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Executive Director Wilson Wyatt Resigns Wilson Wyatt Jr., Academy Executive Director since 1995, resigned his position effective April 30 to engage in other public policy and communications work. Wyatt's tenure as executive director was marked by the Academy's growing involvement with elected officials and legislative staff. He brought to the Academy an increased awareness of the importance of timing in the political process, and he emphasized visibility with credibility for the Academy and the actuarial profession . In accepting Wyatt's resignation, Academy President Allan Kau man said, "It is regret that we accept Mr.Wyatt's resignation, and we wish him well in his future work . The Academy has grown in size and reputation during his three-year tenure as executive director." Wyatt said, "My work with the Academy has been a gratifying experience. I have enjoyed working with the many actuaries who have devoted their skills to provide independent analysis of important public policy issues, ranging from Social Security and health to Superfund and tax reform"

While at the Academy,Wyatt met personally with many elected officials. including ." . ."" .. . .,°" Senate Majority LeaderTrent Lott (R-Miss .), Senators John Breaux (D-La .), Nancy Kassebaum (R-Kans .), Robert Bennett (R-Utah),Wendell Ford (D-Ky.), Jim Jeffords (R--Vt .), and Mitch McConnell (R--Ky.), as well as Representatives Nancy Johnson (RConn-), Lee Hamilton (D--Ind .), and Jim Kolbe (R-Ariz.) . Public recognition of the Academy and the actuarial profession's work increased duringWyatt's tenure. There was also an emphasis on the credibility of the profession's work among regulators and other users of actuarial services . The Academy's senior pension fellow program was begun under Wyatt and has been successful in raising the visibility ofpension actuaries among the policy community and the news media on a range of issues. In the past three years, the Academy has produced and released important reports on Superfund and tax reform, and it has addressed Social Security issues in various public forums and through several media . One of these formats, the issue brief, was developed under Wyatt's direction to provide elected officials and decision makers with the actuarial perspective on significant public issues . Issue briefs are written for a less technical audience and often are extracted from more exhaustive Academy reports . They are sometimes developed to address more narrowly defined issues, such as possible methods of privatizing Social Security, or risk classification in the context of genetic testing . Under Wyatt's direction, a full-time media relations position was created and filled on the Academy staff in 1995 . Academy membership services were emphasized through the hiring of a manager of membership and volunteer development in 1997 . At Wyatt's initiation, the Academy produced year-end annual reports to the membership to summarize the work and accomplishments of the volunteers and the organization . Finally, the Academy Web site was developed, designed, and opened to the public during his tenure . Wyatt was also very involved in the Academy's strategic planning process. The Academy's new strategic plan, which is being developed by the Strategic PlanningTask Force chaired by President-Elect Richard S . Robertson, will be presented to the Board of Directors at its June 30 meeting. Past President Larry Zimpleman will chair a search committee to select Wyatt's successor.


Survey: s ocial Security should Include Private Pensions


he private pension system enjoys broad support among Americans as part of the solution to Social Security's longterm finan cial problems, according to an Academy-sponsored public opinion survey. The survey, conducted byYankelovich

Partners and released April 3, shows that 49 percent ofAmericans believe that an employer pension plan should handle the investment of retiremennds if Social Security privatization is approved Congress . About 25 percent favor individual control of investments, and only 12 percent of Americans prefer that the Social Security Administration

oversee ,Westment of Social Security funds in the stock Mrket . Although the option of using employer-sponsored pension plans for investing Social Security's surplus income has not yet been widely discussed, Senior Pension Fellow Ron Gebhardtsbauer has been bringing the idea to the attention of policy makers as part of the Academy's public education campaign on Social Security.

