Comment by reasonattlm | Hacker News Reader

Comment by reasonattlm | Hacker News Reader

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An industry that will be destroyed or bailed out when there is a large upward discontinuity in life expectancy trends thanks to advances in medicine. There is a very big change going on in medical research at the moment, shifting from not trying to treat aging as a medical condition to actually treating aging and its causes. The difference in outcomes will be night and day; some relevant technologies are transferring out of the lab and into startups even now. E.g. Gensight in France, Pentraxin Therapeutics Ltd in the UK, Oison Biotech and Human Rejuvenation Technologies in the US.

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...

I don't think that will destroy the life insurance industry. In fact, I think it will help them.

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.

The main problem if I understand correctly is with pensions. They have 10 more years to invest your money, but they also have to pay you for 10 more years... so the longer you live, the less they profit. Live long enough, and they will lose money. And if enough people live longer than expected, the insurance company could go bankrupt.

The issue with pensions is already being dealt with. Either by their absence from many employers (US, not sure about the rest of the developed world), or by delaying the age at which you can receive it or reducing the rate at which you earn into it.

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.

You undermine the force of your argument by saying "when" and "will be" instead of "if" and "could be". All predictions are probabilistic, after all!

Pensions (especially) and life insurers are going to need/want bailouts regardless of medical changes. The combination of global ZIRP and absurdly optimistic assumptions about investment returns have led to extreme underfunding for nearly every pension fund in the developed world. This problem is especially acute in the United States but is not unique to it.

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.

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