Life Assurance Business Research Articles

The Assurance Companies Act, 1909. Some Explanatory Notes on Such Portions of the Act as Relate to the Business of Life Assurance

There will, I venture to think, be no difference of opinion among the members of this Institute as to the advisability of an early and adequate discussion of the many points of difficulty presented by the new Assurance Companies Act. Neither will there be any doubt as to this Institute being the proper place for such a discussion, consisting as it does of an unrivalled body of experts on the subject of life assurance. In these circumstances I have ventured to undertake the task of bringing the matter before the Institute, confident in the fact that however inadequate my treatment of the subject may be, those before whom the paper is to be read are fully competent to make good any shortcomings on my part, and will be both able and willing to correct any errors into which I may have fallen.

Canadian Vital Statistics; with particular reference to the Province of Ontario

Investigations of the mortality prevailing in Canada, whether among assured lives or the population at large, have not up to the present been frequent. Such enquiries demand, first of all, a considerable extent and precision of data, and these are seldom furnished by the records of such private corporations as do business in a new country, or by the periodical censuses undertaken by Government. As to assured lives, most of the companies now transacting the business of life assurance in Canada are recent entrants into the arena, and of such of them as are not to be included in this class, it is yet true that most of their assurances have been effected at comparatively recent dates; so that an investigation into the mortality of the lives, whether undertaken by a single company (supposing its business to be of sufficient magnitude) or by any combination of companies, would be subject to the same defects as are chargeable against the Thirty American Offices' Experience, and against many others, for all of which this example—Titanic in all respects—may stand.

The Income Tax as Affecting Life Offices, with special reference to some recent decisions

“In this world,” said Benjamin Franklin, “nothing is certain but death and taxes”, a remark with which all taxpayers, and not least those responsible for the management of life offices, will feel at the present time in cordial agreement. The great increase in the last few years in the rate of income tax undoubtedly presses very hardly upon the tax-paying community, and it is probably, in part, owing to this increase that there have recently been several cases before the Courts on the subject of the tax, which are not without interest to those engaged in the business of life assurance. To some of these I propose to direct your attention to-night.

The Liability of Life Assurance Companies to pay Income Tax upon Income arising from Investments in Foreign Countries

The point in this case was whether the Society was liable to be assessed in respect of interest, dividends, and rents, arising from investments in foreign countries.The Society had large funds invested in various forms in foreign countries, in some of which countries the Society carried on the business of Life Assurance, and in others of which it carried on no business of any kind. It was admitted that only a part of the income arising from these investments was remitted to Great Britain, the rest of such income being either reinvested or remitted direct to other foreign countries for investment, or applied in payment of establishment and other expenses in the country where the interest was earned, or remitted direct to other foreign countries for the general purposes of the Society.

Some Notes on the Net Premium Method of Valuation, as affected by recent tendencies and developments

It may well seem an act of no small temerity to attempt a fresh paper on a subject so often and so ably treated in essays read before this Institute as that of the net premium method of valuation. I am fully conscious of this, and the more so that I cannot profess to be able to add anything appreciable to what has already been said, either expressly or by implication, upon the matter. It will be admitted, however, that the practical importance of the subject, its vital bearing upon the conduct of the business of life assurance, can scarcely be exaggerated. Mr. J. Hill Williams, commenting upon Mr. A. H. Bailey's paper on “The Pure Premium Method of Valuation”, in March 1878 (J.I.A., xxi,, 126), said “The subject of this paper is one upon “which we can never have too much writing or too much “discussion, for it is the very life of our science, and upon the “views which we take of this most important question depends “the safety of many of the greatest financial institutions in the “country”; and with the spirit of such remarks we shall probably all agree. That being so, I think I am right in saying further that we have had no express discussion of this topic at our Institute for several years past. It has, doubtless, on many occasions been referred to—as a thing so intimately intertwined with our daily practice could hardly help being—in connection with other matters primarily before us; but it has not been the actual and avowed theme for consideration.

