How has experience of mortality and accelerated critical illness (ACI) term assurance policies developed post-pandemic?
The CMI Assurances Committee have recently published Working Paper 191 which explores this and other questions through its latest experience analysis.
Overall 2022 experience was marginally lighter than the T16 tables, which are based on experience from 2015-2018. Updated claims data for 2020 & 2021 allows us to update allowances made for late reporting of claims in previous working papers and shows experience was 2% and 5% higher than expected (based on T16 tables) in 2020 and 2021 respectively. The 2021 results are heavier than previously thought. This change, shows that the pandemic may not only have had a disruptive effect on mortality, but also on the reporting and processing of claims, and is a feature actuaries may wish to consider when calculating their own late claim adjustments.
Experience by age and duration is broadly consistent with the shape of the T16 tables, although there is weak evidence that select effects are stronger and last longer than the allowances in those tables, particularly for smokers. It is reassuring that policies taken out during the pandemic are not exhibiting any anti-selective effects, suggesting underwriting processes adapted well to the disruption and new risks brought by COVID-19.
There continues to be a large difference in experience between the highest and lowest sum assured bands and analysis at this level suggests that there have been higher mortality improvements since 2016-2019 at the higher sum assured bands compared with lower sum assured bands.
ACI experience in 2022 was similar to 2021, and fractionally lighter than 2016-19. Although lighter than the expected basis, 2021 experience is heavier than we reported last year, again suggesting disruption to typical claims settlement delays beyond what was captured by our late claim adjustments. There is some variation by sex/smoker and when comparing lives and amounts weighted analysis. There is no obvious catch-up of the ‘missing’ claims from 2020, when experience was around 10% lighter than expected.
Analysis by cause of claim, included here in an annual experience analysis report for the first time, shows that cancer continues to dominate claims experience, with death, heart attacks and strokes making up a significant proportion of the remainder. There is a slight suggestion that the proportion of cancer claims have not returned to pre-pandemic levels.
Experience by age is generally in line with the shape of the AC16 tables with one notable exception: female non-smokers aged 50-54 are around 10% heavier than expected. The AC16 tables feature a non-standard “hump" shape to reflect the commencement of breast cancer screening between ages 47 and 51. However, the actual experience in 2021 & 2022 has been more extreme at ages 50-54, where expected claim rates plateau in the AC16 tables. This is one observation that could be explained by a ‘catch-up’ effect due to screening backlogs from 2020 being cleared, while not having a big enough effect to be noticeable in the overall results.
The analysis of experience by month, started to aid understanding of the impact of the pandemic on assured lives, has been extended out to the end of 2022. This shows a deterioration in mortality experience over the second half of 2022 with December seeing the highest mortality outside the peak COVID-19 waves of April 2020 and January 2021. This was a period of extreme stretch in healthcare services: a combination of COVID-19, seasonal influenza and disruption to services.
Index of Multiple Deprivation (IMD) analysis has been expanded for this report and now includes both nation-specific IMD and analysis by UK region, in addition to the UK-wide IMD analysis provided in earlier reports. While the nation-specific IMD results are similar to the UK-wide pattern, this added detail may be a helpful comparator for actuaries who use the nation-specific IMD for their own analysis.
Under both socio-economic mappings the variation in mortality experience has flattened in 2022, compared to 2020 & 2021, although there remains a 30% variation in mortality between the highest and lowest deciles.
ACI rates by IMD show a very similar pattern to 2021, with suggestion of heavier experience for the wealthier deciles: pre-pandemic the experience was much more level. Perhaps the higher socio-economic groups are benefitting from better access to diagnostic services through private medical services, while the lower groups are relying on an increasingly stretched NHS.
Thanks to support from our data contributors, we have been able to analyse experience at a geographic level as well as the socio-economic level. This is the first time we have been able to do this, and it shows some interesting patterns.
For mortality, there is a clear north/south divide in all years. Analysis within the region level shows that the IMD variations continue to persist, suggesting the regional effect is in addition to the variation by socio-economic group (and not just that there is a greater proportion of wealthier & healthier lives in the south).
Regional patterns for ACI claims are less clear, particularly in 2022, however London and the South East have consistently lighter experience than the rest of the country. This is surprising, given that we saw above that claims are higher for the higher socio-economic groups, which we would expect to be more prevalent in these regions. As with mortality, this suggests that there are regional effects in experience which are independent of socio-economic group.
With both of the analyses by region, we are limited to data from 2020 onwards so we don’t have a pre-pandemic baseline to compare with. It will be interesting to see whether these patterns persist as we settle into a post-pandemic normality.
We would welcome any comments on the results presented in Working Paper 191, particularly in relation to the new analyses we have included in our annual experience reporting.
