New mortality, morbidity indices introduced for insurance valuations

An ages-old model of life insurance in Bangladesh goes as new mortality and morbidity tables have been launched to be used in the construction of insurance policies and other life-fund valuations.

Of the two tables, one is for gauging mortality and the other morbidity. Actuaries use the tables in designing new plans, life-liability valuations and reserves mainly.

Bangladesh so far has used an outmoded mortality table that is actually built on the data taken from the 1949-1952 period.

Such old data usually do not represent the current life expectancy in Bangladesh as the lifespan of people has now increased to approximately 72 years.

When life products are constructed by assuming such data, they become expensive and unjustified across the board for the policyholders in paying premiums. The new data are based on 2015-18 statistics.

A World Bank-funded project has prepared the tables based on the data of life-insurance companies in Bangladesh. The sample size is around 100,000.

The Insurance Development and Regulatory Authority (IDRA), the regulator of 81 life and nonlife insurers, in a circular recently said the life firms should use the old tables up to December 2023.

When contacted, IDRA officials said the new tables have given some time to the firms as many are in the process of valuations of their assets or in the process of making new plans.

They said such tables have significance as they rightly reflect the present life expectancy. Products and life liabilities valuations will be more justified after the use of the latest tables.

Narayana Chandra Rudra, chief executive officer of Meghna Life Insurance Company, says they have no tables of their own. "So the new tables are ours and have been prepared on our own data."

He explains that a mortality table typically shows the general probability of a person's death before their next birthday, based on their current age.

Mr Rudra feels that there is a need for all life firms to comply with the tables. "In our country, there are many underwriters who do not care about the changes, so we need to emphasise implementation of the tables," he told the FE.

Dr Nurur Rahman, a data scientist working with Fortune 250 company in New York, told the FE that the tables are very much important for life- liabilities valuations and product designs.

In the USA, they prepare mortality tables in each decade and morbidity tables frequently.

He also stressed the need for considering other risk factors like smoking and non-smoking issues while constructing life products.

However, IDRA people claim the new tables as better than that of India and other South Asian nations in terms of death probability.

jasimharoon@yahoo.com