Industry Updates
Lower Expectations

• Jeff Roberts
• January 2019
• 

Future improvement in life expectancy will depend on early identification and diagnosis of disease and digital health tools such as telemedicine and wearables, according to a Swiss Re Institute report.

Those gains may become critical as the rate of mortality improvement has slowed recently across several advanced nations. But Swiss Re researchers say it is too early to determine if the slowdown is a short-term trend or a permanent shift in mortality, according to the sigma report.

Staying ahead of such potential shifts is crucial for life insurers as mortality risk cannot be easily diversified or hedged, the authors reported.

“We may be entering a new period where we see no improvements to life expectancy,” Paul Murray, chief pricing officer, Life &Health Products Centre at Swiss Re, said in a statement. “Decision-makers in insurance will need to be alert to how the uncertainty plays out in the coming years in regards to pricing, reserving decisions and policy.”

The longer the slowdown in the rate of mortality improvement persists, the more likely the phenomenon is the new normal and not temporary, the report said.

Age standardized mortality rates in the United States, United Kingdom and Germany have continued to decline since 2011, but at a slower pace than much of the previous century. The decline is attributed to worsening trends in cardiovascular illnesses, including heart disease and diabetes.

Lifestyle choices such as poor diet and lack of exercise are driving those diseases, according to the report. A lack of additional progress in treating major illnesses may be another key factor.

The slowdown has been more pronounced among older people and women, the report found.

The Centers for Disease Control and Prevention announced recently U.S. life expectancy fell again in 2017. It had fallen in 2015 and remained stagnant in 2016 following decades on the rise, the CDC said. The U.S. declines are attributed to the opioid epidemic, the highest suicide death rate in at least 50 years and other “deaths of despair” illnesses such as diabetes.

The authors of the Swiss Re report contend early identification of disease can prevent progression and overall poor health.

Telemedicine can play a vital role by increasing access to care and encouraging markets to compete for affordable options. Meanwhile, wearables can monitor health metrics and alert patients to warning signs.

Convincing consumers to adopt technology and change unhealthy behavior will become a key challenge for insurers.

Although the slowdown in mortality improvement in the general population has not yet been reflected in higher socioeconomic classes, accelerated underwriting and the industry's efforts to sufficiently penetrate the middle market make this an issue of concern.

Swiss Re warns there is danger in being overly conservative in pricing to cover the range of future mortality outcomes. That will result in “unnecessarily expensive” life insurance and annuity products, the report said.

However, prematurely adjusting assumptions about underlying mortality trends “will almost inevitably stretch insurers' balance sheets once the liabilities are ultimately re-rated to reflect revised life expectancy realities,” the report said.