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Motor Vehicle Records and All-Cause Mortality. October 11, 2012. Mark S. Dion FALU FLMI Vice President Underwriting Rules Development and Education US Facultative Underwriting RGA. Motor Vehicle Reports. Historically low cost and readily accessible
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Motor Vehicle Records and All-Cause Mortality October 11, 2012 Mark S. Dion FALU FLMI Vice President Underwriting Rules Development and Education US Facultative Underwriting RGA
Motor Vehicle Reports Historically low cost and readily accessible Routine requirements vs. order for cause after a disclosure Scored by points Not identical to states point system Points adjusted by severity of the infraction and time since conviction Often only one violation is assigned points if multiple infractions for a given day Usually concerned about recent activity, often last 3 years only Sum up the number of points, enter the table, assign the flat extra Flat extras assigned to cover additional risk Age & Gender differences Current underwriting practices - a quick review
What underwriters watch for DUI & DWI Reckless driving Moving violations Accidents Suspensions Medical history Other external cause death risk “Scoff laws” Major, minor, accidents, and suspensions
Beyond traditional use Newer focus Poor equipment maintenance, lapse risks, risky behavior? Inattentive driving, texting, phone calls Seat belt use and risk taking behavior Interaction with other courts, some exclusivity Often the only insight to interactions with law enforcement And various court systems License is suspended, no apparent violations, why suspended? Taxes Child support Criminal activity Other? All cause mortality, not simply accident profile DUI triggers a different type of underwriting investigation If they aren’t paying their taxes or child support, what risks do they represent? Looking beyond the rating table
Some Challenges with the Art of Underwriting MVRs We don’t necessarily know what individuals were stopped for Pleads State variations in severity and application of tickets, sanctions, fines and suspensions Variations in retention of records Some insights to other court actions through Administrative Withdrawals and Suspensions “The agent says the suspension was for failure to pay child support…” If a person is stopped and ticketed for multiple violations are they different than someone who only gets one ticket? And the biggest challenge… where is our empirical evidence? So now we move on to the RGA-LexisNexis MVR Mortality Study Structured information and codes don’t tell the whole story
Background Information RGA Re approached LexisNexis about doing a joint study Saw need for a large-scale MVR Life Protective Value Study LexisNexis is one of the largest providers of MVR records to the insurance industry LexisNexis provided the data Random sample of 7.4 million MVR requests made from 2006-2010 Nearly all automobile insurance applicants Approximately 73,000 deaths were identified using the SSMDF Data included: MVR request date Basic demographic data of the applicant (gender, birth month/year) Motor vehicle infractions and dates of infractions LexisNexis proprietary Standard Violation Codes (SVCs) Month/year of death for deceased individuals
Background Information (con’t.) Goal of Study: Quantify the additional mortality risk of applicants with adverse driving history and assess the protective value of Motor Vehicle Records (MVR’s) in life underwriting RGA assigned a severity to each violation. “Major” violations include: Alcohol or substance related infractions Excessive Speeding (> 30 mph above speed limit) Suspended, withdrawn, revoked, surrendered or cancelled drivers license Failure to provide proof of financial responsibility Failure to appear in court Reckless or negligent driving Mortality Study Study Period 2007-2010 Expected mortality based on most recent U.S. Population Life Table Results are relative mortality differentials based on study A/E’s Includes all-cause mortality
Significant Findings of the Study Significant mortality differences found for those with “major” motor vehicle violations relative to aggregate levels (true across ages and gender) Mortality increases as the number of violations (regardless of the type of violation) increase Mortality increases as the number of “major” violations increase Prevalence of “major” violations varies significantly by age Overall, the extra mortality risk present is probably better represented by a mortality multiple (i.e., table rating) rather than a flat extra mortality load. MVRs likely provide positive protective value across a wide spectrum of ages at relatively low face amounts.
Protective Value Framework Basic Assumptions 10-year actuarial present value model 5.5% discount rate, 6% annual lapse rate Mortality = 100% of the 2008 VBT Select & Ultimate table Mortality Savings = A * B * C * D where A = PV of death benefits expected to be paid for policy B = Relative mortality differential for those with “Major” violations vs. those without C = Prevalence of applicants with adverse or “Major” violations D = Exclusivity of information provided by MVR leading to adverse UW decision Savings are then compared to the cost of the MVR
Protective Value (con’t) Break Even Face Amount Min face for mort savings to exceed cost of the MVR Assumes $9 MVR and 25% exclusivity Savings/Cost Ratio Ratio of the mortality savings to the cost of the MVR Assumes $9 MVR, $250,000 policy and 25% exclusivity Required Exclusivity Min exclusivity required to offer positive protective value Assumes $9 MVR and $250,000 policy
Major violations Accidents (though prevalence is actually low) Criminal complaints (prevalence is low) Alcohol & drug related violations Unlicensed driver – includes driving while suspended or revoked Administrative withdrawals License suspended or revoked Reckless or careless driving Speeding in excess of 35 miles an hour over the limit Descending order of significance for single violations
The Underwriter’s View Our traditional approach of rating MVR by flat-extras is probably not the best method Debits and credits, the mortality multiple, numeric rating system works well MVRs are not merely indicative of accident profiles, they are useful in identifying all-cause mortality Consider the DUI, once it appears on an MVR, the case becomes an alcohol use case On the upside elderly applicants with some degree of significant MVR history show better than expected mortality Surrogate for cognitive testing anyone? More than 3 major violations of any type suggests a moderate substandard rating is called for Early results and some client validation suggests the rating can grade down over time, but not in less than 3 years Some take away points
Next Steps? Time-specific analysis Years since last violation, DUI, etc Number of violations in previous __ years Violation specific analysis Past Accidents DUI/DWI Speeding Violations Moving Violations Administrative withdrawals We’re open to discussion!
