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The Actuary The magazine of the Institute & Faculty of Actuaries

Back to the future IV

wonder how many people remember where they were on 7 May 2006?
On this auspicious day in history, the Actuarial Profession held its tenth annual Healthcare Conference in Edinburgh. Not many things are built to last these days, so congratulations are due to the profession for creating something of such value. Of course, I obviously take some of the credit myself, having chaired the organising committee for two of those years!
So what was the outcome of this meeting of 120 of the most talented actuaries in the land? The good news is that I am going to tell you the answer to that in this article. The bad news is that there is little good news to tell.
That is not to say that it wasn’t an extremely well-organised event, or that all the presenters were not very professional and interesting. Rather, the conclusions we were reaching made me feel like jumping off Tower Bridge. Luckily for me we were in Edinburgh.
Shock! So on what evidence do I base my views? Back to the Future IV is not, as the name suggests, yet another sequel to a dated, but very entertaining 1980s film. No. It is the name of a presentation given by the (only) four people brave/stupid/enthusiastic (delete as appropriate) enough to have attended every such conference since 1997.
Many thanks are due to Steve Payne, Sue Elliott, Alisdair MacDonald, and Stephen Evans for giving an entertaining review of the past ten years, together with a glimpse of what the future may hold for the profession’s involvement in healthcare.
Nowhere else in the history of human literature will one be able to see:
– a chronicle of the rise and fall of critical illness insurance;
– Bob the builder;
– the development of the profession’s syllabus in healthcare;
– Robjohn’s balls;
– a debate on what (else, other than insurance) the profession can offer in the healthcare arena;
– Urmston, the cross-dressing monkey (see picture);
– a description of the life reinsurance industry in turmoil.
Elsewhere on this page, you will see some pie charts. These are the results of a survey conducted of people attending the Back to the Future IV session. The responses are, I admit, not particularly statistically significant, but do cast some interesting light on the current state of actuarial thinking on these matters.

What will 2012 look like?
Seven out of ten actuaries believe that private provision of NHS services will be between 10% and 25%. Maybe right, maybe wrong. But what does this really tell us? Well (a) that most of us are able to project a graph by extrapolating a straight line, and (b) we are happy to give answers with a very wide confidence interval. Wow, what a wonderful impact our skills bring to the wider fields.
Only half of the actuaries asked believe that 12.5% of the population will be covered by private medical insurance in 2012. That is quite reasonable until you consider that the preceding presentation emphasised (perhaps overly so) that this measure has been consistently 12.5% for the best part of eternity. So, it seems, we are happy to extrapolate unless the line is horizontal.
Most attending believed that there would be fewer than nine companies offering long-term care insurance in 2012. Frankly, I am amazed at the optimism here. If current trends and issues continue, it is highly unlikely that there will be as many as nine offering any type of health insurance. The respondents had, clearly, momentarily forgotten that all their employers have recently acquired a dislike for taking any sort of risk, let alone insurance risk.
Just over half of us believe that insurers will increase reviewable critical illness premium rates in 2012. Now, provided that the uncertain nature of future premiums was made clear to customers when they bought the policies, this possibly isn’t an unreasonable assessment. However, I am in a cynical mood. I believe that six years down the line insurers will still be focusing on nothing else but new business volumes no one will be bothering about reviewing rates on a small(ish) portfolio of problematic policies that were sold in the previous decade. Especially when the PR messages will be so problematic. ‘Let’s just up the reserves, take a hit on profits, and blame it on the previous management.’
Okay, this is the killer: 99% of those attending believe that the protection insurance products that we currently sell are flawed. Well over half of us believe that the products are seriously flawed. Individual members of our profession are supporting their employers by agreeing to set rates for risks that cannot properly be controlled, and with policy terms and conditions that are complex and not well understood by the management of the insurers, let alone by their customers. Never mind, we all face these commercial pressures every day, don’t we? At least we can rely on our professional body to take an overview, and voice these serious concerns on our behalf. Maybe I am going deaf in my old age.
Just over a third of respondents believe that long-term care insurance is the riskiest product to provide. Ah, this would explain why most of us believe that so few insurers will be selling it. On the other hand, 42% believe that critical illness is the riskiest maybe my faith in my colleagues is restored a little.

Bird flu
The collective brains of the conference delegates deem that the risk to the world from bird flu is (a) remote and (b) small. Now, I am in no position to judge whether this is right or wrong. My point here is that virtually no one in the profession has done any serious work or research on this subject that would enable the profession to have a serious input into this important social debate. The profession claims that it wants to contribute to wider health and social issues, but it seems that we are more generous with words than with our research.

Until next year
Anyway, enough of my rambling and complaining. I confess that I know as little as the next person about most of these issues. The apparent insights I offer above are more biased by ten days of sleep deprivation and excess alcohol consumption than by my 20 or so years of professional training. (Yes, I know I don’t look that old.) So I’ll sign off before I get struck off!
See you all at the 2007 conference (if I am invited). d
Prediction is very difficult, especially of the future. Niels Bohr
I hate quotations. Tell me what you know. Ralph Waldo Emerson