What Is an Aggregate Mortality Table?
An aggregate mortality table provides data on the imputed death rates of everyone covered by life insurance policies, but without categorization based on age or the time of purchase. This calculation includes combined statistics of mortality tables.
In order to properly price insurance products and ensure that insurance companies maintain adequate reserves, actuaries develop projections of future insured events that will lead to a payout (such as death, sickness, or disability). They do this by developing mathematical models of the frequency and timing of such events.
Aggregate mortality tables can be compared with select mortality tables, which provide data on the death rate of specific individuals who have recently purchased life insurance.
- Aggregate mortality tables average the life expectancy statistics of an entire group covered by a life insurance policy.
- Insurance companies rely on aggregate mortality tables, alongside other types of mortality tables, to determine how much to charge applicants for coverage.
- Aggregate mortality is most appropriate for group insurance policies that cover several individuals or employees.
Understanding Aggregate Mortality Tables
A mortality table, also known as a life table or actuarial table, shows the statistical rate of deaths occurring in a defined population during a selected time interval, or survival rates from birth to death. A mortality table typically shows the general probability of a person's death before their next birthday, based on their current age. These tables are typically used in order to inform the construction of insurance policies and other forms of liability management.
Aggregate mortality tables are made by studying the incidence rate and severity of events in the recent past, but averages all demographics from the population into a single figure. From this, actuaries develop expectations about how the drivers of past events will change over time—for example, whether an increase in life expectancy from generation to generation will continue. This helps them to develop expectations for the timing and number of insured events in the future.
The End of Life (In Statistics)
From these expectations, actuaries create tables of percentages indicating the number of insured events that will occur in a population, usually based on the age or other relevant characteristics of the population. These tables may be referred to as mortality tables (if they provide rates of or death) or morbidity tables (if they provide rates of disability and recovery).
Mortality tables are grids of numbers that show the probability of death for members of a given population within a defined period of time. Mortality tables are usually constructed separately for men and for women.
Other characteristics can also be included to distinguish different risks, such as smoking status, occupation, and socio-economic class. Some actuarial tables determine longevity in relation to a person's weight. The life insurance industry relies heavily on mortality tables, as does the Social Security Administration.
Most people are surprised to learn that mortality rates aren't static. They are constantly shifting according to factors including age group, sex, and other determinants.
Example of Aggregate Mortality Tables
For example, a study published by the Society of Actuaries found "annual mortality improvement rates between 2012 and 2015 for males. In aggregate, mortality for males increased from 2014 to 2015. The young adult group from ages 20-44 experienced the greatest rise in mortality; a primary underlying cause of this increase is a significant rise in deaths from self-harm and accidents.
Aggregate mortality improvement from 2014 to 2015 was negative for the first time since 1999 for retirement-age individuals (65 and Over) and for the first time since 1993 for the population as a whole."