Legend of Actuarial PrecisionPublic

Legend of Actuarial Precision
Public opinion to the contrary, insurance ratemaking is not an exact science. The law of large numbers and the experience of the past permit actuaries to make estimates about future experience, but these must be qualified. When estimating future experience, the actuary implicitly says, “If things continue to happen in the future as they have in the past, this is what will happen...” But things do not happen in the future as they have happened in the past; some adjustment must be made to allow for changes that are likely to modify future losses. But even the adjustments to allow for deviations from past experience may be inadequate, particularly when the magnitude of the deviations is greater than anticipated. Of course, if the future differs from the past favorably, there is no great problem. However, if the deviation is adverse, the rate predicated on past experience may prove inadequate. A major distinction between the fields of prop- erty and liability insurance and life insurance has been the differences in the deviation of present from past experience. In the case of life insurance, we have seen a continued improvement in life expectancy. This has benefited insurance companies in two ways. First, since people have been living longer than originally expected, the insurers have been permitted to delay payment of funds, which can thus continue to be invested. In addition, the people who have lived longer than anticipated have paid premiums on their policies longer than expected. In the property and liability field, actual results have also deviated from those expected, but in this case the outcome has been less favorable for insurers. Inflationary pressures, which push up the cost of repairs and construction, rising medical costs, an increasing rate of automobile accidents, soaring liability judgments, and other similar factors have all acted to the detriment of insurance companies. In- flation does not affect the loss under a life insurance policy because of the agreement to pay a fixed sum of dollars. In property and liability insurance, however, departures from past experience have caused severe difficulties. 5

Kết quả (Việt) 1:

Truyền thuyết về độ chính xác ActuarialPublic opinion to the contrary, insurance ratemaking is not an exact science. The law of large numbers and the experience of the past permit actuaries to make estimates about future experience, but these must be qualified. When estimating future experience, the actuary implicitly says, “If things continue to happen in the future as they have in the past, this is what will happen...” But things do not happen in the future as they have happened in the past; some adjustment must be made to allow for changes that are likely to modify future losses. But even the adjustments to allow for deviations from past experience may be inadequate, particularly when the magnitude of the deviations is greater than anticipated. Of course, if the future differs from the past favorably, there is no great problem. However, if the deviation is adverse, the rate predicated on past experience may prove inadequate. A major distinction between the fields of prop- erty and liability insurance and life insurance has been the differences in the deviation of present from past experience. In the case of life insurance, we have seen a continued improvement in life expectancy. This has benefited insurance companies in two ways. First, since people have been living longer than originally expected, the insurers have been permitted to delay payment of funds, which can thus continue to be invested. In addition, the people who have lived longer than anticipated have paid premiums on their policies longer than expected. In the property and liability field, actual results have also deviated from those expected, but in this case the outcome has been less favorable for insurers. Inflationary pressures, which push up the cost of repairs and construction, rising medical costs, an increasing rate of automobile accidents, soaring liability judgments, and other similar factors have all acted to the detriment of insurance companies. In- flation does not affect the loss under a life insurance policy because of the agreement to pay a fixed sum of dollars. In property and liability insurance, however, departures from past experience have caused severe difficulties. 5