Election Issues 2024—The Academy Weighs In

New Clearinghouse website highlights nonpartisan Academy input on key issues

By Ted Gotsch

THE AMERICAN ACADEMY OF ACTUARIES’ MISSION during its nearly 60 years of existence has focused on public policy. During this national election year, the Academy is devoting attention to the expertise of its volunteers to highlight six key issues that are frequently raised by elected officials and the public. These issues are not new to actuaries—in fact, they’ve been on the Academy’s priority list for years and continue to hold heightened interest. What may not be as evident, particularly for those seeking office, is the analysis and evaluation of proposed solutions to some of these issues that reflect some of the nation’s most pressing problems.

In an effort to offer a single entry point to find such information, the Academy’s new webpage, “Election 2024: Issues Clearinghouse,”¹ serves as a landing spot for politicians, policy wonks, and the public to find out more about these “mega-issues” the Academy has identified—retirement security, health care, climate change, cybersecurity, artificial intelligence, and risk management. The webpage offers visitors access to content such as issue briefs, articles, webinars, and podcasts with unbiased and nonpartisan insights into these overarching and tangible matters.

While it’s not unusual for the Academy to highlight key public policy issues during the election cycle—primarily focused on Social Security and Medicare—we’ve decided to pivot slightly, given the broader interest in issues that lie withing the actuarial wheelhouse. In the past few years, it has become increasingly evident that the facts around significant policy matters are being drowned out by desire to feed the ever-growing need for fast news and fast solutions without a balanced discussion on how to address the issues. Many of today’s most important topics require the sound application of actuarial principles, which are skills that members of the Academy bring to bear.

By sharing the content that volunteers produce on this election-themed webpage, the Academy looks to capture the attention of decision-makers who might not be subject-matter experts but will be in a position to tackle these topics and effectuate changes in the near future.

“Social Security and Medicare are on track to not meet their financial obligations in the near future and elected officials are still grappling with how to handle growing cyber and climate risks. Add to it the uncertainty caused by the growth of AI, and it is easy to see that the U.S. needs to tackle these challenges head-on,” Academy President Lisa Slotznick said. “We believe that presenting these unvarnished, independent insights will be helpful.”

Highlights of the materials currently available in the Clearinghouse include

Retirement security

 The ability of Americans to ensure their financial nest eggs in their golden years once centered around a three-legged stool of Social Security, pensions, and personal savings. But in recent decades, that model has shifted as employers increasingly phased out defined benefit (DB) plans and replaced them with defined contribution (DC) plans. Meanwhile, the fate of Social Security has remained in flux due to a looming shortfall of funds.

The Retirement Practice Council continues to focus on discussing Social Security solvency[2] and ways to reform[3] the program. Social Security’s combined trust fund reserves are projected to become depleted around 2034, at which time its income will be able to pay only 80% of the scheduled benefits for its 80 million beneficiaries. As actuaries evaluate the various options to address the public program’s insolvency, the practice council has evaluated a variety of solutions, including reduced benefits, higher taxes, or a mix of both. Finding a solution means understanding the downstream and immediate impacts, as well as the various winners and losers in any scenario.

While the Academy doesn’t have a single solution, it seems reasonable to encourage earlier reform action, allowing for tax increases and benefit reductions to be phased in gradually and ultimately providing individuals time to plan and adjust to any changes.

As focused as Congress and other elected policymakers are on Social Security, the Academy is also paying attention to the ongoing shifts in other mechanisms that are available to help workers save for retirement. In a September 2023 issue brief,[4] potential modifications to defined benefit plans that would mitigate some of their most significant shortcomings are explored, along with potential opportunities to incorporate some of the more desirable attributes of defined benefit plans into defined contribution plans.

In terms of other lifetime income solutions, a June 2023 issue brief[5] considers Experience-Sharing Lifetime Income, which shares features of lifetime annuities and structured drawdowns but may offer distinct advantages. It is a model that has been established in Europe but has been only narrowly used in the U.S.

While the Academy doesn’t have a single solution, it seems reasonable to encourage earlier reform action, allowing for tax increases and benefit reductions to be phased in gradually and ultimately providing individuals time to plan and adjust to any changes.

Health care

As we evaluate health care in the U.S., the Academy focuses on ways insurers, employers, and consumers can all benefit from better and more efficient use of health care benefits. Beyond the frequent questions around affordability and accessibility, actuaries are increasingly focused on improving health equity among traditionally disadvantaged communities.

