s r e m m o p r e m i u m ,a c c i d e n t o n y , or ow f%ce a rn o u n t .

T h e w h o l e l if e c a t e g o r y i n c lu d e s a n y o t h e r f o r m o f p e m q a n e n t in s u r a n c e .N o i n t e r e s t - s en s i t i v e i if f e wa s i n c lu d ed i n ti ~ e s t u d y . T h e re w as n o t a sig ni~ Cl e a n t a m o u n t o f e : a po s u r c i n t h e w h o i e ] fi b c a t e g o r y , w h i c h i s i n d i c a t i v e o ft h e s m a l i a m o u n t s o f w h o b ]h% b u s i n e s s i s s u ed v i a d i r e c t m a i l . N o d u r a t i o n1 e p e r i e n e e w a s a v a i l a b l e 2 ) r w h o l e l if e .T h e G D B i fb r e s u lt s p e r s i s t s i g h i y b e t t e r th a n t h e w h o l e i i f e r e s u lt st h r o u g h d u r a t i o n 4 . F o r d t r a t i o n s 5 a n d a b o v e , b o t h p r o d u c t s l e v e l o u t i nthe low 90%%. :~ou:~. . . t h e s e x o d u c t s n ave ~ a n a v e r a g e is s u e a g e a b o v e 6 0 .T h e r e f o r e , m o r t a l i t y s h o u l d b e c o n s i d e r e d a s u b s ta n t ia l c o m p o n e n t p i e c e o ft h e o v e r a l l p e r s i s te n c y .

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D I R E C T R E S P O N S E P E R S I S T E N C Y A N D M O R T A L I T Y 29

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u s e d i n i n t e r m e t i n e ~ h o : , s s t t q . S i g m - c s 4 a n t 5 s c p a r a t e e x p e r i e n c e i n t o t h a to r t e r m a n d o r > / h o ] e i f ' ? < . . . .- . . . . . . .~ . . ~ * , . . .. j . T ~ c _ ~ e r s [ s t e n c v . g e n e r a l l y i n c r e a s e s

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l ? i g u re 5 s u n : mar : ze s p e r s i s t en cy ex p e r f en ee % r A &H i n d emn i t y p ro d u c t s .H IP p ro d u c t s i n c i u d e an y p ro d u c t b r w h i c i : t h e p r i m ary b en e f i t i s a d a il yi n d em n i t y b en e~ t ~%r h o s p : ta i iz a t io n . T h e H A P p ro d u c t s h av e t h e v a r i a t io ntha-: the hospitai izatio :~ m ust b e due ~e a:: acc iden t . C an ce r pro du cts p rov ides ch ed u i ed i n d emn i t y b en e f i t s o : : ]y t : p o n can ce r i n c i d en ce . T h es e i n d emn i t ybene f i t s cons i s t o f hosp i t a l i za t ion benef i t s , su rg ica l sche du les , rad ia t ion , ands i mi i a r s ch ed u l ed b en e f i t s .

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D I R E C T R E S P O N S E P E R S IS T E N C Y A N D M O R T A L I T Y 133

1 0 0 % +

F I G U R E 6P E R S IS T E N C Y X P E R I E N C E O R A & H IN D E M N IT Y R O D U C T S

~ %8 0 %7 0 %60e. (

S e /4 0 %

I1 2 3 4 $ 6 - 1 0 1 1 +

P e r s ~ c y l ~ t 3 t o o . ~ 2 I 3 4 5 6 . . t 0 ..... 1 1 + ]7 3 . 2 % 4 4 . 5 % 6 Z O ~ I 7 0 . 9 % 7 6 . 3 % 7 8 . 3 ~ . 4 i . . . '8 0 . ~ /o ~ / a It A P 8 2. 2% ~ . 7 % n / a ; ~ n / a n / a . . .. n / a ~ e I2 a n c e r u / a n / a n / a i ~ a n / a 8 g . 2 ' g 9 . 4 % 8 9 . 5 iT o t a l . I n d e m n i t y 8 0 . 2 7 . ~ 5 3 .1 % 6 2 . ~ .~ 7 0 , 9% 7 6 . 3 " / 0 8 0 . ~ 8 1 . 7 % 8 9.5 5..4 ]i v e s E x p o s e d 1 s t 3 t o o . 1 2 3 4 5 6 - 1 0 1 1 +~ n ' 7 6 , 8 9 ~ 1 2 6 , 4 5 4 7 9 , 0 6 3 . , 6 ; ', 3 4 8 . 1 0 5 , 3 4 5 9 4 ,3 m 7 ~ a 4 S a /a 1

~ a , 2 + 2 , ~ I ~ , m ~ a ~ ~ ~ ~ I ~ ~ . i2ance~r n / a I n / a ~ / a n / a n / a 3 2 ,9 4 3 " 12 1 ,2 5 0 2 5 6 , 1 4 0T o t al . I n d e m n i t y 3 3 8 ,9 ( ~ 4 3 3 ,5 6 5 7 9 ,0 6 3 6 2 .3 4 8 0 5 ,3 4 5 1 2 '7 ~ 4 5 8 2 9 ,3 9 5 2 5 6 ,1 4 0 '

In the experience reviewed, about half of the HIP and HAP policy-ownerslapse during policy year 1. HAP fares significantly better with duration 1persistency rates of 56.7 than HIP, at 44.5 . The average premium on theHAP product is typically significantly lower than that o f a HIP product andmay have some bearing on the results. Unfortunately, no HAP experiencewas available after the first duration.The HIP persistency rises slowly from the first-year result, but still reachesonly 80.4 in policy year 6-10.Cancer experience was available only for older business--durations 5+.Persistency rates in these policy years are slightly less than 90 and appearto have a stable pattern by duration.

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] 3 4 . 1 9 9 3 - 9 4 T S A R E P O R T S

F i g u , - 7 s u m m a r i z e s ~ ? e r s i s te n c , / e x : )e r ie n c e = ~o~- A8c74~ a c c i d e n t p r o d u c t s .T r a v e l a c c i d e n t i n c L td e s c o m b i n a A o n s o f p ia n s g ha t p r o v i d e c o v e r a g e l ~ rm o t o r v e h i c i e / "o e d e st r i an a c c id e n t a n d c o m m o n c a r ri e r . S o m e c o v e r a g e r n a yb e i l ~ f o rv a ' a ~ , ~ o t l~ e r ; ~- -~ - ~,~ ;~ b u t a ,: a l o w e r b e n e f i t l e v e . T h e a c c i d e n t a l

~"" t a t - ' a d a c c i d e n t a l c a u s e s .e a t E p r o d u c t p r o v i d e s o e~ e ~ s pr ~t,m r ~ i y c o v e rT h e r e m ay .. b e a n e l e m e n t o f e x t: "a b e n e f i t s ,~ror~" e x a m n l e .~ t h r e e t i m e s f o rc o m m o n ea u '~ er ) i n t i n s catch ier",,,_~ . ~ r o c m c ; . s" v.,~:n'" n d w i t h o u t d i s m e m b e r m e n tb e n e m s a re c o m b i n e d .

~ : I G U R h]~i RS IS[ EN ( "T ~)(P l{ i (i ] N( [ . i , ')R i \~L. [ ] A ( ' ( I I )H NT ~i

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D I R E C T R E S P O N S E P E R S I S T E N C Y A N D M O R T A L I T Y 135

Trave l acc iden t exper ience by du ra t ion is com ple te and shows a c on t in -u ing inc reas ing pe r s i s t ency pa t t e rn , beg in n ing a t 52 .6 in po l i cy yea r l andr i sing to 91 .6 by po l icy yea r s 11+ .F i g u r e 8 s u m m a r i z e s p e rs i s te n c y e x p e r i e n c e f o r M e d i c a r e S u p p l e m e n tp roduc t s . Th i s c a tego ry inc ludes b road r a~ lges o f Me d ica re Sup p lem en t po l -ic ies , f rom minimal benef i ts to subs tant ia l benef i ts .

100

F I G U R E 8PERSISTENCY EXPERIENCE FOR A H M E DI CA RE SUPPLEM ENT PRODUCTS

70 / ~~ %

~ % 2

P m ~ , , 1 s t 3 o o . 1M e d S u p p ~ ' I n / a

L i v e s E x p o s e d , 1M~:lS u p p n / a n a

3 4 S ~101 ~ L IC Y ~ I N A ' ~ O N

l ~ d S ~sp p2 3 4 I 5 . .. .. .. 66 9 . 6 7 0 , 6 7 4 . 3 [ .. 7 1 1

6g , J5 7 95 ,535 133 ,114~ 104 ,739 3 :

1 1 '

6 - i o I n7 6 1 % I n / a

. .333,765 .. ~/ ~

Of a l l the p roduc t s in the s tudy , Med ica re Supp lemen t cons i s ten t ly hasthe lowes t pe r s i s t ency in the l a te r du ra t ions . A l l in a l l , the Med ica re Sup-p lemen t pe r s i s t ency i s r e la t ive ly f l a t , a l though i t does con t inua l ly improvef rom dura t ion 2 a t 69 .6 th rough dura t ions 6 -10 a t 76 .1 .W hi le o the r p roduc t s in th i s s tudy ma y inc lude som e leve l o f r a te in -c reases em bed ded in the ana lys i s tha t a r e no t iden t if i ed s epara te ly , Med ica reS u p p l e m e n t li n e s a re u s u a l ly m a n a g e d t o h a v e f r e q u e n t r a te i n c r e a s e s - - o f t e nannua l . Th i s p roduc t has a l so t end ed to be v e ry r a te -com pet i t ive , w i thpo l icy -owners f r equen t ly shopp ing r a tes . In add i t ion , w i th the average ageof th i s p roduc t be ing w e l l over 65, m or ta l i ty w i l l f ac to r in a s a s ign i f i can tc o m p o n e m o f th e l a p s a ti o n.

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]_ 3 6 ~: v ,.> -. : ' o ~~ [ S A R K I ~ O R ' i ' S

FoHov,, ,ing a re add i t iona f igures o p e r s i s t e n c y a n d A & H p r o d u c t s s h o w -i n g d i s t i ; n c t i o n s b y m ~ r k e < b y d i s t r i b u t i o n m e t h o d , b y b i l l i n g m e t h o d , a n dby i s su e age . ~. a?i o f these the A & H Nodc~cts a re a gg re ga ted -For c re d ib i i typ u r p o s e s a n d to protec '_ indk, , id~m] co:upa~:y experience.

h~ Figure 9 , '/5; p e I s i > t e n c j b y m ark e t , ~ : cu r ren t cu s to m ers "p e rs is tc ,~ c y i s n o t b e a b i y p o e : c a t i m > J s a t tie r e i t h e r b r o a d m a r k e t o r a f f i n i t ygrou ps . Th is f s CC~T[ra%,,' o popNa," b d ie Par t o f th fs i s a fun c t io n o f thep ro d u c t t m d e i v i n g :~,,~ curt'e

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D I R E C T R E S P O N S E P E R S I S T E N C Y A N D M O R T A L I T Y 137

Figure 10 shows persistency by distribution method. Mail/phone persist-ency :means the initial direct contact was by phone. This could be from toll-free 800) calls inbound) in response to a television advm~isement or directsolicitation outbound). The solicitation/application is by mail. Mail/mailmeans the initial contact and solicitation are by mail. This may be a one-step or two-step process. The mail/phone category is predominantly travelaccident business.

