Grading

  • 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?

--  MR. FOLEY <Regulator>

1995 - SALES ILLUSTRATIONS, 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. 

She <Daphne Bartlett - Actuary>:

  • suggested grading in the interest rate over a period of time to standardized assumptions.
  • said that this would be an appropriate substitute for the sensitivity index. 
  • saw several advantages. It eliminated the portfolio versus new money problem because one could grade down, and the other might need to grade up.
  • said the numbers generated by the illustration would be more realistic...
  • said this would minimize the need for in-force illustrations.

1995-1, NAIC Proceedings

Non-guaranteed Premium

  • On the other hand, at Transamerica Life Insurance and Annuity Company, our pension affiliate, the current premiums are priced using a level interest assumption, rather than the more normal assumptions that interest rates will decline.
  • For most of the products on the market, the current premiums are guaranteed not to be raised for a period of any where from one to six years from issue.
  • During this period when the current premiums are guaranteed, deficiency reserves would have to be set up based on the current premiums. 

-- DENISE F. ROEDER <Occidental>

1980 - NON-PARTICIPATING LIFE PRODUCTS WITH NON- GUARANTEED PREMUIMS, Society of Actuaries

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 are 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