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Insurers make a double profit by charging management fees and by mispricing the longevity risk which essentially means that those dying earlier generate excess profits for the insurer.

In a tontine, those dying earlier generate excess income for the retirees. It's explained here: https://tontine.com/explainer

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I used to price annuities (but no longer have any affiliation or financial interest in the industry) and this isn’t true IME - annuities are typically priced using best-estimate mortality rates. Outside of immediate annuities, which are a pretty small chunk of the business, mortality rates just wouldn’t be a useful lever to increase profits, since the predominant decrement is generally lapse/surrender, not death. Annuities are profitable because insurers price to high target IRRs or equivalent metrics, build in enough fees or spread to achieve that IRR, and build in enough management levers (e.g. the ability to increase those fees/spread) that they can compensate for any mispricing after the fact.

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