Mortality Heterogeneity and Systematic Mortality Improvement

Mengyi Xu, Michael Sherris and Ramona Meyricke

Insurers and pension funds provide life annuities and pensions that are impacted by both aggregate mortality improvement and individual mortality heterogeneity. Aggregate population mortality trends have shown significant improvement over long periods of time. Individual mortality heterogeneity arises from differing risk characteristics across individuals.

This paper assesses the extent that systematic mortality improvement varies with individual risk characteristics. To do this, a Lee-Carter model is used to assess if mortality improvement varies for groups of individuals with similar risk characteristics along with an individual mortality model that allows for heterogeneity with time trends to assess systematic risk.