"This idea is worth considering," Gebhardtsbauer said, "since the survey indicates that Americans seem to prefer it to the options of the government or individuals doing the investing. Pension plans have several advantages . They avoid the concern of government owning stocks, and traditional defined benefit pension plans remove most risks from the individual . Also, it might be easier for the federal government to regulate one million pension plans rather than 150 million individual accounts." In addition, some Social Security reform proposals could have a negative impact on private pensions ."Mandatory employer contributions to individual accounts for Social Security that are above and beyond current payroll taxes might push some employers to reduce their private pensions," Gebhardtsbauer said . "The Academy survey indicates broad public support for solutions to Social Security that do not disadvantage the private pension system . One way to do this might be to permit employers

from 67 to 70 rather than gradually reducing Social Security benefits. Forty-three percent of Generation Xers expressed a preference for gradually reducing Social Security benefits by 20 percent when asked to choose between a retirement age increase and reduced benefits . • Fifty-six percent ofAmericans prefer increasing taxes rather than decreasing Social Security benefits in order to fix the program's financial problems. • Eighty-three percent of the American public say that new employees of state and local governments should be required to contribute to Social Security . The survey results do not indicate significant intergenerational conflict over Social Security, a problem long feared by advocates of Social Security privatization . Tax increases and a retirement-age hike are supported by both baby boomers and the cohort that follows . Finding common ground among generations has been seen as an essential precondition to repairing Social Security. The Academy's Social Security efforts have included publication of a monograph on Social Security and Medicare solutions ; a series of issue briefs on privatization, means testing, retirement age, and other issues ; and testimony before Congress and other public agencies . Over the past two years, Gebhardtsbauer has

who provide pensions to count their contributions to

participated in a coast-to-coast series of public forums on Social Security with both Democratic and

current plans toward their responsibility for the Social Security individual accounts :'

Republican members of Congress . Most recently, in

TheYankelovich Partners poll surveyed 1,019 Americans aged 18 and over . Other highlights of the survey- Forty-six percent of Generation Xers (born between 1965 and 1980) and 48 percent of baby boomers prefer gradually raising the retirement age

March, he joined President Clinton and Social Security Commissioner Ken Apfel in televised town meetings sponsored by the Pew Charitable Trusts and Americans Discuss Social Security, a nonpartisan group founded to spur debate on the program's future . Ten other Academy members, including Pension Vice President Ken Steiner, also participated in the town meetings .

Influence in a Challenging Time his is a time of great importance for the

World Record Actuary Robert J . Myers has long been recognized among actuaries and Washington policy makers for the integrity and stamina he has demonstrated during his 64 years of public service . This fall, Myers will receive broader recognition : The Guinness Book of Records will cite him as the all-time champion of congressional testimony. Myers, former chief actuary of the Social Security Administration and deputy commissioner of Social Security, has testified before Congress 175 times . The majority of Myers's Capitol Hill appearances were before the Senate Finance Committee, House Ways and Means Social Security Subcommittee, and other committees with oversight responsibility for Social Security. Of his dealings with congressional committees, Myers says, " without exception, it has a good relationship, cordial from both sides of the aisle ." On which issue does Myers think he made the greatest impact? "That's hard easure," he replies . "I thin had to pick one it would be the 1983 amendments." Those amendments, which preserved solvency through increases to payroll taxes and the normal retirement age, originated

ed 1997 profits have meant premium reductions as a form of dividend. Academy member J. Robert Hunter, consumer advocate and former Texas insurance commissioner, said that premium rates should decline further by at least 3 percent and by as much as 10 percent in some states , including New York and California . Hunter's successor as Texas commissioner, Elton Bomer, last fall ordered an across-the-board 5 percent reduction in that state. A mandated 10percent cut would be irresponsible, according to New York Insurance Superintendent Neil Levin, because "every company has a different risk profile" Mike LaMonica vice president of pricing at Allstate noted that once lowered, it is difficult to raise premiums when needed in the regulated industry. "That's why we don't just jump in with both feet to make rate decreases," he said.


Simplify Rules Carefully Responding to an April 15 editorial that advocated increased simplicity in retirement savings rules, including easing restrictions on early withdrawals, Academy Senior Pension Fellow Ron Gebhardtsbauer wrote the following letter that appeared in the April 16 USA TO-

in the bipartisan Greenspan Commission that Myers served as executive director. Myers's most recent testimony came only last February, when he

DAY"Americans need to save more for retirement, and your editorial, `To encourage saving, give fewer, but better choices,' is right on

joined Academy Senior Pension Fellow Ron Gebhardtsbauer before a Ways and Means subcommittee hearing on retirement age .

the money in many respects . Simpler, more consistent rules for retirement plans are needed to boost America's retirement savings . "Simplified rules would

