About Mark Pace

T. Mark Pace

When there is an immediate need for cash at the time of someone’s death, it has been my experience that life insurance, when properly acquired and managed, is one of the best tools ever invented for the creation and transfer of wealth. However, life insurance is rarely acquired properly and, because it is mistakenly assumed to be a "buy and hold" asset, it is never managed. The resulting financial disasters are far too frequent and completely avoidable.

If you would like to learn more about any Pig-in-a-Poke blog posts or discuss any other life insurance issues, contact T. Mark Pace at Mark@objectivereview.com

 

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Pace’s Pig-in-a-Poke

About Pace’s Pig-in-a-Poke

Pace’s Pig-in-a-Poke, provides an arena for sharing the four great passions in my life. My three foundational passions are:

  1. Invest in yourself first;
  2. The genius in all of us, and;
  3. We can all live a long healthy life.

These three support my life work and my fourth passion; LIPM™ (Life Insurance Property Management).

As the blog title suggests, my focus is on debunking all of the myths, misuse, and muddled thinking that has accumulated in the life insurance industry. And, from time to time, I will go outside of the specific world of life insurance and share my views on my other three passions.

I hope you find my blog worthy of your attention, informative, and occasionally inspirational. I welcome your comments, questions and suggestions.

Mark Pace

News Update: Risk Parameters in Longevity Markets

Understanding the impact longevity has on life insurance performance management is key to making life insurance work at its very best.  The following article provides some interesting insight into longevity-related risk parameters.

Risk Parameters in Longevity Markets

by Michael Fasano

The 20th century witnessed a steady improvement in life expectancy, with U.S. life expectancy at birth (both sexes) increasing from 47 years at the beginning of the century to 77 years at the end.

Improvements in the first part of the century were significantly affected by reduction in mortality from infectious diseases due to better sanitation, refrigeration of foods, widespread use of vaccinations and the development of antibiotics; while mortality in the latter part of the century was reduced by better diagnostics, new treatment protocols and mitigation of risk factors affecting cardiovascular disease.

As we look forward, it is not clear if mortality improvements will continue at the same rate as in the past, in part because our biologic age has been fixed at 115 to 120 years. Nevertheless, the risk of longevity extension remains a concern of participants in longevity markets. Some of the key longevity risks are:

  • Lifestyle
  • Disease Elimination
  • Demographics
  • Genetics

 

Lifestyle

As the above graph demonstrates, spreads in survival are significant at the older ages, with the least healthy quartile of the population having only a 10-year life expectancy at age 65, while the healthiest quartile will survive approximately 23 years on average. We find that lifestyle risk factors play a significant role in determining which individuals will fall into the respective survival quartiles, with some of the more relevant risk factors being:

  • Smoking
  • Diabetes
  • Obesity
  • Hypertension
  • Sedentary Lifestyle

Indeed, a study published in the 2/11/08 issue of the Archives of Internal Medicine found that the chance of a 70-year old man making it to age 90 was 54% if he had none of the identified risk factors, but only 4% if he had all of them.

Disease Elimination

We have seen the dramatic impact new treatment protocols can have on the survival of those with previously dread diseases. Highly active anti-retroviral therapy (HAART) extended the survival of a 25-year old HIV positive individual from about 6 years in 1995 to approximately 40 years by the turn of the last century.

Imatinib (Gleevec) has given people with chronic myelogenous leukemia a chance for a nearly normal life expectancy, whereas in the 1970s this cancer was associated with only a 4-year life expectancy. What would happen if similar mortality improvements were seen in the major disease categories affecting the older ages – i.e., heart disease and all cancers?

The National Center for Health Statistics has estimated that if all heart disease was eliminated (assuming independence relative to other diseases), life expectancy at birth would be extended 4 years for males and 3 years for females. Similarly, if all cancer was eliminated, life expectancy at birth would be extended 4 and 3 years, respectively, for males and females.

Keeping in mind that these are estimates of life expectancy extension at birth, and not at or above age 65, major disease elimination would have a significant but not deadly impact on well diversified longevity portfolios.

Demographics

Most people know that immigration has had a huge impact on our culture and economy. What is not as well appreciated is the impact that demographic trends can have on population life expectancy. Although there may be a genetic component to differences in life expectancy in different countries, it is more likely that these differences are the result of income differentials.

Using U.S. statistics as an example, we see that life expectancy varies from a high of 80.0 years in Hawaii to 73.6 years in Mississippi, according to the 2006 Harvard University Initiative for Global Health. Could this be the result of a higher Asian population in Hawaii? Perhaps, but more likely the difference is attributable to an average annual family income in excess of $67,000 in Hawaii versus average income of less than $38,000 in Mississippi.

Income differences among the likely sources of future immigrants may well impact portfolio longevity positions. The U.S. Census Bureau has estimated median income of all full time employees to be approximately $31,000 (2009 data), but with significant differences among ethnic groups. For example, Asian American median income per employed was estimated at almost $37,000 versus less than $23,000 for Hispanic Americans. These same two groups are projected to show the largest percentage increase in the U.S. population – with Asian Americans projected to account for 7.6% of the population in 2050 versus 4.5% in 2010, while Hispanic Americans are projected to increase their share of the U.S. population to over 30% in 2050 versus 16.0% in 2010. Investment experience could well be influenced by the distribution of immigrant groups in subject portfolios.

Genetics

In many respects, genetics is the wild card of longevity risk factors – as there is significant uncertainty as to how it might play out. While lifestyle, disease elimination and demographics may well impact life expectancy, as long as our biologic age stays in the range of 115 to 120 years, there will be a mathematical damper on future longevity extensions. The biologic limitation on our longevity has to do with a predetermined number of cell divisions associated with various species, the Hayflict Limit, named after the noted gerontologist, Leonard Hayflict, who established this phenomenon.

Each chromosome has a cap at its end, known as a telomere. Telomeres have been compared to the plastic wrapper at the end of a shoelace that keeps the shoelace from unraveling. Every time a cell divides, the telomere is shortened, until it is ultimately eliminated – at which time the cell enters a senescence phase, in which it divides no more. This senescence phase correlates with aging. Interestingly, cancer cells produce an enzyme that prevents telomere shortening and produce the “cell immortality” that allows cancer cells to divide endlessly.

Is it possible that we might be able to replicate the cancer enzyme that prevents telomere shortening without increasing the risk of developing cancer? Most think not, but even if only a theoretical possibility, the ramifications would be game changing.

About the author

Mark Pace
Mark Pace
When there is a need for immediate liquidity at the time of someone’s death, it has been my experience that life insurance, when it is properly acquired and managed, is one of the best tools ever created for the creation and transfer of wealth. However, in my 35 plus years of experience, life insurance is rarely properly acquired and never managed… thereby creating a monumental financial disaster for many individuals that should never happen.

If you would like to learn more about this Pig-in-a-Poke subject or discuss any other life insurance issues, contact T. Mark Pace at Mark@objectivereview.com

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