The Cost of Living Longer -- Much Longer
Number crunchers are dead set on figuring out how long you will live. For those saving for retirement, it's the $27 trillion question.
By CHARLES PASSY
WSJ
If actuaries were the sorts of people to tell bar jokes, this might be one of them. But in truth, the 78-year-old woman happens to be flesh and blood. (We'll call her Martha.) And equally real, for that matter, is her $20 million, newly minted life insurance policy -- which was approved in late 2010 by The Hartford.
But that, remarkably, is not the surprise of this story. The surprise here is how easy it was for the company's underwriting team, based in Maple Grove, Minn., to make the call -- top executives signed off on the paperwork in a mere 30 minutes. For starters, explains Assistant Vice President David Redpath, Martha's bout with cancer happened when she was in her late 50s -- according to The Hartford's latest guidelines, there is little likelihood of a return now. Her father's early death from heart disease? No worry there -- the woman, having made it so far into her late 70s, has already "outlived the danger marker," says Redpath. Indeed, by The Hartford's calculation, Martha will live an additional 14.5 years -- to the ripe old age of 92 -- which is about four years longer than what the U.S. Census Bureau's life-expectancy table predicts for a woman her age. And at a premium pegged to $1 million a year, Redpath figures, The Hartford ought to be able to turn a tidy profit on the deal, after investments.
On first blush, such a business decision may seem to be merely a bold poker play -- the insurance equivalent of going for an inside flush. (A $20 million policy, after all, is a big deal; the average face amount for a Hartford policy, by comparison, is a mere $500,000.) But look a little deeper and you'll see something at work beyond risk-taking; you'll see a revolution in the making, experts say. Ever so quietly, insurance-industry number crunchers are tossing aside the old statistical models and life tables. They're recasting tired stereotypes about the "fatal" diseases of yesteryear. They're rethinking that most ancient of questions: How long will we live? And they're coming up with what many would say is a radical answer.
Call it the new death calculus: the 21st-century equation for determining human longevity. Or call it misguided guesswork, as some critics have. Either way, it's hard to imagine a math problem that has flummoxed humanity for longer. (Actuaries, in fact, have been fumbling for an answer since 1583, when the first life insurance policy was issued.) And it's even harder to conceive of one with more at stake in the outcome.
(More here.)
By CHARLES PASSY
WSJ
If actuaries were the sorts of people to tell bar jokes, this might be one of them. But in truth, the 78-year-old woman happens to be flesh and blood. (We'll call her Martha.) And equally real, for that matter, is her $20 million, newly minted life insurance policy -- which was approved in late 2010 by The Hartford.
But that, remarkably, is not the surprise of this story. The surprise here is how easy it was for the company's underwriting team, based in Maple Grove, Minn., to make the call -- top executives signed off on the paperwork in a mere 30 minutes. For starters, explains Assistant Vice President David Redpath, Martha's bout with cancer happened when she was in her late 50s -- according to The Hartford's latest guidelines, there is little likelihood of a return now. Her father's early death from heart disease? No worry there -- the woman, having made it so far into her late 70s, has already "outlived the danger marker," says Redpath. Indeed, by The Hartford's calculation, Martha will live an additional 14.5 years -- to the ripe old age of 92 -- which is about four years longer than what the U.S. Census Bureau's life-expectancy table predicts for a woman her age. And at a premium pegged to $1 million a year, Redpath figures, The Hartford ought to be able to turn a tidy profit on the deal, after investments.
On first blush, such a business decision may seem to be merely a bold poker play -- the insurance equivalent of going for an inside flush. (A $20 million policy, after all, is a big deal; the average face amount for a Hartford policy, by comparison, is a mere $500,000.) But look a little deeper and you'll see something at work beyond risk-taking; you'll see a revolution in the making, experts say. Ever so quietly, insurance-industry number crunchers are tossing aside the old statistical models and life tables. They're recasting tired stereotypes about the "fatal" diseases of yesteryear. They're rethinking that most ancient of questions: How long will we live? And they're coming up with what many would say is a radical answer.
Call it the new death calculus: the 21st-century equation for determining human longevity. Or call it misguided guesswork, as some critics have. Either way, it's hard to imagine a math problem that has flummoxed humanity for longer. (Actuaries, in fact, have been fumbling for an answer since 1583, when the first life insurance policy was issued.) And it's even harder to conceive of one with more at stake in the outcome.
(More here.)
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