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The Actuary

November 1981 – Volume 15, No. 9 November, 1981 THE ACTUARY Page Three

ACADEMY’SSOCIAL INSURANCE FOUR LIMRA PUBLICATIONS COMMITTEETESTIMONY These booklets, of special value and iInterest to actuaries, may be olbtained For our readers’ convenience at a time 0 from Life Insurance Marketing & Research Assn., Box 208, Hartford, CT when remedying Social Security financ- 06141. ing problems is in the headlines, we list here live key excerpts from testimony Proposed Lapse Disclosure System-Feasibility Test and Procedures. Report to the NAIC by the Adwory Committee om Policy Lapsation. , 43 pp. and appen- in June and by James R. dixes, 820. Swenson, Chairman of the Academy’s It was in 1974, we recolld, that an NAIC Lapsation Task Force, express- Committee on Social Insmance. His first ing its frustration with excessive lapses experienced by some companies and statement was to the Senate Special Com- some agents, said that there was nothing effective that state commissioners mittee on Aging; the other to the Senate could do about this. But in 1977 the repletors took the first necessary step Subcommittee on Social Security. The toward doing something by seekin, u recommendations from this advisory paragraph titles are ours, not Mr. c group, capably chaired by LIMRA’s Helen T. Noniewicz. At least 14 Society Swenson’s. members contributed to its work. Act Now On Long-Term Problems Apart from the si,rrniIicance of its findings(which have encountered industry “It is apparent that legislation needs opposition) this report has great value in giving more data on policy lapse to be enacted to resolve the predicted and surrender experience than ever before published. Its questionnaire went short term financing problems (of to 1,100 life companies; usable statistics came from companies that have 72 OASl). The Academy believes that it is percent oE the total ordinary life insurance in force in the United States. equally important that long term financ- Having developed sets of comparison standards (i.e., averages deter- in,a issues be addressed at the same time mined as if all the contributors were one giant company), the committee to help assure financial viability and to suggested that if the regulators decide to use the system ‘they might regard restore public confidence.” companies whose termination rates exceed double the applicable standard, Trim Benefits To Affordable Levels in any of their several policy categories, as haviq a lapse problem justifying insurance department enquiry. This reviewer considers this criterion too “[Blenefit promises must be kept at weak, but otherwise unreservedly applauds the report and the committee’s levels that are reasonable and affordable, wisdom and notable fortitude in producing it. This requires that sipificant long term changes be enacted so that future gen- The Disclosure Book: An .4gent’s Guide to Policy Cost Comparoons. 33 pp. and ap- erations will not be faced with a burden .0-- pendixes, $5. they will be unable or unwilling to There are grounds for doubting that nearly enough life insurance train- support. . . . [P] roposals to gradually ers have yet put their hearts into training their agents to understand the increase the retirement age from 65 to interest-adjusted system, and into encouraging agents to explain it fairly 68 would generally eliminate approxi- to interestecl buyers. This agent trainknf; book furnishes means for doing mately two-thirds of the 75 year OASDI this. Its chapter titles are: financing deficit. . . . A ‘safety valve’ provision providing that benefit in- Introduction An Imposed Opportunity creases be based on the lesser of wage or Chapter 1 How and Why Disclosure Regulations Developed price increases would help. . . .” Chapter 2 Basic Concepts Pay Attention To Pessimistic Chapter 3 Cost Disclosures in Action Forecasts Conclusion The Value of Your Service “[Mlore emphasis should be placed on actuarial projections based upon Appendix A How the Indexes Are Calculated pessimistic assumptions.” Appendix B Cost Disclosure in Canada Appendix C Where To Go For More Information Let Actuaries Make Their Own Forecasts Career Agent Termination Patterns. Research Report 19814. 19 pp. and appeuldixes. “The current financing problems itlus- J Agent Service Tables Ifandbook. Actuarial Calculations for Marketing. 12 pp. and trate the continuing need for indepen- appendixes. dent, professional, actuarial analysis. ! You are advised to ask Joseph R. Brzezinski for these two helpful re- The Office of the Actuary (of SSA) and ports, both dealing with the Gent termination tables that he described in the actuaries employed in the Health this newsletter’s issue. The Research Report gives the termina- Care Financing Administration are I tion rates and related data by both contract year and calendar year, describes uniquely qualified to provide such an- their derivation and uses, and gives comparisons with the McConney-Guest alysis. They must be given latitude to tables in TASA XLJTI 11942). The Handbook poses six questions that arise select a range of appropriate assump- about agent survival and shows how they are answered from a company’s tions independent of ‘official’ economic 0 own statistics in conjunction with the tables furnished. forecasts.” E.I.M. (Continued on page 5) November, 1981 THE ACTUARY Page Five

