> But somebody who is 10 today, will likely have a life
> expectancy much longer than the 80 years
> But somebody who is 10 today, will likely have a life
> expectancy much longer than the 80 years
Anyway, pensions and life insurance will most likely be bailed out when the crash comes, and the expectation of this socialization of losses might explain some of what is observed there in the sense that they are not responding aggressively to the actuarial community's ever more strident warnings on the uncertainty of their projections. Also people are not particularly rational in their expectations about aging - see this for example, a survey of the actuaries who are the same time as warning that life expectancy predictions are increasingly uncertain due to medical advances in the works, still base their future expectations on what happened to their grandparents:
https://www.dovepress.com/longevity-expectations-in-the-pens...
If I buy a life insurance policy for a 15 year old today, I pay them $X in order to receive $Y when the insured dies. If the insured lives for 70 years, the insurance company has 70 years to invest $X, in order to have $Y available when the insured dies.
But if the insured lives 80 years, then the insurance company has 10 more years to invest $X. They gain from that situation, rather than lose.
Social Security is an example of this, http://www.ssa.gov/planners/retire/agereduction.html. This, of course, requires an act of Congress to change. But businesses aren't so limited, new employees can be brought in on a new pension system while grandfathering in the old ones, with few (if any) legal holdups.
The extra uncertainty in actuarial assumptions will only leverage that problem further. Your assessment of expectations is actually pretty reasonable: pension fund managers aren't taking it seriously because they expect to be bailed out regardless, so they may as well enjoy their moral hazard dividends in advance. But I think that has more to do with the fact that financial repression and systemic underfunding have rendered everything else irrelevant anyway.
Also note that policies like this require ongoing maintenance payments, otherwise you forfeit past payments and benefits.
The problem with claiming that the life insurance market is a predictor for death statistics is that firms tend to keep the most important data and calculations used to derive their pricing schemes secret. The firm is only concerned with keeping to projections as far out as they can model.
The consumer has no real input into the model (except as a selector of alternatives) and therefore cannot obtain much knowledge about actual death statistics (except perhaps a near meaningless lower-bound).