Life Tables and Survival Analysis

AS 205 Chapter 1 Jan 2014
Life Contingencies I Raymond Lo

1

Chapter 1 Survival Distributions and Life Tables

In later chapters, we deal primarily with models for insurance systems designed to
manage random losses where the randomness is related to how long an individual will
survive. ( ) T x , the time-until-death random variable, is the basic building block for
these chapters.
In this chapter, we develop a set of ideas for describing and using the distribution of
time-until-death and the distribution of the corresponding age-at-death, X

The Survival Function
Consider a newborn child. This newborns age-at-death, X , is a continuous random
variable. Let ( ) Pr( )
X
F x X x = denote the distribution function (d.f.) of X ,

And set

We always assume that (0) 0
X
F = , which implies (0) 1 s = . The function ( ) s x is called
the survival function (s.f.). For any positive x , ( ) s x is the probability a new-born will
attain age x . The distribution of X can be defined by specifying either the
function ( )
X
F x or the function ( ) s x .
Using the laws of probability, we can make probability statements about the age-at-
death in terms of either the survival function or the distribution function. For example,
the probability that a newborn dies between ages x and z ( ) x z < is
Pr( ) x X z < < =
=

Time-until-Death for a Person Age x
The conditional probability that a newborn will die between the ages x and z , given
survival to age x , is

The symbol ( ) x is used to denote a life-age- x . The future lifetime of ( ) x , X x , is
denoted by ( ) T x .

2

To make probability statements about ( ) T x , we use the notations

The symbol
t x
q can be interpreted as the probability that ( ) x will die withint years; that
is,
t x
q is the d.f. of ( ) T x . On the other hand,
t x
p can be interpreted as the probability
that ( ) x will attain age x t + ; that is
t x
p is the s.f. for ( ) x . In the special case of a life-
age-0, we have (0) T X = and

0
( )
x
p s x = 0 x

1 x
q =

1 x
p =

There is a special symbol for the more general event that ( ) x will survivet years and
die within the followingu years; that is, ( ) x will die between ages x t + and x t u + + .
This special symbol is given by

| t u x
q =

As before, if 1 u = , the prefix is deleted in
| t u x
q , and we have
| t x
q

t x
p =

t x
q =

Under this approach,
| t u x
q can be expressed as

| t u x
q =

3

Concept Review
1. Write two expressions (one with F only and one with s only) for the
probability that a newborn dies between 17 and 40, assuming the newborn dies
between 10 and 40.
2. Interpret the following expression
(20) (35)
1 (80)
s s
s

3. Write the symbol for the probability that (52) lives to at least age 77.
4. Write the symbol for the probability that a person age 74 dies before age 91.
5. Write the symbol for probability that (33) dies before age 34
6. Write the symbol for probability that a person age 43 lives to age 50, but
doesnt survive to age 67.
7. Write
5|6 x
q in terms of F and then in terms of p .
Solution

Example
Given ( ) 1
100
x
s x = 0 100 x . Find the below
( )
X
F x , ( )
X
f x ,
t x
p ,
t x
q ,
x
q , Pr(10 40) X < <
Solution

4

Example
According to the survival function above ( ) 1
100
x
s x = 0 100 x .
Find (50)
X
F , (50)
X
f ,
50 t
p ,
50 x
q ,
50
q . Hence, interpret the answers
Solution

Curtate-Future-Lifetime
A discrete random variable associated with the future lifetime is the number of future
years completed by( ) x prior to death. It is called the curtate-future-lifetime of ( ) x
and is denoted by ( ) K x . Because ( ) K x is the greatest integer in ( ) T x , its p.f. is
Pr[ ( ) ] K x k = Pr[ ( ) 1] k T x k = < +
Pr[ ( ) 1] k T x k = < +
=
=

Try
Pr[ ( ) 0] K x = =

Pr[ ( ) 1] K x = =

Pr[ ( ) 2] K x = =

5

Example
Given
2
( ) 1
100
x
s x = 0 10 x . Find the d.f. of (4) K
Solution

Example
If
100
( )
100
x
s x

= for every x , what is the probability that 19 K = for (18)
Solution

Force of Mortality (remember force of interest?)
Pr( | ) x X x x X x < < + > =

The function
( )
1 ( )
X
X
f x
F x
above is denoted by ( ) x
( )
( )
1 ( )
X
X
f x
x
F x
= =

( ) x is called the force of mortality. In study of the survival probabilities of
manufactured parts and systems, ( ) x is called the failure rate or hazard rate, or
more fully, the hazard rate function.
6

We may use the force of mortality to specify the distribution of X .
Rearrange the formula above
'( )
( )
( )
s y
y
s y

