On behalf of Wilton Re, Milliman recently conducted a comprehensive mortality study of the final expense marketplace. The study is called the Milliman Final Expense Study (MFES) and highlights of the study are shown below.
- 20 companies participated, generating over 11 million policy years of exposure and over 322,000 deaths during the 2000-2009 study period.
- The focus of the study was on the level death benefit policies since they represented 94% of the exposure. The level death benefit policies had an Actual to Expected (A/E) ratio of 120% by face amount, using the Society of Actuaries 2001 VBT ultimate rates as the expected.
- There was significant variation in results by issue age.
- There was a general trend of improving A/E ratios by calendar year. The improvement in all durations was likely due to the introduction of new underwriting tools. The improvement in durations 1-2 was also likely due to an improvement in claims management.
- The impact of the use of various underwriting tools was studied across all death benefit structures. The three tools found to provide the most protective value were: automatically declining those with a “yes” answer to an application question, the Rx database, and the APS (Attending Physician’s Statement).
- Companies that did not move to smoker distinct rates had less favorable experience.
- The career agent/multiple line distribution channel had the worst experience, mostly due to higher A/E ratios in durations 1-2. This was likely due to fewer rescissions in that channel.
- Rescissions play an important role in most final expense business. There was a large difference in rescission rates among the companies, impacting individual companies’ overall results.
- Cardiovascular, cancer, and respiratory disease were the three leading causes of death across all death benefit structures.
Questions regarding the study or if you are interested in purchasing MFES, please contact either: