MIB Comment on APF 2017-81 (Revised VM-50)

MIB Comment on APF 2017-81 (Revised VM-50)

I am responding to John Bauer’s request for comments on the impact on moving from a 2-year to a 1-year time lag for data submission that follows:

The following paragraph is from LATF Amendment Proposal Form, by John Bauer, NAIC:
The proposed amendment revises VM-50 to recognize the increased role of the NAIC in the experience reporting process and to provide consistency of language within the document.
Commenters are asked to consider the impact on companies of moving from a 2-year to a 1-year time lag for data submission.

My comment is that companies would be adversely impacted by moving from a 2-year to a 1-year time lag unless the following change is made in VM-51:

Change VM-51, Section 2: Individual Life Insurance, 2. Statistical Plan for Mortality, 3, b. ii:

From:

‘Terminations that were incurred in year 20XX and reported before July 1, 20XX+1.’

To:

‘Terminations that were incurred in year 20XX and reported before April 1, 20XX+1.’

My reasoning behind the adverse impact on companies of retaining the July 1 date is that:

1. Companies would have to wait until after July 1st to obtain the termination data, which would

2. Force companies to submit data during the time period from August and before end of year processing, which would

3. Unnecessarily stress company resources.

A date later than the end of the calendar year for collection of terminations is set collect late reported terminations. My opinion is that a 3 month lag time is sufficient to account for late reported terminations.

In MIB’s role as statistical agent for the New York Department of Financial Services and the Kansas Insurance Department, we researched the effect of moving from a 6 month lag time to a 3 month lag time.

For calendar years 2009 through 2014 data calls, the data has:

· A total of 14.7 million of terminations, including death terminations, non-death terminations and other terminations for policies that are non-substandard, underwritten and at issue age 18+ . Among those terminations:

o 95.8% were reported within the observation year.

o 3.7% were reported through the first three months (1/1 – 3/31) of the following year.

o 0.5% were reported through the next three months (4/1-6/30) of the following year.

Therefore, I estimate that 0.5% of the total terminations will be affected by moving from a 6 month lag time to a 3 month lag time.

Tom Rhodes

ThomasE.Rhodes, FSA, MAAA, FCA
Vice President, Actuarial Services
Actuarial and Statistical Group