F I G U R E 1PERSISTENCY EXPERIENCE BY DISTRIBUTION [VIETtlOD I: )l.~ A~:~H i>RODUCTS

1~ ' / o -

6 0 % -

5 0 %

2 3 4 5P O L I C Y D U R A T IO N

i M a i l / M i l l ~ M z f l/ l? h o ne ~ C u r g C u s t / M ~v e ~ t ~ , . . . . . . . ~ . m 3 m o . i ] i 2 . . . . 1 3 . . . . . . . + ~ IM a i l / M a i l 8 5 . 7 % 5 6 . 2 % 7 8 . 2 % 8 2 .f f% 8 3 . 8 % 8 7 4 %

M a r l /P h o n e 6 5 . 7 /. 0 4 6 1 3 % ' 6 6 . 2 % 7 8 . 2 % 7 9 . 5 % j 8 8 .6 %C u r r e n t C u s t o m e r s / M a i l n / a 6 7 .5 ~ ] 7 9 . 5 % 8 0 . 8 % 7 9 . 7 % [ 8 4 . 4% ii T o t a l A & H 7 2 .6 % 5 3 : 6 % 7 6 . 2 % 8 i . ~ A 8 3 ~ 5 % 1 8 7 . 4% I

" i , L i ve s E xp os ed ,, l s t 3 m o . 1 . . . . I 2 , 3 4 5 ......Mai YM ai l , 199 ,542 773 ,745[ 546 ,844 567 ,598 655 ,426 i 617 ,558M aiL/Phone 376,797 383,626i 122,152 57,090 3t ,9 66 .. ... .. 306 'C u r r e n t C u s t o m e r s / M a i l n / a 5 9 ,3 1 9 i 3 4 , 9 0 6 2 2 ,8 5 9 1 2 , 5 1 6 1 4 , 1 6 65 7 6 , 3 3 9 1 , 21 6 ,6 9 0 [ 7 0 3 , 9 0 2 6 4 7 ,5 4 7 . 6 9 9 , 9 0 8 t 6 2 2 , 6 3 0o ta l A & H

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] 3 8 9 9 3 - 7 A TS.A R F}PO RT S

F i g u r e i~ w h i c : s u m ; n a : i z e s p e rs is t@ r _ c )' y b i l l i n g n e t h o d ~ s h o w s d ~ s -t i n c t v a r i a t i o n s b y b i ] ii n g m e ,h o ds .; i s h c o ~ % ry d d r a @ o n s , b u t m u c h c o n -v e r g i n g b y d u r a t b n d - a n d i a s e - , i n &: ddk]on~ ' . e ] cm ark e t ed d i N erences o nc r e d i l c a r d bi]], ing s l o w s u b s a n t h ~ d -%% resces i s t h e f i r s t t h r e e d u r a t i o n s .M o s t h e a t h N r o~ iu cts & : e b r o a d l y 7 e p r e s e n t e d ~ % cro ss t h e b i l l i n g c a t e g o r i e s .T h e c r e d i t c a r d -t e e m a r k e ~ e d i s d o i s i n n t e d b y h e " o w - p r e m i u m " p r o d u c tt ) / 'pes--- / ,~D Ditravei accide"~t /Z. , ' : .P.

2 S % ~? U D . S IST H \ ( Y kX P i N ~ i i i X ( 'K I i i " ~ ] l i , F x ( i P ] i { i l l( ) D O R /~c "~ ~ PROI )L iCTS

98 % -~ 0 i

~ " ~ - - ', . . . . ~ -

s u L . N i le V i4o % . . ~ ' - % S L . _ , . _ ~ L

. . . . . . . N ~ m

NNi

- t l i i t ~--ii~, U-:A~ f -. - ~ i . } ~ i _ t

i ' i , i i t I ; i~ < I i ' L

] S L_.:;iC )KKii~LtZONL/_ : i }k - :~s : 3i11 L J CC- ?~i~x,:n~'i;eCsSC C : - i : ti :~ : ,' r ~ O- i f: e :- AuIer~ rzCei

i?~sistc~cy I . 'st S :ao. i L i 5+ i 3 4. ] , L ~ 079.5%

O~he r Au e ~ AC , EF2% i ~ e w / d ) ] 5 .5 % 3 C 3 % %i ' ? 2 . 7 % 7 5 .2 % i 7 6 . 5%. . . . . . . ".? o~ A ~ H L 7 8 . 4 % 1 5 1 . 2 ~ / 7 ~ i 7 $ % i 7 5.5 %~v es S.,x;os,.~ I :,stSsm o.i : i 2 ', s

~ ~ . r k e t ~ i I 5~3S6:i N '% S4q ~9,47q S & ~ 4 :S ,1 9 4

L _ . . _ _ _ _ _ 7~ #tA& HjI ,259o293]Lc3~ 56 7g$ ,593] 636 , 26 4 ; , 2 6 7

~ . ~ i 8 ~ .2 o /d , s . s ~- - - i - . .. .. .. .. .. i- - - 7 - - i ~ q o I ~ t ~ : - -- 2 7 : , , ; 2 2 j :,s25,s~5132z,s2;

oI.~~f ~.@;1J ~ a

I~00,583 5~&662I 800,9374 0 4 ~ : Iz s ~ s 4 = l S x t o ~

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D I R E C T R E S P O N S E P E R S IS T E N C Y A N D M O R T A L I T Y 1 3 9

F i g u r e 1 2, w h i c h s u m m a r i z e s p e r s i s t e n c y b y a g e , s h o w s t h a t a g e d i f f e r-e n c e s a r e n o t p r o n o u n c e d , e x c e p t f o r th e f ir st t h r e e d u r a t i o n s u n d e r a g e 3 4a n d t h e f i rs t t w o d u r a t i o n s f o r a g e s 3 5 - 4 9 . T h i s e f f e c t i s o b s e r v e d i n a llp r o d u c t s .

1 0 0 %

F I G U R E 1 2PERSISTENCY EXPERIENCE BY I SSUE GE FOR A & H PRODUCTS

8 0 %

6 0 %

4 0 %

2 0% ~ ' ~ - ~1 2

t ~ e r s is t e n c y ] i s t 3 t o o .1 8 3 4 I 75 .5 '%35 . -49 ] 77 .0 %50 . .64 : 79 .5 %6 5 - 7 9 8 0 . 9 %

g O + ' 8 3 . 4 %T o t a l A & H 7 7 . 9 , 4

L i v e s E x p o s e d l s t 3 t o o.1 8 . - 3 435...495O -646 5 - 7 9 3 9 , 3 8 680+ 1,847' T ota l A& I-I '373.7 '83

8 2 , 0 0 6 2 5 6 , 1 5 9128,416122,128

i ' 2 2 0 , i 2 0I t 0 3 5 8. ,78311,174,322

3P O L t C Y

a 8 3 4INl 6s -79 ISS31 238.1% ' 6o.9%4 5 . 8% ] 6 8 . 8 %

5 3 . 0 . 4 7 5 . 1 %5 8 . 3 % 7 5 . 4 %5 6 -8 % 1 6 7 . 9 . 44 8 . 6 % 7 1 . 7 / 0

I1 ~ 26 8 , 3 8 9

358,347 108,729329,338 123,006184,424

10,0224 9 4 , 5 6 9

i l$

D U R A T I O N3 ~ - 4 98 ~ , +36 3 . 8 % 7 2 . 4 %

7 1 . 6 %7 1 . 8 %78.0.466.9 .4 ,6 71.8%7 6 . 0 %

6.-10

m ~ 0 - 6 4

11+

4 5 6 - 1 0 1 1 +8 4 . 9 % 8 3 . 1 % 9 2 . 5 %' 7 7 . ~ A 8 4 . 9 % 8 3 . 1 % 9 2 . 3 %

7 7 . 6 % 7 8 . 9 % 7 8 . 8 % 9 0 . 4 %7 9 . 2 % 8 1 . 2 % 8 0 . 8 % 8 6 . 1 %

7 1 . 8 % 7 1 . 2 % 6 9 . 4 %' 7 8 . 1 % 8 0 . 4 % 8 0 . 8 % 8 9 . 2 %

3 4 ~ 5 6 -10 IX +9 , 6 3 4 1 7 , . 5 0 5 1 ' 1, 57 2 1 4 8 ,3 5 2 t l , 4 9 4

19 ,299 38,12112 ,258 221 ,46 7 50 ,05g20,941 43,805 35,2 63 260,413 i 122,9171 9 9 , 8 3 4 " . ' 2 4 9 , 3 7 9 : 2 1 6 , 0 0 7 6 76 ,6 06 6 8 ,5 8 013 ,126 20 ,24 3 15 ,235 37 ,371 6 ,440

2 6 2 , 8 3 4 3 6 9 , 0 1 3 2 6 9 , 3 3 5 1 , 34 4 ,2 0 8 2 5 9 , 4 8 9

I II . MO RTALITY EXPERIENCE FOR UNDERWRITTEN LIFE PRODUCTST h i s a n a l y s is d e v e l o p e d q / s u s i n g t h e n u m b e r o f a ct u a l d e a t h s in a d u r a ti o n

d i v i d e d b y l i f e - y e a rs e x p o s e d , L i f e - y e a r s e x p o s e d is t he n u m b e r o f y e a rse x p o s e d to d e a t h i n a g i v e n d u r a t i o n . L i f e - y e a r s e x p o s e d is a d j u s t e d

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1 4 0 i 9 9 3 - 9 4 i S A R i } P () iZ T S

for partiai ]apse years. U),a~ is i2 ~br example a ]apse occur s after threemonths into a dur.atio;% ti~is v.:ouXi be counted as 0.25 year exposed. ~f adeath occurs durhag the d~ratio ~ the policy is giv en a Full ),ear exposure todeath. Data were 7equested on this basis, bnt contributions were not checkedfor con sis tency ,,,,,,, :z .. . oc~n : o . 7 nereforc , there is a poss ibil ity o f someinco~sTstenc)/off rest: is.