Life Assurance in France

One of the most remarkable features in the history of the nineteenth century has been the rapidity with which some scientific discovery made in one country has been followed, and often eclipsed, by one on similar lines in another country. The reason for this is not far to seek, for he who would excel in any branch of science or learning must keep himself thoroughly acquainted with its latest developments, and with the progress it is making in all parts of the world. Thus, we find that a rivalry has sprung up, which grows keener every day, between this and the Continental countries in Science and Philosophy, as well as in Commerce and Politics. In this country, however, until quite recently, the insurance world in general, and the actuarial student in particular, have not considered it worth while to inquire how and upon what lines insurance business is carried on across the Channel. So far as I have been able to ascertain, the only books in the Faculty Library dealing with the subject of Life Assurance in France are Walford's Insurance Cyclopœdia, published in 1876, and a pamphlet by H. S. Washburn in 1879. The object of this paper is to supplement to some small extent the information contained in these volumes, and to place materials in the hands of the Actuarial Society which will enable its members to form some idea of the progress and nature of life assurance business in France.

Some Remarks on the Valuation of Endowment Assurances in groups

One of the most striking features in the history of Life Assurance business during the past few years is the marked increase—both absolute and proportional—which has been shown in the number and amount of policies effected under the Endowment Assurance plan. There is every reason to expect that this increase will continue, and that ere long Endowment Assurances will divide honours with whole life policies as regards importance in the periodical valuations. It is consequently very desirable so to improve the methods of valuing such policies as to minimize the amount of labour involved, and it will become more and more necessary to abandon methods which answered very well so long as Endowment Assurances were looked upon as “Special Policies”, but which are extremely cumbersome when applied to a large mass of contracts. The shorter methods that have hitherto been suggested, though admirably adapted for use in test or check valuations, involve an error which many actuaries will consider too appreciable to be neglected, more especially as the approximate methods nearly always bring out a reserve which is smaller than the true reserve, and it accordingly becomes desirable to seek some process that will be free from this objection.

On some Legal Points arising in Life Assurance Practice

The subject I have chosen for my paper may seem to call for some apology, on the ground that it is more suitable for discussion at a legal institute than by a body of Actuaries. There would doubtless be some force in such a criticism, and yet I venture to think that in many respects the subject is not an unsuitable one to be brought before this Institute. The time has gone by, if indeed it ever existed, when the ordinary legal incidents arising in connection with life assurance business were submitted to the company's solicitors for advice and direction. In a large life assurance institution it would be impossible, in practice, to submit every question as to title, in the case of claims and surrenders, to a solicitor, on account of the expense and delay thereby occasioned, if for no other reasons, and at least as great practical difficulties would arise if, in order to get over the difficulty of the expense of such a reference, it were sought to saddle the applicant with such legal expenses as might be incurred. Questions of title, unless they be of a peculiarly complicated nature, are therefore usually settled by an official of the company, and since amongst the officials the Actuary will, as a rule, stand almost alone as having, of necessity, some legal knowledge, the ultimate decision on such points will, in most cases, devolve upon him.

Life Office Investments Retrospect and Outlook

On looking over the list of interesting and varied subjects which have been submitted for consideration and discussion in past years to this Society, in the enjoyment of which I have been a constant participant, I find that it is fully sixteen years since I appeared before you in the position which I am glad to occupy again to-night as the reader of a paper.The subject then selected related to the distribution of population in the United Kingdom, and discussed how each district could most effectively be occupied by branches and agencies, so as to bring the beneficent system of Life Assurance within the reach of every one. Since that paper was read, it has been my good fortune to extend my experience from the superintendence of the outside organisation of a great office to other departments of the business of Life Assurance, and especially to give the closest attention in a variety of connections to that most important but most difficult subject, the investment of moneys at the highest rate of interest consistent with the safety of the principal.

Life Assurance Business in Australasia

I shall, in the following remarks, mainly confine myself to some considerations connected with the rise and the development of life assurance business in Australasia—a development which, considering the limited population of these colonies, is probably quite as phenomenal as that which has attended its progress in the United States of America with their teeming millions. To such an extent, in fact, has this been the case, that in no part of the world, so far as I am aware, has the amount assured per head of the population reached so high a figure as in Australasia. The figures are approximately as follows: Australasia, £19; Canada, £9; United Kingdom, £12; United States, £10.

