Self-prophesying models

A phenomenon to watch for is that of the "self-prophesying model".  It occurs when a variable is too specific to the mortality experience of a reference portfolio to have wider application.  It has been claimed that the risk of this increases for smaller data sets and more lifestyle categories. In fact, the error is actually most likely where there is a small number of lives in each sub-group prior to grouping.  This is simply because the impact of random variation is largest in very small groups.

As an illustration of this, consider the apparently reasonable alternative of using postcode sector instead of a geodemographic type.  The postcode sector is basically everything except the last two characters of a UK postcode, so EH11 2 is the postcode sector for our full postcode EH11 2AS.  Postcode sectors are free, so they appear to have a cost advantage over geodemographic types, which require a licence from a third-party provider.

However, this cost "advantage" is wholly illusory.  Using a medium-sized annuity portfolio, we found that the median number of lives per Mosaic type code was 3,950.  This is unlikely to result in a self-prophesying model, as random fluctuations will not be unduly influential for such large numbers of lives.  The same cannot be said for a model based on postcode sector: for the same data set, the median number of lives per sector was just 4.  Any model based on postcode sector will therefore suffer from being a self-prophesying model, and will be inapplicable to other portfolios as a result.  Indeed, such a model will not even be applicable to the same portfolio in the near future.

Geodemographics in Longevitas

Longevitas users can control the geodemographic profiler used in the Deduplication tab in the Configuration area. The Upload Processing section contains a drop-down option list for available profilers. Options for UK data include Mosaic, Acorn, P2, Health Acorn, FSS, CAMEO and Personicx.

A variety of other options exists for territories outside the UK, such as the USA, Canada and the Netherlands. Note that each profiler requires a separate licence from the owner: Experian for Mosaic and FSS, CACI for Acorn and Health Acorn, Beacon Dodsworth for P2, Eurodirect for CAMEO and Acxiom for Personicx.

Previous posts

Mortality transformation

A tool often used by demographers is the distribution of age at death in a population.  This is known to actuaries as the curve of deaths, and the past 170 years have seen a rather remarkable transformation in this curve. 
Tags: Filter information matrix by tag: mortality transformation, Filter information matrix by tag: curve of deaths, Filter information matrix by tag: mortality compression

Influenza and coronary heart disease

 Every good statistician knows that correlation does not imply causation.  Just because two things appear linked does not mean they are. However, with historical data we often don't have the luxury of carrying out controlled, scientific experiments to see if A really does cause B.
Tags: Filter information matrix by tag: influenza, Filter information matrix by tag: CHD, Filter information matrix by tag: mortality projections, Filter information matrix by tag: Spanish influenza pandemic, Filter information matrix by tag: ICA, Filter information matrix by tag: stress test, Filter information matrix by tag: cause of death

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