Cites Actuaries on Auto Premiums Auto insurance premiums are declining in most parts of the U.S., and the New York Times turned to several Academy members to explain the reasons behind the price decrease for an April 15 front-page article. According to Marvin Johnson, vice president for pricing at Nationwide Insurance, his com-

strengthen both individual savings plans and employer-sponsored pensions. As you note, almost 40 percent of American workers do not have a pension plan . A 1993 study by the American Academy ofActuaries showed that most employers who drop their pensions do so because of cumbersome red ulations that change every year . "However, some rule changes could have negative consequences . Removing restrictions on dipping into retirement savings For nonemergency needs could leave many

pany has reduced rates in order to increase market share . Steven

people with a hollow nest egg when they need it most . The ultimate result could be increased pressure on Social Security and government welfare programs to

Goldberg of USAA, a mutual

provide for the needs ofAmerica's

firm, said that larger-than-expect-


actuarial profession . As the baby boomers age, Americans are making the transition from an era of great produc-tivity to a time when America will see the largest population of elderly in its history. Similar aging patterns are emerging in many other coun-

Aaaa K Aappaport

tries, where there are sometimes much greater challenges . This transition is predictable and can be planned for, and actuaries should have a central role in such planning . It is a great challenge to determine how to most effectively provide for the needs of the elderly, and much of this challenge is closely entwined with our financial security systems. Actuaries are the architects and engineers of these systems, and so they have a vital role to play in helping our society make this transition smoothly. The effective operation of these systems will be vital to the well-being of our nation . As leaders, we should use our influence and our access to forums to gain attention for these issues and help develop solutions . Three SOA projects conducted in 1997 and 1998 are building our knowledge base while helping actuaries to more effectively address the issues of an aging society These are research into social security mortality projection methods, research on different methods of risk measurement, and the retirement needs framework project . During 1997, we organized and conducted a major research project on methods of projecting mortality for social security systems . This project, "Impact of Mortality Improvement on Social Security : Canada, Mexico, and the United States ;' was conducted jointly with the social security administrations of the three NAFTA countries . Other partners in this project included the Pension Research Council, Actuarial Foundation, Retirement Research Foundation, and American Society of Pension Actuaries Pension Education and Research Foundation . This project included input from a multidisciplinary panel of experts, including actuaries, economists, medical researchers, and public policy researchers . The insights gained will be valuable to actuaries w with life insurance as well as pensions . This project is important to the p son : it addresses an it ut social issue, and it provides new insights for some of our most importantice areas. Furthermore, it strengthens relationships between actuaries and other professionals of common interest ; these The pe types o e of partnerships Iewill be increasingly important in the future. ted'Approaches to Risk Measurernent "in the pinaricial Services Industry' sponsored by the SOA's finance practice area, consisted of a call for papers and a conference at which the papers were discussed. Thiference focused on value at risk and other new ways to look at risk, partic,y with regard to invests . It is critical to highlight these concepts as the large, maturing populatio ds retirement assets and the value of these assets grows. The third project, "Retirement Needs Framework," focuses on the period after retirement . A retirement plan can be viewed as two parts : a period of asset accumulation and a period of asset use . Most of the emphasis in retirement planning to date has been on the period before retirement ; this project focuses on the period after retirement and the methods of defining events and modeling them . A particularly critical area is care of the frail elderly, and several papers are expected to deal with this topic . A call for papers has yielded more than 15 abstracts, and the papers will be presented at a conference in December . Depending on the project's outcome, further phases may be considered . Adjusting Social Security and Medicare to changing demographics is a key national issue today . The Academy and individual actuaries are contributing to that debate in different ways, and I am delighted to see this participation . Marc Twinney, HowardYoung, and Mike Sze were part of the last Social. Security Advisory Council and its technical panel. Steve Kellison, an actuary, is one the public trustees of the Social Security system. On the topic of aging and society, l personally have focused on raising awareness of two key points . First, many more women than men live in poverty in old age . Unmarried older women are particularly vulnerable. More than 20 percent of widows live in poverty, and this percentage grows with increasing age . Second, Social Security pays survivor benefits as well as retirement benefits, but for two-earner families these benefits can be quite low, and much lower than for single-earner families with the same income . At various pay levels, there are significant differences in retireEXAMPLE I ment and widow's benefits for families with the same Family A Family B earning histories but different splits of earnings beHusband earns $34,200 $17,100 tween the spouses. These families paid the same taxWife earns $0 $17,100 es. Families with dual earners often in effect subsidize Annual Social Security tax $2,1201year $2,1201year single-earner families . Example 1 will show how seTotal benefit at retirement* $1,623/mo. $1,3481month rious these issues are . Total benefit to survivor $1,082/month $674/month Both families had the same income and paid the same Social Security tax. Yet Family B has $275 per *Assumes both are age 65 and retire in 1998 . month less in Social Security benefits while both spouses are alive and $408 per month less in survivor benefits after the husband dies . This happens because Family A gets spousal benefits but Family B does not . This is particularly distressing because this is a middleincome family, close to the average-income family, and because of the documented decline in the economic status of widows . The people being hurt here are middle-class working Americans, not the wealthy. I feel that it is critical for these issues to be recognized and considered in the Social Security reform debate. It is critical that each Social Security proposal be evaluated for its effect on individuals with very different family patterns. I encourage all actuaries to focus on the aging of our society and what it means to all of us . I encourage you to use the opportunity of our influence . I am proud of the Society of Actuaries for adding to the knowledge base for aging-related issues and of the Academy in contributing to the public debate. RAPPAPORT IS PRESIDENT OF TIME SOCIETY OF ACTUARIES .