~. .e~c.~ were mcast~ro(, per.i- n aooso[ute terms (deaths and exposures) a n das /t/E ratios. For the -esu ts sho>,.n here, ~%xpected" is treated in one or"two alternative ways:o 1975-80 Select and Ultimate Tabie, ~tge last birthday, male and fema leo i9 75 -8 0 Ultimate "Fable, age 7ast bh'thday, male and female.

W e have si:own comparisons to both expected tables to aid in analysis.The standa::d deviatfo~ fs estimated b y using the traditional mortality tableconstruct ion approach ':~ and is compute d by dividing the A /S ratio by thesquare root of the num ber oF" actual deatSs. Two s tandard dev iations areused to estimate 95% confidcnec using a normai distribution.

L~ u_sing ~'" " " ~.. . s{a ~c~a~c de~,,b/_io~L note Cigar the figures shown measure 95%confidence relative to the :uadcr ying expected table, if a dif~)srent (for ex-ample, higher) expected tabie were tsed, the standard deviation would bedii~f~erent (lower) relative to that tab e, but the var iat ion in expec ted deathswill remain the same.

We have oresented m o ~ l i i t y experience on underwritten business divided. . . . . . ' - '~ ", ,">>' / iwc / i o ; . , . ] n g J c w o o d C ] i F I~ , N .. L : P r e n t i c c H a l l , 1 9 7 8 , 2 2 3 .

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DIRECT RESPONSE PERSISTENCY ND MORT LITY 141

The applications were not studied for similarity or distinctions by com-pany. For the application only business, a typical direct response two- tothree-question accept/reject application is believed to be used normally,although the exact questions and the number of %ub-questions" varies bycompany. For the '~with follow-up" business, it is believed the applicationranges from a similar two- to three-question application to in-depth appli-cations that more closely resemble the questions asked on agent nonmedicalapplications.To improve statistical validity, it was necessary to combine the male andfemale data along with several issue age av~d durational cells. Therefore, lessdetailed results are shown in these tables. The expected %'s were calculatedat the individual cell (gender, specific duration, mid-point of 5-year ageband) and then combined for presentation.

For the ultimate durations, only male data were available. Durations 1 l+were chosen to represent ultimate rather than the typical actuarial use ofdurations 16+, because the Task Force be]:ieved any selection effects on thistype of business would generally be worn off after ten durations.Only term insurance was included in ~he analysis. Some whole life datawere collected but were not credible and were left out o f the study to preventdistortion.Data were collected and analyzed on a per-life basis only, not per unit.The age for expected calculations was estimated as the central age of eachcell, except that the central ages for cells; 18-34 and 80+ were assumed tobe 30 and 82, respectively.As with the persistency analysis, companies were not always able to pro-vide data in the exact form requested. One company was able to supp y dataonly in a non-sex-distinct form. The company had stated that 80% of itsbusiness was male, so for measuring expected ratios, we split the businessinto 80% male and 20% female at each age. To the degree that this variesby age, this could cause some distortion in the analysis. Similarly, one com-pany kept its records in decennial age groupings; before submitting its data,the company divided the data in ha lf to :fit the quinquennial age groups (forexample, for age group 40-49, the assumption was made that half of theexposure and hal f the deaths fit into the 40-44 group and the other half fitinto the 45-49 group). None of the data have been smoothed.

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4-2 t 9 9 3 -9 d i S A R E P O R T S

A. 5 ~ . u r4 m a O , q / ' / ; d o r m ' i i O ; 221e)e,-, esTce.)%r i% s 'U ic ~ t io : ,7 with Follow up$ % d e s ' w r iH s v g B ~ ,~ s ii~ e < %Tab]e 1 . samnnarizes . 2 h e -~ ' ~ < , ' " wltx~"- "o . . . . ~v ex>ene,ace ~ - application ml,ow-

up underwrking business. Resuks %r duratio,s - 0 are shown by threebroad age group ings and combined. As s~:ated above, re suks are shown rel-ative to both the 1975-80 Basic SeJecl and Ultimate Table and to the Ul-timate Table. Only maie/2zn:sle combin ed results are shown because o f thelack o credibie ema]e da~a.

T / t B L E 1[ V k ) I { T A I . ' N Y K X i~ E I [ { ~N ( I FO R / "N ~ I) { [('\i 'ON- IH-720[.l.OW-UP U N D E R V x Z R FN N G ~ U S I N E S S

. 'OR PVi , ' \L : iS . \> . :D ~-IFvTAld S C O M I 3 T N H ' J

[ i i%-YcarsDuralioN I%q~l:scd

I 6 8 , 0 9 92 5 2 . 5 1 0I 2 2 0 , 6 0 93 5 1 4 7 2 8 16 - 1 0 1 7 1 8 5 81 - - 1 0

./\c tn Il ) ca l h s

2 62 852.[ 4 13 0 0

1 9 7 % / 98 ( 3 1 9 7 5 1 9 8 0SN cc i an d U k h n N e I % h lc 1 U l t i m a t e T ab ] e, ' \,[ j 2 Standard / AlE 2 Stan dard

Ra io I i ) .v , i a tio tns . [ Rat io De viat ion sI s s t c \ g o g 3 46 7 . 4 % 9 ~ , o ,85 3 3 2 . 97 6 . 0 ] 2 0 . 91 2 2 . 4 j 2 0 . 61 5 r . . . ] 7 . 8

3 8 . 2 % 1 5 . 1 %5 3 . 2 2 0 . 34 4 . 7 1 2 . 39 2 . 2 1 5 . 61 3 8 . 6 1 6 . 0

4 . 3 9 , 2 4 8 - . . . ' ' 7 / "z () ~ 1 3 0 % [ I 1 . , 1 0 1 . 3 % 9 . 1 %l~suc , \go 36 ~9

I 7 6 , ] 5 5 3 8 1 5 5 . 1 % T I 8 . 0 % 2 5 . 6 % 8 .4 -%2 6 2 . 9 0 8 d 3 i 5 3 . 0 ] 6. - 3 1 . 2 9 . 6{ - 2 1 3 9 , 0 6 4 8 ',) 5 4 . 3 2 . 1 2 8 . 3 6 . 33 - 5 2 ( 1 2 :2 9 0 4 3 4 J l 0 . 4 I 1 0 . 6 8 3 . 2 8 . 06 - 1 0 i 4 2 , 7 3 2 d .7 d I 0 4 . 2 I 9 . 6 8 9 . 6 8 . 2I - i 0 4 8 4 , 0 8 6 9 8 S 9 9 . _ 7% j_ o.~_~O,/o 74 .1 % 4 . 7 %

i s st lc A ge 50 74 .i

21--23 - 56 - 1 01 - 1 0

1 7 , 3 6 3i 3 . 0 9 63 0 , 4 5 92 6 , 5 2 97 , 6 2 66 4 , 6 4

3 i ;A~J.k1 6 95 2q - -3 0 i

8 5 . 9 %9 2 . 68 9 . 52 0 . 37 4 . 4i 0 t ) . 4 %

2 8 . 6 % 2 6 . 0 % 8 . 7 %2 7 . 9 3 5 . 6 I 0 . 72 0 . 0 3 0 . 4 6 . 8i 8 . 5 6 0 . 3 9 . 32 0 . 6 4 6 . 3 i 2 . 8i i . 6 % 4 6 . 0 % 5 . 3 %

21 - 23 - 56 - 1 01 - I 0

A l l \ g c s

i 2 Q 5 . ~ - i 1 ~ 4 7 1 . S 1 3 . 5 3 6 . 6 6 . 92 9 0 , i 3 1 : 2 1 3 ] 6 9 . 5 ) .5 3 2 . 1 4 . 43 7 6 , 0 9 9 7 4 3 i 4 / 7 8 . 4 7 7 . 9 5 . 7[ 3 2 ' . , 7 5 826 I I 1 4 . ~ 8 . 0 9 6 . 3 6 . 7[ 9 R , :, -< ,'~ ,78 2 ,r i 06 .4 % I 5 . 0% .I i2 .d /o 3 .4 .%

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D I R E C T R E SP O N S E P E R S I S TE N C Y A N D M O R T A L I T Y 43

Tab le 2 s ho w s the u l timate result s , com bin ed for durations 11 + , gen eral lyby f ive - year a t t a ined age group ings . Not e t hat Tab le 2 shows male l ive son ly , whereas Tab le 1 i s m ale / f em ale combined . T ab le t i s approx im at e ly80 ma le . There w as not enoug h cred ib le f ema le exper ience t o be inc ludedfor durations 11 .

T A B L E 2MOR TALITY EXPERIENCE FOR APPLICATION-WITH-FOLLOW -UPUNDERWR ITING BUSINESS

FOR M A L E S O N L YULTIMATE (DURATION 11 +)

LiE-YearsAtta ined Ag e Exposed Actual Dea~s

18--34 87,6 53 10335--39 50 ,9 98 8440 -44 37 ,74 8 134-4 5 - 4 9 4 2 , 5 8 8 2 013 5 - 4 9 1 3 1 , 3 3 4 4 1 95 0 - 5 45 5 - 5 960- -646 5 - 6 97 0 - 7 475 798 0 +

2 4 , 8 8 02 1 , 1 6 82 0 , 7 9 01 7 ,7 2 61 4 ,4 6 91 0 ,4 7 95 ,3 8 9

2 0 02 6 544-5 6 86 4 67 0 25 2 65 0 - - 8 0 + 1 1 4 ,9 01 3 ,3 5A l l A g e s 3 3 3 , 8 8 8 3 , 8 7 3

1975-198(1 Ultimate Table2 StandardA/E Ratio Deviations

1 0 4 . 0 2 0 . 51 2 4 .8 2 7 .2180 .2 31 .1137 .6 19 .41 4 5 . 6 % 1 4 . 2 %1 4 0 . 5 % 1 9 . 9 %134.9 16 .6139 .4 13 .2128 .9 10 .81 1 2 . 2 8 .81 0 6 .4 8 .09 9 .4 8 .71 1 7 . I % 4 . 0 %1 1 9 . 2 % 3 . 8 %

Overal l , A/E rat ios are h igh re lat ive to recent reported exper ience forstandard nonmedical individually underwritten insurance. The overall rat iore la t ive to the 19 75 - 80 Bas ic Se lec t and Ul timat e Tab le f or durations 1 - I 0com bin ed w as 106.4 . Th e ratio for u l t im ate durat ions (11 +) re lat ive to the19 75 - 80 Ul t imat e Tab le w as 119 .2 . De t a i l ed durational exper ience w asnot captured fo r the end of the norm al Se lect Table (durations 11 -15 ) , sot hat t here i s a b i t o f a d i scont inu i ty m easur ing be t w een t hese t wo numbers .

