FRA to issue tailor-made actuarial tables
Inching closer to a tailor-made life ins. industry: The Financial Regulatory Authority (FRA) has finished drafting Egypt’s first actuarial life tables in a move that is expected to help ensure a fair valuation of life ins. policies in line with the country’s mortality rates, FRA boss Mohamed Omran told CNBC Arabia yesterday.
When will Egypt’s first actuarial table go live? “As soon as possible,” Omran said, stressing that the final draft is still up for public discussions by stakeholders. Hesham Ramadan, a top deputy to the FRA chairman, told us technical considerations could push implementation until the upcoming fiscal year.
Wait, what’s an actuarial table? Think of it as a spreadsheet that an underwriter can use to estimate the probability that you’ll croak before your next birthday based on things including your current age and gender.
Why are made-in-Egypt tables important? The tables used in the Egyptian market are based on life expectancies in the UK in the 1970s, actuarial science expert Wael Abdel Hady tells us. The new tables should standardize projections on life expectancy across the market. Today, Ins. companies consider several data sets when pricing their policies: Their own death tables, those across the market as outlined in the FRA’s annual statistical publication, and those issued by CAPMAS and the National Population Council. The new tables should bring about a fairer pricing of policies for clients, Abdel Hady said.
Preliminary data from the tables suggests that actual death rates are 10-20% lower than those applied by Egyptian policy providers, Ramadan told us, noting that trends in our death rates differ greatly from those in the west.
Which ins. products will be affected? There are two main types of life ins. policies on offer in Egypt, mixed policies and term life policies, which are most likely to be affected by the new standards. A third type known as an investment policy is the most popular at the moment and is the least likely to be affected, since the portion of the paid installments covering death or incapacitation amounts to only 7% of the installment.
The new system should have a positive impact on pricing, Ins. Federation of Egypt Head Alaa El Zoheiry told us. Current tables use data that assumes death at a much younger age than 60, El Zoheiry said. The new tables should also help policy providers get a better handle on what to expect in terms of potential claims, but this will differ from one company to the next depending on the kind of policies on offer and their duration and scope, Ramadan said.
Private ins. funds will be getting their own actuarial tables next, the FRA’s Ramadan told us, without specifying when that is likely to take place.