Chapter 3: Survival Distributions and Life Tables
3.8 Select and Ultimate Tables insurer might only accept (or select) those applicants who
Suppose you are trying to issue life insurance policies and
2 50 year-old women, A and B, apply for policies. You
want to make sure you charge appropriate premiums for
each one to cover the cost of insuring them over time.
1) A is simply picked from the population at large.
2) B is picked from a group of women who recently passed
a full physical exam and shows that she is significantly
healthier than the general population.
Is it equitable to charge the same premium to A and B?
Notations:
[x] = the age when the individual is accepted (or selected)
to buy insurance.
(x) = the age of an individual (ie. the attained age)
When an individual applies to purchase a life insurance
policy, it is often the case that the insurer might require the
applicant to have a medical examination, and then the
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meet some specific health criteria. As a result, [x] is
usually healthier than (x). Therefore,
q[x] < qx,
where qx is the ultimate mortality rate (the probability that
a life x, chosen from the general population, will
die within 1year); and
q[x] is the select mortality rate (the probability that a
life x, chosen from the selected insurance
population, will die within 1year)
Notes:
1. Let k be the number of years since the selection (we
assume that k is an integer, k = 0,1,2,…).
Then q[x]+k represents the probability that an individual
accepted for life insurance at age x, now aged x + k, will
die between ages x + k and x + k + 1.
q[x]+k ≤ qx+k
2. However, the impact of selection may diminish as years
pass. The period where the impact of selection is
negligible is called the ultimate period. The select
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period is the smallest n for which the select mortality
rates are equal to the “ultimate” mortality rate, i.e.,
q[x]+k ≤ qx+k for k = 0, 1, 2, …, n – 1
q[x]+n = qx+n
3. To represent a select and ultimate life table, we use a
two-dimensional array. Each different row represents a
different age at selection, and each column represents the
duration since the selection.
Example:
We assume a period of selection of 2 years (n = 2), [x].
In general:
The select table corresponds to the first n columns, and the
ultimate table corresponds to the n+1 column.
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In general:
Let q[x-n]+n represents the mortality rate of a person aged x
who joined the select group n years ago, then
q[x] < q[x-1]+1 < q[x-2]+2 < …< q[x-(n-1)]+(n-1) < q[x-n]+n.
If n is the select period, then q[x-n]+n = qx.
Therefore, in order to find the mortality rate:
Step1: Find the age at selection [x].
Step2: In the corresponding row, move right until you cross
the desired probability.
Step 3: If the duration is longer than the selection period n,
you will not get this probability on the chosen row,
so you have to move down at the end of the row.
a) A life table in which the functions are given only for
attained ages is called an aggregate table.
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 Chapter 3: Survival Distributions and Life Tables Chapter 3: Survival Distributions and Life Tables

Example: Example (SOA):

For a 2-year select-and-ultimate table, you are given:
[x] l[x] l[x]+1 lx+2 x+2
30 1000 998 995 32
31 996 994 988 33
32 994 990 982 34
Find:
33 987 983 970 35
a) 2p[30]
Which of the following are true?
b) 5p[30]
a) 2p[31] > 2p[30]+1
c) 1|q[31]
b) 1|q[31] > 1|q[30]+1
d) 3q[31]+1
c) 2q[33] > 2q[31]+2

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 Chapter 3: Survival Distributions and Life Tables Chapter 3: Survival Distributions and Life Tables

Example:
Suppose that 5000 lives were selected for life insurance at
1.1k
age 30. If q[30 ]+ k = for k = 0,1,2,3,4,5,… Calculate the
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number of deaths between the age of 30 and 32.

Example (SOA):
For a 2-year select-and-ultimate table, you are given:
i) q96 = 0.350, q97 = 0.475, q98 = 0.675
ii) q[x] = 0.5qx for all x
iii) q[x]+1 = 0.5qx+1 for all x
iv) l[96] = 10000
Find l[97].

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