A new paradigm of mortality modeling via individual vitality dynamics

Abstract: The significance of mortality modeling extends across multiple research areas, ranging from life insurance valuation to optimal lifetime decision-making. Existing approaches, such as mortality laws and factor-based models, often fall short in capturing the complexity of individual mortality, hindering their ability to address specific research needs. To overcome these limitations, this paper introduces a novel approach to mortality modeling centered on the dynamics of individual vitality. A four-component framework is developed to account for initial conditions, natural aging processes, stochastic fluctuations, and accidental events over an individual's lifetime. We demonstrate the framework's analytical capabilities across various settings and explore its practical implications in solving life insurance problems and deriving optimal lifetime decisions. Our results show that the proposed framework not only encompasses existing mortality models but also provides individualized mortality outcomes and offers an intuitive explanation for survival biases.