concierge service as insurance?

 One of the trends in the world of healthcare is concierge medical are. Honestly, I'm not sure if I got the term right -- maybe there's another or a better word for it. But I'm talking about the practice of doctors charging a membership fee for access to their services.

One doctor I know is typical. In private practice, he's a primary care physician. But he charges a membership fee to see him. Of course, once you've paid the membership fee, you don't have to pay extra for most services. members do pay for such things as vaccinations, since he himself has to pay for those. In theory, nonmembers can see him. But it's very difficult for them to get appointments, and they pay for every service.

But now, this doctor tells me, he has heard grumblings from the New York Department of Financial Services. They are, as he puts it, uneasy about the arrangement. Their concern is that a patient can come in every day and get looked at and examined for free. So, the argument goes, the doctor is effectively selling health insurance -- without all the reporting, review and other logistical hoo-hah required of health insurers.

I mentioned this to a small group of colleagues. They all seem to think it's a stretch. The doctor isn't putting himself on the hook for any kind of monetary outlay. It's just time. They also argued that any kind of product guarantee is, effectively an insurance policy. I suppose that's more in the realm of P&C insurance, and we're all life actuaries, but the principal is the same.

I didn't debate the issue with my colleagues, since this isn't my fight. I will be interested in following up with my doctor friend to find out if there are any developments.

In the meantime, can I claim CE credit for the time it took me to write this blogpost?

25 years a fellow: could i have blown it all?

Last Monday marked the 25th anniversary of my becoming a Fellow of the Society of Actuaries. Attaining that credential was the culmination of years of studying and stress. I should have marked the occasion on Monday, but I forgot. Oops. At any rate, that's not the point of this post.

A question came up at work this week -- did I, as I was receiving my fellowship diploma, risk having it taken away?

Some background is in order. When I got my Fellowship, the last hurdle was the Fellowship Admissions Course. It was a two-or-so day seminar on professional ethics and responsibility, designed to instill in us a sense of the importance of acting honestly and ethically. The process of attaining fellowship has changed over the years, but the FAC remains a part of it, and I believe the FAC still has the same purpose.

The FACends with a banquet at which the new FSAs called up one by one to receive their diplomas from the President of the Society (at the time, it was Dave Holland) and get their pictures taken. And that's where I made it interesting. I brought a gorilla mask and a banana to the banquet. When my name was called I quickly put the mask on and made my way to the podium. There, amid laughter, I offered Mr. Holland a banana in exchange for the diploma. One of my regrets is that somewhere along the way I lost the picture.

Was I was worried that the stunt would cost me my Fellowship? The fact is, is did cross my mind. I didn't want to ask Mr. Holland in advance, since I wanted it to be a surprise. But I did ask one of the FAC faculty what he thought. Was there a chance that Holland would decide that I wasn't taking the whole thing seriously enough? Might he tear up the diploma and tell me I had to start again? Might the ABCD* take interest and impose some sanction. The faculty member assured me that Mr. Holland has a good sense of humor and would most likely be amused.

I'm thinking about that question again after 25 years. Suppose Mr. Holland (or some other high-ranking SoA people or FAC faculty) was actually offended that I wasn't taking it seriously enough? Could it actually have cost me my Fellowship?

Short Answer:
No.

Long Answer:
The first important consideration is that, by the time of the banquet, we had all been declared FSAs. Why is that important? Because it speaks to what would have been needed for the stunt to cost me my Fellowship.

Suppose we hadn't been declared Fellows before the banquet. Then, I suppose, the faculty could have decided that I failed and not given me my diploma. I don't think that would have happened, and it would have been unduly harsh. But maybe it could have happened. Maybe.

But by the time I pulled the stunt I was already an FSA. So for it to have cost me my Fellowship the faculty would have had to revoke it. That, I figure, is a bigger deal. The faculty at the FAC do not have the power to revoke Fellowship. They would have had to make a complaint to the ABCD. After a full investigation, the ABCD could decide to revoke my credentials.

But that seems unlikely. I looked at the Code of Professional Conduct to see if I could find anything there on the subject. Most of the precepts in the code have to do with the actual work of being an actuary. They govern communication, disclosure, ethical issues. Things that aren't affected by a lighthearted but irreverent joke. at the FAC banquet. The closest I could come to seeing anything problematic is in Precept 1, which reads:

An Actuary shall act honestly, with integrity and competence, and in a manner to fulfill the profession's responsibility to the public and to uphold the reputation of the actuarial profession.

