When discussing life expectancy underwriting, the term “longevity” is often mentioned, but without drawing the very important distinction between “macro-longevity” and “micro-longevity”. While at first glance the difference may not seem significant, a better understanding of these two terms and the critical distinctions between them is fundamental to understanding life expectancy underwriting.
What is Macro-Longevity?
Macro-longevity risk is generally described using actuarial tables related to large populations. These groups may be made up of “like-kind” individuals, or they can be comprised of very broadly defined categories (e.g., all smokers). For example, determining the average life expectancy of the American population as a whole is a macro-longevity exercise. Macro-longevity analysis may also take large populations and break them up into smaller, but still very large groups of individuals with similar characteristics.
If someone were to tell their financial advisor, “I’m 65 years old. I don’t smoke and never have. I run three times a week and I have no major health impairments.” The financial planner might reference a general population or macro-logevity-based mortality table and say, “Well, you’re going to live to be 95 based on the current trends within the population.” However, this macro-longevity-based assessment the unique, individual characteristics of that 65 year-old individual that are highly relevant to their personal micro-longevity assessment.
What is Micro-Longevity?
Micro-longevity analyzes the life expectancy of an individual member of a population based on their unique individual characteristics. It is an underwriting exercise first and foremost, though some actuarial techniques are used to report outcomes as well.
A micro-longevity assessment takes into account the conditions attributable to a specific (and unique) individual and relates some of them to information pertaining to the population of which they are a member. However, the focus of micro-longevity analysis is predominantly focused on the individual information about the subject as an individual. This information includes their lifestyle, family history, medical history, medical impairments, treatments, test and therapies, and their probability of survival relative to their population group.
The Path to Accuracy is Driven by Volume
ISC Services conducts micro-longevity analysis on older aged, insured individuals, which is a population group a large segment of which the life insurance industry generally does not underwrite. Additionally, life insurance companies are not seeking to ascertain the life expectancy of applicants for insurance, rather they are filtering out those applicants who do not qualify, beyond certain limits, at which point their underwriting process stops. As a micro-longevity underwriter, ISC evaluates all of the available pertinent information to determine the appropriate mortality rating applicable to each unique individual.
The more of this kind of data ISC Services collects while assessing individual life expectancies, the more outcomes we have to fine tune the underwriting process. This body of work will eventually be sufficient in size for larger scale analysis to be conducted. Actuaries and data scientists can filter out the “noise,” found in all large data sets, and eventually measure the relative consistency of micro-longevity risk assessments within each given population. The key is consistency of input (i.e., new underwriting events for an increasing number of unique lives) and output (outcomes tied to these lives over time).
If you are interested in learning more about micro-longevity and macro-longevity risks and what is required for calculating life expectancy, contact ISC Services today.
