Reasonable Assumptions

The number one perceived problem is that buyers simply do not understand the nonguaranteed nature of life insurance illustrations.
- Also, it is impossible for the average buyer to judge the reasonableness of the assumptions underlying the numbers in the illustration.

— John W. Keller, Northwestern Mutual

1991 – SOA – Illustrations, Society of Actuaries – 20p

Summing up, it seems to me that reasonable assumptions for annual premium policies must recognize the long-term commitments in question, and thus should consist of a realistic current mortality table with projection into future years, together with an interest rate not higher than 3% and preferably somewhat lower.

— Wilmer A. Jenkins

1961 – SOA – Ordinary Insurance Premiums, Society of Actuaries – 3p

Trying to balance the profitability and competitive requirements is a tough task in today’s competitive marketplace.
- The profit testing, premium adjusting, and benefit adjusting process is an iterative process involving a lot of give and take.
- There are many factors that the pricing actuary can adjust during this process.
  - Premium rates, agent compensation, cost of insurance charges, expense charges, surrender charges, and investment margin are all examples of items that can be “fine-tuned.”
- The key is to find the proper balance of these items so that an acceptable level of profit is achieved, while at the same time producing a saleable product.
  - It is not uncommon for the pricing actuary to occasionally question if this is all possible, but somehow we seem to always find a solution.
It is common during this process to question, or to have others question, the assumptions used.
- While it is appropriate to use the market as a check on the reasonableness of the assumptions you’re using, you need to be very careful about making changes that can’t be supported.

— William Gatterman

1987 – SOA – Product Development Process — Bringing New Products To Market Quickly And Efficiently, Society of Actuaries – 22p