What Is the Commissioners Standard Ordinary Mortality Table?

The commissioners standard ordinary mortality table is an actuarial table used to compute the minimum nonforfeiture values of ordinary life insurance policies. The commissioners standard ordinary (CSO) mortality table reflects the probability that people in various age groups will die in a given year.

Key Takeaways

  • The commissioners standard ordinary mortality table, used by life insurers, lays out the probability that people of a certain age will die in a given year. 
  • These commissioners standard ordinary mortality tables differ from the tables used for industrial life insurance policies, where CSO tables require lower premiums because the individuals tend to live longer. 
  • The commissioners standard ordinary mortality table was updated in 2017 for the first time since 2001. The update brings more data into the CSO. 

How the Commissioners Standard Ordinary Mortality Table Works

Commissioners standard ordinary mortality tables stand in contrast to industrial mortality tables for industrial life insurance policies. CSO tables require lower premiums from policy owners than industrial policies because these individuals tend to live longer. Both types of tables must be approved by the National Association of Insurance Commissioners (NAIC).

The latest commissioners standard ordinary mortality table was completed for 2017. As of Jan. 1, 2020, all life insurers must now be using the updated tables from 2017. The 2017 update was the first update of the tables since 2001. 

The 2017 update comes as there’s now more available data and people are living longer. The big difference from the 2001 CSO is that the 2017 update has more than twice the data from companies providing experience data, as well as more information on smokers vs. non-smokers. The amount of insurance exposure for the 2017 CSO is $30.7 trillion, well above the $5.7 trillion for 2001. 

The 2001 CSO mortality table update was examined with a number of metrics in mind. For instance, the first and second differences were inspected to determine the smoothness of the table. Reserve values were calculated and examined for appropriate relationships. Statutory reserves produced by the table were compared to check reserves to ensure that the proposed table would provide statutory reserves sufficient for most companies. Deficiency reserves were not considered because gross premium assumptions were not available to serve as a base for that estimation, which made for a more conservative estimate.

Requirements for the Commissioners Standard Ordinary Mortality Table

The commissioners standard ordinary mortality table comes into play when figuring out reserve requirements for a particular insurer. It is the legally required table for calculating required reserves and nonforfeiture values for life insurance companies. In other words, life insurers must look at their policyholders' ages and then calculate how much money they must hold in reserves to pay future policy benefits, using the mortality rates of the CSO. It also means that the CSO is the basis for determining guaranteed cash values and other nonforfeiture benefits. These are the amounts available to policyholders if they surrender their life insurance contracts.

Life expectancy is the one statistic that matters most to insurers. There are thousands of life insurance underwriters at work across the nation, trying to accurately guess someone's life expectancy, and health conditions and family history are used to adjust a quoted rate up or down. Each life insurance company has its own sophisticated life expectancy tables, which it uses to write policies. Companies consider the CSO as a factor or basis for those calculations.