Posted on 08/03/2006 10:05:58 AM PDT by SirLinksalot
Actuaries admit that they cannot tell how long we will live
By Christine Seib
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ACTUARIES, the highly trained professionals who calculate pensions liabilities, yesterday broke with tradition and admitted that it was too difficult to estimate how long human beings might live.
For more than 80 years the Continuous Mortality Investigation (CMI) has supplied mortality tables that showed how lifespans were lengthening and how they might continue to improve.
Yesterday, the CMI acknowledged after the release of its latest set of tables that there was so much room for error it was no longer sensible to offer a single set of predictions. It said that projections of future mortality had not been done with the latest tables “because of the uncertainty surrounding future improvements”.
Actuaries use mortality tables to work out how much money companies should put aside for future pensions obligations. Insurers use the tables to price products such as life insurance. Improvements in medical care and diet and reductions in manual work and smoking have undermined established patterns in longevity improvement, causing actuaries to be accused of misleading companies over their data.
Kevin Wesbroom, principal consultant at Hewitt Associates, the actuarial consultancy, said that the admission was not a mere technical point. “If the FTSE 100 companies assumed that people will live two years longer, their pension deficits would increase by around £20 billion,” he said.
The new tables, called the 00 Series, look at mortality rates between 1999 and 2002. The previous tables, the 92 Series, were based on death rates for 1991 to 1994. The 00 Series showed that 12.85 men of every 1,000 aged 65 would die that year; the 92 Series put the figure at 18.12, meaning mortality rates had improved in that period by 29 per cent.
...and admitted that it was too difficult to estimate how long human beings might live.
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Another excuse to raise insurance costs.
Heck, my next door neighbor tells me I won't live to see Christmas (he tells me this every time he sees me). I don't know how he knows this (he's not even an actuary, in fact, I don't think he's held a job since he got out of prison last year.
it's a joke
Actually just the opposite. When people live longer the premiums should be lower.
On the other hand, pensions face the prospect of paying benefits for longer periods of time. For a long time we've known that social security was in trouble, but this tells us that as bad as we think the situation is, it's really much much worse.
Duh? There are lies, damned lies, and statistics.
I knew several actuaries in grad school at the University of Texas at Austin -- one of apparently only a handful of schools that trains them. I don't recall a dumb one in the bunch.
Where people often become confused is where they misuse actuarial reports, often by failing to read the conditions expressed in the footnotes -- frequently expressed in terms of confidence intervals and probabilities.
For example, actuaries can't tell (and won't predict) how long a specific 50 year old male will live. On the other hand, they can tell with uncanny accuracy how long a population of 50 year old males will live.
This sort of goes with the old adage our profs used to pitch at us in engineering statistics classes, "Always remember, the average American has one tit and one ball."
Actually just the opposite. When people live longer the premiums should be lower.
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Not with medical insurance. Oh no. I can testify to that.
I was talking about life insurance.
The article is a bit fuzzy, but I'd say that the annuity industry is a bit worried that life extention technology developed over the next 30 years could through off contracts made now.
I expect the industry will respond in a few years by putting in exclusion or limitation language into some of the longest term annuity contracts, since it will impact upon risk selection. No one will notice at first, but in 10 or 15 years as extention techniques and medications are developed it will become an issue and agents and consumers will begin to scrutinize and compare these provisions.
I should note that those who feel that there are real possibilities in life-extention may want to take a hard look at an annuity contract now. You may want work with a very experienced annuity specialist who could advise you on contracts that are more resistant to future amendments.
Most promising technologies have to do with lowering overall metabolisim while attacking the causes of a specific list of an individual's degenerative diseases that they may be most vulnerable to.
Interesting stuff, really.
Anyone can take the actuarial exams -- I took Parts I and II myself back in college. I didn't impress any insurance company enough to hire me though. I'd be surprised if UT-Austin were any better at placing students as actuaries in training than any number of other schools that just offered a major in statistics, say. I could be wrong though.
However, I did quite well on the exams -- I think I fell short on the social skills, personality requirements, and such of the job rather than intellect.
How long will I live?
Most likely I will die between the age of 60 and 110.
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