What does "excess mortality" refer to in life insurance?

Excess mortality in life insurance refers to a situation where the actual death rates among a specific group of insured individuals exceed what was originally anticipated or expected based on standard mortality tables. This phenomenon often necessitates adjustments in pricing because the insurance company could face higher-than-anticipated claims, which can put financial strain on the company.

When the mortality rates are higher than predicted, it reflects an increase in the level of risk associated with the insured population. For insurers, this could mean they need to adjust their premiums to ensure that they have enough funds to cover the claims resulting from this unexpected excess in mortality. Proper pricing is essential to maintain the viability of the insurance product and the company's financial health.

In contrast, the other options discuss circumstances that do not align with the concept of excess mortality. For example, a decrease in life expectancy for policyholders may relate to different issues but does not specifically capture the meaning of excess mortality. Higher claim rates among healthier individuals or lower premiums due to medical advancements are also unrelated to the definition of excess mortality, which is specifically tied to actual deaths surpassing expected rates.