A Report on the Actuarial, Marketing, and Legal Analyses of the CLASS Program. Appendix Q: Table 2: Actuarial and Demographic Assumptions

10/14/2011

Table 2. CLASS Modeling Assumptions Under Three Scenarios
  I.
  Worse than Expected  
II.
  Expected  
III.
  Better than Expected  
Antiselection: ARC1 0.85 0.7 0.55
Antiselection: Avalere2 High Moderate Low
Relative Claim Costs3 1.2 1.1 1.0
Return on Investment4 4.70% 5.70% 6.70%
Lapsation5 0.50% 0.75% 1.00%
Morbidity Improvement6   0.25% 0.50% 0.75%
Mortality Improvement7 1.31% .78% .32%
Participation 1% 2% 4%
  1. Dampening factor; 1 = perfect antiselection
  2. Composite measure: high = dampening factor starts at 85%, ends at 15%, 20 years to reach terminal rate;
    medium = dampening factor starts at .7, ends at 10%, 20 years to reach terminal rate;
    low = dampening factor starts at .6, ends at 5%, 20 years to reach terminal rate
  3. Times incidence from survey data
  4. Average annual rate of return; 5.7% from 2011 Social Security Trustees Report
  5. Percentage lapse per year
  6. Annual percentage improvement for the first 20 years; 0% thereafter
  7. Annual percentage improvement over the 75 year period; from 2011 Social Security Trustees Report

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