Guessing

  • The actuary cannot and should not attempt to estimate or predict the future.
  • This would reduce actuarial work to guessing.

⇒  What then are actuarial assumptions?

1998 01 - SOA - Actuarial Futures - Actuarial Assumptions and the Future, by W. Harold Phillips, Society of Actuaries - 4p

  • (p3) - Companies say: After 5 years, there will be enough in your cash value for you to stop paying premiums forever, or your money will earn at 10 percent, or your premium will never be more than $7.00 per thousand dollars of insurance.
    • And very quietly, maybe hidden in a footnote or in a gobbledygook phrase, they say: Well, we are really only guessing.  (p3)
  • They never say: We do not have any idea how much you will eventually have to pay for policyholder.
  • They do not say: We are not telling you how much of your premium will go into your cash value, but probably none for 4 or 5 years.
  • They do not say: All of your first-year premium will go to expenses, mostly agents' commissions.
  • And they do not ever say: The interest or dividend we are promising you will probably drop by next year.
  • But these are the very things that unwary policyholders must confront.
  • When the policyholder has to pay more premiums than he expected or notices that his cash value is not accumulating, his company will tell him: Values were not guaranteed.
    • Translation: We were only guessing.
  • Some witnesses today will testify what happened when their insurance companies guessed wrong. Companies have been guessing wrong for a while now.
    • One of our witnesses today told an industry group not long ago that less than 10 percent of life insurance in the market will perform as illustrated, and it is getting worse, not better.
    • The Wall Street Journal reported May 12 that life insurers would almost certainly be cutting dividends and interest rates paid to policyholders again this year.
      • The story said: "They have fallen sharply this year, but are expected to fall even further. Every rate that is not guaranteed has to come down."
  • Why is this flimflammery allowed to continue?
  • Where are the laws to prevent companies from misleading people?
  • What is wrong with the State regulators?
  • Why is the Congress of the United States not doing something about it?

Senator Howard Metzenbaum

1993 - GOV (Senate) - When Will Policyholders Be Given The Truth About Life Insurance? - [PDF-354p]