South Africa a lifestyle time -bomb? Petro Appelo Business - PowerPoint PPT Presentation

South Africa … a lifestyle time -bomb? Petro Appelo Business Development Actuary Hannover Re Actuarial Society 2015 Convention 17 – 18 November 2015

Lifestyle Factors Diet Stress Work Alcohol demands Sleep Smoking Drugs Actuarial Society 2015 Convention 17 – 18 November 2015

Expectation vs Reality Aggregate non-natural mortality rates (q x A ) for South African Insured population A ) Accidental Mortality rates (q x Mortality rates (q x ) 20 to 24 25 to 29 30 to 34 35 to 39 40 to 44 45 to 49 50 to 54 54 to 59 60 to 64 65+ * Based on Hannover Re mortality tables 3 Actuarial Society 2015 Convention 17 – 18 November 2015

Expectation vs Reality A ) Accidental Mortality rates (q x 20 to 24 25 to 29 30 to 34 35 to 39 40 to 44 45 to 49 50 to 54 55 to 59 60 to 64 65+ Motor Vehicle Accidents Other non-natural * Based on Hannover Re mortality tables 4 Actuarial Society 2015 Convention 17 – 18 November 2015

South African Insured Mortality Rates Mortality rates (q x ) 20 to 24 25 to 29 30 to 34 35 to 39 40 to 44 45 to 49 50 to 54 54 to 59 60 to 64 65+ Natural causes Non-natural causes * Based on Hannover Re mortality tables 5 Actuarial Society 2015 Convention 17 – 18 November 2015

South African Insured Mortality Rates Breakdown of total mortality rate by Non-natural and Natural causes 100% 90% Breakdown of total mortality rate (%) 80% 70% 60% 50% 40% 30% 20% 10% 0% 20 to 24 25 to 29 30 to 34 35 to 39 40 to 44 45 to 49 50 to 54 54 to 59 60 to 64 65+ Non-natural Natural * Based on breakdown of total claim amounts paid in market experience investigation 6 Actuarial Society 2015 Convention 17 – 18 November 2015

Results relative to Other Markets Total mortality rates (q x ) for Male Non-smokers Mortality rates (q x ) South Africa 20 to 24 25 to 29 30 to 34 35 to 39 40 to 44 45 to 49 50 to 54 54 to 59 60 to 64 65+ South Africa United Kingdom * Based on Ultimate rates used by Hannover Re in South Africa and the United Kingdom 7 Actuarial Society 2015 Convention 17 – 18 November 2015

Results relative to Other Markets South African rates relative to United Kingdom rates for Male Non-smokers at Ultimate Durations 700% 600% Relative mortality rates (SA: UK) 500% 400% 300% 200% 100% 0% 20 to 24 25 to 29 30 to 34 35 to 39 40 to 44 45 to 49 50 to 54 54 to 59 60 to 64 65+ * Based on Ultimate rates used by Hannover Re in South Africa and the United Kingdom 8 Actuarial Society 2015 Convention 17 – 18 November 2015

Non-natural causes Breakdown of total Non-natural Mortality rate by Detailed Cause 100% Other non-natural 90% Violent assaults Breakdown of non-natural mortality rate 80% 70% 60% Suicide 50% 40% 30% Motor vehicle 20% accident 10% 0% 20 to 24 25 to 29 30 to 34 35 to 39 40 to 44 45 to 49 50 to 54 54 to 59 60 to 64 65+ * Based on breakdown of total claim amounts paid in market experience investigation 9 Actuarial Society 2015 Convention 17 – 18 November 2015

Risk Breakdown 86% of exposure Mortality rates (q x ) Natural Mortality rate (q x ) Natural Non-Natural Non-Natural 20 to 24 25 to 29 30 to 34 35 to 39 40 to 44 45 to 49 50 to 54 55 to 59 60 to 64 65+ 20 to 24 25 to 29 30 to 34 35 to 39 40 to 44 45 to 49 50 to 54 * Based on Hannover Re mortality tables 10 Actuarial Society 2015 Convention 17 – 18 November 2015

How is this being taken into account in Life Insurance Average 40 year old male Aviation Other non- 2% natural 5% Suicide 8% Underwriting Other Requirements: Natural Natural • Violent HIV test 32% 42% assaults • 30 medical 10% questions Motor Cardiovascular vehicle 10% accidents 33% 11 Actuarial Society 2015 Convention 17 – 18 November 2015

How is this being taken into account in Life Insurance ‘Average’ Joe Actuarial Society 2015 Convention 17 – 18 November 2015

Potential cost reductions Average 40 year old male 100% 100% 90% 90% 80% 80% 70% 70% 60% 60% 50% 50% 40% 40% 30% 30% 20% 20% 10% 10% 0% 0% Total cost 50% reduction Total cost 20% reduction Natural MVAs Suicide Violent assaults Other non-natural Aviation Natural MVAs Suicide Violent assaults Other non-natural Aviation * Based on Hannover Re market experience investigation 13 Actuarial Society 2015 Convention 17 – 18 November 2015

Potential Cost Reductions 50% Reduction in Certain Non-natural Causes 14% 17% Mortality rates (q x ) 20% 25% 45% 30% 35% 20 to 24 25 to 29 30 to 34 35 to 39 40 to 44 45 to 49 50 to 54 Revised Mortality rate Mortality rate * Based on Hannover Re market experience investigation 14 Actuarial Society 2015 Convention 17 – 18 November 2015

Conclusion Research of risk misaligned to Understand emerging Non-natural profile of factors experience causes account that contributes for 43% of total • Better use of towards risk claim amounts information available aversion or risk • Incorporating short- paid in industry taking behaviour term risk assessment techniques Actuarial Society 2015 Convention 17 – 18 November 2015

Questions Actuarial Society 2015 Convention 17 – 18 November 2015