23 October 2018
Tim Gordon, Chair of the CMI Mortality Projections Committee explains why providing more regular mortality analysis will help in the understanding of future longevity projections.
There is always a lot of ‘noise’ when trying to understand trends in mortality. This is particularly true at the turn of each year, from December to March, when the death rate tends to be higher than at other times. There are always a variety of factors at play, including cold weather and the effectiveness of the flu vaccine. The unpredictability of these factors mean that winter is also the time of year when mortality death rates are most uncertain.
The Continuous Mortality Investigation (CMI) has a long history of providing independent mortality and sickness rate tables for UK life insurers and pension funds. So our key function is to turn down some of that ‘noise’ and provide analysis which will put those trends into a wider context and help those using the tables to see where mortality may be headed.
There is much debate around the reasons behind changes in mortality trends. The truth is, there is never one neat and tidy explanation. The financial sector understands this and isn’t looking to the CMI to explain why the trends change. But it does need reliable data and analysis in order to see the big picture and to try and understand where future mortality is expected to land. Actuaries working in pensions and insurance will use our Mortality Projections Model to help when they are reporting on financial positions and to look at where they may need to recommend changes in pricing.
Access to reliable analysis is crucial for actuaries who need it for their calculations and helpful in informing the general mortality debate. So far, the CMI has provided an annual update through its Mortality Projections Model. But we have decided that there is more we can do and so from this October onwards, we will be providing analysis on England and Wales population mortality every quarter. We believe we can add value through analysis based on Standardised Mortality Rates (SMRs) which adjust the data to allow for changes in the size and age profile of the population to allow for sensible comparisons.
Our analysis means that we can track mortality during the year and understand how it will impact on future longevity projections. The Office for National Statistics (ONS) already produces quarterly analyses based on its data, but our analysis offers two additional benefits. Ours will be produced sooner, and will be more closely tied to the CMI Model. We will track the cumulative annual mortality improvement through the year, using a method consistent with the CMI Model, to provide an indication of the likely results of the next version of the Model.
Nice surprises on birthdays and at Christmas time may be fun. But in our line of work, avoiding any big surprises is a big plus. The CMI clearly states that its mission is to produce high-quality impartial analysis, standard tables and models of mortality and morbidity to further actuarial understanding. We believe these quarterly updates fit that mission, will help to limit surprises and contribute to the debate around mortality and longevity.
Our quarterly analysis: feedback on our proposal
Our quarterly analysis will be publically available as will our methodology. As we are just getting started and this is the first quarterly update, we want to make sure that what we’re providing and the way we are doing our calculations are as robust as possible and useful to those following mortality trends. We are inviting feedback on our proposals and may make changes to the method and/or outputs as a result. Details on how to provide feedback can be found in our working paper and we would ask that any comments are sent to us by 30th November 2018.