=
( ) log ( )
d
y s y
dy
=
( ) log ( ) y dy d s y =
Integrating this expression from x to x n + , we have
[ ] ( ) log ( )
x n
x n
x
x
y dy s y
+
+
=

And on taking exponentials obtain

Sometimes, we rewrite the formula above with s y x = , as

The time of survival for a newborn is ( ) s x and can be denoted using force of mortality,

0
( )
x
s x p = =

Let
( )
( )
T x
F t and
( )
( )
T x
f t denote, respectively, the d.f. and p.d.f of ( ) T x , the future
lifetime of ( ) x . Earlier, we note that
( )
( )
T x t x
F t q = ; therefore,

( )
( )
T x t x
d
f t q
dt
=

Thus ( )
t x
p x t dt + is the probability that ( ) x dies betweent andt dt + , and

0
( ) 1
t x
p x t dt
+ =

[Constant Force of Mortality]
If the force of mortality is a constant for every age x , show that
1. ( )
x
s x e

=
2.
t
t x
p e

=
7

Life Tables
Given a survival model, with survival probabilities
t x
p , we can construct the life table
for the model from some initial age 0 to a maximum age . We define
x
l for
0 x .
0
l can be thought as initial survivors. (called radix of the table).

0
( )
x
l l s x = or
0 0 x x
l l p =
From this, we see that

0 0 x t x t
l l p
+ +
=

So that, we know that
t x
p

We can now use the
x
l function to calculate survival probabilities. We can also
calculate mortality probabilities. For example,

30
q =

And

15| 30 40
q

In principle, a life table is defined for all x from the initial age, 0, to the limiting
age, . In practice, it is very common for a life table to be presented, normally at
integer ages only. In this form, the life table is a useful way of summarizing a lifetime
distribution since, with a single column of numbers, it allows us to calculate
probabilities of surviving or dying over integer numbers of years starting from an
integer age.
It is usual for a life table, tabulated at integer ages, to show the values of
x
d , where

1 x x x
d l l
+
=
In addition to
x
l , as these are used to compute
x
q . We have

x
d =

Definitions:
0
l = number of people in cohort at age 0, also called the radix
i
l = number of people in cohort at agei (those remaining from the original
0
l )
= limiting age at which probability of survival = 0 ( ( ) 0 s x = for all x )
n x
d = number alive at age x who die by age x n +

8

Relationships:
0
( )
x
l l s x =
1 x x
x
x
q
+
=
l l
l

x x n
n x
x
q
+
=
l l
l

x n
n x
x
p
+
=
l
l

n x x x n
d l l
+
=

Illustrative Life Table: Basic Functions
Age
x
l
x
d 1, 000
x
q
0 100,000.0 2,042.2 20.4
1 97,957.8 131.6 1.4
2 97,826.3 119.7 1.2
3 97,706.6 109.8 1.1
M M M M
40 93,131.6 259.0 2.8
41 92,872.6 276.9 3.0
42 92,595.7 296.5 3.2
43 92,299.2 317.8 3.4

Example: (Life Table Mortality)
Above is an excerpt from the Illustrative Life Table in the book. The following
questions are all based on this excerpt.
Find (42) s ,
40 2
d ,
38 3
q ,
2| 40
q
Solution

9

Other Life Table Characteristics
The expected value of ( ) T x , denoted by x e
o
, is called the completed-expectation-of-
life. By definition, we have

( )
0 0
[ ( )] (t) ( ) x
T x t x
e E T X t f dt t p x t dt

= = = +

o

A similar integration by parts yields equivalent expressions for
2
[ ( ) ] E T X

2 2 2
( )
0 0
[ ( ) ] (t) ( )
T x t x
E T X t f dt t p x t dt

= = +

The median future lifetime of ( ) x is denoted ( ) m x and simply represents the
number m such that
m x m x
p q = . In other words, it is the number of years that ( ) x is
equally likely to survive or not survive. It can be found by solving any of the
following:
1
Pr[ ( ) ( )]
2
T x m x > =
Or
[ ( )] 1
( ) 2
s x m x
s x
+
=
Or
1
2
m x
P =

10

The curtate-expectation-of-life is [ ( )] E K x and is denoted
x
e (no circle).

