Spreadsheet Issues: Pitfalls, Best Practices, and Practical Tips

Mary Pat Campbell

Introduction
Spreadsheets are one of the largest workhorses in actuarial work and business work in general, but few of us have serious, rigorous training in their use and design. We usually pick up knowledge and skills through assignments on an as–needed basis, which can prevent a methodical approach to the technology. Alas, I have not created any such needed methodical approach, but I have found a variety of resources, general theories, and specific practices that you may wish to put into effect in your own work.

Below I assemble material I've written, originally published in CompAct, the newsletter for the Society of Actuaries' Technology Section. I start out with "To Err is Human; To Correct, Divine," where I highlight the general problem of spreadsheet errors and point to some useful resources. The next four sections are from a series titled "The End Users Justify the Means" ostensibly about spreadsheet design based on the end users, but the main themes are both usability as well as error–prevention. Finally, I review some presentations given at the 2009 European Spreadsheet Risks Interest Group Annual Conference, which gives one an idea the type of research and work that is being done in this realm.

I hope the ideas found herein may be useful in one's day–to–day work with spreadsheets. Most of the ideas originate with others, and what may be even more useful is the list of my original resources at the end of this paper. This paper is directed primarily toward those who create or maintain spreadsheets, but their managers can also gain valuable insights from the material presented here.

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Health Expectancy

Faye S. Albert, John M. Bragg and James C. Brooks, Jr.

1. Introduction
   More than 100 years ago, the actuarial profession introduced the concept of "expectation of life," a measure of the average future lifetime of a group of people generally the same age and sex. Over the ensuing years, people in academic circles and others, primarily in countries other than the United States, began to write about a different measure of future lifetime, the average future healthy lifetime of such a group. Most of this research has focused on health expectancy as a macro or aggregate measure for comparison of different population groups around the globe. Such research is noted in the "References" section of this paper.

Over the past 20 years, the authors became interested in expanding the literature about health expectancy in two important ways:

1. By concentrating on truly homogeneous groups of people with the same age, sex, smoking status and medical impairment profile. In this manner, we have made a valuable contribution to people dealing with questions of personal risk management as they face an uncertain future. For seniors in particular, health expectancy provides insights into survival to very advanced ages.
2. By assessing the impact of known impairments using actuarial science as opposed to medical science or underwriting art.

The balance of this paper explores these two new aspects in great detail.

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Living to 100: Survival to Advanced Ages: Insurance Industry Implication on Retirement Planning and the Secondary Market in Insurance

Jay Vadiveloo, Peng Zhou, Charles Vinsonhaler and Sudath Ranasinghe

Abstract
The paper will focus on two broad areas:

1. Integration of insurance products with investment products to mitigate the risk of outliving one's assets in post–retirement financial planning
2. Modeling and pricing for the longevity risk in the secondary market in insurance.

For the first area, the author will discuss different designs of variable and fixed immediate annuities together with investment products in order to manage the longevity risk. In particular, the author will discuss some theoretical results from the doctoral research work of one of his PhD students on integrated post–retirement financial planning. The research describes asset allocation techniques between investment, annuity and insurance products in order to optimally manage post–retirement income and bequest needs subject to ruin probabilities being kept within a prescribed minimum level.

For the second area, the author will describe techniques on how to manage the longevity risk in the secondary market in insurance for impaired policyholders needing liquidity from their existing life insurance policies. The author will describe how he has adapted into the secondary market in insurance the doctoral research work of his PhD student in developing a provision for adverse deviation (PAD) model for the longevity risk of structured settlements. In particular, the author will discuss how life expectancy and qualitative information from external underwriters can be utilized to quantify the slope risk, underwriter misstatement risk and statistical volatility risk of impaired policyholders in order to develop a PAD for the longevity risk.

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