An Actuary .Ahem . of His Time A Conversation with C onsultant Thomas Bowles veteran of 65 years in the insurance industry, Thomas P. Bowles,Jr. is one of the most respected members of the actuarial profession . In the 1940s, at a time when most actuaries spent lifelong careers in insurance-company employment, Bowles struck out on his own to build the actuarial consulting firm that is now T illingha t. n addition to his business success, Bowles maintained an active role in the profession's organizations, including service as president of the Society of Actuaries and the Academy . In recent years, he has devoted much of his time to strengthening the academic base of the profession . The Thomas P. Bowles, Jr . Chair ofActuarial Science at Georgia State University is one of the most prestigious academic posts in the field, and Bowles himself is active in organizing the annual symposium that bears his name at the Atlanta campus . Last March, Bowles took time away from the 1998 symposium on genetic testing to discuss his career with the managing editor of the Actuarial Update. Why did you go into the insurance industry?

by the tail . But we've awakened to find that is not the case . Economic forces are forcing insur-

Insurance runs in the family. My uncle, George A . Bowles, was insurance commissioner ofVirginia and also president of the National

ers to become more competitive in the marketplace, and this has led to company consolidation and staff

Association of Insurance Commissioners . In fact, as president of the NAIC he wa~ responsible for the project headed by Al Gerten that changed the whole

downsizing .

and could change the way the insurance business functions .

What is the purpose of the Bowles Symposium?

What is planned for next year`s symposium?

The symposium is an opportunity

We will be meeting soon to evaluate this year's session and to start planning for 0 year. As to the topic of discussion, we welcome

concept ofnonforfeiture values and that underlIation even today -

for actuaries to participate in the

I started at Life of Virginia in

We would like to increase the par-

.1933 and went into the actuarial department. Charlie Taylor, who later became resident and CEO

discussion of issues that go beyond the traditional actuarial concerns .

In this 1997 photo, Thomas P Bowles (center) greets two Academy members who are key participants in the Bowles Sympasiarrc Sam Cox (left) Georgia State University professor and chief symposimn organizer, and Jim Hickman, former holder of the Bowles Chair of Actuarial Science .

of Life of V, was my mentor and encouraged me in my career. He made sure that his actuarial trainees were familiar with the entire business-underwriting, investment, accounting, etc . Thanks to him, I knew life insurance companies from A to Z .

