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What is an Actuary?

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I was surprised when I Googled the term to find that there are so many kinds of actuaries. There are scores of subdisciplines in which actuaries are the notable characters, each making calculations on the risk in a given situation as against, say, cost or even more likely profit. Actuaries are profit prophets. They are bright, industrious, learned, reasonably well-rounded mathematicians with a general deficit in social graces attributable probably to the nature of their work and, as things like this go, probably due to a wisp of Aspergers, too. Actuaries are not risk managers, however, for they do not control the processes, structure, or dynamics of any situation they are asked to calculate and assess. This turns out to be an important point. Actuaries work for insurance companies throughout the world mainly because they are paid very handsomely for their work. Wiki says that being an actuary is one of the top five jobs in the world from the standpoints of stress, income, dignity, and a whole host of other parameters that people generally use to assess the desirability of an occupation. I am not writing to upset that applecart, but only to make a point that actuaries are limited, by definition, to making global decision tables that result in others ... sales people generally ... making decisions on whether you or someone else gets insurance and at what dollar cost. So, for instance, the folks at Lloyd's of London employ actuaries who know the mathematics of transshipment technology (which changes daily, by the way) and so know how much to charge Exxon for shipping a several million gallons of Liberian petroleum to the refineries in coastal Texas. Actuaries do not hire ships' masters or crews, nor do they plot courses, inspect generators, mind the helm, or even check the sobriety of persons involved in relatively slow-moving vessels plying the sea lanes of the world. Actuaries produce a mathematics that applies to a continuum of contingencies for a large class of situations. They cannot and do not know (or even care) about individuals. In other words, actuaries are statisticians, who like intelligence testers can tell you that at a certain age a certain small percentage of the fifth graders in America will answer correctly 99 out of a 100 questions in a "standardized" examination (free of cultural biases and presented in normal vocabulary). If a school psychologist tests your child five times and the result is that he or she is in the 99th percentile every time, you can bet (but not actually know) that your child is a genius. The child may have other characteristics that will play out to mask the good test-taking skill. Actuaries are used by insurance companies throughout the world. The rest of the industrialized world, however, has health care, so we are not interested particularly in what they do. We are interested in domestic American insurance companies who are attempting (successfully) to extend the meaning and purview of actuaries from broad statistical situations to individual cases. What I am saying is that insurance companies, very profitable companies based on the work of actuaries, use actuarial information as if it pertained to individuals ... or to use the earlier example, insurance companies attempt to make decisions about individual health care and thus are attempting to hire the ship's master, crew, steer the course, mind the helm, and decide whether or not the ship goes to Texas or to Louisiana refineries. How could statistical information be used so pointedly. If they simply said that transplanting a kidney in an 80 year old patient with COPD, hypertension, and supporating bedsores has an average three year benefit ending in mortality, then others with some idea of this particular person, his family, and his activities in the world could make the decision. Insurance companies for all their accumulated lore and experience should not. (But they do.) So, what makes insurance companies try to slip this notion of statistical precision at the level of individuals over on an entire nation? You ask? Of course it is that insurance is a hugely profitable industry, one in which local agents and corporate executives get paid huge sums of money annually for deciding to use actuarial tables or not. They do use them, because actuaries ARE ABLE to calculate broad patterns of situations involving millions of people. Insurance companies make so much money at insuring things, people, lives, body parts, etc., that it only makes sense for them to persuade Congress to keep the playing field tilted their direction. Virtually every member of Congress is beholding at one level or more to various parts of the insurance industry, so the decision on whether there will be a Public Health Care Option or not is already half decided (squelched). The only reason it is not completely out of the conversation is that the President and many others have said that a Public Option is the only real way to hold down costs. Let's say a country like ours has among its various programs of health care a Public Option, that is, a publically owned and operated insurance carrier that employs both actuaries and medical personnel to help local doctors make decisions about specific health care options for individuals. Such an organization would quickly reveal the astoundingly profitable nature of insurance when large numbers of insured patrons are involved. (Remember: the first rule of for-profit enterprise is REPS, repetitions, repeating situations, repeating and proliferating requests and decisions to buy.) Everyone knows that the role of the Public Option is to cut down on the profitability of medical insurance companies. They know it, we know it, but we seem to be caught on some strange point of indecision about it. What? The indecision is this: will I (Joe or Sally Congressperson) have enough money to run for office next term if I screw the insurance companies? Politicians are not geniuses; they don't know how much they will need to run again. They don't know who the competition will be. They tend to take the safe routes ... the personal aggrandizement route ... the way of the conservative which means that if they can concoct a reason for not doing something that might shave a few dollars off their campaign fund, they will concoct it with alacrity. There are several petitions circulating this week to let the Congress know that as their perform their own little actuarial task of assessing the risk to themselves, they should know that millions of Americans are fed UP TO HERE with their feckless egoism and inept representation. I heartily recommend this one at the Democracy for America website endorsed by Dr. Howard Dean, former Governor of Vermont and former Chairman of the Democratic National Committee. Click on that link and add your name to the petition. Congress needs to know what we individuals think about the Public Option for national health care. JB

 

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James R. Brett, Ph.D. taught Russian History before (and during) a long stint as an academic administrator in faculty research administration. His academic interests are the modern period of Russian History since Peter the Great, Chinese (more...)
 

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