11

Assumptions for Fractional Ages
A life table ( )
x
l provides exactly the same information as the corresponding survival
distribution, ( )
x
s . However, a life table tabulated at integer ages only does not contain
all the information in the corresponding survival model, since values of
x
l at integer
ages x are not sufficient to be able to calculate probabilities involving non-integer ages,
such as
0.75 21.5
p . Given values of
x
l at integer ages only, we need and additional
assumption or some further information to calculate probabilities for non-integer ages
or durations. Specifically, we need to make some assumption about the probability
distribution for the future lifetime random variable between integer ages.
We use the term fractional age assumption to describe such an assumption. It may
be specified in terms of the force of mortality function or the survival or mortality
probabilities.
We assume that a life table is specified at integer ages only and we describe the two
most useful fractional age assumptions.
- Uniform distribution of deaths
- Constant force of mortality

Method 1: Linear Interpolation:
( ) (1 ) ( ) . ( 1) s x t t s x t s x + = + +
This method is also known as Uniform Distribution of Deaths, or UDD. Under
UDD, ( ) s x t + and
t x
p are both straight line between 0 t = to 1 t = . This method
assumes that the deaths occurring between ages x and 1 x + are evenly spread out
between the two ages.
One key formula for UDD you might want to memorize is:

To see why, please note that the number of deaths from time zero to timet is a fraction
of the total deaths in a year

Here, for convenience we interpret ( ) s x t + as the number of people alive at age x t + .
For example, if ( 0.5) 0.9 s x + = , we say that for each unit of people at age x , we have
0.9 unit of people at age 0.5 x + .

Example
Given that
70
q = 0.010413 and
71
q = 0.011670, calculate
0.7 70.6
q under the assuming a
uniform distribution of deaths.
Solution

12

Method 2: Exponential Interpolation: Forget about the complex formula
log ( ) (1 ) log ( ) .log ( 1) s x t t s x t s x + = + +
All you need to know is that under the constant force of mortality, ( ) x t + =
for 0 1 t

{ }
1
0
exp
x x s
p ds
+
=

Hence,

Probability Theory Functions for Fractional Ages
Function Uniform Distribution Constant Force
t x
q
x
tq 1
t
x
p
( ) x t +
1
x
x
q
tq

log
x
p
1 t x t
q
+
(1 )
1
x
x
t q
tq

1
1
t
x
p

y x t
q
+

1
x
x
yq
tq

1
y
x
p
t x
p 1
x
tq
t
x
p
( )
t x
p x t +
x
q log
t
x x
p p

Example
Given that 0.999473
x
p = , calculate
0.4 40.2
q under the assumption of a constant force
of mortality.
Solution

13

Example
Given that
70
q =0.010413 and
71
q =0.011670, calculate
0.7 70.6
q under the assumption of
a constant force of mortality.
Solution

Select and Ultimate Tables
Suppose you are trying to issue life insurance policies and two 45 year-old women
apply for policies.
1. Simply picked from the population at large.
2. Who recently passed a comprehensive physical exam with flying colors.
Is it fair to charge the same premium to the two women?

___. Because you have additional information about the second woman that would
cause you to expect her to have better mortality experience than the general
population.

Thus, to her premium, you might apply a ________ mortality table that reflects better
mortality experience of very healthy 45 years old.

However, after a certain period, e.g. 2 years, the condition of health may deteriorate
and be no difference among the general population. So at that point, you might want
to go back to use standard mortality rates at age 47 regardless of status at age 45.

Above scenario illustrates the idea behind select and ultimate tables. For some period
of time, you expect mortality to be different than that for the general population the
select period. However, at some point, youre just not sure of this special status
anymore, so those folks fall back into the pack at some point the ultimate table.

Consider table below,

14

Excerpt from the AF80 Select-and-Ultimate Table in Bowers, et al.
[ ] x
[ ]
1, 000
x
q
[ ] 1
1, 000
x
q
+

2
1, 000
x
q
+

[ ] x
l
[ ] 1 x
l
+

2 x
l
+

2 x +
30 0.222 0.330 0.422 9,906.74 9,904.54 9,901.27 32
31 0.234 0.352 0.459 9,902.89 9,900.58 9,897.09 33
32 0.250 0.377 0.500 9,898.75 9,896.28 9,892.55 34
33 0.269 0.407 0.545 9,894.29 9,891.63 9,887.60 35
34 0.291 0.441 0.596 9,889.45 9,886.57 9,882.21 36

In general,

[ ] [ ] 1 1 x x x
q q q
+
< <
Why? (find the value for above when 32 x = )

Example: Select and Ultimate Life Table
Using the select and ultimate life table shown above find the value of
[ ]
2 30
p ,
[ ]
5 30
p ,
[ ]
1 | 31
q ,
[ ]
3 31 1
q
+
, and
[ ]
( ) 3 32 3 32
1000 q q
Solution

Life Tables and Survival Analysis

Uploaded by

Document Information

Original Title

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Life Tables and Survival Analysis

Uploaded by

Copyright:

Available Formats

AS 205 Chapter 1 Jan 2014

Life Contingencies I Raymond Lo

You might also like