How was the business different in those days? Personal relationships were very important. For instance, Charlie Taylor encouraged us to get to know the agents and to attend their conventions . I learned a lot late at night over drinks with the agents . Sometimes improvements in our business practices would result . A classic example involved the death benefit in juvenile insurance, which materially depended on the policy year in which death occurred. Late one night at a meeting down in Dayton Beach, an agent told me how hard it was to explain to parents why the payout was different for two kids who died at the same time but in different policy years . I

Did you employ casualty actuaries? We brought three casualty actuar-

had been with Life ofVirginia for 15 years and needed a challenge. The actuary of Life ofVirginia, Bob Towne, and I decided to explore the market and mailed a marketing survey to companies through-

ies on board early, but it didn't work out from a business standpoint . We were ahead of our time . By the 1970s, things were different, and Jim MacGinnitie joined us. Starting from scratch,Jim built

out the South under the name of the Actuarial Consulting Bureau . The response was overwhelming,

one of the two largest casualty-insurance consulting services in the country

so we left the company in 1948 and began our own business under the name of Bowles, Andrews, and Towne. We set up shop in Richmond, but by the early 1950s it was clear to us that Atlanta was going to be the commercial, economic, transportation, and cultural center of the South , so we opened an office in Atlanta. My family and I moved here in 1954 .

What was the care of your business in those early days? Our first clients were life insurance companies that were seeking good

How did your invulvmant with Georgia State begin? Did you teach here? No. I got involved back in the 1950s as president of the Southeastern Actuaries Club . The club supported the establishment of the actuarial science program at the institution that is now Georgia State . It was the first such program in this part of the country. Sixty percent of the actuaries practicing in the U.S . have had an academic relationship with the program at Georgia State . The program has been quite successful .

took the problem back to Charlie and we got approval to change the

professional advice . Then we got into pensions, and I even got involved in casualty work . I repre-

death benefit basis from policy year to attained age .

sented the Virginia Manufacturers Association in rate filings for work-

How did you start out in the consulting business?

ers compensation insurance. That couldn't be done now because of the qualification requirements . I studied the subject, knew it pretty

I think that actuaries have been slow in the exploration of fields outside the strictly actuarial discipline . But that is changing . The actuarial profession was once a

well for a life actuary, and helped the VMA win several rate cases .

rather smug group of professionals who thought they had the world

When I finished my military service at the end ofWorld War II, there was not a single consulting

not enough of them actuaries. It

suggestions from people in the profession . Sam Cox, who is director of Georgia State's actuarial science program and editor of the North Arnericuarial Review, is doing an exce t job as leader of

seems that actuaries have not suffi-

planning activities .

ticipation of actuaries in the symposium. For instance, this year's symposium is a success with more than 90 people in attendance, but

actuary south of Washington, D.C. When I received my fellowship, I

Is the profession missing out on opportunities because of limited contact with academic life?

ciently opened their eyes to the challenge of genetic testing . Most think that it is merely another risk classification problem, but it obviously has broad social implications

Top Federal official at Academy Luncheon Nancy-Ann Min DeParle, administrator of the Health Care Financing Administration (HCFA), will be the featured speaker at the Academy's Washington Luncheon on June 30 . As HCFA chief, DeParle has responsibility for the federal government's Medicare program and is expected to discuss prospects for long-term solvency and the Clinton administration's proposal to extend coverage to Americans as young as 55 . Also at the luncheon, the 1998 Robert J . Myers Public Service Award will be presented to an actuary who has made a significant contribution to the public welfare. All Academy members are invited to attend; reserve your place by fax to the attention of Doreen Evans at 202-872-1948 or by e-mail to

Bruce Holmes, a member of the Academy Task Farce on Genetic Testing , addresses the 1998 Bowles Symposium an Genetic Technology and Underwriting at Georgia State University. Holmess presentation focused on the Academy task force's most recent issue brief, 'Genetic Information and Voluntary life Insurance," which examines widespread public fears about the use of genetic test results by insurers. The Academy report will make its official debut at a Washington briefing for Capitol Hill staff and the media, to be hold later this spring. Task fore member Gene Held and Academy Federal Life Committee Chairperson Arnold Dicke also participated in the Georgia State symposium.

,t t PRESIDENT Allan M . Kaufman

Just Hot Air?

