An industry that will be destroyed or bailed out when there is a large upward discontinuity in life expectancy trends thanks to advances in medicine. There is a very big change going on in medical research at the moment, shifting from not trying to treat aging as a medical condition to actually treating aging and its causes. The difference in outcomes will be night and day; some relevant technologies are transferring out of the lab and into startups even now. E.g. Gensight in France, Pentraxin Therapeutics Ltd in the UK, Oison Biotech and Human Rejuvenation Technologies in the US.
Anyway, pensions and life insurance will most likely be bailed out when the crash comes, and the expectation of this socialization of losses might explain some of what is observed there in the sense that they are not responding aggressively to the actuarial community's ever more strident warnings on the uncertainty of their projections. Also people are not particularly rational in their expectations about aging - see this for example, a survey of the actuaries who are the same time as warning that life expectancy predictions are increasingly uncertain due to medical advances in the works, still base their future expectations on what happened to their grandparents:
I don't think that will destroy the life insurance industry. In fact, I think it will help them.
If I buy a life insurance policy for a 15 year old today, I pay them $X in order to receive $Y when the insured dies. If the insured lives for 70 years, the insurance company has 70 years to invest $X, in order to have $Y available when the insured dies.
But if the insured lives 80 years, then the insurance company has 10 more years to invest $X. They gain from that situation, rather than lose.
The main problem if I understand correctly is with pensions. They have 10 more years to invest your money, but they also have to pay you for 10 more years... so the longer you live, the less they profit. Live long enough, and they will lose money. And if enough people live longer than expected, the insurance company could go bankrupt.
The issue with pensions is already being dealt with. Either by their absence from many employers (US, not sure about the rest of the developed world), or by delaying the age at which you can receive it or reducing the rate at which you earn into it.
Social Security is an example of this, http://www.ssa.gov/planners/retire/agereduction.html. This, of course, requires an act of Congress to change. But businesses aren't so limited, new employees can be brought in on a new pension system while grandfathering in the old ones, with few (if any) legal holdups.
Pensions (especially) and life insurers are going to need/want bailouts regardless of medical changes. The combination of global ZIRP and absurdly optimistic assumptions about investment returns have led to extreme underfunding for nearly every pension fund in the developed world. This problem is especially acute in the United States but is not unique to it.
The extra uncertainty in actuarial assumptions will only leverage that problem further. Your assessment of expectations is actually pretty reasonable: pension fund managers aren't taking it seriously because they expect to be bailed out regardless, so they may as well enjoy their moral hazard dividends in advance. But I think that has more to do with the fact that financial repression and systemic underfunding have rendered everything else irrelevant anyway.
Yes, but what is the implied life expectancy? I'd guess pretty low.
Also note that policies like this require ongoing maintenance payments, otherwise you forfeit past payments and benefits.
The problem with claiming that the life insurance market is a predictor for death statistics is that firms tend to keep the most important data and calculations used to derive their pricing schemes secret. The firm is only concerned with keeping to projections as far out as they can model.
The consumer has no real input into the model (except as a selector of alternatives) and therefore cannot obtain much knowledge about actual death statistics (except perhaps a near meaningless lower-bound).
But they're probably wrong, too. Insurers have a lot of money riding on the actuarial tables, but they're still just a wisdom-of-crowds best guess. No one will know what the true life expectancy was of everyone born this year until the last of them dies; similarly, no one will know the true remaining life expectancy of everyone who is currently 50 years old until the last of them dies. I agree that actuaries are taking into consideration a lot more data and experience than any HN armchair futurist, but that doesn't mean they're going to be right. Until the 1970s, most of the increase in life expectancy at birth was due to reductions in child mortality, which from an actuarial standpoint is not very interesting because it's rare for infants to have life insurance policies. The life expectancy of a 40-year-old didn't change much from 1850 until then (source: http://www.infoplease.com/ipa/A0005140.html). In essence, nearly everyone now makes it to 40, and what's changed greatly since is what happens after that. The widespread concern is that it's not well understood whether that trend will continue, accelerate rapidly (and if so, whether the mean will increase, skew will increase, or both), or even reverse. Actuaries are professionals paid to make good guesses; they do it well, but they are not oracles.
