While the world of actuaries and their calculations may not be considered particularly sexy, the idea of a longer lifespan certainly is. Actuaries are specialized financial professionals who excel at assessing and managing businesses’ financial risks, especially in areas like insurance and pensions. They bring together a diverse range of fields, including mathematics, computer science, statistics, and economics, to create meticulous risk assessments.
In the course of their work, many actuaries find themselves diving deep into the task of determining life expectancy. This entails a thorough analysis of numerous factors, leading to a precise result that holds significant predictive value. In this article, we will venture into the intriguing realm of actuaries to uncover the secrets behind the calculation of life expectancy from their unique actuarial perspective.
What, Exactly, Does an Actuary Do?
Actuaries use a diverse combination of high-tech tools and resources, including statistical modeling software and databases, to highlight businesses’ risks and challenges as well as to establish and fine-tune their strategic policies. Here is a list of some of actuaries’ most common tasks:
- Highlighting significant patterns of statistical data for analysis
- Formulating hypotheses regarding potential risk factors for a business or organization
- Testing these hypotheses to determine their accuracy.
- Predicting the likelihood and consequences of various outcomes
- Learning more about industry-specific risk factors
- Reviewing company rules and workflows for their effect on overall efficiency
- Generating solutions to possible risks before they arise
- Maintaining project-specific risk registers
- Citing credible information (e.g., market trends) to explain their predictions.
- Creating actuary tables, actuarial charts, and other visual tools to help stakeholders understand their findings.
- In the context of insurance and pension planning, calculating life expectancy for financial products like insurance premiums and pension contributions.
That last item on the list is the central focus of this post—let’s dive into the specifics of actuarial life expectancy calculations!
What’s the Difference Between Actuarial Age and Individualized Longevity?
Actuarial age is the age to which someone is expected to live based on statistical calculations. Insurance and pension planning companies often rely on this data point to price their products.
While your individualized longevity is how long you can expect to live based on factors comprising your health, lifestyle, and family history/genetics, actuarial age is a population average that describes how long a typical person of your age and gender is likely to live.
Actuarial age and individualized longevity are so different that the two numbers themselves can diverge significantly even for the same person. For instance, if someone of your age and gender is expected to live to be 78 (your actuarial life span), but you are chronically sleep-deprived, stressed due to factors beyond your control, or are addicted to smoking cigarettes, your life expectancy might be less than that.
How Does an Actuary Calculate Life Expectancy?
How is life expectancy calculated by actuaries? We’ll explain!
Statistical and Mathematical Modeling
Actuaries rely on sophisticated statistical and mathematical models to analyze demographic data, mortality rates, and health trends and assess various groups’ life expectancies. Actuarial tables, including mortality tables, are important references for these calculations, accounting for a range of factors to estimate the probability of survival at different ages. Below, we’ll describe the main factors that actuaries use to calculate life expectancy.
What Factors Does an Actuary Use to Calculate Life Expectancy?
Age
Age is a fundamental variable influencing mortality rates, so it’s a crucial factor in actuaries’ life expectancy calculations.
Gender
Gender impacts life expectancy significantly as well. Because men and women have different mortality rates, actuaries must account for gender in their calculations.
Location
Actuaries consider notable geographic variations in health conditions, healthcare access, environmental factors, and more that can affect life expectancy.
Lifestyle
Habitual health behaviors like diet and exercise have a major impact on health outcomes and thus on life expectancy calculations.
Drug Use
Substance abuse is detrimental for life expectancy, and actuaries must account for these effects in their calculations.
Give the Most Accurate Life Expectancy Calculator a Try
The closest thing to having your life expectancy calculated by a real actuary—while avoiding their potentially steep fees ($63 per hour on average in the U.S.)—is utilizing the Life Expectancy Calculator.
Based on the most up-to-date research, advanced mathematical algorithms, and nuanced statistical models, the tool provides a precise estimate of your life expectancy based on your environment, habits, and other key characteristics. Try the Life Expectancy Calculator now.
Ready to learn even more about longevity, life expectancy, and the array of factors that affect them—so you can take control of your health and your future? Check out our “Life Lessons” series of blog posts.
