Ambiguities at the heart of with-profits

Invented to deal with mortality risk, with-profits have come to reflect other risks over the years, which has led to some of the problems experienced recently

When it was established in the 18th century, Equitable Life was the first insurance company to successfully sell life insurance based on actuarial principles - that is, its premium rates depended on an actuarial estimate of life expectancy based on age at the time the contract was taken out and, once set, remained constant throughout the life of the contract. In the preceding decades, several other companies had attempted to do the same but after apparent initial success became insolvent because the initial premium rates were set too low. Too little was known about human life expectancy...