Milliman is carrying out a series of policyholder behaviour experience studies using predictive analytics. This blog post discusses the most recent US-based study looking at Guaranteed Lifetime Withdrawal Benefit (GLWB) utilisation, which, along with lapse, is a key driver of variable annuity (VA) business value.
The study was based on a data set containing around 2 million unique VA policies issued between 2003 and 2015 of seven large variable annuity writers based in the US. These policies represent roughly $220 billion of account value (based on initial purchase amounts) and cover a range of GLWB product designs as well as demographic attributes. This provides a rich data set with which to study policyholder behaviour.
A predictive model can be constructed with common variables such as age, tax-qualified status and single/joint status to allow easy implementation. The models constructed for our study use drivers that are readily available in a typical in-force data file, making them suitable for implementation in existing actuarial projection platforms. Including additional explanatory variables or interactions to the assumption formula is a natural step of predictive modelling because many variables can be captured in a single model without double-counting the individual variables’ effects. This framework allows iterative improvements to predictions and better differentiation of policyholder behaviour at a seriatim level.
The 2016 Milliman VALUES™ GLWB Utilisation study examined both when the policyholders chose to begin taking lifetime withdrawals, as well as how efficiently they continued to take them thereafter. We were able to confirm and, more importantly, quantify many intuitive assumptions about these behaviours and what drives them, and discovered new insights as well. For example, less than half of all policyholders currently taking GLWB withdrawals utilise their GLWB benefit with 100% efficiency (i.e., taking precisely the maximum allowed withdrawal amount). This is interesting as we believe many companies price on a basis of 100% efficiency.
April 7th marked National Beer Day, in honor of President Franklin Roosevelt signing a law on that date in 1933 to once again legalize the brewing and selling of beer. It was one of FDR’s first steps toward ending prohibition.
Today, craft beer is a growing market, with the number of small and independent operating breweries in the United States totaling 5,301—a 16.6% increase over the year before. But as with any small, closely held business, this expanding industry faces some unique liabilities. The infographic below is based on an article by Milliman consultant Michael Henk, which examines some of the liabilities that both craft brewers and insurers should consider in order to minimize the financial impact of the risks they face.
Spring has sprung, which means wedding season is just around the corner. But what if there is trouble in paradise—and someone calls off the wedding? Or weather prevents the parents of the groom from making it to the ceremony? Or the venue closes? Or the photographer gets lost?
The average wedding in the United States costs $35,329 (ranging from $12,769 in Mississippi to $88,176 in Manhattan). Pulling off a typical wedding involves a lot of variables—which all introduce the possibility of financial loss. So if you’re looking for information on wedding insurance—either buying it or offering it—check out our “Wedding Insurance 101” infographic, based on an article by Milliman consultant Elizabeth Bart.
The infographic below illustrates how a risk event can develop over time and how enterprise risk management (ERM) can help prevent an organizational breakdown.
For more perspective on how ERM can map risk and uncertainty within a business management process to avert systemic failures, watch this video.
Recently, the Milliman Risk Institute partnered with Oxford Economics to survey 125 North American risk executives on the current state of their enterprise risk management (ERM) programs. Insights from the survey report include two differentiators for successful ERM programs and several action items to boost the effectiveness of ERM efforts.
The following infographic captured these highlights from the survey report:
To access the full survey report, click here.