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Abstract
Mortality projections are of great interest to the pension and insurance industry and with an ageing population, the projections need to cover a longer period. A significant question is how to incorporate in mortality projections the longevity risk due to medical advances and uptake of health interventions. We show how hazard ratios obtained from medical studies in combination with the baseline hazards described by Gompertz or Weibull survival distributions, can be translated into changes in individual and population period life expectancy. The impact of medical advances and health interventions can differ among groups of people, such as by sex, age, and deprivation. Changes in life expectancy depend on the composition of the population and these attributes. These calculations are illustrated by a case study on statins, a drug that can significantly improve life expectancy. An R program implementing our methodology is provided in the Appendix.
Highlights
Life expectancy (LE) and changes in life expectancy are of great interest to the pensions and insurance industry, society, and government as they affect among others the old-age dependency ratio, social security and pensions, long-term care, and healthcare systems
In our previous work (Gitsels et al, 2016), we developed 12 Cox proportional hazards models to estimate the effect of statin prescription on all-cause mortality for three QRISK2 groups
In this Subsection we demonstrate that the Gompertz distribution provides an adequate model for all-cause mortality, for the England and Wales population
Summary
Life expectancy (LE) and changes in life expectancy are of great interest to the pensions and insurance industry, society, and government as they affect among others the old-age dependency ratio, social security and pensions, long-term care, and healthcare systems. National life tables are often used in projecting mortality trends in populations of insured and in pension schemes (Barrieu et al, 2012). These mortality projections are susceptible to heterogeneity in mortality rates and their trends (basis risk) and to significant improvement in longevity (longevity risk). Longevity-trend projections are used for managing longevity risk in pricing and reserving for insurance and annuity products as well as for costing of public and private pensions. Changes in these projections result in significant consequences. Aviva longevity reserve releases were £780 million in 2018 and £779 million in 2017 (Montague, 2019)
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