Com parable ratios to the 19 75 -8 0 Se le ct and Ult im ate Table for s tandardnonmedica l ind iv idua l ly underwr i t t en po l i c i e s as r epor t ed in t he 1 9 9 1 - 9 2TSA Repor ts are 86.5 (betw een 1987 and 1988 anniversar ies) for the se lectper iod ( po l i cy years 1 - 15 ) and 101 .0 ( be t w een 1983 and 1988 ann iver -saries) for the ult imate durations.

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] 4 4 - 9 9 3 - 9 4 T S A R E P O R T S

A d d i t i o n a ] a n a l y s i s s h o w e d t h a t [ nc ~_ iv id ua l c o m p a n y e x p e r i e n c e v a r i e sg re a tl y w it h in th e agg~ega~e~-~ ~mj~,","~ o , d a t a r ep o r t ed i n Tab l e i . _ e n o t e t h a to n i y f o u r c o m p a n i e s e o n t r i b ~ t e d d a t a t o t h i s s e g m e n t . I n a d d i t i o n t o T a b l e

, w h i c h a g g r e g a t e s r o s e ,i ts , v,,,e a i s c m e a s u r e d t h e r a n g e o f r e s u l t s r e l a t i v et o e x p e c t e d w i t h e i t h e r t h e h i g h e s ~ o r i o w c s t c o n t r i b u t e d r e s u l t s r e m o v e d . I ft h e c o m p a n y w i t h t h e w o r s t e x p e ~ ' i e n e e i ~ e s u i t s i s r e m o v e d , t h e r e s u l t i n gA /iE S e l ec t an d U t i m a t e r a t i o d ec r ea s e s fi,o m i d .4 % to 5 i . 4 % ( w i th t w os t a n d a r d d e v i a t i o n s , 4 .. 5% ) . i f t h e c o m p a n y c o n t r i b u t i n g t h e b e s t r e s u l t s isr e m o v e d , t h e r e s u l t i n g A / E S e l e c t a n c i U l t i m a t e r a t i o i n c r e a s e s f t c o r n i 0 6 . 4 %to 16 7.4 % ~v,,i* i~ tw o s tm~cia-c c~ evm uan s, v .2y0 ) .. . . .

W h i l e w e e x p e c t e d a r a n g e o m o r t a l i t y r e s u l t s b y c o m p a n y , t h e v e r yb ro a d ra n ge o f rep oi~ ed ~_~,,~.......:~4,~ i s t in ' eat e r t han w as an t i c ipa t ed b y the t as kf o r c e . S p e c i f i c d a t a w e ? e n o t a v a i l a b l e t o d e t e r m i n e t h e r e a s o n s ~ or t h isd i f ~ r e n t i a ] b u t m a y i n e i ~ d e :c B r o a d d i f f e r e n c e s h~ a m o u n t o z ~ d e r w r i t i n g f o l l o w - u p , w h i c h r a n g e s

l% o m M ~ B o n l y t o A P S ~o f f i m e d i c a l .o D i f ~ b r e n c e s i n t h e u n d e r l y i n g g r o u p s b y c o m p a n y . B o t h s t r o n g a f f i n i t y

g r o u p s a n d b r o a d m a r k e t s o l i c i ta t i o n a r e i n c ]u d ed in th i s a n a l y s i s .o D i f f e r e n t l e v e l s o f r e s o e n s e r a t e s a n d m a r k e t i n g e f f e c t i v e n e s s , w h i c h l e a dto d i ~f ierent levels of a?~t i select iome P r o d u c t v a r i a t i o n s i n c l u d i n g sm o ke ~" a n d n o n s m o k e r p r o & r o t s p l it s .o V a r i a t i o n s i n a v e r a g e s i z e , i ~ ? d i n ~ io m o r e or" t o i e s s a f f l u e n t g r o u p s .o V a r i a t i o n s i n p e r s i s t e n c y , r e su l th ~ g in a d d i t i o n a l a n t i s e l e c t i o n b y d u r a t i o n .o V ar i a t i o n s i n t h e u n d e~: v ,' rh i ng q .u e s ti o n s f n t h e ap p l i ca t i o n , p a r t i c u l a r l y

w i t h r e g a r d t o A I D S . B e c a u s e t h e o b s e r v e d p e r i o d is 1 9 9 0 1 9 92 a n n i -v e r s a r i e s , d u r a t i o n s 5 - 9 i n c lu d e i s s u e s f i o m i 9 8 4 t h r o u g h 1 98 5. T h i s w a sa p e r i o d i n w h i c h s i g n i f ic a n t A i D S a n t i s e l e c t i o n o c c u r r e d p r i o r t o in n-p r o v e m e n t o f u n d e r w r i t in g s t a nd a r d s to e l im i n a t e H [ V / A I D S a p p l ic a n t s.B y d u r a t io n , T a b l e I s h o w s a s h a r p i n c r e a s e i n A / E r a t io s ~ c r m o s t a g e s

i n d u r a t i o n 3 . C o m p a r e d t o t h e S e l e c t a n d U l t i m a t e T a b l e , t h e r a t i o s a r e6 9 .5 % fo ~" d u r a t i o n s i - 2 , i 1 4 .7 %

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D I R E C T R E S P O N S E P E R S I S T E N C Y A N D M O R T A L I T Y 145

The pattern of increase by duration, particularly at the end of the secondyear, was less pronounced in the company contribming favorable A/E re-sults. We understand that this company had a nonsmoker/smoker distinctrating, a larger average size policy, and more complete underwriting follow-up procedures. Durational results with the data of this company removedare summarized below:

Ratio to I975 80 Select and UltimateDura t ion All Contr ibutors Best Removed

1 --2 6 9 . 5 9 3 . 73 - -5 1 1 4 . 7 1 8 1 . 96 - - 1 0 1 1 4 . 8 1 8 5 . 0

The total A/E ratio for durations 11+ as shown in Table 2 is 119.2%. Thisis reasonably in line with the experience shown for durations 6-10. Notethat the durational results can be distor~ed because of differences in therelative proportion of exposures by contributing companies between the se-lect and the ultimate portions of this study.Overall results by age for the entire select period showed the best exper-ience for age 35-4.9 and the worst experience for the youngest ages. Wenote again that patterns o f results by age and by duration have been affectedby the relative proportion of exposures by contributing companies. The high-est ratios during the ultimate period were for attained ages 4ff44, while themore favorable experience was under age 35 and over age 69. It is difficultto evaluate the extent to which results by age are affected by AIDS claims.

B. Su m m ary o f M ortality Experience.for Application Only BusinessTable 3 shows results for the business underwritten by application onlyon an accept/reject basis. Four companies also contributed to this portion ofthe study, but note that the exposure here is only 4% of the exposure forthe prior, with follow-up analysis. There are only 322 total deaths, so thatthere is significantly less credibility to these data. Standard deviations showsignificantly wider ranges here than for the application with follow-up cat-egory. The select experience for application only presented in the same formas in Table 1. Data beyond duration 10 were not available.

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M 6 1993-94 T S A ~ p ~ ~ I ) w q

T A B L E 3i V i O R T A I . I I ' Y ~ X i 'f Ri T {N C I 2 I :O R / \ P P L 1 C / \ I I o N - O N L Y U N D F d ~V v 'R I 'i I N G B U S I N E S S

[ . O R i \ i ,X [ .l {S A N D [ rl EM . ,X L /{ S C ( ) M 3 t N I [ D

[ 23 56 1 0I 1 0

2I 23 56 1 0I-dO

]iXua t i on

197~ i 9S ( ) S e l e c ta n d U k i t n ~ t t : T a b l e

. i {c-N ca t~ Ac tua l[ xp{ >cd Dcat l ' t s

0O000 .32810,328

(i1)003333

2,(126 i 32,38(I i64,406 ~c~8,37{ d48591 55

1 9 7 5 - 1 9 8 0U l t i m a t e T a b l e7, \ '[ 2 | 2 S t a n d a ] d A / E 2 S t a n d a r d

l , La t k~ l ) c v i a l i ons R a t i o De v i a t i ons]:qS[IC A .C ' ,~ 34

318 .8% ] 1 .0318.8% i 11 .0%

i s s u e . \ g u 35 -197] 6 .5% 397.5%55.2 272.6610.7 225.8282.5 85.22 0 5 ~ ; 55.5272 .0% 48 .1%

294 .3% 102 .5%294.3% 102.5%320.1%310.1314.5206.7190.9

177.6%155.1116.862.351.52 1 S 7 5 [ i 2 8 2 1 5 . 8% 3 8 . 2 %

l 1.5422 8091 2 2,3513- 5 4,20 06 10 2 ,789] l 0 9,340

I s s u e A g e 5 0 7 4333871539

I5 i

4 9 2 . 6 %1,480.2766.3241.0i 6 2 / .295 .7%

7 1 . 5 %480.318 i .967.552.04 6 . 6 %

155.3%581.0255.5119.1120 6

I 156.4%

5 4 . 1 %188.560 .633.338.62 4 . 6 %

A l l A g e s

223 56 ] 0

I- i0

3,568 463, i 89 546,757 001Z578 9521,708 1274-1,043 322

540.4% i 159.3%98 .5 267.17 3 .6 i 142.7258.6 53.12O7.8 36.92 8 7 . 9 % I 32. [

I81 .7% 53 .6%461.6 125.6270.2 54.0148.2 30.4175.5 31.1185.6% 20.7%

T h e o v e r a ] i A / Z r a t i o w a s v e r y h i g h , c o m p a r e d t o e x p e r i e n c e r e p o r t e d % rs t a n d a r d n o n m e d i c a a n d i n d i v i d u a ] l y u n d e r w r i t t e n i n s u r a n c e a n d a l s o c o m -p a re d , t o t h e 5 2 r e c t r e s p o n s e e x p e r i e n c e o n a p p l i c a t i o n w i t h f o l l o w - u p u n -c i e r w n t m ~ . A / E r a t i o s a r e g e n e r a n y m g h e r i n a l l a g e s a n d d u r a t i o n s a n ds h o w a s l o p e t h a t is : ;a c re t y p i c a l o f g u a r a n t e e d i s s u e b u s i n e s s O v e r a l l t h ee x p e r i e n c e w a s 2 8 8 % 0 t h e 1 9 7 5 - 8 0 S e e c t a n d U l t k n a t e T a b i e . T h e r a t i o sd i d no~: s h o w a s i g n i f i c a ? t v a r i a t i o n o f r e s u l t s b y a g e , b u t a g a i n w e c a u t i o nt h a t t h e e x p o s u r e s w e r e l i m i t e d .

