Assumptions
Assumptions
Assumptions (also Actuarial Assumptions)
Definition – An actuarial assumption is an estimate of an uncertain variable input into a financial model, normally for the purposes of calculating premiums or benefits.
https://actuarialtoolkit.soa.org/tool/glossary/assumptions-also-actuarial-assumptions
Current assumptions are critical to interest sensitive products such as Universal Life. When interest rates are high, benefit projections (such as cash value) are also high. When interest rates are low, these projections are not as attractive.<https://www.dfs.ny.gov/consumers/life_insurance/types_of_policies>
“It is unlikely that the question of the proper assumptions will ever be acceptable to all insurers on a voluntary basis.” MR. ROBERT G. BRAUND1969, Life Insurance Net Cost Comparisons, Society of Actuaries “….provide illustrations based on different assumptions. This would serve to demonstrate to the consumer the effect on future benefits of changes in assumptions.”
STATEMENT ON BEHALF OF THE AMERICAN COUNCIL OF LIFE INSURANCE TO THE NAIC MARKET CONDUCT SURVEILLANCE (EX3) TASK FORCE, June 13, 1988
1988-2, NAIC Proceedings
2. Standardized Assumptions
Tony Higgins (N.C.) asked the working group to consider projections into the future for only a few years of the non-guaranteed elements, and then projections further into the future of standardized assumptions or guarantees. Mr. Wright said this allows a company to show how its policy works without the problem of projections of non-guaranteed elements far into the future. Lester Dunlap (La.) also expressed interest in the idea of standardized assumptions to show how the policy works. He said projections far into the future can border on misrepresentation.1994-3 NAIC Proc. 515 It is possible that five per cent might be safely assumed, but there were a great many contingencies about this business, and gentlemen differ as to the rate of interest which can be received in the future, and the assumption in the life insurance calculations is that this money is perpetually invested.
HON. WILLIAM BARNES
1881-1, NAIC Proc (FKA National Insurance Convention)
“Assumptions lie at the heart of actuarial work.”2017 – The Great Assumptions Debate, 2017, American Academy of Actuaries
Wishlist: archived slides and audio “It is unlikely that the question of the proper assumptions will ever be acceptable to all insurers on a voluntary basis.” MR. ROBERT G. BRAUND
1969, Life Insurance Net Cost Comparisons, Society of Actuaries
2. When the product was launched, SEC ruled that one was allowed to illustrate a variable life product assuming a growth rate of only 8 percent in the underlying funds.
The resulting cash values were not much better than the old participating product.
When Monarch Life filed their prospectus, they managed to persuade the SEC that 8 percent was out of date and that 12 percent should be used.
Everybody used 12 percent, and the resulting variable product values were much better than those under the traditional participating product.
1985 – VARIABLE UNIVERSAL LIFE INSURANCE, Society of Actuaries – 22p