The Mortality among Assured Lives viewed in relation to the Sums at Risk

What was probably the beginning of knowledge in this country in regard to the subject of Life Annuities and Assurance was the publication, in 1661, by John Graunt, of his Natural and Political Observations on the Bills of Mortality. In that publication we have no doubt the primary data on which the business of Life Assurance is founded. By the gradual development and extension of that business, it soon came to be recognised that in all calculations connected with the subject it was needful to proceed on a sound fundamental basis. For not only was it seen to be necessary that the affairs of an institution conducting such business required to be administered for the immediate benefit of those concerned; but it was also observed that there were many prospective liabilities, and that therefore it required to be built on such a solid and substantial foundation as to be able to meet all obligations in the future. This is appreciated by all who are in any way interested in Assurance.

The Progress of Life Assurance Business in the United Kingdom during the last Fifty Years

At so striking an epoch in the history of our times as the Jubilee of our Most Gracious Queen, it seems natural that those who are engaged in any special branch of trade, or commerce, or science, should look back with interest at the records of the progress of that branch during the period then completed; and I therefore venture to hope that the particulars which I have collected regarding the progress of Life Assurance Business in the United Kingdom during the last half-century, and which I propose to lay before you this evening, may prove in some degree interesting to you.Before submitting to you these particulars, I think it may be useful if I refer for a few minutes to the condition of the United Kingdom in 1837, and to the changes which have occurred since then in matters which have had an important, though indirect, bearing on Life Assurance Business.

On the Rate of Mortality among Liquor-Sellers

The Reports of the Registrar-General of Births, Deaths, and Marriages, and the writings of the late Mr. F. G. P. Neison and others, abound with statistical information regarding the influence of occupation on health and the duration of life. These statistics, the most of which are derived from observations made upon the general population, or the members of Friendly Societies, are useful in many ways. From them we learn that there are certain occupations which tend to preserve health and prolong life, and that there are other occupations which tend as decidedly to injure health and shorten life. But these statistics are not applicable to the business of Life Assurance, and are not appropriate data for the purpose of determining the amount of premium which persons of different occupations should pay for Life Assurance. We still desiderate reliable data for this purpose, and it can best be obtained from the Life Assurance Companies themselves.

Remarks on the Position and Prospects of the Actuarial Profession, and of the Business of Life Assurance

In welcoming you once again as your Honorary President, at the beginning of another Session, I would fain that it were allowed me merely to refer you back to one or other of the Opening Addresses of past years—the classics of your Society—which tell, many of them in terms much more eloquent than I could hope to do, what lines the Actuary had better follow in setting out on his professional career, and what goal he should steer for once he is fairly started on it.But, as the old order changes yielding place to new, each year brings round with it some altered phase of thought, turns up to the surface some fresh and suggestive idea, and in so doing compels one forcibly to remember—notwithstanding there may be nothing altogether new under the sun—that the world still moves on ever more rapidly with kaleidoscopic effect, bringing old developments within the field of view in some fresh and altered light. Wherefore I am in duty bound in my turn, if I can, within our own sphere of observation, to draw notice to the new forces that are there at work, and to indicate the direction to which our attention should be turned.

The Progress of Life Assurance Business in the United Kingdom during the last Fifty Years

Omitting from consideration the speculative and evanescent schemes which were the precursors of life assurance companies, and taking into account only the properly-constituted life offices, we find that up to 1 January 1837 the total number of such companies which had been established was 94, of which 20 had ceased to exist, leaving 74 then in operation. The average age of these 74 companies was 17¾ years. Not more than 18 of them had been 25 years in existence, while the remaining 56 had only attained an average age of 7 years. It at first strikes us as a very remarkable circumstance that only 20 offices out of a total of 102 had succumbed in the long period of 131 years, dating from 1706, when the Amicable was founded: but it has to be borne in mind that in 1837 the great majority of the offices had not attained an age sufficient to test their stability.