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DIRECT RESPONSE PERSISTENCY AND MORTALITY 147

The high A/E ratios indicate that the no follow-up business has beensubject to significant antiselection, at least for the companies contributing toour study. The impact of AIDS is once again not explicitly known.iV MORTALITY EXPERIENC E FOR GUARANTEE D ISSUE LIFE PRODUCTS

The analysis approach to guaranteed issue products was the same as thatfor underwritten products. For guaranteed issue products, the expected tableused is the U.S. Life 1979-81 Male/FemaIe White Table.The products presented here are all graded death benefit products, whichhave the shared characteristics of a limited-death-benefit feature in the firstfew durations (usually two to three). During this period, the death benefitmay be a return-of-premium or a pro-determined low face amount. For ac-cidental death, the full face amount is often paid. The term product may belevel or increasing premium and also may be level or decreasing faceamount.

As with underwritten mortality, data were collected and analyzed on aper-life basis only, not per unit. The age for expected calculations was es-timated as the central age of each cell, except that the central ages for cells18-34 and 80+ were assumed to be 30 and 82, respectively.As with the persistency analysis, companies were not always able to pro-vide data in the exact form requested. One company was able to supply dataonly in a non-sex-distinct form. The company had stated that 80% of itsbusiness was male, so for measuring expected ratios, we split the businessinto 80% male and 20% female at each age. To the degree that this variesby age, this could cause some distortion in the analysis. Similarly, one com-pany kept its records in decennial age gro'apings; before submitting its data,the company divided the data in ha lf to fit the quinquennial age groups (forexample, for age group 40-49, the assumption was made that half of theexposure and half the deaths fit into the 40-44 group and the other half fitinto the 45-49 group). None of the data has been smoothed.Data were not analyzed separately for individual contributing company.Unlike the underwritten term data, no significant skewing by companyseemed to be present in the underlying results.

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4- 8 : ,x;v. 9 ~ / S , , ' /," ' , ~ " R- , , . S

~a. c>;,;~7.:~:~:,. '~ : / , ; / ; : A / / , / , : ' . J 2 : 7 , " / ~ M . : ' " . j ( i ; v u ~ / 7 ~ . , ) / e ; f b. . . . . . ~ P r o c / t ~ c t s~ a N s z . s u < 2n ta T[z :2 ~: : c / :. . : a i : > s ( < st : ~ S ,a ,~ ;v x p r o d u c t f o r e a c h o f

t ~ c 2 7 T i . : s ; - ~ , ' , ' c - , . . ~ : c o : :2 -: ; . ~ : c . ; ~ ~ t n -~ ..,~ ,.,:~ '~ ~ d n m e s a n d c o m b i n e d .

: ' 2 , 2 { .1. ,'~( 'i 5 ' ,{. - ; - ] N '1( ' "[21) ~ ' , i ( 'S , )R { i ; ; 21: . , ' ,Ni i ' I }D [SS[. ] i , ( }R,XD Et )DE, , \ ' r I t BIENEI ' IT

' , ; , [ ( ) . 1 . l I ? ~ O I ) U C I S~, l i R ; I @ ~ I s

Du mt o] 25 dC 5~} % [ < 5~; " s ~ 0 07 I 0 8 1 9

2 ~ : ~ 5 _ i . n , : . . . i . 6 2 { : _ I T I T _ _2. ( : [ ]L 7 2 52 / ( ; ?2 . 7 O 22 . 5 2 Y2 . 2 72 . 4 6 82 . 0 7 12 . ( 1 Gi . 7 2 2

kiRJcN ~ id ]C[NR[C ((1 ll[)]/lq2d2 . 2 7 : ) i . 9 g '. 1 . 5 6 02 :, i :: : 8 8 i 5 ~< ,-;2 . 2 3 ~ ; .

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D I R EC T R E S P O N S E P E R S IS T E N C Y A N D M O R T A L I T Y 49

T a b l e 5 p r e s e n t s t h e sa m e i n f o r m a t i o n in m o r e d e t a il : l i fe - y e a r s e x p o s e d ,a c t u a l d e a t h s , a n d s t a n d a r d d e v i a t i o n s a s w e l l a s A / E r a t i o s . F o r c e l l s i nw h i c h e x p e r i e n c e i s l im i t e d , w e h a v e s h o w n A / E r a t io s o f z e r o . I n m e a s u r i n ga g g r e g a t e r a t i o s a c r o s s a g e s o r a c r o s s d u r a t i o n s , n o t e t h a t o m i t t e d c e l l s c a na f f e c t t h e s e c o m p a r i s o n s . F o r i n s t a n c e , i n T a b l e 4 , fo r m o s t a g e b a n d s , t h em a l e a n d f e m a l e A / E r a t io s ar e s im i la r . H o w e v e r , a t a g e s 5 5 - 5 9 , t h e m a l er a ti o is n o t i c e a b l y h i g h e r th a n t h e f e m a l e r a ti o. H o w e v e r , t b r t h i s a g e g r o u p ,o n l y t h e fi rs t f iv e d u r a t i o n s o f m a l e e x p e r i e n c e a re p r e s e n t e d ; t h e r e f o r e t h ed i f f e r e n c e i s d u e m o r e t o d u r a t i o n w e i g h t i n g t h a n to s e x d i f f e re n c e s .

O v e r a l l , A / E r a t i o s a r e g r e a te r t h a n 1 0 0 a t a l l a g e s a n d d u r a t io n s e x c e p tf o r a f e w l a t er d u r a t io n s a b o v e a g e 7 5 . T h e r a t io s s h o w v e r y l i t tl e d i f fe r e n c eb y s e x b u t d o s h o w a g e n e r a l l y d e c l i n i n g p a t t e rn as a g e i n c r e a s e s a n d a sd u r a t i o n i n c r e a s e s .

T A B L E 5MORTALITY t~XPERIENCE FOR GUARANTEED ISSUE GIG KDED-DEAFH-BENEFIT

V~THOLF, LIFE PRODUCTS

Duration

i2345678910A l l D u r a t i o n s

2345678910A l l D u r a t i o n s

Male FemaleLife Years Actual A/E 2 Standard Life -Year s Actu al lE 2 Standard

Exposed Deaths Ra tio Deviations Exposed D eaths Ratio DeviationsA g e s 45-49

2 ,3 0 6 2 3 1 .9 4 0 8 0 .9 2 8 7 1 4 1 .6 4 0 1 6 4 .0 21 ,8 4 6 [ 5 3 5 .0 1 1 3 7 .6 5 1 ,6 5 7 2 2 4 .2 8 3 1 8 2 .6 21 ,7 6 4 [ 3 2 2 .8 0 9 9 9 .8 3 2 ,2 6 4 2 0 2 .5 7 6 1 1 5 .2 01 ,9 1 6 3 3 2 .4 1 5 8 4 .4 9 2 ,3 7 3 1 2 1 .3 4 5 7 7 .6 61 ,845 52 3 .6 13 00 .52 2 ,135 19 2 .171 99 .611 ,5 8 5 3 3 2 .4 4 9 8 5 .2 8 1 ,9 8 8 2 7 3 .0 3 8 1 1 6 .9 51 ,3 9 5 2 9 2 .2 2 6 8 2 .6 6 1 ,6 1 8 2 0 2 .5 3 3 I 1 3 .2 81 ,0 6 1 2 4 2 .2 0 3 8 9 .9 2 1 ,2 9 3 2 3 3 .3 4 4 1 3 9 .4 41 ,159 31 2 .37 8 85 .4 0 1 ,151 18 2 .701 127 .320 0 0 .000 0 .00 _ 1 ,276 17 2 .121 102 .911 4 ,8 7 8 3 0 9 2 .7 6 0 3 1 .4 0 1 6 ,6 2 5 1 8 2 2 .5 5 1 3 7 .8 1

A g e s 50 546 ,1 1 95 ,5814 , 6 5 05 ,3 1 05 , 4 6 94 , 4 6 74 ,0 4 13 ,6 2 33 ,7 4 70

4 3 , 0 0 6

1 1 8 2 . 2 6 9 4 1 . 7 7 6 , 9 5 7 9 9 3 . 1 8 41 4 0 2 .6 8 6 4 5 .4 0 6 ,5 4 0 8 9 2 .7 8 91 1 8 2 . 4 7 8 4 5 . 5 6 5 , 1 9 6 6 8 2 . 4 4 81 5 6 2 .6 1 7 4 1 .8 6 5 ,5 9 9 9 3 2 .8 5 91 7 2 2 .5 6 8 3 9 .1 3 5 ,8 4 6 1 0 5 2 .8 5 11 3 6 2 .2 7 5 3 9 .0 2 5 ,2 9 4 8 6 2 .3 8 51 3 8 2 .3 3 3 3 9 .7 1 4 ,4 7 6 9 0 2 .7 1 01 2 7 2 .1 8 4 3 8 .7 6 3 ,7 8 5 5 7 1 .8 5 71 5 2 2 .3 0 2 i 3 7 .3 5 3 ,3 7 5 4 8 1 .6 0 00 0 .0 0 0 0 .0 0 3 ,1 5 6 5 3 1 .7 2 21 ,2 5 8 2 .4 1 1 1 3 .5 9 5 0 ,2 2 3 7 8 7 2 .4 5 5

6 3 . 9 95 9 .1 25 9 .5 25 9 .3 95 5 .7 45 1 .4 55 7 .1 34 9 . 1 94 6 . 1 84 7 . 3 21 7 .5 1

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5',. , 1 9 93 94. T S A R E P O R T S

i ,,~..;.,,/2 < 5 O o n t i ~ l d

) u r a t i o ] l

X k t i 1 F o l n a l c

i 8 ] 7 t 42 7 " q ( ~ 4 .3 6 . 2 5 74 71 ; . 97

7 ' 6 9 i8 p 09 00 ( }

A ll L~tua~"~o ; ~ l ' 3 7 , 3 6 8

2 8 2

{(10i - . 3 3 5

1 2 , 9 7 6 5 9 31 1 1 , 5 9 8 4 5 78,(}83 [ 39,69 , 3 16 l 46 : ..9 . 9 4 9 [ 5 9i) I' o6 . 9 5 6 3 8 0617 82 39 1" 06 . 9 5 7 4 . 3 7

, i , 6 I ~ I 3 , 6 3 0

i23456789I 0

A ] I D u r a t i o n s

, \ p e n 5 5 5 ~ )2 . 39 ] - r - 7 7 T2 3 . 4 8 %2 . 2 9 , 2 8 . 9 0v v 3 2 9 . 9 32.15 /~ I 26. I}9- '3.6322 . } 7 5 ] - L 0 110 . o o ( )0 . 0 ] 8 0 . 0 00 . 1 ) 0 0 0 , 0 0, , t p, , ~1 ,. 0 1 , ~ [ 0 . 0 02 . 2 i 7 1 i 2 . 4 %

' < a c s D (

g , 4 6 0

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D I R E C T R E S P O N SE P E R S I S T EN C Y A N D M O R T A L I T Y 5

