While browsing the web I found an interesting blog post titled “Your body wasn’t built to last: a lesson from human mortality rates”. The fact that the average age of insured group in the TLI portfolio is going up is good news for investors. To quote the first part of the post:
What do you think are the odds that you will die during the next year? Try to put a number to it — 1 in 100? 1 in 10,000? Whatever it is, it will be twice as large 8 years from now.
This startling fact was first noticed by the British actuary Benjamin Gompertz in 1825 and is now called the “Gompertz Law of human mortality.” Your probability of dying during a given year doubles every 8 years. For me, a 25-year-old American, the probability of dying during the next year is a fairly miniscule 0.03% — about 1 in 3,000. When I’m 33 it will be about 1 in 1,500, when I’m 42 it will be about 1 in 750, and so on. By the time I reach age 100 (and I do plan on it) the probability of living to 101 will only be about 50%. This is seriously fast growth — my mortality rate is increasing exponentially with age.
And if my mortality rate (the probability of dying during the next year, or during the next second, however you want to phrase it) is rising exponentially, that means that the probability of me surviving to a particular age is falling super-exponentially.
The next few months are also expected to be good for the TLI investor. Winter is the deadliest time of the year. A ‘fun’ graph from the @Legacy blog showing the daily deaths in the US indexed by month to January. The blue line shows the relative expected number of deaths while the red and green lines represent the 90% confidence interval.