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 (CSO) mortality table, used by life insurers, lays out the probability that people of a certain age will die in a given year. 
  • The CSO mortality table was updated in 2017 for the first time since 2001.
  • The 2017 CSO mortality table update was the result of more available experience data, and it includes longer life expectancy in general.
  • The CSO mortality table is used to calculate reserve requirements for a particular insurer.

Understanding the Commissioners Standard Ordinary Mortality Table

The commissioners standard ordinary (CSO) mortality tables are broken down by male vs. female, as well as smoker vs. nonsmoker. The latest CSO mortality table was completed for 2017. For all policies issued on or after January 1, 2020, life insurers must now be using the updated tables from 2017. The 2017 update was the first update of the tables since 2001. The terminal age of 121 is still used in the 2017 update, as it was for 2001.

The 2017 update was issued as a result of more available data, including the fact that people are now 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 data used in the creation of the 2017 CSO is $30.7 trillion from 51 insurers, well above the $5.7 trillion from 21 insurers for 2001. 

The CSO mortality table update was examined with a number of metrics in mind. For instance, modifications from the 2001 figures to 2017 figures 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.

How the Commissioners Standard Ordinary Mortality Table is Used

The commissioners standard ordinary (CSO) mortality table is used to calculate 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.

Commissioners Standard Ordinary Mortality Table vs. Industrial Mortality Table

Commissioners standard ordinary (CSO) mortality tables stand in contrast to industrial mortality tables for industrial life insurance policies. Industrial life insurance policies require lower premiums from policy owners than CSO policies because the face value of industrial life insurance is lower, typically no more than $10,000. In addition, industrial life insurance premiums are commonly paid weekly, rather than monthly. Both types of tables must be approved by the National Association of Insurance Commissioners (NAIC).