Surrender Value Research Articles

Whole Life Non-Profit Assurances

The subject of this Paper is Whole Life Non-Profit Assurances with uniform Premiums payable throughout life.In choosing this subject for investigation, I have been influenced mainly by the following reasons :(1) This type of policy represents life assurance in one of its simplest and earliest forms. The premium and the sum assured are both fixed throughout life, save for the very slight chance of insolvency of the office causing the contract to be reduced. Also nowadays it is not uncommon to find that the surrender values and equivalent paid-up policies are guaranteed from the outset.(2) Other tables such as Whole Life by Limited Premiums, Half Premiums for first “n” years, &c., are as a rule founded on the basis of the simple whole life ordinary rates.(3) A considerable body of data derived directly from the experience of British Offices under ordinary whole life non-profit policies is available as a result of the British Offices Mortality Investigation, 1863-93.(4) In spite of the apparent simplicity of the contract, there are marked divergencies in the rates of premium charged by first-class offices and in the surrender values and equivalent paid-up policies offered by them.

Bankruptcy: Property Vesting in Trustee: Insurance Policies with Cash Surrender Value Absorbed by a Lien

Bankruptcy: Property Vesting in Trustee: Insurance Policies with Cash Surrender Value Absorbed by a Lien

Insurance. Nature and Incidents of Insurance Contracts. Assignability of Cash Surrender Value

Insurance. Nature and Incidents of Insurance Contracts. Assignability of Cash Surrender Value

Paid-up Policies and Surrender Value

The principles upon which surrender values should be calculated are discussed at length in papers by Mr. Macfadyen (J. I. A., xvii, 381); Mr. Crisford (J. I. A., xxi, 301); and Mr. Fulford (J. I. A., xxxv, 199), but none of the methods proposed appear entirely satisfactory in practice, and I have therefore attempted to devise a scheme which shall not only give results in reasonable accordance with strict theory, but also prove simple and easily worked in its practical application.

Bankruptcy. Insurance. Policy Had No Technical Cash Surrender Value. Assignable Interest Passes to Trustee

Bankruptcy. Insurance. Policy Had No Technical Cash Surrender Value. Assignable Interest Passes to Trustee

Remarks on the Exercise of Independent Thought by the Head of an Office and his Subordinates

Gentlemen,—I beg leave to thank you for the honour you have done me in again requesting me to act as your Honorary President. This was an honour which I accepted with much pleasure; for I am always glad to meet the younger men of my profession, to discuss with them points of principle or practice, and, as far as practicable, to assist them in their endeavours to obtain a better knowledge of the theory of our subject, or (it may be) to extend its boundaries by original investigations.After much consideration as to the subject on which I should address you to-night, I decided not to take up some intricate or new point of theory, but rather to put together a few practical remarks suggested by my business experience. I do not take this course because I consider the theory of our subject is thoroughly workt out. On the contrary, I am of opinion that there are many important questions which still remain to be elucidated,—subjects which will well repay careful study, and which will reflect credit upon those who investigate them exhaustively.One such subject is the very practical one of the proper allowance to be made for the surrender of a policy upon an under-average life. According to general practice, every such policy that has been in force for not less than (say) three years, is considered as entitled to a surrender value.

The Values that should be allowed by a Life Office for the Surrender of its Policies, considered under their various aspects, as affecting the Interests of the Office and of the Policyholder

The importance of this subject may be indicated by the fact that more than half a million a year is paid by the British Life Offices to their assured, as surrender values on the discontinuance of their policies. Competition also, and the increasing interest which is being taken in the subject by the insuring public, have a tendency to induce companies to make these surrender values a prominent feature in their prospectuses; perhaps also it may be an inducement to some companies to offer large values in order to bid for larger patronage.

On the carrying out of Reversionary Transactions by Life Assurance Companies

Some years ago I had the honour of reading before this Institute a paper which, though mainly devoted to a study of surrender values, treated such surrender values as purchases by life offices of reversions. On that occasion I stated that sound British companies could well afford to repurchase their own acceptances at 6 or even at 5 per-cent. Subsequent experience has done much to confirm me in the opinion then expressed, but I did not then, nor do I now assert that offices should on such terms purchase other reversions than their own policies; and I trust it will not be thought wasting your time, if I preface this paper by enumerating a few considerations which seem to indicate that the present market price of reversions gives, comparatively, a return none too high to an investor. Such market rate I take to be 5 per-cent in the case of an investor who does not stand, or, what is the same thing, arrives at his price as if he did not intend to stand, any risk of loss, whether through longevity of life tenant or death of reversioner.

On a general Formula for the value of present or future Benefits, whether free or burdened with charges; and on the application of the Formula to determining the Surrender Values of Life Policies

With the exception perhaps of extra premium, there is, it seems to me, no actuarial point in which the practice of assurance offices is so empirical as that of the allowance to be given for the surrender of a policy. The usual custom, so far as I am aware, is to find the value of the policy (generally by the table of mortality and interest used in calculating the reserve) and from that value to deduct a certain proportion, handing over the remainder to the policyholder. The amount of this deduction is purely arbitrary, and were it not for the equalizing effects of competition, would show very startling diversities; since, even with this counteracting effect, the differences in practice can hardly help striking anyone who has examined the amounts given as surrender value by the various offices interested in large reassurance cases which from any reason do not follow the rule of the parent company. In fact, making any return whatever under discontinued policies is the result of that struggle for existence called competition; and like all things growing from this root, the practice has been moulded much more by the pressure of circumstances than by theoretical considerations. Consequent on this method of growth we find extraordinary and indefensible anomalies imperatively calling for rectification. Further it seems to me, looking at the matter as a purely practical question and not one of actuarial fitness at all, there is no point more needful of examination. As things are at present, nobody can say positively whether as its proportion of the value the assurance office retains too little or too much. If the former, the sooner a practice resulting in loss is reformed, the better.

On the Value of Policies of Assurance in connection with Life Interests

In the course of an actuary's practice, the question not uncommonly arises—What is the value of a life interest, accompanied by a policy of assurance on the same life ? The most obvious course for solving this question is to value the life interest and the policy separately—the former by the well-known formula . With regard to the policy, it is not so clear how it should be valued. If valued on the same principles as the life interest, the value of a policy for £1 would be 1 − (p + d) (1 + A); but this formula is quite inapplicable, for it gives a negative value for many years to a policy, and almost always a much smaller value than the surrender value allowed by the Office. There is, therefore, apparently no choice but to take the value of the policy at the latter amount.