T A B L E 5 Continued

D u r a t i o n

2345678910

A l l D u r a t i o n s

12345678910

A l l D u r a t i o n s

23456789I 0

A l l D u r a t i o n s

M a l e F e m a l eL i f e Y e a r s A c t u a l A / E 2 S t a n d a rd L i f e Y e a r s A c t u a l A / E 2 S t a n d a r d

E x p o s e d D e a t h s R a t i o D e v i a t i o n s E x p o s e d D e a t h s R a t i o D e v i a t i o n sA g e s 6 5 6 9

1 4 ,1 8 31 1 ,7 0 78 ,3 7 09 ,0 5 09 ,3 2 86 ,4 7 85 ,6215 , 0 5 44 , 3 3 63 ,6 7 8

7 7 , 8 0 4

9 , 3 5 97 , 1 3 64 , 7 0 04 , 8 5 64 , 8 5 62 , 7 6 42 , 3 3 22 , 0 9 81 ,7631 ,4254 1 , 2 9 0

2 1 21 ,2 1 46516 2 45 7 32 7 22 1 52 0 2175129

4 , 2 6 7

7 1 0 1 .5 5 6 1 1 .6 8 1 1 ,8 2 6 2 9 6 1 .5 6 9 1 8 .2 46 6 4 1 .6 2 3 1 2 .6 0 1 2 ,7 7 0 3 5 5 1 .5 9 8 1 6 .9 65 1 3 1 .6 1 0 1 4 .2 2 I 1 ,3 2 2 3 5 6 1 .6 5 0 1 7 .4 95 3 5 1 .4 2 4 1 2 .3 2 1 2 ,5 7 7 4 1 8 1 .5 9 0 1 5 .5 5598 1 .419 11 .61 13 ,168 41 9 1 .388 13 .56391 1 .232 12 .46 10 ,22 0 338 1 .314 14 .29352 1 .183 12 .61 8 ,955 285 1 .153 13 .663 4 4 1 .1 9 3 1 2 .8 7 7 ,8 4 4 2 8 3 1 .1 9 2 1 4 .1 72 9 7 1 .1 1 4 1 2 .9 3 6 ,3 3 3 2 0 5 0 .9 7 6 1 3 .6 4295 1 .208 14 .06 5 ,213 191 1 .007 14 .58

4 ,6 9 8 1 .3 8 4 4 .0 4 1 0 0 ,2 2 7 3 ,1 4 7 1 .3 4 9 4 .8 1A g e s 7 0 ~ 4

5 7 8 1 .2 6 0 1 0 .4 8 8 ,9 0 1 3 0 6 i . 3 6 6 1 5 .6 24 6 8 1 .2 3 9 1 1 .4 5 9 ,6 9 3 3 5 5 1 .3 2 7 1 4 .0 93 2 2 1 .2 0 0 1 3 .3 8 8 ,0 0 3 3 1 7 1 .3 0 7 1 4 .6 9338 1 .131 12 .31 8 ,373 348 1 .253 13 .44376 1 .165 12 .02 8 ,150 355 1 .197 12 .71248 1 .250 15 .87 5 ,065 232 1 .141 14 .98189 1 .044 15 .19 4 ,351 236 1 .214 15 .811 8 6 1 .0 5 6 1 5 .4 9 3 ,8 0 8 2 0 3 1 .0 6 7 1 4 .9 81 5 2 0 .9 4 8 1 5 .3 7 3 ,2 7 5 1 6 9 0 .9 2 3 1 4 .2 0143 1 .015 16 .98 2 ,7 00 138 0 .819 13 .952 ,9 9 9 1 .1 6 1 4 .2 4 6 2 ,3 1 8 2 ,6 5 8 1 .1 8 3 4 .5 9

A g e s 7 5 7 92 1 1 . 38 0 6 0 . 2 1 t , 5 4 6 5 8 0 . 9 3 4 2 4 . 5 47 9 0 .8 3 8 1 8 .8 6 1 ,5 3 3 7 4 1 .0 81 2 5 .1 25 5 1 . 00 6 1 2 7 . 1 4 1 , 1 7 i 6 2 1 . 0 60 2 6 . 9 35 6 0 . 9 8 6 1 2 6 . 3 6 1 , 23 3 6 5 0 . 9 4 3 2 3 . 4 04 3 0 .7 5 9 2 3 .1 5 1 ,2 2 5 6 2 0 .8 1 1 2 0 .6 12 0 0 . 6 8 5 3 0 . 6 4 7 1 4 4 6 0 . 9 2 7 2 7 . 3 42 6 1 .0 41 4 0 .8 4 5 9 5 4 4 0 .9 5 9 2 8 .9 12 4 0 .9 4 9 3 8 .7 3 5 1 4 3 3 0 .7 5 2 2 6 .1 82 6 1 .1 0 0 i 4 3 .1 4 4 2 1 3 3 0 .8 2 8 2 8 .8 41 5 0 .7 9 7 4 1 .1 5 3 4 3 2 9 0 .8 0 6 2 9 .9 3

3 6 5 0 . 9 1 4 9 . 5 7 9 , 2 9 4 5 0 6 0 . 92 1 8 . 1 9

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1 5 2 ] 9 9 3 -9 4 T S A R E P O R T S

T a b l e 6 s h o w s r e s u l t s or d u r a t io n s ] i + b y f i v e - y e a r attained a g e g r o u p s .I n e o n q p a r i n g t h e A / E r e s u l t s f r o m 7 a b l e 4 , t h e r e i s a s h a r p d i s c o n t i n u i t yb e t w e e n d u r a ti o n i 0 a n d t h e d u r a t io n s i + b u s i n e ss . T h e le v e l o f h o m o -g e n e i t y o f d a t a is u n c l e a r a t th e s e d u r a t i o n s ; i t i s p o s s i b I e t h a t l a t e r d u r a t i o n sr e p r e s e n t a d i s t i n c t c a s s o f b u s i n e s s ~ ha t i s e i t h e r n o t i n c l u d e d o r i s a l e s s e rpor~don o t o t a l e x p o s u r e o e a r l i e r d u r a t i o n s . W e n o t e t h a t t h e e x p o s u r e a td u r a t i o n i 0 i s 3 6 , 4 5 9 , w , i~ erea s :~ he ex p o s u re f o r a l t d u ra t i o n s i 1 + i s o n l y9 4 , 4 4 1 .

T A B L E 6iX/IORTALITY ,~XPERiENCE i~OR (}UARAN TEED iSSU E GRAD ED-DEA TH-BENEFIT

\7vqIOLE ~F 'E ~RODC CTS DU RATION 1 ] +

Ailained Age5 5 5 95 0 -6 4 .5 5 - 6 9A I1 A g e s

vlale FemaleLifb-Years [ Actual A/E 2 Standard Lit b- /ea rs Ac tual lE 2 StandardExposed l Deaths Ra tio Ds via t io ns Exposed Deaths i R a t io Deviat ions

7 , 8 7 0 3 7 5 3 .5 6 1 3 6 . 7 8 % 1 3 , 3 0 5 3 1 8 3 . 5 1 0 3 9 . 3 6 %1 3 , 4 0 9 7 1 8 2 . 5 2 7 1 8 . 86 2 0 , 8 9 5 6 0 5 2 .7 1 4 2 2 . 0 6i 5 , 2 8 2 9 4-0 1 . 9 1 i i 2 . 4 7 2 3 , 6 8 0 8 4 1 2 . 2 2 7 1 5 . 3 63 6 , 5 6 ] 2 , 0 3 3 3 1 2 . 3 0 7 ] 0 . 2 3 % I 5 7 , 8 8 0 1 , 7 6 4 I 2 . 5 5 2 1 2 .1 5

T a b l e s 7 a n d g s h o w r e s u k s ~%r b u s i n e s s t h a t c o u l d b e i d e n t i f i e d a s e i t h e rc urt'e nd : c u s t o m e r o r a f f in i t y . S e p a r a t e b r o a d m a r k e t b u s i n e s s w a s n o t a v a i la b l e f o r t h e G B W L p r o d u c t . T h e t o t a l a f fi n i ty e x p o s u r e i s 1 1 5 , 38 3 l iv e s ,w h i c h is 1 6 % o f t h e to t a l G B W L e x p o s u r e . T h e t o t a l cm ~re nt c u s t o m e r e x -p o s u r e i s 7 8 ,0 4 9 , w h i c h is i i % o f t h e t o ta l G B W L e x p o s u r e . T h e A / E r a t io sf o r th e a f f i n it y m a r k e t s a r e i o w e r t h a n t h o s e f o r th e c u r r e n t c u s t o m e r b u s i -n e s s. A s w k h t h e g e n e r a l p a t t e r n o f r a ; io s g r a d i n g d o w n w i t h a t ta i n e d a g ea n d d u r a t i o n , t h i s d i f f e r e n c e is m o r e n o t i c e a b l e a t ~:he y o u n g e r a g e s a n d a tt h e e a r l y d u r a ti o n s. R e a s o n s f o r d if i ~ r e n c e s in a f S n i t y a n d c u r r e n t c u s t o m e rm a r k e t s c a n n o t r e a d i I y b e d e te r .m i n e d b e c a u s e o f t he d i f f e r e n t m i x e s o f b u s i -n e s s p r o v i d e d b y e on

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D I R E C T R E S P O N S E P E R S I S T E N C Y A N D M O R T A L I I T Y 53

T h e u n d e r l y i n g m o r t a l i t y m a y b e b e t te r f o r t h e n a m e s s o l i c i t e d i n t h ea f f in i t y m a r k e t b e c a u s e t h e n a tu r e o f t h e a f f in i t y m a y l i m i t t h e p r o p o r t i o no f v e r y p o o r r is k s i n t h e e x p o s u r e . T h e c u r r en t c u s t o m e r l i s ts a r e m o r el i k e l y t o h a v e c o m e f r o m a b r o a d m ar ke t b a s e s u c h a s a t e l e v i s i o n / n e w s ~p a p e r s o u r c e .