HOW MANY MEMBERS? Social Insurance Committee Testimony This m-tide’s aim isn’t SO much to provide figures that today’s readers specially (Confmfied jront pnge 3) want, as it is to keep future historians from being thwarted by unavdability of Amend Law To Require Actuarial membership figures that would have appeared in the 1979 Year Book. That Year Certification Book, it will be remembered, died aborning. We take this opportunity also to rectify a temporary miscount, perpetrated dur- “ERISA requires that valuations of ing that same hiatus period. Our 1980 Year Book reported, at p. 60, that we had priva’te pension plans be certified by 3,955 Fellows and 3,042 Associates on , 1979; the correct numbers were qualified actuaries. A similar actuarial 3,934 Fellows and 3,035 Associates. certification is required by P.L. 95-595 There is a third matter. Desire for earlier Year Book emergence has prompted for pension plans covering federal em- a set-back in our closing date for &se membership figures. Formerly that closing ployees. . . . The American Academy of date was December 1st; starting with 1979 it is November 1st. The significant effect Actuaries recommends that the Social of this change is that, in any attempted comparisons with prior and subsequent years, Security Act be amended to enable the the figures for 1979 don’t reflect the new Fellows (of whom there were 90) nor the public to enjoy the same benefit of pro- new Associates (360) who qualified in the examinations. fessional actuarial certification for the Executive Director John O’Connor reports that we can be assured that we really Social Security program.” (Readers may did have 7,697 members on November lst, 1980; our faithful Chicago staff proved note that actuarial certification was this by making a page-by-page count. This reporter is confident that now that the dust has settled, our 1982 Year Book adopted for the 1981 Trustees Reports- will revert to the tabular forrrmt with opening and closing to’tals used in past days. see our October issue-but its perma- nence has yet to be assured by legisla- MEMBERSHIP STATISTICS tion.) E.J.M. December 1. 1977 to November 1, 1980 Fellows Associates HOW TO BECOMEAN ARCHACTUARY 3,469 2,694 Membership, December 1, 1977 by Courtland C. Smith December 1977 to December 1978 ARCH (Actuarial Research Clearing Increase: By Examination 314 449 . - By -Election . 33 House) is an informal journal for By Reinstatement 2 6 prompt dissemination of current actu- Total 3,785 3,182 arial research. A typical issue contains short papers on particular research Decrease: By Death 20 5 topics, longer papers (with abstracts to By Withdrawal 7 4.8 help readers judge their utility), ex- By Associates becoming Fellows 314 changes of letters, a few problems and Membership, December 1, 1978 3,758 2,815 solutions, translations of foreign-lan- December 1978 to November 1979 guage items, and perhaps useful com- Increase: By Examination 189(l) 399(l) puter programs or references thereto. By Election 20 We also print proceedings of our Actu- Total 3,947 3,234 arial Research Conferences. Decrease: By Death 13 6 Published two or three times yearly, By Withdrawal the annual subscription is U.S. $25. By Associates becoming Fellows 18k2) Join us by remitting to: Society of Ac- Membership, November 1, 1979 3,934(3) 3,035 (3 ) tuaries, Box 98474, Chicago, IL 60693. November 1979 to Manuscripts in original or dark Increase: By Examination 276 756 photocopies will be welcomed by any By Election 22 of the following at his Year Book ad- By Reinstatement 1 8 dress: Arnold F. Shapiro, Co-Editor; Total 4211 3,821 Courtland C. Smith, Co-Editor; Charles S. Fuhrer, our new Assistant Editor. Decrease: By Death 14 By Withdrawal 8 298 Ed. Note: Another valued ARCH ser- By Associates becoming Fellows 276 vice is publishing scripts sent to The Membership: November 1, 1980 4,189 3,508 Actuary that are beyond this newslct- ter’s capacity to handle. One example is the batch 01 welcome comments from (1) If November exam results had been refleoted, there would have ‘been 279 Fellows and 759 Associates. (2) This figure would have been 279. (3) These figures would have readers of Hilary Seal’s “An Attempt shown 4,024 Fellolvs and 3,305 Associates. to Convert American Actuaries” (March E.I.M. 1981 issue.) cl