Defined terms for the annuity market and lifetime income landscape.
Actuarial fairness is the principle that each participant in a lifetime income arrangement contributes a premium that exactly equals the expected present value of the benefits they will receive, with no implicit cross-subsidy between participants of different risk profiles.
Adverse selection is the general insurance phenomenon in which individuals whose risk profile is unfavorable to a particular arrangement are more likely to enter it than those whose profile is favorable, producing a pool whose experience differs systematically from population averages.
The Armstrong Investigation was a 1905–1906 New York State legislative investigation of the US life insurance industry led by Senator William W. Armstrong with chief counsel Charles Evans Hughes, which produced reforms — including the effective prohibition of tontine policies.
Assessment plan insurance is an early US life insurance institutional form in which member premiums were not actuarially level but were assessed retrospectively as claims arose, with surviving members assessed for amounts needed to cover deaths since the last assessment.
Basis risk in the pooling context is the gap between the longevity risk a pool's structure is designed to absorb and the longevity risk the pool actually faces, arising when the pool's members or their mortality experience differ in unanticipated ways from the pool's design assumptions.
