Commissioners Standard Ordinary Mortality Table

The commissioners standard ordinary mortality table is an actuarial table used to compute the minimum non-forfeiture values of ordinary life insurance policies. The commissioners standard ordinary (CSO) mortality table reflects the probability that people in various age groups will die in a given year.

Commissioners standard ordinary mortality tables stand in contrast to industrial mortality tables for industrial life insurance policies. CSO tables require lower premiums from policy owners than industrial policies because these individuals tend to live longer. Both types of tables must be approved by the National Association of Insurance Commissioners (NAIC).

The latest commissioners standard ordinary mortality table was completed for 2001. In response to a request by NAIC, the Society of Actuaries (SOA) and the American Academy of Actuaries worked together to produce a proposal for a new CSO mortality table. The goal was to move to a valuation system that provided more actuarial flexibility and responsibility to set reserves that reflect individual company characteristics.

The new 2001 CSO mortality table was examined with a number of metrics in mind. For instance, first and second differences were inspected to determine the smoothness of the table. Reserve values were calculated and examined for appropriate relationships. Statutory reserves produced by the table were compared to check reserves to ensure that the proposed table would provide statutory reserves sufficient for most companies. Deficiency reserves were not considered because gross premium assumptions were not available to serve as a base for that estimation, which made for a more conservative estimate.

The commissioners standard ordinary mortality table comes into play when figuring out reserve requirements for a particular insurer. As of Jan. 1, 2009, the 2001 commissioners standard ordinary mortality table is the legally required table for calculating required reserves and nonforfeiture values for life insurance companies. In other words, life insurers must look at their policyholders' ages and then calculate how much money they must hold in reserves to pay future policy benefits, using the mortality rates of the 2001 CSO. It also means that the 2001 CSO is the basis for determining guaranteed cash values and other non-forfeiture benefits. These are the amounts available to policyholders if they surrender their life insurance contracts.

Life expectancy is the one statistic that matters most to insurers. There are thousands of life insurance underwriters at work across the nation, trying to accurately guess someone's life expectancy, and health conditions and family history are used to adjust a quoted rate up or down. Each life insurance company has its own sophisticated life expectancy tables, which it uses to write policies. Companies consider the CSO as a factor or basis for those calculations.