Applying Non-traditional Risk Factors in a Traditional Industry

This RGA article explores the value of several additional criteria, including consideration of frailty in older aged applications, the importance of sleep as well as the impact of personality on mortality expectations. Aging populations and growing demands for digital insurance sales may help create a need to expand insurance rating factors beyond traditional underwriting criteria.

As the world population ages, frailty will become an important predictor of disability and diminished quality of life. Frailty itself can be a significant indicator of mortality, but it is usually overlooked in favor of traditional underwriting assessment methods.

One of the key factors in pricing is age at policy inception. Mortality tables tell us that a 60-year-old should pay a higher premium for cover than someone half that age. Yet several studies have shown that the frailty index is a stronger predictor of mortality than chronological age. Frailty status may be a promising risk factor to add into the underwriting mix, particularly for disability products. 

Personality type doesn’t necessarily present an additional risk, but it is the behaviours associated with it which can alter mortality and morbidity outcomes. The Five Factor Model is a recognised framework of five broad traits commonly used to describe human personality:

• Openness to experience (expressing feelings, curiosity, creativity)

• Conscientiousness (self-disciplined, dutiful, planned behaviour)

• Extraversion (assertiveness, outgoing, positivity)

• Agreeableness (trusting, compassionate, helpful)

• Neuroticism (anxiety, hostility, depression, vulnerability, sensitivity)

Understanding the correlation between personality behaviours and mortality could help more accurately define areas of insurance risk.

Multiple studies show that sleeping less than six or more than seven hours at night increases the risk of an early death. The majority of studies show that getting seven hours of sleep each night provides the greatest protection against early mortality. In a large meta-analysis of 67 articles covering more than 3.5 million participants from the U.S., Europe, Asia and Australia, length of sleep was strongly associated with all-cause mortality, CVD, CHD and stroke.

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