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"It's like spending all day thinking about that girl you just fell in love with." — Obama was giving a speech about Baton Rouge, LA. In this "quote" he was referring to viewing the city's architecture, which was admittedly different than the real architecture of Baton Rouge, but not that different. The most striking difference was that all of the downtown government buildings were powder blue with white accents.

—Jack

Labels: Baton Rouge, politics, visitors

I got up this morning and stood in line for a relatively short hour to cast my vote. I'm glad to see that the rest of the country seems to agree that Obama was the better choice in this election, and I am excited to have a thoughtful, open, forward looking President in office again.

After I voted I took my actuarial exam. I feel like I probably came up a little short of passing, though passing isn't impossible. It's hard to say for sure because I didn't get a chance to try and remember my answers for comparison with other folks who took the exam. I'll find out for sure in January, but the other two times I felt like this after an exam I got 5's (6 is passing), so I'm going to assume I've got another 5 coming my way. So it goes. On the bright side, I do feel like the exam was fair and that I could have passed given a little more time; I was trying to solve problems right up until the proctor told us to stop working.

I'll try to get my economics credit out of the way by the end of the year and bid a fond farewell to the VEE requirements. After that I'll review my study manual to work on solidifying the few topics that I'm still a little fuzzy on and try to make sure that I can solve problems quickly. If I have to take it again in May I want to be sure to pass.

—Jack

Labels: actuarial, exams, politics

Erica signed me up for Daddy Dialectic on Google Reader recently to try and get me to spend a little more time reading and thinking about parenting issues. I've found the blog to be enjoyable. But today there is a stark contrast in adjacent posts that I wanted to point out:

• It's happening, and
• Palling around with terrorists.

Please think carefully as you consider who to vote for this November. Who is promoting which types of behavior? Which of these are good or bad for the country?

I liked McCain in 2000. But he's found himself in the wrong crowd, and I'm not sure if Candidate McCain can ever get back to the person that Senator McCain was. If he's going to do it he has to start by breaking free from his current associates, and it won't be easy to do if they manage to help get him elected.

—Jack

Labels: politics

In a recent interview Matt Damon, of all people, said of John McCain: "You do the actuary tables, there's a one out of three chance, if not more, that McCain doesn't survive his first term." Of course, when non-actuaries start invoking actuarial tables there's often some controversy in actuarial circles. I thought I'd address the issue here since the statistic seems to have been misquoted, as well as possibly misapplied.

First of all, using actuarial tables to predict the probability of death for an individual is a tenuous exercise at best. The tables are built from mortality data collected from multiple life insurance companies, and the mortality factors need to be applied to a large group of people in order to be properly utilized. They do not purport to predict the demise of any individual, but on the aggregate, for a group of policy holders, they attempt to quantify life expectancy. Some folks will die sooner than the tables suggest, some folks will die later, and in the end, with a sufficiently large group of insureds, the company hopes that their actual experience is as good or better than the mortality tables that they use.

In short, even with a lifetime of studying and work in the field, I'll never be able to tell anyone when they are going to die.

Secondly, there is the issue of population selection. The population of insured lives is not the same as the population of the United States; some folks don't have life insurance. So the data that the companies are compiling doesn't necessarily represent the mortality of a randomly selected person out of the general population. Some individuals can't get life insurance because the companies deem them too high a risk, and some choose not to buy life insurance. Since the insured population is not the same as the total population, there is bound to be some bias in the mortality data. However, this is a smaller concern than you might think because of the next point.

The standard mortality tables that insurance companies use do not show the actual observed mortality of the insured population. Instead they are padded with margins for profit and conservatism. The profit makes the companies happy. The conservatism makes the insurance regulators happy; we would rather a company hold a little too much money to pay a future death benefit than too little and risk going out of business and leaving other policy holders with no protection.

Finally, there is a question of which mortality table should be applied, and what adjustments, if any need to be made to it. The earliest standard mortality table currently in use is called the American Experience (AE) table, and it was compiled in 1898. It is still used by some insurance companies who sell what is known as industrial insurance. The policies written on the AE table usually have small face amounts, typically less than $1,000, and are written to pay for burial expenses. Since 1898 there have been several industrial insurance tables adopted, including the 1941 Standard Industrial table and the 1961 Commissioner's Standard Industrial (CSI) table. Since the health and longevity of the US population has improved, these subsequent tables generate higher life expectancies than the AE table.

Most people today buy what is known as ordinary insurance. This is what you see advertised on TV with $500,000 policies and the like, which are meant to provide income replacement instead of just covering burial expenses. The consumer who needed this much coverage was generally healthier and lived longer than their industrial counterparts who only wanted $500 policies to pay for a funeral (back when they cost that much). So the expected mortality for the ordinary insurance is much better than the expected mortality for industrial insurance. This also makes the insurance more affordable; since the company expects to be able to collect and invest premiums for a longer period of time before a death benefit is payable, they don't have to charge as much per year or month to provide the coverage to you. There are several Commissioner's Standard Ordinary (CSO) tables, but the two that are most prevalently used today are the 1980 CSO, which was the first to provide separate tables for smokers and non-smokers, and the 2001 CSO, which was the first table to take mortality factors all the way to age 120 (most other tables stop at 100, and the AE table stops at age 96). I believe I heard that there will be a 2007 CSO as well, but if so it will probably not be in use for several more years.

In addition, there are other mortality tables in use besides the life insurance tables I have been talking about, but since this post is already long I'll spare you the details. Suffice it to say, depending on which table you pick you can get different answers, as you'll see below.

Back to McCain. Now we have to decide which table is most likely to reflect his actual mortality. It's complicated further by the fact that we know he has had skin cancer several times. Even if you picked, say, the 1980 CSO, you might want to adjust it a little for that knowledge. I don't have any experience making those sorts of adjustments to mortality tables, and I doubt Matt Damon does either, so we're just going to use straight life insurance mortality tables. Here we go:

Using standard life insurance tables I've tried to show the worst case scenario, the best case scenario, and what I view as the likely scenario that generated the statistic that Matt Damon misquoted. Using the 1980 CSO table, the life expectancy for McCain over two terms in office is slightly worse than 60%. Using this table also makes sense to me because the 1980 CSO table is still more widely used than the 2001 CSO, and so if someone wanted to run "industry standard" numbers they'd be more likely to select that table. As far as one term versus two, I have to believe that Matt Damon didn't accurately quote the statistic he had heard, since the numbers match better for two terms and even the AE table doesn't give McCain as low of a life expectancy as Damon claimed.

However, as a fellow actuary suggested, perhaps the truth lies more along these lines:

Will Hunting is just baiting us. We disagree and then, "Of course that's your contention, you just passed Exam 3 and read Actuarial Mathematics. Next year you're going to be in here talking about loading for Cancer and Family History. Do you just look at the tables or do you have any thoughts of your own on the matta? The sad thing is, you just dropped $15 grand of your company's money on exam fees and materials that you could've gotten for a $1.50 in late cha-ges at the Drake University library. How do you like THEM apples?"

—Jack

Labels: actuarial, politics

Do yourself a favor and take some time, make some time, to read and/or listen to this speech by Barack Obama. The full exploration, the display of understanding of both major sides of the issue of race, is a powerful exhibit of a politician who thinks. Really thinks. We need people who think.

—Jack

Labels: politics