Observations on Casualty Insurance Rate-Making Theory in The United States

Writing in 1941, Mr. Arthur L. Bailey, probably the most profound contributor to casualty actuarial theory the United States has produced, observed as follows with regard to his entry into the actuarial profession: "The first year or so I spent proving to myself that all of the fancy actuarial procedures of the casualty business were mathematically unsound. They are unsound - if one is bound to accept the restrictions implied or specifically place on the development of the classical statistical methods. Later on I realized that the hard-shelled underwriters were recognizing certain facts of life neglected by the statistical theorist. Now I am convinced that casualty insurance statisticians are a step ahead of those in most fields. This is because there has been a truly epistemological review of the basic conditions of which their statistics are measurements."