In honor of Groundhog Day, I’m wondering how the actuarial tables Ned “Needle Head Ned” Ryerson refers to, work.

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Is this just a point based on age and a standard decline?

Table for reference: [https://www.ssa.gov/oact/STATS/table4c6.html](https://www.ssa.gov/oact/STATS/table4c6.html)

BING!

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2 Answers

Anonymous 0 Comments

Actuarial tables (also called life expectancy tables, mortality tables,and life tables) are statistical tools used by companies, scientists, courts, and government agencies to predict the life expectancy of a person by their age, gender, and other factors. Naturally, the life expectancy of a person is a major factor when deciding the details of a life insurance policy.

So, an insurance salesman like Ned would use them to determine how much to charge for a policy of a given amount based on the specifics of his customer. He’d use those factors to determine the life expectancy of his client and based on their likelihood of dying during the term (duration) of the policy, would charge accordingly.

Anonymous 0 Comments

Think of them like betting lines from a sports book.

Life insurance is basically a gamble: You’re saying, “I bet I’ll die within the terms of my policy,” and the insurance company is saying, “I bet you won’t.” The actuarial tables give the odds of the bet; the payout amount in combination with the odds sets your wager (or premium). If you win and die, then the insurance company will pay you (or more likely, your beneficiaries, since dead people tend not to need much money). If you lose and survive, then the insurance company gets to keep your premiums without giving you anything.

As for the tables themselves: They’re a proprietary statistical engine that factors in large amounts of data to figure out how likely a given person is to die within a given amount of time. To know exactly how they work, we would need to know all of the factors that went into them, and how heavily the insurance company weighed each of those factors. Given that these tables are literally how the life insurance companies make money, they are not terribly forthcoming with the details. Age and gender obviously go into it, as do weight, height, medical history, leisure activities and much more.