Maybe that last clause could be invoked to argue that wearing a gorilla mask at the FAC banquet could harm the reputation of the profession. But I think that would be a difficult argument to make. Especially in light of Annotation 1-4, which clarifies that even that part of the precept is intended to apply to professional activities. That Annotation reads:

An Actuary shall not engage in any professional conduct involving dishonesty, fraud, deceit, or misrepresentation or commit any act that reflects adversely on the actuarial profession.

Now, it's possible that non-actuarial activities can be interpreted as being violations of the Precept if they are egregiously immoral, and well publicized. And then an actuary could be censured or lose his credential. But it's hard for me to see that happening in the kind of situation I'm discussing.

Thoughts?

__________________________

*The Actuarial Board for Counseling and Discipline, which is the profession's body charged with dealing with ethical or professional violations. They have the power to investigate accusations and, among other things, revoke or suspend actuaries' credentials.

the value of being locked in the bathroom

A guy gets locked in a bathroom and gets compensated with free Whoppers for life. Or until Burger King's regional office decides to stop honoring their agreement.

Well, that's the gist of it, anyway. I won't repeat all the details in this blogpost, but you can read about it here.

The upshot? The guy, Curtis Brooner, is suing BK for $9,026.16, which is his estimate of the cost of Whopper meals*($7.89 a pop) for life. He's basing that on the assumption that he lives to age 72. He's 50 now. I saw that and wondered how the figure lines up to reality.

My first thought is that $9,000 seems like a bargain and BK should probably pay him off. Actually, they should simply honor the deal they made with him. But maybe they don't want to set a precedent and run the risk of people purposely jamming themselves into restrooms in order to get free Whoppers. But that's neither here nor there. I'm thinking in terms of his calculation.

Some quick analysis shows what he did. One meal a week, 52 weeks a year, for 22 years comes out to 1,144 meals. At $7.89 each, that's exactly 9,026.16. That's naive.

Now, I don't have much experience with this kind of thing, so I'm not sure of how to handle all the assumptions involved. For example, there's discount. $7.89 in 22 years is worth less than $7.89 today. On the other hand there's inflation. Whopper prices are likely to go up, so a Whopper that costs $7.89 today is likely to cost more than that in the future. I don't know what are appropriate assumptions for the discount rate and the rate of Whopper inflation. Since the two rates have opposite effects on the value of the Whopper stream, they serve to mitigate each other. I doubt they're the same, but maybe the net effect of the two can be ignored.

But a bigger issue is life expectancy. I'm not sure exactly where Brooner came up with 72 as his expected date of death, but I assume he heard somewhere that life expectancy is 72. Problem is, that's life expectancy at birth. And it's outdated, but let's pretend it isn't. As a fifty-year-old, his expected age at death is higher (assuming he is in reasonable health. According to the Social Security Administration (or at least according to their 2015 period life table), a 50-year-old male has a future life expectancy of 29.6 years. Making that change alone raises the amount he should be going after. Now it's $12,144.29. And, while we're at it, there are actually more than 52 weeks in a year. Adding another 4 weeks or so (over the course of the nearly 30 years brings the total up to $12,175.85. Here's where it really helps to assume the discount rate is the same as the rate of Whopperflation -- assuming they exactly offset each other, we can simply look at expected number of Whoppers and multiply by the present cost of each.

And, speaking of the number of Whoppers, I think Brooner is being quite reasonable in only assuming he'd have one Whopper a week. According to the article, he had been getting at least one free Whopper a day. So if he claims a Whopper a day instead of one a week, the value goes up to $85,230.94. But it should be higher. Here's the relevant passage from the article:

For the next two weeks, Brooner capitalized on the offer. He tells WW he ate at the Burger King location at least once a day—until Dec. 26, when the restaurant's district office allegedly told employees to stop giving him free meals.

So, in two weeks, he had a free Whopper at least once a day. That doesn't say exactly how many Whoppers he got, but I figure it has to be at least 15 in 14 days -- if it were just one a day, then he wouldn't have said "at least once a day." So multiplying my last figure by 15/14, we get to $91,318.86.

