Global professional services company Towers Watson (NYSE, NASDAQ: TW) announced the release of The Older Age Mortality Study 3 (TOAMS 3), the company’s third study of U.S. life insurance industry mortality. TOAMS is the most comprehensive, longest-running study of older age mortality experience in the market. The original TOAMS, released in 2005, covered mortality experience for insureds attained ages of 50 and higher during 2000, 2001 and 2002. The subsequent TOAMS 2 report, issued in 2008, covered older age mortality during 2003, 2004 and 2005.
TOAMS 3 spans the five-year experience period from 2006 to 2010 for insureds attained ages of 50 and above. The 21 participating companies provided $8.2 trillion of face amount for 48 million policy years. Over 700,000 deaths in the study represent $40 billion of death claims. The study was performed on an issue age and duration basis, using a 25-year select period, consistent with the Society of Actuaries 2001 and 2008 Valuation Basic Table (VBT).
“This study is very timely for life insurers,” said Elinor Friedman, director, Life practice, Towers Watson. “It’s no secret that the low interest rate environment has placed downward pressure on life insurers’ profitability. Insurers have had to reprice many products with profit streams vulnerable to low interest rates, heightening the need for greater pricing accuracy. Our study gives insurers the tools to address trends in life expectancy and fine-tune their pricing assumptions.”
One new feature and important enhancement to TOAMS 3 is the inclusion of predictive modeling analysis of the participant-submitted data using Towers Watson’s proprietary generalized linear modeling (GLM) tool, Emblem™. Emblem uses advanced modeling procedures to determine what function set of independent risk factors best predicts a chosen target variable — in this case, the expected mortality rate. TOAMS 3 is the first industry-wide mortality study to combine traditional experience analysis with GLM.