Actuarial Tables

Actuarial tables — most commonly mortality tables or life tables — are constructed from large population datasets and updated periodically to reflect changes in life expectancy, medical advances, and demographic shifts. In the United States, life insurers typically rely on tables published by the Society of Actuaries (SOA), while the IRS publishes separate tables used for required minimum distribution calculations from retirement accounts.

A mortality table assigns a probability of death within a one-year period to each age. From this, actuaries derive the probability of surviving to any future age, which directly feeds into the pricing of life insurance, annuities, and pension obligations. For life insurance, higher mortality probability at a given age translates to higher premiums. For annuities, higher longevity (lower mortality) requires higher premiums because the insurer expects to make more payments.

The distinction between aggregate tables and select-and-ultimate tables matters in underwriting. Aggregate tables reflect the mortality experience of the general population. Select-and-ultimate tables separately model the mortality of recently underwritten insureds — who have just passed a health screen and tend to be healthier than average — and then grade into ultimate (population-average) mortality rates over time as this select effect wears off.

Mortality improvement scales are another critical component. Because life expectancy has generally increased over time, actuaries do not assume that today's mortality rates will persist indefinitely. Improvement scales project future reductions in mortality, which is particularly important for valuing long-duration liabilities such as pension annuities and life insurance reserves.

Actuarial tables are also used in disability income insurance, long-term care insurance, and workers compensation, where morbidity rates (the incidence and duration of illness or disability) rather than mortality rates are the primary input.