Trendspotter: Uncertainty about mortality will shake the life, well being and pension sectors

What you need to know

  • A federal agency says total life expectancy in the US peaked at birth in 2014 at 78.9 years.
  • Life expectancy fell by a full year between 2019 and the beginning of 2020.
  • One disadvantage is that trends for commercial financial services customers are different from trends for the general US population.

The tendency

Life insurers must be prepared for the fact that life expectancy of life insurers, annuity and annuity insurers could fall.

The driver

Life expectancy at birth in the United States increased, or at least remained constant, almost every year from 1943 to 2014.

Insurers, actuaries and personal financial advisers believe that the main risk for most family breadwinners and retirement savers is longevity risk – the risk that retirees will live longer than expected and use up their wealth.

But something changed between 2014 and 2015: Possibly because of the opioid epidemic, overall life expectancy in the US at birth fell from 78.9 years in 2014 to 78.7 years.

Life expectancy at birth stayed the same or decreased each year for the next three years.

The National Vital Statistics System, the branch of the National Center for Health Statistics that compiles U.S. birth, death, and life expectancy statistics, changed its methods of calculating life expectancy in 2018. Life expectancy increased to 78.7 years and 78 in 2018 , 8 years in 2019.

However, the COVID-19 pandemic caused life expectancy to drop by a full year to just 77.8 years in the first half of 2020, according to the tables attached to a report on life expectancy estimates.

The average life expectancy of 65-year-olds fell from 19.5 years in 2018 to 19.1 years.

Players in the insurance and retirement communities are wondering whether the pandemic has mainly shortened the lives of frail people and left the country with a healthier population overall, or whether the pandemic has damaged the health of survivors enough to shorten their life expectancy.

We are interested in hearing from you. How do you see life expectancy trends in the US? Let me know what trends you are discovering this week [email protected].

The buzz

Elizabeth Arias, Betzaida Tejada-Vera and Farida Ahmad, Health Scientist, National Center for Health Statistics

Preliminary life expectancy at birth in the first half of 2020 was both the overall population (77.8 years) and men (75.1) at its lowest level since 2006 and for women (80.5) at its lowest level since 2007.

Life expectancy for the non-Hispanic black population declined the most at 72.0, the lowest estimate since 2001 (for the black population regardless of Hispanic origin). The Hispanic population experienced the second largest decline in life expectancy (79.9), a lower number than in 2006, the first year in which life expectancy estimates were made by Hispanic ancestry (80.3). The values ​​observed for the non-Hispanic white population were last observed in 2005 for the white population (regardless of Hispanic origin).

Another consequence of the decreased life expectancy estimates observed in the first half of 2020 was a worsening of racial and ethnic mortality differences. For example, the gap in life expectancy at birth between non-Hispanic black and white populations widened by 46% between 2019 and the first half of 2020 (from 4.1 to 6.0 years).

Regardless of Hispanic ancestry, the life expectancy of the black population was consistently lower than that of the white population, but the gap between the two races had generally narrowed since 1993 when it was 7.1. The 6.0 gap observed in the first half of 2020 is the largest since 1998.

Conversely, the gap between the Hispanic and non-Hispanic white populations narrowed by 37% between 2019 and the first half of 2020 (from 3.0 to 1.9 years). This suggests that the Hispanic population has lost some of the mortality advantage it has demonstrated since 2006 compared to the non-Hispanic white population, despite having a lower socioeconomic status in general.

The preliminary estimates of life expectancy presented in this report have important limitations. First, they are based on deaths that occurred in the first six months of the year and do not reflect the entirety of the 2020 COVID-19 pandemic impact or other changes in causes of death, such as the increase in temporary drug overdose deaths until the beginning of 2020.

The patterns of death are seasonal each year, with the winter months typically having more deaths than the summer months, which is not reflected in the data.

Second, the COVID-19 pandemic affected certain geographic areas differently in the first half of 2020. The life table estimates may disproportionately show mortality in those regions that are more urban and have different demographic characteristics than the areas affected by the pandemic in the latter part of the year. As a result, life expectancy at birth for the first half of 2020 could be underestimated as the most affected populations, Hispanic and non-Hispanic black populations, are more likely to live in urban areas.

Sam Gutterman, advisory actuary

There are considerable uncertainties about the future longevity of the USA.

It is important to note that our population is quite heterogeneous with a wide range of characteristics and behaviors of risk of death. It is the long-term aggregation of the effects of many of these factors that affect longevity. So many observations made about the “average” US person do not capture our true future longevity. Overall, for example, over the past few decades, people with “higher” socio-economic characteristics have benefited from improved mortality, while those with “lower” socio-economic characteristics have not.

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