Here are some comments (responding to the above question) from an FSA, ACAS
who works on the life side. I thought his views might be broadening because
all we've seen so far, I think, has come from those with a bent toward the
casualty side (By the way, he also points out that potential actuaries would
do well to check out the SoA web page for additional perspectives. I agree.):
"Obviously a good deal could be written about this, and each person's
experience would bring different insights. I think (Scott Martin, in his
comments of 9/16,) makes some valid points.
On the claim side, however, I should point out that life actuaries work with
more than just life insurance: there are many forms of health insurance,
including Long Term Care and Disability Income, where claims can recur and
the amount of the claim is uncertain. So this is not as cut and dried as a
single fixed claim amount per person. Annuities and pension products are also
important. Life actuaries also work . . . a good deal with investment
oriented products, including recently developed products that credit the
insured with some percentage of growth in a stock index, for example (equity
indexed annuities). This brings into play more exotic forms of investment
considerations, such as futures and options. Also, life insurers must
perform an extensive cash flow asset/liability analysis of all their business
once a year for filing with state insurance departments. In performing this
work one deals with projections and modeling a good deal, including modeling
future policyholder behavior in light of changing economic circumstances and
company investment strategies, and the behavior of assets (calls, mortgage
prepayments, etc.). More stochastic modeling is taking place today, and
statistical analysis of results is used.
The nature of many life products explains part of the difference. Generally
life and health products have longer term "rate guarantees" than P/C
coverages. It's not uncommon for an individual disability income policy to
have guaranteed rates for life with no right of the insurer to raise rates or
cancel the policy. Long Term Care policies have limited rights for the
insurer to raise rates, and the policy cannot be cancelled by the insurer.
Life insurance cannot be cancelled by the insurer either, and rates are
often guaranteed for many (20-30) years. This places more of a focus on the
investment income of future renewal premiums, and policy persistency becomes
a bigger factor in pricing products.
I could go on, but maybe this is enough for now."
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