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Insurers profiting from enhanced underwriting returns

Insurers profiting from enhanced underwriting returns
Published on November 8, 2024
Insurers profiting from enhanced underwriting returns

It’s not widely appreciated, but Edmond Halley (he of comet fame) was hugely influential in the development of actuarial science. In 1693, Halley published an article on life annuities, enabling sellers (usually governments at that time) to pitch financial products at an appropriate price based on the age of the purchaser.

Halley used the first mortality tables drawn from experience for that calculation. Of course, he later became synonymous, indeed eponymous, with a celestial body that appears in our skies every 72–80 years, rather than his more profitable insight that the risk of dying demonstrably increases with age.

Halley, following on from a long line of number crunchers dating back to ancient Babylon, had attempted to employ statistical analysis and mathematical precepts linked to probability to evaluate and manage risk across a variety of fields. But until his time, the development of theories in this area was stymied by a widespread theological view which held that God directly determined the outcome of all seemingly random events. Although some managing agents at the Lloyds Market Association would still probably be willing to solicit divine intervention when they get on the wrong side of a contract, a more profane approach is probably the preferred option.

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