Society Of Actuaries Surveys Experts On Longer Life Spans And Forecasting Mortality For Social Security

December 22, 1997

SCHAUMBURG, Ill. -- A survey of experts conducted during a seminar on social security and mortality improvement in the NAFTA countries calls for development of forecasting methods with greater heed to uncertainty so that financing needs for social security can be more accurately projected.

A preliminary analysis of the survey points to the "medical advances, lifestyle changes, economic resources and distribution of resources by sub-populations and the physical environment" and their as-yet unknown impacts. In light of those and other uncertainties, the experts said "the modeling process of (mortality) projections should be dynamic and incorporate random shocks to the system to account for catastrophes, whether they be war or epidemics, and other unanticipated twists."

Survey results will serve as the basis for Phase 3 of the project, which will test the impact of new mortality rates on social security financing for Canada, Mexico and the United States against the impact of current rates. Phase 3 results will be announced during the Society's Feb. 17 session at the 1998 Annual Meeting of the American Association for the Advancement of Science, Feb. 12-17, Philadelphia.

The survey was conducted during an invitation-only, multidisciplinary seminar sponsored by the Society of Actuaries on Oct. 30 in Washington, D.C. The seminar was Phase 2 of a three-phase project, "Impact of Mortality Improvement on Social Security: Canada, Mexico, and the United States," sponsored by the Society and cosponsored by the social security administrations of the three countries. Nearly three-fourths of the 80 actuaries, demographers, economists, medical researchers and public policy analysts attending the seminar responded to the survey. The three NAFTA countries and the United Kingdom were represented among the attendees.

The survey covered three areas: forecast methodology, factors affecting mortality improvement, and quantitative assessments about the percentage of future mortality improvements.

Section I, forecast methodology, showed that stochastic methods -- which allow for chance occurrences (such as catastrophes) and errors in forecast estimates -- are advocated by many experts to complement currently used models. The current method involves testing for two extreme scenarios rather than the full range of probabilities.

In Section II, the preliminary survey analysis showed that, according to the experts' responses on specific factors affecting mortality improvement, the human life span in the NAFTA countries can be expected to increase. The experts said lifestyle changes and medical advances will be the most important factors leading to longer life in the three countries over the next 10 or 25 years. The major factors contributing to greater mortality will be eipdemic disease, catastrophes and the decline of the physical environment. Respondents believed differences in life span by gender, income level, educational level or marital status would decrease but by less than 50 percent within 25 years. "The result of combining the effects of these factors will lead to an increase in human life span," the draft report said.

Section III asked respondents to estimate mortality improvement rates for the three countries by age group, gender, and the population as a whole. A lower level of response combined with a wide range of estimates indicate "the uncertainty of what the future may bring," the initial report said.

A final survey analysis is expected early in 1998. The preliminary report was authored by Marjorie Rosenberg, Fellow, Society of Actuaries, and assistant professor, University of Wisconsin School of Business, Madison, who is expected to coauthor the final report with Warren Luckner, director of research, Society of Actuaries.

Conducted in three phases, the project began with a compilation and analysis of literature on mortality improvement (Phase 1), continued with the seminar (Phase 2) and will proceed with new projections and a test of their impact on social security financing for the three countries (Phase 3).

Project sponsors, in addition to the Society and the three social security administrations, are The Actuarial Foundation, Retirement Research Foundation, American Society of Pension Actuaries Education and Research Foundation, and Pension Research Council.

More information on the project is available from Warren Luckner at the Society offices, 847/706-3572, e-mail wluckner@soa.org. Materials from the seminar are available in two packages -- costs are $25 and $75 -- through the Society's Books Department (phone: 847/706-3566;
fax: 847/706-3599; e-mail: bhaynes@soa.org), which can provide details on the packages.

EDITOR'S NOTE: All materials are free of charge to journalists.
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Society of Actuaries

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