Abstract:In this paper, the methodology underlying the graduation of the mortality of members of group schemes in South Africa underwritten by life insurance companies under group life-insurance arrangements is described and the results are presented. A multivariate parametric curve was fitted to the data for the working ages 25 to 65 and comparisons are made with the mortality rates from the SA85–90 ultimate rates for insured lives and the ASSA2008 AIDS and demographic model. The results show that the mortality of members of group schemes is lower than that of the general population, mortality decreasing with increasing salary, as would be expected. For males it was found that there were differences in mortality rates by industry for a given salary band, whereas for females these differences only occurred in the lower salary bands. Furthermore, there is evidence of the healthy-worker effect at ages 60 and above, where the mortality rates appear to level off or even decrease as age increases. This contrasts with the mortality rates from the SA85–90 ultimate rates for insured lives and the ASSA2008 AIDS and demographic model, which increase exponentially.

Abstract: An accurate measure of the change in the price of medical-scheme cover over time is necessary to inform health and social-security policy, and would provide consumers, employers and the regulator with a useful benchmark. A medical-scheme contribution index based on gross contributions to open medical schemes is constructed using the Paasche formula and a sample of schemes for the period 2006 to 2010. The results of the index indicate a 17,48% increase in real contributions over the period.

Abstract: In this paper, the mortality of members of group schemes underwritten by South African life insurance companies is investigated. The research provides some indication of the level or mortality of this population as a whole, which apart from being useful for costing group schemes in future could be used, to the extent that these data represent the mortality of those in formal employment, in the costing of a national retirement scheme. Rates of mortality are investigated by several demographic factors such as age, sex, salary and industry of employment.

Abstract: Individuals in defined-contribution retirement funds currently have a number of options as to how to finance their post-retirement spending. The paper considers the ranking of selected annuitisation strategies by the probability of ruin and by expected discounted utility under different scenarios. ‘Ruin’ is defined as occurring when income falls below a given threshold, but does not relate to the extent of that deficit. If there is insufficient money to buy an inflation-linked annuity at retirement, then the minimisation of the probability of ruin tends to result in living annuities with a high equity content. This is because the objective function does not reflect the extent of shortfall of income or the investor’s level of risk aversion. The authors argue that this is a limitation to using the minimisation of the probability of ruin. Expected discounted utility may be more difficult to apply in practice, because of the complexity of explaining the approach to investors and the need to estimate a greater number of parameters explicitly. The authors argue that the use of expected discounted utility is, however, likely to be more representative of most investors’ perception of risk, and illustrate its use by applying an extended discounted utility model that caters for the bequest motive and different reference income levels.