T A B L E 7~IORTAL[TY EXPERIENCE FOR WH OLE LIF E PRODU CTS FOR CURRENT CUSTOMERS

55-59 60-64 65-69 70+ All g e sDuration Exp. A/E Exp. AJE Exp. [ AdE Exp. A/E Exp. A/EMales

1 ~,,08~ 2 . 89 7 2 ,8 57 2 .4 45 3 , 1 2 4 - 1 . 9 0 0 ~ [ ~ i 1.3 23 1 0,0 69 1 .8 862.605 2 ,87~ 2 .103 3 ,54 30 1 .86 5 1 .352 10,67~ 1 .7973 0 0 .000 0 0 .000 3 ,71~ 0 .000 2 ,04~ 0 .000 9 '65 2 0 .0004 0 0.000 3,895 1.885 1.427 1.075 1.4320.000 0 .000 0 .000 0 .000 0 .000T o t a l 3,902 2.74 0 9,626 2.263 10,379 1.848 6,485 1.220 30,39 2 1.745

Females1 2,526 2.325 3,912 1.797 4,541 1.6022 2,661 2.077 4,336 1.866 5,371 1.5943 0 0 .000 0 0 .000 0 0 .0004 0 0.000 4,62 0 1.922 5,353 1.5125 0 0 .000 0 0 .000 0 0 .000T o t a l 5,187 2.192 12,868 1.956 15,265 1.673

Males and Females Corabined1 4,40 9 2.665 6,769 2.180 7,665 1.7752 4,68 0 2.393 7,210 2.001 8,914 1.7493 0 0.000 0 0.000 0 0.0004 0 0.000 8,515 1.899 9,064 1.4635 0 0 .000 0 0 .000 0 0 ,000T o t a l 9,089 2.519 22,49 4 2.141 25,643 1.774

4,857 1.302 15,836 1.5295 ,357 1 . 3 2 1 17 ,725 1 .5300 0.000 0 0.0004,123 1.130 14,096 1.4150 0 .000 0 0 .00014,337 t .239 47,657 1 .519

7 ,0 6 2 1 . 3 1 1 2 5 ,9 057,592 1 .334 28,3960 0 .000 06,169 1.104 23,7480 0 .000 020,823 1.230 78,04 9

1.7171.6660.0001.4250.0001.638

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154 i993-94 TSA REPORTS

] A B L E 8N' i OR T A I . I T Y E XP E R E NC F . F OR Vv ~ HOL E ~ I F [ ~, P R O DI J C T S F OR A F F I N I T Y C U S T O ME R S

55 59 J 60 (6.. 65 69 I_ 70 = AII Ag esDura:ion Exp. A ES Exp A/E Exp. ] A.,E I Ex p. A/E Exp. A/E

Males7- 5 759 2 .050 8 ,3 3 8 i .834 9 , i 93 1328 5 .968 1 .2 0 0 29 ,258 .4562 3 17 12 i.6 75 4 1 9 3 6 i .4 5 2 5 ,2 27 1 . 3 6 3 3 1 2 9 4 1 . 1 0 1 1 7 , 1 6 9 1 . 3 2 83 " 0 0 .000 31 05 2 i .481 2 ,979 1 .3 5 3 2 ,116 1 .235 8 ,14 6 1 .4094 2 278 1 .7 6 1 ~919 i .543 2 ,809 1 .325 1 ,372 1 .164 91370 1 .3865 0 0 .000 0 0 .000 0 0 .000 2 ,1 4 1 1 .049 2 ,14 1 2 .060T o ta i 1 1 , 7 4 9 2 .1 28 i9 ,2 3 7 i .7 73 2 0 ,2 07 I . A . 5 4 1 4 , 8 9 1 1 . 1 5 3 6 6 , 0 8 5 1 .4 .4 9Fcnna[cs

i.20 9 5 , 2 0 5 1 . 2 7 7 3 , 5 8 1 1 . 1 7 5 1 8 ,9 5 21.I53 4 . ,1 7 8 1 . 2 7 9 2 , 9 2 1 1 . 0 3 5 1 4 ,9 1 ~0.000 0.000 0 0.0001.655 3 ,97~ } 4 82 2 . 1 8 8 1 . 1 6 3 1 3 , 3 4 00 .000 0 .000 2 10 93 1 .058 2 ,0931 .7 7 2 1 3 , 3 6 2 1 . 8 6 2 1 0 , 7 8 4 1 . 1 3 2 4 9,2 98

Males and Females Com bined1 .6 7 8 1 4 , 3 9 8 1 . 3 1 7 9 ,5 49 1 . 1 9 4 4 8,2 101 .3 6 2 9 , 4 0 6 1 . 3 3 9 6 , 2 1 5 1 . 0 7 9 32,08 21 .935 2 ,979 1 .8 94 . 2 ,116 1 .236 8 ,1461 . 5 8 9 6 , 7 8 6 1 . 3 9 0 3 ,5 6 0 1 . 6 4 2 2, 71 00.000 0 0.000 4,234 1.0 52 4,2341 . 7 44 3 3 ,5 6 9 1 . 5 5 7 2 5 ,6 75 1 . 1 4 6 1 1 5 , 3 8 3

I2345Total

4 ,6 64 1 . 6 3 7 5 , 5 0 2 I1.893155~ 0.000 4,25~3,12~ 0.0001726 4,048

I1,35 1 2 .047 13.802 II 0 ,4 2 3 1 . 9 3 0 1 3 , 8 402 7 ,271 .746 9 , i903 0 0 . 0 0 0 3 ,0 524 5 ,406 1 .7 4 6 6 ,9575 0 0 .000 0Total 23,100 2 .10i 33,039

1.2671.2310.0001.4432.3681.5241 . 4 1 01.2981.6591.4102.1701.472

N o a t t e m p t w a s m a d e to c o m p a r e t h e s e r e s u ] t s to a n y o t h e r T S A R e p o r t sd a ta . T h e g u a r a n t e e d i s s ~ e b u s i n e s s i s s i g n i f i c a n t i y d i f f e r e n t P ro m a n y u n -de rw rk ten eus_ness p re v io us ly p~:@iishe 4 in th e T S i Re por ts .

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DIRECT RESPONSE PERSISTENCY AND MORTALITY 55

B Summ ary of Mortality Experience fo r Graded Benefit Term LifeProductsTable 9 sum m ar ize s the A /E rat ios f or t he GBT L produc t f or each o f the

f irst f ive durat ions each age group and m ales fem ales and com bined . Tab le10 presents the sam e informa t ion in m ore detail : l i fe -years ex po sed actualdeaths and standard deviat ions as we l l as the A/E rat ios . For ce l l s in w hi chexper ience i s l imi t ed w e have show n A /E rat ios o f zero .

TABLE 9ACTUAL-TO-EXPECTED RATIOS FOR GUARANTEED ISSUE GRADED-DEATH-BENEFIT

TERM PRODUCTSA/E Ratios

. . Duration 50-54 55-59 60 64 I 65 69 70-..74 All AgesMales

1 0.000 2.971 2.309 1.827 0.000 2.2182 2.887 2.825 2.256 1.859 0.000 2.1843 3.392 2.515 2.200 1.845 1.838 2.1204 3.306 2.425 1.906 1.512 1.459 1.8615 2.547 2.458 1.887 1.517 1.429 1.8236 2.472 0.000 0.000 1.451 1.180 1.512All Durat ions 2.782 2.506 1.984 1.583 1.394 1.851

Females1 0.000 0.000 2.559 2.420 0.000 2.4782 3.895 3.595 2.884 1.885 0.000 2.6113 3.403 3.426 2.514 1.970 1.614 2.3114 3.904 2.608 2.538 1.851 1.458 2.1425 3.038 2.333 2.098 1.754 1.506 1.9326 2.551 2.267 1.890 1.526 1.266 1.736All Durations 3. I 18 2.522 2.222 1.768 1.424 1.990

Males and Females Cambined

123456All D u r a t i o n s

0.0003.2243.3953.49I2.7032.4982.890

2.9713 0582.7762 4822.4172.2672.512

2.3852.4382.2842.0871.9501.8902.072

2.004 0.0001.866 0.0001.880 1.7511.623 1.4591.602 1.4621.479 1.2161.645 1.406

2.2842.3082.1761.9531 8 6 11.6271.902

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] 5 6 9 9 3 -9 4 T S A R E P O R T S

T A B L E 1 0b , ,~ ( )RTALFI 'Y ~ 'XPER/I{NCE POR GUA RA NT I i{D iSSUE G RADED-DILB, .I I- I-BENIF/T TE RM PRO DU CT S

A l l D u r a t i o n s

t Male t_ FemaleLife Yc~:s cmal ,~,[ 2 Stan dax ] l . ilb-Yclrs Actual A,/ 2 Standard

D;~ration Exposed Deaths R at io I)cviatkms Exposed Deaths R at io Deviat ionsAges 50 5

0 0 0 .0 0 0 ] 0 .0 0 % 0 0 0 .0 0 0 0 .0 0 %1 2 6 i 34. 2 . 8 8 7 9 9 . 0 2 1 , 21 0 2 3 3 . 8 9 5 1 6 2 . 4 42 ,8 1 3 9 8 3 .3 9 2 i 6 8 .5 3 2 ,4 8 6 [ 4 5 [ 3 .4 0 3 1 0 1 .4 46 ,452 240 52.306 [ 42 .6 9 5 ,618 I 127 [ 3 .904 I 69 .298 ,256 258 2 .547 ] 31 .7 l 7 ,5

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DIRECT RESPONSE PERSISTENCY ND MORT LITY 157

T h e A / E r a t i o s f o r t h e G B T L p r o d u c t a r e g e n e r a l ly h i g h e r a t al l a g e s a n dd u r a ti o n s t h a n t h o s e f o r t h e G B W L p r o d u c t . T h i s m a y b e i n d ic a t iv e o f m a r -k e t d i f f e r en ces o r ad d i t io n a l an t i se l ec t io n f ro m th e t e rm p ro d u c t , wh ich g en -e r a ll y h a s a l o w e r u n i t p r e m i u m t h a n t h e G B W L p r o d u c t . I n a d d i ti o n ( a ssh o wn ea r l i e r i n th i s r ep o r t ) , t h e p e r s i s t en cy fo r th e GBTL p ro d u c t i s s ig -n i fi c a n tl y w o r s e t h a n t h e p e r s is t e n c y f o r t h e c o m p a r a b l e G B W L p r o d u c t . A sw i t h t h e G B W L p r o d u c t , t h e A / E m o r t a l i t y r a t i o s d e c r e a s e w i t h b o t h i n -c r ea s in g ag e an d in c r eas in g d u ra t io n .