Building upon the Academy’s Health Equity Committee’s 2023 work, which culminated in four issue briefs[6] and a public symposium, work continues to address the numerous challenges to implementing equity-based health plans and support the ongoing efforts to reduce health disparities. Working together, the entire ecosystem—including employers, insurers, actuaries, community leaders, health services researchers, policymakers, state and federal regulators, and consumer advocates—can develop and test equity-based benefit innovations.

Other persistent health challenges include addressing Medicare’s financing[7] and the desire to improve Medicare’s near- and long-term solvency and sustainability. Echoing some of the concerns in the retirement space, the Academy has noted that delaying corrective measures could increase the burden imposed on beneficiaries and taxpayers.

In the post-Covid world, the very real and immediate impact on Medicaid[8] has experienced in the aftermath of the pandemic has meant millions of enrollees have lost coverage, leaving many to reenroll or find other health care arrangements. Actuaries have a perspective to share and can help state and federal regulators, along with consumers and the advocates who are working with those vulnerable individuals, better understand the long-term implications of such shifts in coverage, the potential impacts on population health and risk factors, and the opportunities that stem from such an unprecedented event.

Rate increases and reduced benefits are top concerns when it comes to long-term care (LTC) and keeping it sustainable for both consumers and providers. The LTC Actuarial Equivalence Work Group unveiled a 2022 framework[9] highlighting the relationship of benefits to premiums for regulators, insurers, and other interested parties.

Climate change

The most direct harm from the effect of climate change has been on display for years. Most recently, the growing prevalence of extreme weather events has led to higher property insurance rates, driving some providers to leave the marketplace in states like California and Florida.

As discussed during an Academy webinar last year,[10] stronger hurricanes and severe rainstorms have increased flooding across much of the Eastern U.S. The number of hurricanes causing more than $1 billion in damages (in 2022 dollars) has tripled over the past 40 years, while deaths from such storms have increased more than 17 times.

Meanwhile, sustained droughts have led to more prevalent wildfires, mostly in the West. The number of billion-dollar fires has quadrupled over the past 40 years, with the overall costs of such disasters rising nearly 11 times.

The Academy, collaborating with the Casualty Actuarial Society, Society of Actuaries, and the Canadian Institute of Actuaries, recognized the need to create the Actuaries Climate Index (ACI). [11] An educational tool describing changes in the conditions that produce extreme weather events, the ACI is an objective indicator of changes of six climate-related conditions since 1990 in the continental U.S. and Canada.

Cybersecurity

With ransomware incidents hitting an all-time high in 2023, awareness of the growing cyber threats being faced at home and in the workplace has become one of the primary strategic priorities of the Academy. In 2023, the Academy held a webinar explaining how cyber criminals are increasingly jeopardizing the security of private companies, as well as the public.[12] This has raised the need to combat risks that threaten operations, as well as financial stability, as currency holdings continue to migrate into the digital realm while more and more people work from home.

Increasingly, users are leaning on the zero-trust model[13] in an effort for greater security. Zero trust, according to the National Institute of Standards and Technology, is a set of cybersecurity principles used to create a strategy that focuses on moving network defenses from wide, static network perimeters to focusing more narrowly on subjects, enterprise assets such as devices and applications, and individual or small groups of resources.

The availability of cyber insurance for consumers[14] is growing to cover damages such as financial loss, unrecoverable funds, breach of personal information, and identity restoration. And the need for such services is only going to increase in the years ahead. There is also an increasing need for parametric insurance,[15] which protects against system crashes and outages, leading to downtime for anywhere from a matter of hours to days or even weeks. Such crashes cost companies time and money—and customers. Parametric insurance insures a policyholder against the occurrence of a specific event by paying a set amount based on the magnitude of the event, as opposed to the magnitude of the losses in a traditional indemnity policy.

Artificial intelligence

The growing footprint of AI has led some to trumpet the technology as one that could advance society, while others raise fears about what that future could bring. One thing is certain when it comes to this nascent technology: There is still much to consider.

There is also the question of how to regulate AI. In a recent Contingencies article, Adam Benjamin wrote[17] that “effective and sustainable AI policy is challenging work that requires the cooperation of many different groups. It needs to be focused enough to address current use cases while also putting structures in place to guide the development of future AI tools, many of which may be beyond our imagination at this time.”

