On our blog on January 28th (see below) we said that the ground has been laid for more changes, and that there is too little transparency. We also said that the race to the conservative high ground is on – the longer the LEs, the lower the legal risk.
Barely one week after coming up with a completely new set of underwriting tables and a new underwriting methodology, 21st Services is making the next changes. They are made to appear as small ‘optimization’ steps. Far from. 21st Services is discovering that the very old ages are under-researched territory, and from what we can see, not enough attention has been paid to that area.
We applaud 21st Services rapid reaction to uncovering problems. We would applaud 21st Services even more if the Black Box became more transparent – and with it the need for adjustments and shifts could be dramatically reduced.
Sent: Monday, February 04, 2013 11:03 AM
To: Kurt Gearhart; Vince Granieri; Megan Euteneuer
Subject: PLEASE NOTE - CORRECTIONS BEING MADE TO 2013 TABLE LEs
Last week we began issuing LEs using our new 2013 Tables. Once clients had an opportunity to review the new certificates, we received numerous questions regarding the results. Each issue raised was thoroughly investigated and we also re-analyzed and re-tested the other calculations in our system to identify any other potential issues. Through this analysis and testing, we identified three items that required adjustments. One adjustment impacts all life expectancies we issued on the new 2013 Tables and the other two only impact a portion of the life expectancies. Otherwise, the life expectancies have been produced under the new Tables with the results we expected. We are working to correct the life expectancies now and sincerely apologize for the inconvenience. A summary of the adjustments is below.
Change One: Impacts Mean Calculation on All LEs – The “Mean” on all LEs will Shorten by 6 Months
The first change results in a 6 month shortening of the "mean" LE calculation on all certificates. The mean calculation on all 2013 Table LEs was computed using the annual mortality rates versus monthly mortality rates (used previously). The half period adjustment was inadvertently dropped from the calculation, resulting in a 6 month overstatement of the mean. This correction does not impact the "median" LE. Please note, the survival curve and deaths per year shown on the certificate was correct, only the mean calculation was affected.
Change Two: Impacts Only LEs Where Certain Cancer Related Factors Are Present – The “Median” and “Mean” on LEs where the conditions are present will shorten by varying degrees.
The second change results in a shortening of LEs where certain cancer related factors were present. The error related to a co-morbidity calculation. Only a small portion of the LEs will be impacted by this. Both the mean and median will shorten to varying degrees based on the insured’s age and specific conditions.
Change Three: Impacts All LEs Where Insureds Have Probability of Reaching Advanced Ages (over 92)– The “Median” and “Mean” will Shorten by Varying Degrees
The third change impacts mortality rates only at advanced ages (over 92). As stated in our presentation, we recast mortality rates at uppermost ages so as to remove the last vestiges of the 2008 VBT from our tables. Therefore, even though we believe that mortality rates for all persons tend to converge over time, we expected to see some divergence from the 2008 VBT at those high ages because the VBT levels off at that point. After reviewing a number of certificates, we realized that the level of divergence at the oldest ages was higher than we anticipated. Accordingly, we made the changes necessary to reflect our expectations for mortality rates at these ages. Both the mean and the median will shorten to varying degrees based on age, gender and smoking status.
Once again, we apologize for these errors and the inconvenience this causes. We expect to be re-issuing the LEs beginning later today. You will be able to confirm that you received the most recent version of the life expectancy certificate as there will be a “Form” number at the bottom right of the certificate which previously was not included. Please contact me, Vince or Megan if you have any questions.
We appreciate your patience and support.
21st Services LLC
333 South Seventh St., Suite 300
Minneapolis, MN 55402