Mortality Tables for the Brazilian Insurance Market - a Comparison

Discussion Paper No. 1047

Posted: 1 Feb 2005

See all articles by Kaizo I. Beltrao

Kaizo I. Beltrao

National School of Statistics from the Brazilian Institute of Geography and Statistics - ENCE/IBGE

Sonoe S. Pinheiro

Universidade Federal do Rio de Janeiro (UFRJ)

Danilo Cláudio da Silva

Superintendência De Seguros Privados

Elder Vieira Salles

Superintendência De Seguros Privados

Date Written: October 2004

Abstract

The mortality table for a given population is an important tool not only in terms of general actuarial and demographic studies, but also for public policy planning and private costing of certain services. It is widely used for a number of situations ranging from forecasts and demand studies for health services, estimations of the school age population and labor market, to cost estimates for social security and insurance premiums. Due to its crucial importance in problem analysis of diverse natures, a precise estimation is often required.

This text compares period mortality rates obtained across different products and coverage available in the Brazilian insurance market. Data for private pension (PP) and for individual life insurance (LI) products refer to a three-year period: 1998 to 2000, whereas group insurance (GI) and personal accidents (PA), refer to the years 1999 and 2000. With more data (for the coming years), we hope to estimate cohort mortality tables and extrapolate future trends in mortality. A mathematical equation was interactively fitted to the data. This equation has three components: infant mortality, mortality by external causes and mortality by senescence. The first component cannot be adjusted from the available information and only adult/elderly mortality was modeled.

To resume the results, we considered seven age group: young adults (20 to 30 years of age), adults (30 to 40 years of age), middle aged (40 to 50 years of age and 50 to 60 years) and those of on the third age (60 to 70 years of age) and forth age (70 to 80 years and 80 to 90 years). We present the loglikelihood for each combination of sex, type of coverage and product by age group and mortality table considered in the study. We noticed that two of the mortality tables considered, namely IBGE-2000 and CSO-2001, show up as upper and lower limits of the set of mortality tables analyzed in this study.

Even for a rather homogeneous group like the clients of the Insurance market, there is a clear differentiation among the several sub-groups. For all types of product and coverage, if we compare the respective mortality rates with those made available by IBGE, we can verify that mortality rates of these consumers show lower figures than those of the population as a whole, suggesting that they are probably a wealthier sub-group and therefore, bias by income, years of schooling, race etc are strongly prevalent. What economic theory predicts (in the absence of insurance company underwriting and equal access to insurance products) is that there should exist an adverse selection that should increase mortality rates for those who buy life insurance products and decrease these rates for those who buy annuity products. It is a hard task to judge from the available evidence since the analysis encompasses four types of products, two o them (LI and GI) are obviously life insurance products while one (PP) is an annuity product and the fourth one (PA) is related to hazardous situations. The type of coverage, though, can be by survival, death and disability. Survival coverage has an annuity character and death coverage has a life insurance one. As was the case with types of products, disability coverage also carries a hazardous flavor. If one considers a specific product, mortality rates are ordered as expected: higher values for life insurance and lower for annuities.

Another assumption is that adverse selection should be more severe in case individuals buy the products voluntarily rather than compelled to do so. It is hard to check which is the case with our data. We can not assume that buyers of these products do it voluntarily, since it is common practice in Brazil to force bank customers to buy products in order to get access to some specific services like loans or special accounts. Gender differentials in mortality rates are clearly perceived for all cases, whether the analysis is done by product or by coverage type.

Keywords: Mortality table, demographic studies, social security, mortality rates, Brazilian insurance market, private pension, individual life insurance products, personal accidents products, group life insurance products, statistical models

JEL Classification: C51, G22, I12, J1

Suggested Citation

Beltrao, Kaizo I. and Pinheiro, Sonoe S. and Silva, Danilo Cláudio da and Salles, Elder Vieira, Mortality Tables for the Brazilian Insurance Market - a Comparison (October 2004). Discussion Paper No. 1047, Available at SSRN: https://ssrn.com/abstract=657002

Kaizo I. Beltrao (Contact Author)

National School of Statistics from the Brazilian Institute of Geography and Statistics - ENCE/IBGE ( email )

Rua Andre Cavalcanti, 106
Rio de Janeiro, RJ 20081-1
Brazil
+55 21 224 7677 (Phone)
+55 21 262 6330 (Fax)

Sonoe S. Pinheiro

Universidade Federal do Rio de Janeiro (UFRJ) ( email )

Rua General Canabarro, 706
terreo - Bairro Maracana
20271-201 - Rio de Janeiro, RJ, 23890000
Brazil

Danilo Cláudio da Silva

Superintendência De Seguros Privados ( email )

Rua Buenos Aires 256, 30 andar
Rio de Janeiro, 20061-000
Brazil

HOME PAGE: http://www.susep.gov.br/principal.asp

Elder Vieira Salles

Superintendência De Seguros Privados ( email )

Rua Buenos Aires 256, 30 andar
Rio de Janeiro, 20061-000
Brazil

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