On the Official Publications of the Mortality of Assured Lives

Gentlemen,—I thank you for again electing me your President, —it is an honour which I highly esteem. You may rest assured that I will, to the utmost of my power, endeavour to perform the duties of the chair, I trust, to your satisfaction.It is customary on the opening of a session for your President to say a few words by way of “Address” on some subject, of his own selection, which has more or less relation to the general business of the Society. As I had last winter the pleasure of reading a paper which occupied a good deal of my time, I have chosen a subject for which the materials are almost all at hand, but which when strung together may, in their continuity, possess an interest which will not be unwelcome to the members of an Actuarial Society. I propose to consider one or two incidents in the History and Statistics of Life Assurance.The History of Life Assurance is exceedingly interesting. Bestowing all our attention upon the engagements of the passing hour, we are very apt to forget the arduous up-hill struggles of the many schemes of the past two centuries. If an account should ever be written, as I believe it will, of the career of those futile efforts, it should teach us to be very careful, and watchful of our position. There is in our time, it sometimes appears to me, rather an excess of that spirit of competition which I fear tends to weaken, and not to strengthen. Life Assurance is not entirely one of the exact sciences. The ordinary trader may easily, by applying one or two principles of accounting, exhibit the solvency or insolvency of his business; but it is almost impossible, except in the mass, to fathom the Liabilities of the business of Life Assurance. An ordinary debt is owing now, or a bill will certainly mature on a given date, but our debts accrue in the future, and are not individually dated. In the maturing of a multitude of them we have the utmost confidence.

On the construction of Models of Policy-values, and on a new method of comparing the Reserves for Policies, according to different Tables of Mortality and Rates of Interest

There is no subject of greater importance in the conduct of the business of Life Assurance than that of the valuation of policies. It is a matter which comes before the actuary from day to day and from year to year, whether in the form of fixing the amount to be returned to an individual policyholder on the cancelment of his contract, or in that of estimating what reserve should be made in the aggregate for a mass of policies existing at the close of a valuation period. Both of these questions have been discussed before the Institute on many previous occasions, and it is not necessary to enter into them now. The task I have set before myself is the humbler one of dealing with results already arrived at. I do not propose to enquire what are the reasons for preferring one mortality table or rate of interest to another, or on what principle of calculation the surrender-value of a policy should be based. I accept the results brought out by the use of any mortality table or rate of interest agreed on, and I propose to consider how these results may be represented by means of diagrams and models, and whether by this means we can arrive at any clearer understanding of the relation to one another of the reserves brought out by different standards of valuation.

On the method of comparing the Expected with the Actual Experience of a Life Insurance Company, as regards the number of Deaths and amount of Claims

The business of Life Assurance is founded on the principle that the number of deaths which will occur among a large number of persons in a given time is not a matter dependent entirely on what is called chance; but is subject to a law of average so uniform in its operations, and so trustworthy as to its results, as to be capable of forming the basis of calculations on which the shareholder may stake his capital, and the assured the welfare of those for whom it is his duty to provide. Proceeding on this principle, tables of mortality have been constructed,—from data collected at different places and under a variety of circumstances, and tabulated and adjusted with various degrees of accuracy,—which show, out of a given number of persons born, the number who survive each year of age, and the number who die at each age from year to year. From such tables, companies transacting the business of assurance calculate the rates of contribution to be required from their clients; and on the sufficiency of the rate of mortality founded on in any instance depends, of course, the sufficiency of the premiums which the company is to receive in consideration of its risks. It is therefore of great consequence that the company should ascertain from time to time how the rate of mortality actually experienced compares with that indicated by the table on which the calculations are founded, in order that there may be proper grounds for being satisfied that the basis is a correct one. For it is not sufficient that the mortality table founded on should be known to represent faithfully the death-rate prevailing among the general population, or even among assured lives generally.

Germany — Life Assurance Business in 1870

Germany — Life Assurance Business in 1870

On certain Methods of dividing the Surplus among the Assured in a Life Assurance Company; and on the Rates of Premium that should be charged to render them equitable

The subject of the division of surplus in a Life Assurance Company is one that cannot fail to be interesting to all who are engaged in the business of life assurance, as well as to the public at large; and while there is so great a diversity as at present exists in the methods of division in use, it must be useful occasionally to draw attention to it, as a means of inviting discussion and the interchange of opinions. This must be my apology for bringing before this Society this evening a subject which has more than once been discussed here; for I can scarcely hope to lay before you in my remarks much that has the merit of novelty, on a matter that has occupied the attention of the most eminent men in our profession.