On the other hand, the foregoing has been written with the assumption that the Burger King in question will be around as long as Brooner. His deal was with that particular BK -- not with the chain as a whole. If that BK fails, his stream of Whoppers ends. And fast food franchises fail all the time. The BK near my subway station just shut down a few months ago. Which really sucks because now Blair can't pick me up there. I couldn't find any really good data on the failure rate of fast food restaurants. The best I found in the three minutes I spent looking was this online article which says that, 0ver a five year period, 5% of franchises fail. I'll take that to assume a 0% failure rate, since Brooner would be better-served by ignoring the possibility of his BK closing. And BK itself would be better off not arguing that they should pay very little because their franchise is likely to fail.

I wonder what Burger King has to say about all this? Once this is posted, I'll email them and ask for comment. I'll be sure to share anything they have to say on the matter.

Anyway, Brooner should ask for $91,318.86. And when he gets it, he should pay me a consulting fee of $27,430.90. Yeah...I'm not holding my breath...

Disclaimer: While I am an actuary, this is intended to be whimsical. It is not a complete analysis of the value of being locked in a Burger King bathroom, and should not be used as such.

*According to the article, we're talking Whopper meals which, I believe, come with fries or onion rings and a drink. For the sake of brevity, I'll just talk about it as if he was getting Whoppers. That doesn't really change the analysis.

**I should trademark that

my protest vote in the soa elections

Suppose you're a member of a group with a stated purpose. Maybe it's a group of people that share the same hobby, or a travel club. Something like that. But suppose the group's leadership is controlled by a small group of people who have interpreted the rules in such a way that they have full control of who can be elected. The leadership picks the candidates for office, and there's no mechanism for anyone not endorsed by the current leadership to get elected. You might not care, and continue your membership without making a fuss. But you might care a lot, concerned about leadership that is effectively unanswerable to the club's membership. In which case you may want to leave. Now, suppose this isn't simply some kind of club for hobbyists. Suppose it's a professional organization, and you need to maintain your membership for your job. That's the situation that the membership of the Society of Actuaries found itself in about five years ago.

Before I go on, I need to stress that the opinions in this post are my own. They are not necessarilly shared by anyone else. That is, of course, true of all my posts. But I need to stress it here.

I earned my Fellowship in the SoA, and the right to vote in its elections, in 1997. I don't remember whether I voted that year. For the first 15 years that I could vote I was pretty blase about it. I didn't have the time or inclination to bother researching the candidates and their positions. My thoughts on the elections could have been easily summed up in one word: "Whatever." I have no doubt that that was the feeling of the majority of the SoA membership -- and that it still is.

At the time, there was a two ballot process. I don't recall the exact process, but FSAs could nominate candidates to appear on the first ballot. The top vote-getters would appear on the second ballot. At some point around ten years ago the process was changed. There would be only one ballot, and the Nominating Committee would be responsible for picking the candidates.

I wasn't aware of there being any issue until Tom Bakos. Bakos, who had an extensive history of service to the profession wanted to run for President Elect*. I knew Tom, having served with him on the American Academy of Actuaries' Committee on Professional Responsibility. Bakos had put his name in, but the Nominating Committee wouldn't put him on the ballot.

But the SoA bylaws grant FSAs the right to nominate**, so Bakos reached out to various members, soliciting their nominations. In 2012 he was nominated for President Elect by over 100 FSAs. But when the election came around, we couldn't vote for him because he wasn't on the ballot. Predictably, many of us who had nominated him raised a hoo-hah. We were infuriated that our nominations hadn't been honored. I contacted SoA leadership. So did a lot of others, apparently. The SoA President sent an explanatory email to the membership. The key paragraph reads as follows:

The SOA has a well-considered and effective system for identifying and selecting future leaders. Since a bylaws amendment in 2006, our Nominating Committee has been charged with vetting and recommending a slate of candidates for the Board. The Nominating Committee carefully considers all nominations and interviews nominees to learn more about their strategic vision and assess their leadership qualities against the position descriptions for these roles. The Committee develops a recommended slate of candidates, which is then reviewed and approved by the Board of Directors. Nominees who are not selected as candidates are invited to receive confidential feedback from the Committee. Mr. Bakos has received that feedback.

