A forecast reconciliation approach to cause-of-death mortality modeling


Life expectancy has been increasing sharply around the globe since the second half of the 20th century. Mortality modeling and forecasting have therefore attracted increasing attention from various areas, such as the public pension systems, commercial insurance sectors, as well as actuarial, demographic and epidemiological research. Compared to the aggregate mortality experience, cause-specific mortality rates contain more detailed information, and can help us better understand the ongoing mortality improvements. However, when conducting cause-of-death mortality modeling, it is important to ensure coherence in the forecasts. That is, the forecasts of cause-specific mortality rates should add up to the forecasts of the aggregate mortality rates. In this paper, we propose a novel forecast reconciliation approach to achieve this goal. We use the age-specific mortality experience in the U.S. during 1970–2015 as a case study. Seven major causes of death are considered in this paper. By incorporating both the disaggregate cause-specific data and the aggregate total-level data, we achieve better forecasting results at both levels and coherence across forecasts. Moreover, we perform a cluster analysis on the cause-specific mortality data. It is shown that combining mortality experience from causes with similar mortality patterns can provide additional useful information, and thus further improve forecast accuracy. Finally, based on the proposed reconciliation approach, we conduct a scenario-based analysis to project future mortality rates under the assumption of certain causes being eliminated.

Insurance: Mathematics and Economics 86