The impact of AI on actuarial work and the actuarial profession is also a significant topic of discussion that has implications for other professions including data scientists. As Robert Eaton wrote in Contingencies, [18] while those in the field should be on their guard, “[t]he actuary should be particularly eager to understand model results, and ensure that model and data biases are understood and accounted for in business decisions.”

Actuaries are thinking about how to balance the risks that emerge from financial and investment innovation with the potential benefits they offer consumers, businesses, and the government.

Risk management

The insurance industry grapples with numerous topics that threaten its bottom line. Actuaries are thinking about how to balance the risks that emerge from financial and investment innovation with the potential benefits they offer consumers, businesses, and the government.

During an Academy-sponsored webinar last year looking at insurance fraud,[19] for example, experts said that regulators, insurers, and the public can no longer afford to ignore the issue. A 2022 report by the Coalition Against Insurance Fraud estimated the crime costs Americans $308.6 billion annually, and that increase is being passed on to ratepayers. Organized crime rings play a significant role in running scams, they stated.

The legalization of medical marijuana in a growing number of states means more attention needs to be paid to how it affects workers’ compensation, including the interpretation of workers’ compensation law when medical marijuana use intersects with workers’ compensation claims, as an issue brief[20] from last year asserts.

Issues around environmental, social, and governance (ESG) disclosures[21] have captured the attention of policymakers at the state and federal level. From an actuarial perspective, there is an awareness that actuaries might play a role in and carry responsibilities associated with such disclosures featured in a company’s financial statement. Given the increasing involvement of principals in ESG investing, awareness and analysis of ESG positions have become more prominent.

Following the broader conversations around bias that the nation has been struggling to address, the Academy has also considered potential unintended bias in insurance practices.[22] While the concerns exist across the practice areas, the issue has been of particular concern in the property/casualty lines, as regulators and other elected officials consider personal coverage lines of business, such as auto insurance.

SAME GOALS, NEW APPROACH

Ted sat down with Geralyn Trujillo, the Academy’s senior director of public policy, to discuss the genesis of the Issues Clearinghouse, the election cycle, and how the work of the Academy’s volunteers helps drive change.

The Issues Clearinghouse is a new direction for the Academy. Why the change?

There were a lot of changes that happened heading into 2024, and I thought it was a great opportunity to try something new. Traditionally, the Academy has focused on two primary issue areas during presidential election season—health and pension/retirement. Two large federal programs, Medicare and Social Security, tend to come up in debates, campaign materials, and as part of the annual federal budget process. While our members and volunteers have a lot of valued insight and expertise when it comes to the sustainability and the financing of those two programs, this election year seemed ripe to also highlight other broad public policy issues that the candidates and the public are focused on. We thought it made sense to put examples of the past and ongoing work that the practice councils have done that can help educate and inform policymakers, the media, and other interested stakeholders into one easily accessible page on our website. It’s one-stop shopping for issue briefs, past webinar content, podcasts, Contingencies articles—the entire complement of work that the Academy has created in the recent past on issues around AI, climate, risk management, and cyber issues as well as health care and retirement security.

So the audience is really intended to be outside of the Academy’s membership?

Yes! Especially for those policymakers inside the Beltway, here in the Washington, D.C., area, the amount of information that is filling their inbox or being sent their way through social media and other channels can be overwhelming. They forget where they may have seen something that spoke to the downstream impacts of proposed solutions related to public pensions or have a vague memory of a series of papers on how health equity can be incorporated into health benefit plans. Part of our responsibility as staff of the Academy is to find ways to ensure that the hard work and expertise that our members are sharing is accessible. One of the things we all noticed was a theme of issues coming up frequently in election materials that speak to issues that the actuarial community has been exploring and talking about for a number of years.

The focus on AI is a great example—the amount of commentary and thought around appropriate use of AI, both from a professional perspective as well as from the legal and regulatory oversight perspectives, is not insignificant. The Academy has some great resources available, all of which can be found on the Contingencies website. Tying that material to some of the work products that the Casualty Practice Council and the Risk Management and Financial Reporting Council have produced made sense.

Hopefully, when individuals visit the Clearinghouse, they’ll both find information that is new to them and revisit work that they have seen before. It’s also a great resource that we can promote when Academy staff and volunteers are visiting congressional offices, federal agencies, and state regulators. Making our work easy to find is one of our top priorities—and the Clearinghouse should help.

