| Abstract: | Abstract The work of actuaries is concerned with estimating the future on the basis of past experience. The calculation of a premium to be charged for a given risk implies a forecast of the future but so far as mortality is concerned we have generally been content to examine past experience and assume that the results will be repeated. Judged as forecasts our estimates have sometimes been wide of the mark and owing to an almost continuous improvement in mortality actuaries have been assuming heavier rates of mortality than have been experienced. We may defend the use of past experience by saying that it is on the safe side when we are calculating premiums and we may argue that it is the best practical method; but an alternative is to make a more accurate forecast and then allow in our calculations a margin for chance deviations, emergencies, etc. Moreover the assumption that the past will be repeated has not been uniformly safe; it has led to bad results in annuity business and may prove unfortunate in social insurance, pension funds, and even sickness insurance. For some of these purposes we should either work on an estimate of future rates of mortality or, which comes to much the same thing, take a sufficient margin to cover the error involved in our assumptions. |
