Forecasting Leading Death Causes in Australia using Extended CreditRisk$+$

TL;DR

This paper introduces a novel stochastic mortality modeling framework using extended CreditRisk$^+$, applied to Australian data, to forecast leading death causes and assess impacts of health trends on future mortality and social systems.

Contribution

It applies an innovative CreditRisk$^+$ based model to mortality data, enabling detailed cause-specific forecasts and stress testing for future health scenarios.

Findings

Neoplasms will become the leading cause of death after 2011.

Deaths due to mental and behavioral disorders are projected to surge.

Circulatory disease deaths are expected to decrease.

Abstract

Recently we developed a new framework in Hirz et al (2015) to model stochastic mortality using extended CreditRisk$^+$ methodology which is very different from traditional time series methods used for mortality modelling previously. In this framework, deaths are driven by common latent stochastic risk factors which may be interpreted as death causes like neoplasms, circulatory diseases or idiosyncratic components. These common factors introduce dependence between policyholders in annuity portfolios or between death events in population. This framework can be used to construct life tables based on mortality rate forecast. Moreover this framework allows stress testing and, therefore, offers insight into how certain health scenarios influence annuity payments of an insurer. Such scenarios may include improvement in health treatments or better medication. In this paper, using publicly available data for Australia, we estimate the model using Markov chain Monte Carlo method to identify leading death causes across all age groups including long term forecast for 2031 and 2051. On top of general reduced mortality, the proportion of deaths for certain certain causes has changed massively over the period 1987 to 2011. Our model forecasts suggest that if these trends persist, then the future gives a whole new picture of mortality for people aged above 40 years. Neoplasms will become the overall number-one death cause. Moreover, deaths due to mental and behavioural disorders are very likely to surge whilst deaths due to circulatory diseases will tend to decrease. This potential increase in deaths due to mental and behavioural disorders for older ages will have a massive impact on social systems as, typically, such patients need long-term geriatric care.