Essentially, he was explaining that our nominations were honored; Mr. Bakos was a nominee, but it's up to the Nominating Committee to decide which nominees become candidates. I felt -- many of us felt -- that this was a semantic game which made our right to nominate meaningless. As President Smith explained it, our nomination was effectively a suggestion. But anyone can suggest a candidate. An ASA could. An actuarial student could. My dentist could.

This procedure was defended by SoA leadership as necessary. Most actuaries simply don't have the time or inclination to fully research the candidates, their visions, their character, how well they play with others. The Nominating Committee's role in deciding which nominees become candidates was necessary, they argued, to protect actuaries and the actuarial profession from electing a bad actor. I'll admit that there's something plausible about that argument. But if a small cabal has absolute control over the levers of power, they can easily set the entire agenda. They can maintain a leadership body with their particular vision and become unanswerable to the general membership. That's simply not healthy. If they want to replace the current exam-based system of credentialling with something focused on college courses, they can do it. If they want to create a casualty specialty and try to force the Casualty Actuarial Society out of business, they can do it. If they want to inject their own opinions into every political issue (whether related to the actuarial field or not), they can do it. And it doesn't matter if literally all of the rest of the membership doesn't approve of their course of action.

Following the ensuing debate, SoA leadership relented, and agreed to a new process. The Nominating Committee would come up with a slate of endorsed candidates. Anyone qualified who gets nominated by a sufficient number of FSAs will get on the ballot as a "by petition" candidate. "Enough" is defined as at least 10% of the number of people who voted in the prior year's election. So

Spoiler alert: Jim Glickman got enough nominations this year, and is the only petition candidate for President-Elect on the ballot. I'm voting for him.

I think this rule is an abomination. It still doesn't seem to me to be a reasonable interpretation that hundreds of nominations are required to get on a ballot. I could see saying you need two nominations. Or even three. I'm not sure I can determine where I think is the cutoff between reasonable and unreasonable. But the current rule is, I think, unreasonable. I suppose I can see an argument made that they can't allow anyone with one nomination to be on the ballot because then they'd run the risk of having too many candidates. But I simply don't see that happening. Under the current system we don't have an unwieldy number of people on the list of candidates for nomination.

At any rate, the irony is that, by making it so difficult to get a candidate on the ballot through the member-nomination process, the leadership actually made it more likely that such a candidate can win. If it were easy to get on the ballot, we would see more such candidates, and they would split the protest votes. With only one petition candidate on the ballot, it's more likely that he or she can win.

Honestly, I have had very limited interaction with Glickman. But several actuaries whose judgement I tend to trust are supporting him. And I am doing so -- as a protest if for nothing else. The status quo needs to be changed.

*One peculiarity of the SoA governing structure is that one is not elected President. One is elected President Elect, then serves as President Elect for a year under the President (who is the prior year's President Elect). After a year, the President Elect becomes President, and is replaced by a newly-elected President Elect.

**Article III, §1.b. says "Fellows...are entitled to vote, hold office, make nominations, and generally exercise the rights of full membership."

the omega glory

At work, some colleagues and I got into an email exchange about mortality tables. It was prompted by a passage in an old probability textbook. Feller, I think. The relevant passage:

It is impossible to measure the life span of an atom or a person without some error, but for theoretical purposes it is expedient to imagine that these quantities are exact numbers. The question then arises as to which numbers can represent the lifespan of a person. Is there a maximal age beyond which life is impossible, or is any age conceivable? We hesitate to admit that man can grow 1000 years old, and yet current actuarial practice admits no bounds to the possible duration of life. According to formulas on which modern mortality tables are based, the proportion of men surviving 1000 years is of the order of magnitude of one in 10^10^36 — a number with 10^27 billions of zeros. This statement does not make sense from a biological or sociological point of view, but considered exclusively from a statistical standpoint it certainly does not contradict any experience. There are fewer than 10^10 people born in a century. To test the contention statistically, more than 10^10^35 centuries would be required, which is considerably more than 10^10^34 lifetimes of the earth. Obviously, such extremely small probabilities are compatible with our notion of impossibility. Their use may appear utterly absurd, but it does no harm and is convenient in simplifying many formulas. Moreover, if we were seriously to discard the possibility of living 1000 years, we should have to accept the existence of maximum age, and the assumption that it should be possible to live x years and impossible to live x years and two seconds is as unappealing as the idea of unlimited life.