T a b l e 11 s u m m a r i z e s t h e G B T L p r o d u c t s f o r b r o a d m a r k e t a n d T a b l e 1 2sh o ws th e GBTL r e su l t s f o r t h e a f f in i ty m ark e t . Wh i l e th e a f f in i ty m ark e tex p o su re i s r e l a t iv e ly sm a l l , o n ly 8 ,4 6 2 l iv e s , t h e r e su l t s sh o w m o r ta l i t yr a t io s n o t t o o d i s s im i l a r f r o m th o se o f th e w h o le l i fe a f f in i ty g ro u p an ds ig n i fi can t ly b e t t e r re su l t s t h an th e to ta l G B TL l in e . Th e b ro a d m ark e t r a t io s ,w h i c h i n cl u d e 1 4 4 , 84 5 l i ve s e x p o s e d ( 5 0 o f t h e t o ta l e x p o s u r e f o r t hi sp ro d u c t ) sh o w r e su l t s su b s t an t i a lly h ig h e r th an th e a f f in ity m a rk e t an d so m e-wh a t h ig h e r th an th e ag g reg a te m ark e t . We n o te th a t t h e r em a in in g d i f f e r -e n c e b e t w e e n t h e e x p o s u r e s i n T a b l e 11 a n d 1 2 a n d t h o s e u n d e rl y i n g T a b l e9 (2 8 8 ,3 2 7 l iv e s ex p o sed ) a r e cau sed b y d a ta in c lu d ed in th e to t a l t h a t we ren o t sp ec i f i ca l ly id en t i f i ed an d sep a rab le b y m ark e t .An ex p lan a t io n fo r th e d i f f e r en ces in m o r ta l i t y b y m ark e t i s ag a in n o tr e a d i l y d i s c e m i b l e b u t m a y b e d u e t o t h e s a m e r e a s o n s s t a t e d a b o v e .C Interpretation of Results

In u s in g th e an a ly ses in th i s r ep o r t , i t m u s t b e r eco g n ized th a t t h e d a tas u p p l i e d a r e f a r f r o m h o m o g e n e o u s . W k h i n t h e p r o d u c t g r o u p i n g s s h o w n ,th e r e a r e so m e v e ry d i sp a ra t e p ro d u c t t y p es . I n ad d i tio n , d i f f e r en t su b m i t t in gco m p an ie s h av e d i f f e r en t l ev e l s o f a ff in ity , b i l li n g m e th o d s , m ark e t t y p es ,an d o th e r f ac to r s th a t c au se in d iv id u a l su b se t s o f t h e se d a ta to h av e d i f f e r en tl ap sa t io n th an th e ag g reg a te . Co m p an ie s en te r in g an d ex i t in g b u s in ess l i n e sm a y h a v e p r o v i d e d d a t a f o r a f e w d u r a t i o n s o n l y . T h i s c a n c a u s e c h a n g e sin th e o v e ra l l ex p e r i en ce d u e to d i f f e r en t we ig h t in g s ac ro ss d u ra t io n s . I na d d i t i o n , l a p s e c o n s e r v a t i o n m e t h o d s v a r y b y c o m p a n y a n d a l s o o v e r t i m e .T h i s w i l l h a v e a n e f f e c t o n o v e r a l l p e r s i s t e n c y a n d p o s s i b l y o n m o r t a l i ty .D i r ec t r e sp o n se p ro d u c t s o f t en u se u p g rad es o r ad d -o n s a f t e r t h e in i t i a li s su e , a n d w e b e l i e v e t h a t th e s e a f f e c t p e r s is t e n c y a n d m o r t a li ty . A f t e r m u c hd i s c u s s io n , t h e T a s k F o r c e c o n c l u d e d t h a t u s e f u l i n fo r m a t i o n c o u l d n o t f e a -s ib ly b e o b ta in ed o n u p g rad es . Th e im p ac t o f u p g ra d e r id e r s an d th e d i f f i-cu l ty in cap tu r in g in fo rm a t io n w ere p a r t o f t h e r a tio n a le fo r d o in g th e s tu d y

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DulaIion

T A B L E 1 1MORTALITY E XPERIEN(?E FOR GUA RANTEED ISSUE GRADED-DEATIt- t~,EN[zFII TERM PRODUCTS

FOR THE BROAD MARKET55 59 --]_ 60 64 65 69 [ 70+ All AgesLxP I _A E l E x p . - t Aq i E x p . [ A /E d Exp . I . .. . A /E . . . . Ex p. _ . [ A /E

12345Total12345Total

A/E

o o o o o o - T S ~ - ]530 3.03 0 894 4..126 /1,594 4.093 2,713 I 2.5 26 ]4,553 3.456 5,791 [ 2.3 23 [6 ,858 2662 8413 2 53~ l - -1 3,5 35 I_ 3 .0 83 I 1 7 ~ - - - ] - 2 . 5 3 0 1

o 5 . d ~ ] oo o . o o o / 8321,457 4.515 | 2,2 293,965 4.574 / 5,4 146,278 3 .0 4 4 | 8 , 3 1 311,700 3.707 16,788

2 533 3 , 0 5 1 [4 I 8 5 1 8 1Total

0.000 03.030 1,7264.229 4 9 4 23.802 11,2052.784 16,7263.276 34,599

Males0 0.0001,196 2.3833,915 2.3498,037 1.990ti,161 1.890

24,309 2 .0 0 9FemMcs

0.000/ 3 1 0 4 I 1 .9 7 3/ 5 , 3 4 6 1 1 . 5 6 9[ _ . . ~ _ _ [ 1 . 6 0 115,077, v . t 1 . 6 5 8

- - - - V2,297 ]6 803 114,906 /I 2 1 , 0 0 4

0.000 [ 0 [ 0.0 00 04.050 1 101 3.830 984-3.872 / 21888 [ 3.02 5 2,3292.846 / 6 , 8 6 9 / 2.571 5 6929 843.381 [ , ~_ / 2.1 56 7,9232 .7 7 0 E 2 0 , ] 0 1 -7 2 . 4 7 6 [ 1 6 , 9 2 8

Males and Fem alcs Combined0.000 0.000 04.101 2.840 9842.921 2.531 5,4332 .4 9 1 2.163 11,0382.483 1.971 14,5502.608 2.148 32,005

0.000 02.395 02 . 2 9 7 01.957 3,3171.772 4,6791.926 7,996

0.000 0 0.0000.000 2,620 2.9520.000 11,326 2.3190.000 23,727 2.0170.000 33,059 1.9840.000 70,732 2.0710.000 2 9 1 ~ - 0 . 0 0 00.000 3.1790.000 8;903 F 2 .9 6 21.8-83 25 257 ] 2.23 01 . 4 8 0 1 3 7 ; 0 3 6 I 1 .9 421 .4 83 _ I - - - - - - - ~ 3 - ~ 2 . 17 4

0 0.0005,537 3.05220,229 2.49948,984 2.10270,095 1.967

0.000 0 0.0002.395 0 i 0.0 002.061 0 0.0001.705 3,317 1.4831.665 4,679 i 1.4 801.755 7,996 /.483 144,845 2.112

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TABLE 12MORT AL I T Y E XP E RI E NCE FOR GUARANT E E D I S S UE GRADE D- DE AT H- BE NE F I T T E RM P RODUCT S

FOR TI lE AFFINITY MARKET

Duration

12345Total

50-54Exp. A/E

0 0.0000 0.0000 0.0008~ 1.0710.000

83 1.071

1 i 0.0002 0 0.0003 18 0.0004 0.0005 0 0.000Total 187 0.000

55-59Exp. ArE

1 2594090780

1 746

2.1371.1690.0002.9100.0001.942

6064 [ 65--69Exp. 1 A/E Exp. J

Males1 213 - ~ .2 8 4 1 133 1.536

352 } 1.595 400 1.860125 ] 0.634 139 1.32476 ] 1.442 75 1.6070 ] 0.000 0 0 0001 766 ] 1.30 5 1 747 1.598

70 All AgesA/E Exp. ] AlE Exp. ,ME

000720

72

0.0000.0000.0000.6780.000/I.678

3 6 0 51 16126438405 414---

1.5821.6361.0661.3420.0001.537

1 0.0002 0 0.0003 187 0.0004 83 1.0715 0 0.000Total 270 0.519

Females028513600

4211 25969413678

02 167

0.0003.3104.5330.0000.0003.7292.1371.7284.5332.9100.0002.151

83O i.242 786221 0.389 246115 2.763 1290 000 00 000 0

1 166 1.243 1 16tMales and Fem ales Combined

2 043 1.273 1 919573 1 . 3 0 6 ~ 646240 1.304 26876 1.442 750 0.000 02 93:~ 1.289 2 908

1.1961.6352.0320.0000.0001.4011.4491.8071.5491 . 6 0 70.000

0011300113

00113720

0.0000.0000.2920.0000.0000.2920.0000.0000.2920.6780.0001.549 185 0.510

1 616752

03 0485 2211 913944384

08 462

1.2151.6741.5910.0000.0001 A08i .5041.6451.3431.3420.0001.506

8/12/2019 TSR935

38/38

i 6 0 1 99 3 9 4. T S A R E P O R T S

o n a p e r - p o l i c y b a s is , r a t h e r t h a n a ~ 'a c e a m o u n t b a s is . T h e d u r a t i o n a l p e r -s i s t e n c y is b a s e d o n t h e i n i ti a l i ss u e d a c e o f a p o l i c y . I f a r i d e r is a d d e d i ns u b s e q u e n t d u r a t i o n s , t h is r i d e r is n o t s e p a r a t e l y i d e n t i f i e d f o r t h e s t u d y .H o w e v e r , a n a d d - o n p o l i c y i s s u e d t o a n e x i s t i n g c u s t o m e r i s t r e a t e d a s as e p a r a t e p o l i c y a n d a n e w i s s u e .

i n s u m m a r y , t h e r e s ~ a l t s c o n t a i n e d i n t h i s s t u d y a r e b a s e d o n c o m b i n a t i o n so f h e t e r o g e n e o u s d a t a . A n y i:.~ .d iv id tm l c o m p a n y ' s r e s u l t s m a y v a r y o v e r ag r e a t r a n ge . T h e s e r e s u lt s m a y n o t b e r e p r e s e n t a t i v e o f e x p e r i e n c e f o r o t h e rc o m p a n i e s d u r in g t h e s a m e e x p o s u r e p e r io d a n d s h o u ld b e u s e d o n l y w i thcau t i o n m a t t emp t i n g t o ~ r ed i c t : r u - u r e ex ' o e r i en ce .

V. ACKNOWLEDGMENTT h i s r e p o r t r e p r e s e n t s t h e f ir st t im e t h a t a s tu d y h a s b e e n p e r f o r m e d o n

i n d u s t r y g u a r a n t e e d i s su e p e r s i s t e n c y a n d m o r t a l i ty d a t a. f o r d i re c t r e s p o n s eb u s i ne s s . T h e T a s k F o r c e r e c o g n i z e s th e d i f f ic u l t y i n a s k in g c o m p a n i e s t os p e n d t i m e a n d e n e r g y to ? b r w a r d d a t a a n d g i v e s a h e a r t f e l t t h a n k s t o a ltc o n t r i b u t o r s . W e h o p e ~ ha t t h is w i l b e a s p r i n g b o a r d s t u d y a n d t h a t a d d i -t i o n a l , u p d a t e d , a n d b r o a d e r p e r s i s t e n c y s t u d i e s o n i n d u s t r y w i d e b a s i s w i l lb e p e r f o r m ed an d p u b l i s h ed i n tl-~ e P ~ tu re .