How does this reflect the Academy’s unbiased, balanced perspective? With a focus on an Issues Clearinghouse, does that start to lean into a lobbying perspective?

That’s a great question! I think having a resource like the Clearinghouse actually reinforces our unbiased, balanced perspectives and underscores the value that actuaries bring to the policymaking table. In my past life as a lobbyist and advocate, we were always looking for balanced resources that offered data points, helped explain complicated issues, and provided both the pros and cons of varying proposals. The Academy offers all of that and more—which is why we are frequently called upon by the National Association of Insurance Commissioners (NAIC), congressional committees, employers, and other trade associations to speak to the underlying problems and offer trustworthy perspectives on various options.

One of our greatest strengths lies in the fact that we don’t promote specific proposals or positions. Instead, we encourage thoughtful consideration and an appreciation of all the potential outcomes—not just the most optimistic—before selecting a path forward. I think that sometimes our elected officials forget the full breadth of experience and expertise that the actuarial profession offers—which is why we selected six mega-issues that speak to some of the bigger and more frequently discussed topics as an easy way into the deeper context that Academy work products offer.

What happens after November?

After November, we’ll continue to work with the various elected officials, their staff, and other policymakers to help implement public policy change. While sometimes the players and the perspectives will change, the underlying concerns and issues will remain. There are no easy answers, which is why we need to ensure that the Academy and our members remain vocal and valued members of the policy process. We’ll continue to work on these mega-issues— and my only prediction about the election is that we will see a continuing evolution around how each practice area will be influenced by these issues and each other. Especially when we look at issues like climate or cyber—whether you work in health, retirement, property/casualty, life, or financial reporting, it influences what you are doing today and will continue to influence the work next year and five years from now. It’s the good and the bad of some of these larger policy questions that don’t necessarily have a single, simple answer.

Endnotes

1. Available on the Contingencies website at https://contingencies.org/ election-2024/.
2. An Actuarial Perspective on the 2023 Social Security Trustees Report; American Academy of Actuaries; December 2023.
3. Reforming Social Security Sooner Rather Than Later, American Academy of Actuaries, October 2023.
4. Enhancing Retirement Security Through Changes in Plan Design and Related Requirements, American Academy of Actuaries; September 2023.
5. Experience-Sharing Lifetime Income, American Academy of Actuaries; June 2023.
6. Health Benefit Design Innovations for Advancing Health Equity: Removing the Barriers to Successful Implementation—Issue Brief Series—Summary; American Academy of Actuaries; November 2023.
7. Medicare’s Financial Condition: Beyond Actuarial Balance; American Academy of Actuaries; April 2023.
8. “The Great Unwinding: What’s Next for the Medicaid Population?” Academy webinar; March 14, 2023.
9. “Value of Reduced Benefit Options in Long-Term Care Insurance Rate Increases”; Academy webinar; June 10, 2022.
10. “Academy Panel Identifies Actuarial Concerns Related to Climate Change”; American Academy of Actuaries; undated.
11. “The Actuaries Climate Index and the Actuaries Climate Risk Index— Informative Results With a ‘Just the Facts’ Approach”; Contingencies; January/February 2020.
12. “Cyber Threat Webinar Highlights Growing Risks to Commercial, Consumer Networks”; Contingencies; January/February 2024.
13. “The Zero-Trust Paradigm—Cyber Security for the 21st Century”; Contingencies “Actuarial Software Now” supplement; November 2022.
14. “Personal Cyber: An Intro to Risk Reduction and Mitigation Strategies”; Cyber Risk Toolkit; American Academy of Actuaries; October 2023.
15. “Insuring the Cloud”; Contingencies; September/October 2022.
16. Discrimination: Considerations for Machine Learning, AI Models, and Underlying Data; American Academy of Actuaries; February 2024.
17. “Regulating AI?”; Contingencies web exclusive; December 2023.
18. “The Future Is Here”; Contingencies; July/August 2023.
19. “Curbing Insurance Fraud Requires Buy-In of Public, Providers, Policymakers”; Contingencies; September/October 2023.
20. Navigating Workers’ Compensation and Medical Marijuana; American Academy of Actuaries; April 2023.
21. ESG and the Actuary; American Academy of Actuaries; January 2024.
22. Approaches to Identify and/or Mitigate Bias in Property and Casualty Insurance; American Academy of Actuaries; February 2023.