 Before going on, I should note one mistake in the passage above. Current actuarial practice is (and, I believe, was as of the time that Feller was written) to use mortality tables that did have a maximal age. Modern mortality tables generally have an omega -- that age at which q (the probability of dying within a year) is 1.

At any rate, the question being alluded to is whether it makes more sense to have an omega or to assume that there is no upper bound on potential lifespan. For practical purposes, it doesn't matter. There is clearly a mathematical difference between having q=1 at age 120 and having q=.99999999999999 at age 120, growing monotonically, and converging to 1 as age approaches infinity. But in the world of insurance (and its place in finance), it doesn't matter.

Conceptually, I prefer the notion that there is no omega, but q's get arbitrarily close to 1. It just makes more sense to me. But, based on the conversation at work, I am in the minority.

my starring role as the titular character in "educating asa"

It was 2004 -- a little over twelve years ago. The Society of Actuaries was having a meeting in New York. Somehow it was decided that, as part of the lunchtime program, there should be a play to illustrate the need for actuaries to have soft skills.

Tom Bakos wrote the play, which was titled "Educating Asa." I was a long-time member of the Academy's Committee on Professional Responsibility, and in that role I knew Bakos. I was also a bit of a ham with an unrequited dream of being an actor. So I was a natural choice to play the title role.

In my brief acting career, this was by far the biggest audience I ever performed for.

I look back at this video with a mix of pride and embarrassment. We actually had very little time to prepare and memorize our lines. There was only one rehearsal. We didn't have the luxury of costume changes, which was fine for the others. But Asa had to make a complete transformation. Given the constraints, I think I did pretty well with it. Ditching the pens from my shirt pocket, pulling the cuffs on my pants down to cover the (mismatched) socks. Putting on a jacket. But I couldn't perform a miracle. So I still had my five o'clock shadow. And I didn't completely fix the top of my pants, so the belt and waistline combo still look funky after the transition. But the point was made.

For that line about "...a pig like that you don't eat all at once," I was given freedom to pick whatever punchline I wanted. From any joke. I actually was tempted to go with "I don't know about the ones on the sides, but the one in the middle is Willie Nelson," which is one of my favorites. But the joke is overtly sexual. Still, I was tempted to go with it. Absent the context of the joke, the punchline isn't dirty at all. If anyone complained, I could plead ignorance. "Hey, you're the one with the dirty mind," I could argue, as if the punchline was some kind of Rorschach test. In the end I decided on a punchline from a nonsexual joke.

A few of my friends from work were at the meeting. Two of them knew in advance that I would be part of the lunchtime entertainment. A third, who was seated with them, didn't know in advance. Afterwards, I loved hearing about how his jaw dropped when he realized that it was me onstage.

Oh, for the record, I dress better than that when I'm at work.

famous among people who know me

I attI had made plans with a colleague to go out for dinner, and we were meeting in the hotel lobby (along with two others whom I had never met before). One of them introduced himself, and asked my name. I told him. His response was "So, you're the famous Marc Whinston."

This had me puzzled. I'm not famous. My initial thought was that it was a joke. I'm not above doing things like that. On occasion, a friend will introduce me to someone I've never met before and I react as if we had met years before. Or I'll say "Hi Bob" or "Hey, Mike!" to a stranger. Usually, people don't react. But when I've got the name right, that's when the fun begins. I once had a guy going for a few minutes, until he asked where we met. I gambled. "That proctology convention in Tampa." Go big or go home. But, alas, he had never been to a proctology convention in Tampa.

On the other hand, this was an actuarial crowd, I've heard that, at the Fellowship Admissions Course, they still sometimes tell the story of how I received my FSA diploma. It seems that only happens when there'a TIAA actuary there, and there's a comment along the lines of "Do you know Marc Whinston? You might like this story." This guy was not from TIAA, but maybe he heard the story at a FAC?

Sadly, the truth was more mundane. This guy's father-in-law is someone I shared an office with for a few years.

I guess I am famous. At least among people who know me.