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Q-Waves & Cigarettes. Few policyholders have the remotest idea how the Pru figures the premiums they pay on their insurance. One of the great misconceptions is that insurance men simply use a set of standard U.S. mortality tables. But the mortality tables are only a start. Every company has its own constantly changing tables, based on its own experience with policyholders. The Pru keeps close tabs on the card files of each one of its 33.2 million policyholders, watches for any unusual increase in deaths throughout its thousands of classifications. When it finds such an increase, the odds—and the premiums—change accordingly. Its actuarial department alone employs 1,000 mathematicians whose job translating the death odds into dollars and cents is so complex that it would put a Las Vegas gambler to shame. Sample question for an actuary's exam: "What is the probability of throwing exactly nine heads exactly twice in five throws of ten true coins?"*
Actuaries do only part of the job. The U.S. insurance industry also does more medical research on a wider variety of diseases than any other business, with the possible exception of the drug industry. The Prudential itself carries on dozens of different studies on everything from arthritis to high blood pressure, calculates how they affect the odds. For heart research alone, the Pru has a file of 25,000 electrocardiograms, one of the biggest in the world, which it uses to study the effects of the various heartbeat patterns (P, Q, R, S and T-Waves). Years ago the Pru refused to accept applicants whose cardiograms showed deep Q3-waves. Now it knows that deep Q3-waves are often meaningless, accepts most applicants. The Pru never says that any one individual will die sooner than another. What it does say is that, actuarily, in any given group of 1,000 people with a heart abnormality, possibly 30% will die before their time, and that it must charge all a certain penalty to cover the added risk.
Today, like every other company, the Pru is constantly revising its ideas of what a risk is. Once, policy seekers who had tuberculosis but recovered were considered uninsurable. Now the Pru charges only a slight penalty plus a temporary extra charge, which it takes off after several years if the policyholder remains cured. On the other hand, the Pru's doctors look with increasing suspicion on cigarettes as a possible cause of cancer; the Pru has considered giving a credit to light smokers.
Currently, a few deadly diseases are absolutely uninsurable, not only by the Pru and other first-line companies but by second-rate companies that will insure those whom the first-line companies turn down. Some day even people with cancer may be able to get insurance. New studies show that many risks are not so great as insurance men thought, and that almost anyone can be insured—at a price. Says one Pru executive: "Every company is taking risks now that would have been unthinkable five years ago. Our job is to see how we can accept the risk, not turn it down."