Hold the Crossfire

I read Fred Kilbourne's well-written article on the global warming issue (March Update, "Global Warming ; A Lot of Hot"') with some dismay. Kilbourne lays out some very valid points regarding the difficulty of determining whether or not global warming is occurring and whether or not certain forms of human-produced pollution are causal

Fred Kilbourne is a well-respected actuary, and he has earned that respect. His global warming views, however, are more political than scientific, and appear to be gleaned primarily from the editorial pages of the Wall Street Journal. If the Actuarial Update plans to devote space on a regular basis to political comment by actuaries, I will volunteer to be Fred's "Crossfire" adversary . However, I think the most appropriate course is to save limited space for actuarial topics and save us from the rantings of both the far right and left .

in the matter. Yes, there are many good reasons to doubt the science . C02 pollution may not cause global warming, and even if it does, we will probably be unable to prove that it was the cause . However, these are not good reasons to avoid cleaning up after ourselves, even if it comes at a significant cost . Past generations grew up believing that the world would care for itself. Somewhere along the way, we have discovered that what we do can have dramatic effects on the world around us. Small incidents can damage ecosystems and, like a single domino bringing down an entire row, result in very significant effects . Whether or not the greenhouse gasses pumped into the atmosphere over the past century plus will specifically result in global warming is important but ultimately beside the point . The fact is we should clean up our mess . We are changing the air we breathe, the food we eat, and the water we drink without due concern for its effects. If the clean-up ends up costing quite a bit, then perhaps we should be more careful and dispose of our garbage more effectively in the first place.We should no longer tolerate those who argue that they should not pick up after themselves because they feel it would not be "cost effective ." (Note that the ones making this argument are usually the source of the pollution.) And we should stop quibbling over moot side issues .

Donald Bashline WATERTOWN, MASS .

PRESIDENT.ELECT Richard S . Robertson SECRETARY TREASURER Stephen R. Kern VICE PRESIDENTS William E 13ltthm Ken W. Hartwell Lawrence A . Johansen Kenneth A. Steiner Michael L .Toothman Robert E . Wilcox


Insure Against Warming It seems to me that a sober and forthright response to the possibility of global warming would be to concede that it may exist and may have ill effect . It would then be reasonable to consider the possible magnitude of the ill effects and whether any prey action, delaying tactics, or palliatives o tively low cost are available . In the case of climate change, many of the measures currently being advocated are actually savings to the economy as a whole, and not costly as the author suggests . It will require a degree of will to do this, as some of these measures involve changing significant aspects of our economic lives. I consider this cheap insurance to increase the likelihood that future generations will grow up in a livable world . To insure

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Anna M. -appapurt Influence in a Challenging TIME

A Cnnversatio with Cansultalr<t Thnmes .Bowles COMMrrTEE ON PUffi.ICATIONS CHAMPERSOk

against a dire contingency is a good and conservative course . EDITOR

'Ad m Renee'

John Woolsey SAN ANTONIO

Shawn R . Cowls NEW YORK (ITY

Pension Fellow to Help SAVERS t the request of the White House, Academy Senior Pension Fellow Ron Gebhardtsbauer will participate in a June conerence on implementing the 1997 Savings Are Vital to Everyone's Retirement (SAVER) Act . The SAVER legislation is intended to encourage increased participation in retirement savings programs, both employer-sponsored pensions and personal savings plans . The White House conference, dubbed the National Summit on Retirement Savings, is charged by Congress to advance the public's


knowledge and understanding of retirement savings ; identify the barriers that hinder workers from saving adequately and impede employers from assisting in worker savings ; and develop specific recommendations for government and private sector actions to promote retirement income savings . Society of Actuaries President Anna Rappaport and AcademyVice President Ken Steiner have also b vited to attend the conference, as well as American Society of P Actuaries Executive Director Brian Graff and President Karen Jordan .

ASSOCIATE EDITORS William Earrok Ronald Gebhardtsbauer Patrick J, Grannan

Pe nsion

Fellow to l1elp aRVtlfis

MANAGING EDrTOR Jeffrey Speicher speicher a@actuary crg CONTRIBUTING ED]rr. OR . Aen Krehbieh PRODUCTION MANAGER Renee Saunders EDITORIAL ASSISTANT Susan Scot Statements of fact and opinion in this pubhcadon;; ed-terials and leases to the editor, are n n the responsibility of the authors alone and do not necessarily imply or represent the ` position of theAmericanAcademy o£Actuaries,, the editors or the members of the Academy ©1998 The American Academy of Actuaries, All Rights Reserved

unn in Search 9f ∎ Jarvis Fariey Service Award ASO Bmxscore

May 1998 Actuarial Update