Risk transfer...and transfer risk

(Dec 21, 2017)

The risk-transfer market for defined-benefit pensions in the UK has been  buoyant for many years.  There is considerable demand from pension schemes - to say nothing of their sponsoring employers - for solutions that transfer risks to insurers.  These risk transfers can be comprehensive, such as bulk annuities that take on investment, inflation and all demographic risks.  Or else they can be narrowly focused, such as the longevity swaps that only transfer a specific part of a scheme's overall risk.

Whatever the solution, something else needs to be transferred long before the risk can be: data.  To price a longevity swap or a bulk annuity, an insurer or reinsurer needs some very specific data on the lives covered. …

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Tags: personal data, postcodes, security, Excel

How not to do postcode profiling

(Jun 15, 2011)

We have written extensively about how to use postcodes for mortality modelling.  The best approach in the UK is to use so-called geodemographic profilers, which map postcodes to relatively homogeneous groups of households sharing certain socio-economic characteristics.  This approach uses the full, two-part UK postcode, which is often sufficiently accurate to pinpoint a residential street.  We have both an A4 flyer and a short web video which introduces newcomers to the subject.

However, it is often instructive to look at mistakes.  Somewhat surprisingly, there are still so-called "postcode mortality" tools which make the error of assuming that the first part of the postcode is all that…

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Tags: postcodes, geodemographics

Developments in the management of annuity business

(Mar 16, 2010)

Last night an paper on the management of annuities was presented to the Faculty of Actuaries in Edinburgh.  The same paper will be presented again to the Institute of Actuaries on 22nd March in London.

I made some comments during the debate which can be found here.


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Tags: annuities, longevity, postcodes, cause of death

Island Life

(Nov 10, 2009)

We have written extensively about the use of postcodes and geodemographics for mortality modelling.  Two peer-reviewed papers recently presented to the Institute of Actuaries in London have testified to the power of geodemographics when applied to pensioner mortality: Richards (2008) and Madrigal et al (2009).

One feature of standard U.K. postcode profilers is that they typically exclude the crown dependencies, which are not legally part of the United Kingdom.  This makes it impossible to assign a geodemographic type, despite the fact that crown dependencies often have a postcode system which follows the same hierarchical structure as that of the UK.  Postcodes for crown dependencies are therefore…

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Tags: postcodes, geodemographics, Mosaic, Acorn, Guernsey, Jersey, Isle of Man

Beginner's guide to postcode pricing

(May 15, 2009)

We've created a short graphical summary of the application of postcode-driven lifestyle within actuarial mortality models. It shows how the incorporation of postcode geodemographics as a proxy for socio-economic group can overcome the limitations involved in pricing by benefit size alone.

Feel free to download the postcode pricing information sheet.  It may be used for any purpose you like, as long as it is kept whole and unmodified and the copyright message is unaltered.

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Tags: postcodes, mortality, annuities

Sweating your data assets

(Apr 16, 2009)

In recent years insurers have looked to making better use of the data they already have. The appeal is simple: if you have already collected the data, then it is like leaving money on the table if it is not being exploited to the full. Worse, if your competitors make better use of their data, you can be selected against and lose money.

The biggest change has been in insurers' attitude towards the use of postcodes. Postcodes have to be collected and maintained anyway as part of normal business, so any extra value which can be squeezed out of them is a low-cost bonus.  As we will see, this can sometimes even be a zero-cost bonus.

Every UK residential postcode can be assigned a geodemographic type to describe the sort of people…

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Tags: postcodes, geodemographics, smoking, missing data, P-squared

Postcode pricing in 15 minutes!

(Apr 2, 2009)

Just a short post to announce we've revised our overview videos for both Longevitas and mortalityrating.com.

The Longevitas video takes you through the creation of a pricing and reserving model incorporating both postcode geodemographics and benefit size in just over 13 minutes. You'll have to put up with my dulcet tones, but other than that, enjoy!


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Tags: postcodes, survival models

Size isn't everything

(Dec 9, 2008)

In an earlier post we discussed the correct way of using postcodes for analysing mortality, and also how this works in countries outside the UK.  It is worth re-iterating why insurers use so-called geodemographic profiling.

The first point is that the more risk factors in your underwriting model, the less likely an insurer will be selected against in the market.  For example, if you price annuities just using age, gender and fund size while everyone else uses the same three plus postcode, you will lose money due to the relative lack of sophistication of your underwriting model.  The richer your underwriting model, the less scope there is for being selected against by the rest of the market.  Indeed, if your underwriting…

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Tags: postcodes, geodemographics

Modelling and the Maple Leaf

(Oct 10, 2008)

We get a lot of interest in our software from Canada. We don't know specifically why this might be - despite that fact that two of our founders are Scottish, we are not aware of any distant relatives still panning for gold out there.

One possible reason is that Canada, like the Netherlands, USA and the UK, has a hierarchical postal code with fine granularity.  This makes Canadian postcodes highly amenable to profiling for socio-economic status, and therefore useful in modelling longevity, persistency or any other decrement influenced by wealth and lifestyle factors.

Statistics Canada keeps tabs on the number of active postal codes, estimated at around 861,000 and shared across a population of around 33 million…

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Tags: postal code, postcodes, Canada, geodemographics

Zip codes

(Sep 8, 2008)

Following a previous entry on postcodes, we have been asked how US zip codes can be used for mortality modelling.  Most people in the USA understand the five-digit zip code, for example 20500 in the address for the White House:

The White House
1600 Pennsylvania Avenue NW
Washington, DC 20500

However, a five-digit zip code typically covers thousands of people and is therefore of severely limited use for geodemographic profiling for mortality. What is needed is the nine-digit zip code, also known as "zip plus four".  This is shown below with the same address in standard format for the US Postal Service:

The White House
1600 Pennsylvania Avenue NW
Washington, DC 20500-0003

A nine-digit zip code covers…

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Tags: zip code, postcodes, zip plus four, geodemographics

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