Description: Traditional predictive tools are not built to deal with the variability the world currently faces. The COVID-19 pandemic amounts to a prolonged black swan event, for which one must look past conventional assessments to arrive at any level of confident predictions. Behavioral analysis factors for biases and heuristics designed specifically for uncertain evolutionary contexts, and which are the primary drivers of market participants’ decisions at present. Through understanding the most likely behaviors of individuals, it becomes possible to arrive at an aggregate understanding of market outcomes.

Description: This essay explores the role that the emerging defined contribution retirement system may be playing in the growth of wealth inequality in the United States. The current system leaves many Americans with little or no retirement savings. Those with higher accumulation levels appear to invest proportionally more in equities, which may have an exponential effect of balances over long time periods. The author hypothesizes that willingness to take investment risk involves the relationship between the amount an investor has accumulated and what she/he needs in order to cover basic costs of living. This is one reason that investors with greater accumulation levels may be able to earn higher rates of return. The essay concludes by suggesting that the U.S. defined contribution system should include all workers and provide additional fiduciary guidance. Examples reforms, both in the U.S. and other countries, are provided.

Description: This article discusses the advantages, logistical concerns, and pricing formulas of implementing a TNHP, in which members pay less for treatment from providers who meet higher quality and cost-effectiveness standards.

Description: In this article, the author discusses the considerations and advantages of implementing an integrated enterprise risk management program for a health insurance company, and presents a summary of Aetna's experience with ERM as a case study.

Description: This article provides an overview of behavioral economic theory as it relates to health and welfare insurance plans and provides summaries of two sample applications of the theories: enrollment in health insurance exchanges created by the Patient Protection and Affordable Care Act, and product design considerations in light of vast health illiteracy.

Description: A three-minute neuroscience-based image exercise is able to accurately unlock the emotional state of individual employees, permitting prediction of a host of specific needs. Actuaries can use this quantitative information at scale to target resources, benefits, and supports to increase the objective wellness and subjective well-being of workforces.

Description: Many retirement actuaries have experience developing, implementing, and monitoring Liability Driven Investing (LDI) strategies for plan sponsors. These strategies typically involve modifying a plan’s investment strategy to remove a significant portion of the investment and interest rate risk now or at some point in the future when specific triggers are met. The tactics often involve the use of fixed income assets to cash flow and/or duration match the liabilities. In the spirit of helping actuaries expand their roles in an evolving defined contribution world, this article explores the application of LDI and derisking strategies within defined contribution and individual retirement accounts. The economic theory behind this approach is called the lifecycle hypothesis, or lifecycle finance. The benefits of the lifecycle finance method are that it provides a safe approach to save for retirement and a secure source of floor income during retirement. Similar to pension plans, each individual has his or her own idiosyncratic needs, wants, and risks that should be considered. Actuaries are uniquely situated to help defined contribution plan sponsors, individuals, and even themselves implement the lifecycle finance approach by developing and distributing tools and methods that focus on income (rather than wealth), LDI strategies, and personalization.

Description: To help agents advise their clients on analyzing their LTCi rate increase options.

Description: Long-term guarantees place unanticipated burdens on companies because of the degree to which the environment can change. These risks are compounded when combined with estimation of policyholder behavior, especially when solid experience data is not available. When risks are properly reflected, long-term guarantees do not always provide value to the customer in excess of the manufacturing cost. The product development actuary is challenged to compare customer value to company cost and use that measurement to identify novel ways to design products to better serve customers.

Description: This is the second part of a 2 part series on Real options analysis (ROA). This article looks into the limitations of using financial option theory when doing real options analysis with projects that are long-dated and uncertain, such as: 1. First-degree homogeneity, 2. Uncertainty must derive from Brownian motion, and 3. Risk neutrality.