Mortality Modelling Using Stochastic Mortality Models: A Study on Malaysia’s Ethnic Groups

DOI

10.2991/978-94-6463-014-5_16How to use a DOI?

Keywords

Stochastic mortality model; mortality modelling; Hyndman-Ullah model

Abstract

Globally, the life expectancy of the population has been continuously improving over the years due to healthcare and socioeconomic advancements. The rapid increase in life expectancy over the last few decades leads to an ageing population as the population lives longer. With the rise of elderly population in the society, insurance companies and pension funds need to deal with longevity risk, which is the risk of incurring greater pay-out ratios than projected as life expectancies exceed pricing assumptions. Hence, accurate mortality modelling and projection are of key interest to insurance companies, pension providers and government to minimize such risks. This study will focus on the modelling of mortality rates in Malaysia based on three main ethnic groups, namely Malay, Chinese and Indian using data from Abridged Life Tables for a 20-year period (2001–2020) obtained from Department of Statistics Malaysia. Mortality rates for six subpopulations (Malay male, Malay female, Chinese male, Chinese female, Indian male and Indian female) under 18 age groups will be modelled using three stochastic mortality models, i.e. Lee-Carter model, Hyndman-Ullah model and Augmented Common Factor model. We conclude that Hyndman-Ullah model has the best fit for past mortality rates with the lowest values of goodness-of-fit using Root Mean Square Error (RMSE) and Mean Absolute Percentage Error (MAPE). Future research can be conducted by using Hyndman-Ullah model to forecast mortality rates in Malaysia based on age, gender and ethnic groups, which can be then applied in updating pension and annuities calculations on the existing and new contracts to minimize financial losses arising from longevity risk.

Copyright

© 2023 The Author(s)

Open Access

Open Access This chapter is licensed under the terms of the Creative Commons Attribution-NonCommercial 4.0 International License (http://creativecommons.org/licenses/by-nc/4.0/), which permits any noncommercial use, sharing, adaptation, distribution and reproduction in any medium or format, as long as you give appropriate credit to the original author(s) and the source, provide a link to the Creative Commons license and indicate if changes were made.

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TY  - CONF
AU  - Qian Yun Ng
AU  - Lay Guat Chan
PY  - 2022
DA  - 2022/12/12
TI  - Mortality Modelling Using Stochastic Mortality Models: A Study on Malaysia’s Ethnic Groups
BT  - Proceedings of the International Conference on Mathematical Sciences and Statistics 2022 (ICMSS 2022)
PB  - Atlantis Press
SP  - 163
EP  - 172
SN  - 2352-538X
UR  - https://doi.org/10.2991/978-94-6463-014-5_16
DO  - 10.2991/978-94-6463-014-5_16
ID  - Ng2022
ER  -