Grading

Grading

All these methods are based one way or

another on the ancient truth that the present value of benefits, expenses,

and margins must equal the present value of premiums.

When one considers the interest assumption, it must be remembered

that rates axe presently very high but may be showing signs of leveling

off. It seems inconceivable in view of the past that interest rates will

stay at their present levels for a long period of time. If the interest

assumption in the early policy years is taken as the rate on new investments,

the actuary should allow for the possibility of a reduction after

the first few policy years and provide for a more conservative rate at the

later policy durations.
1960 – PREMIUMS AND DIVIDENDS FOR INDIVIDUAL ORDINARY INSURANCE, Society of Actuaries

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.  MR. FOLEY <Regulator>: Where were the people that wanted to do that when we were going through the process.
Folks, we’ve been talking about this for a year.
We have taken input from anyone and everyone.
If we had any sense that we could have had ten-year projections only, if we had any sense that we could have graded interest rates and that
it would have gotten any support, believe me, we would have done it. Where were you people when we were developing the model?
1995 – SALES ILLUSTRATIONS, Society of Actuaries