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Actuary: Fap2-3

Section 3 Caltural and Social Values

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Objectives

• Describe cultural/social values.
• Describe the application of cultural/social values across and within areas of actuarial practice.
• Explain the effects of cultural/social values on the Define the Problem and Design the Solution stages of the Control Cycle.

Examples of cultural/social values

• In Understanding Actuarial Management (2010), read Section 4.6.1, pages 97–98. This reading describes the family as a financial security system.
• Culture encompasses a broad range of learned behavior patterns, including:
  • Disapproval of discrimination based on gender, race, religion, sexual preference, age, etc.
  • Relative roles of individuals and families versus the community or government in addressing different issues, such as poverty and aging.
  • Religious beliefs and their effects on the range of permitted solutions.
  • Prevalence of violence and criminal activity within the society.
  • Attitudes toward wealth accumulation.
• In Understanding Actuarial Management (2010), read Section 5.6.4, pages 119–120. Think about how different cultural belief systems have influenced actuarial work. Remember, the term context is another way of referring to external forces.
• How do cultural/social values affect the work of an actuary? What challenges do actuaries working internationally face? (m2s3-01_Practitioners.pdf)
• Balancing Different Stakeholders’ Needs: In Understanding Actuarial Management (2010), read Section 5.6.5 on page 120.
• The needs of a society may be addressed by individuals, by families, by employers, by the country as whole or by a combination of all these institutions. The attitudes of the culture may determine the division of responsibility among these entities. These topics were covered in Section 21.1 of Understanding Actuarial Practice (2012). The reading illustrated how the evolution of family structure has changed retirement and health care plans in different countries.
• Re: old age security systems as populations age: As tax rates increase, some countries have seen increases in tax evasion that reduces the effectiveness of the increases.
• Prevalent religious beliefs may influence the types of services covered or the types of contracts that can be offered.
• Islamic Law, Sharia, covers types of contracts and investments it deems acceptable for Muslims. The result is Takaful, the guiding concept for insurance coverage in Islamic societies based on mutual co-operation, responsibility, assurance, protection and assistance between groups of participants. (m2s3-02_Takaful.pdf)
• Advertising for prescription drugs led consumers to act in different ways. Some visited their doctors and asked for the advertised drug to treat a symptom not previously discussed with their physicians. Others visited their doctors and asked for a different treatment plan for conditions already being treated. As a result, self-reports indicated improved health. Certainly, some consumers mistakenly tend to think that they have the answers. Some information they receive, however, may be from incorrect or biased sources.
• Cultures without access to advertising via television, radio or other media might behave differently and how their solutions are different. (m2s3-04_HCNews.pdf)
• More Examples of Cultural/Social Values: m2s3-05_CulturalSocExamples.pdf

Effects of cultural/social values on the Define the Problem stage of the Control Cycle.

• Examples of cultural/social values relevant to health actuaries include:
  • Society’s views on how health care is provided.
  • The entitlement mentality of society.
  • The extent of social violence.
  • Awareness and communication.
  • Attitudes toward end-of-life treatment and practices.
  • Rationing of health care.
  • Other factors; see material from Section 29.2 of Understanding Actuarial Practice (2012).
• Chapter 13 in Understanding Actuarial Practice (2012) introduces you to term insurance, whole life insurance, universal life, variable life, riders and additional benefits, deferred annuities and immediate annuities.
• Social and cultural values have an effect on the types and sophistication of risk transfer mechanisms such as life insurance and annuities. Read Section 14.1 of Understanding Actuarial Practice (2012) to learn more.
• Life insurance companies may discriminate in underwriting and pricing when there is a demonstrable difference and the law does not prohibit the particular form of discrimination. Life insurance products often discriminate on the basis of age, gender and health.
• Retirement: Cultural and social factors with respect to various sources of retirement income can affect a person’s ability to retire. This, in turn, affects actuaries who design retirement plans or calculate funding requirements of the plans. Read Section 21.1.2 of Understanding Actuarial Practice (2012) to learn more.
• Before considering how cultural/social values affect property and casualty, read Chapter 2 of Introduction to Ratemaking and Loss Reserves for Property and Casualty Insurance (2007).
• According to the doctrine of proximate cause, which requirements must be met for a loss to be covered by a Homeowners policy?
  • The consequence is covered under the policy.
  • The peril is covered under the policy.
  • An unbroken chain of events led from the peril to the consequence.
• Many states and provinces adopted no-fault auto insurance for various reasons, including an attempt to reduce insurance premiums and administrative costs

Effects of cultural/social values on the Design the Solution stage of the Control Cycle.

• In developing an investment strategy, each individual, company or plan considers its own outlook for the markets, its risk tolerances and the effect on its liabilities. Read Cultural/Social Values and Finance, Investment and ERM (m2s3-09_F_I_ERM_Apps.pdf) to learn how cultural/social values apply to financial problems, as well as investment practices and decisions.
• Investment Risk Tolerance Quiz: Your Score: 25. You have an average/moderate tolerance for risk.
• In m2s3-10_RiskTolActivity.pdf, actuaries responds to the following:
  • identify the investment products you might consider purchasing in various situations;
  • identify the types of investment options you’d recommend as choices if you were an actuary designing a 401(k) plan to be offered to a group of people with certain characteristics.
• Read “Last Chance Therapies: A Question of Health Care Rationing,” (m2s3-11_LastChanceTherapies.pdf) an interesting article on the dilemma over how far society should go to prolong life.
• Rationing occurs in many forms. Your list may include items such as the following.
  • Insurance company denial of coverage for procedures considered medically unnecessary.
  • Medicare denial of coverage for skilled nursing care once progress ceases.
  • Insurance plan restrictions on coverage for brand name prescription drugs.
  • Ineligibility of cosmetic surgery costs for tax deductions.
  • Dental benefit plan paying for the lowest cost suitable procedure.
  • Receipt of minimally required services if unable to pay for them.
  • Individual decision to forego a treatment due to cost.
• Section 22.2 of Understanding Actuarial Practice (2012) discusses how cultural/social values influence government retirement plans and their features.

Tidbits from end of section quiz

• Health care costs do not necessarily increase when people in developed countries gain more access to information.
• Insurance premium rates are dependent on rating variables. Gender is a classification used in auto insurance for certain age groups. Many contend that gender as a classification for automobile insurance is discriminatory. Discrimination issues caused life insurers to stop using race as a classification variable.