Page:Encyclopædia Britannica, Ninth Edition, v. 13.djvu/190

178 INSURANCE [LIFE. of the twenty offices which contributed their statistics to the formation of the Institute of Actuaries Tables, and he shows the comparative reserves required by such an office at the end of successive quinquennial periods, according to various mortality tables and at different rates of interest. As these illustrative tables afford an admirable means of comparing the results of valuing by different mortality tables, we give the following extracts. It must be borne in mind, however, in seeking to apply the figures in these tables to estimate the strength of the reserves maintained by particular offices, that the soundness of the estimate may be a good deal affected by circumstances. In particular the rates at which new business has come in and policies have been discontinued must be taken into account, and, as before stated, the amount of " margin " contained in the premiums must not be lost sight of. Moreover, the supposed liabilities do not include bonus additions, and the presence of these will of course modify any conclusions drawn from the tables. Table of Mortality and Rate of Interest. Comparative Reserve, 1000 being assumed for the Reserve by the combined II s1 and II 5 (. ) Tables at 3 per cent. Interest. Age of Ottice. Ten years. Twenty years. Thirty years. Forty years. Fifty years. Per cent. Analysed mortality ) (Mr King) 1124 1061 1002 1067 1000 938 1006 941 881 994 929 870 909 848 793 924 861 803 978 916 858 866 837 1070 1014 961 1059 1000 945 1016 958 904 1009 951 898 917 862 811 938 881 829 988 933 881 877 872 1050 999 952 1052 1000 951 1023 971 922 1017 965 917 923 874 8-27 952 901 853 995 945 898 887 898 1039 993 950 1047 1000 955 1024 977 933 1019 972 928 927 882 839 959 912 868 997 952 909 895 914 1035 991 951 1044 1000 958 1024 980 938 1018 974 933 931 888 847 962 918 876 997 954 914 901 923 Do. do. 3V Do. do. 4^ Combined IP 1 and ) H M (5) Do. do. 3i Do. do. 4^ H M 3 Do. . 3i Do. ... 4 Seventeen Offices ... 3 Do. do. ... 3i Do. do. ... ^ Davics s Equitable.. 3 Do. do. ... 3i Do. do. ... 4" Carlisle 3 Do. ... . . 3^ Do 4 English, No. 3 3 Do. do 3^ Do. do 4 Northampton 3 American .. ,4 Division of Surplus. There are various sources from which a surplus of funds may arise in an assurance coin- Sources pany : (1) from the rate of interest actually earned being of profit, higher than that anticipated in the calculations ; (2) from the death-rate among the assured being lower than that provided for by the mortality tables; (3) from the ex penses and contingent outlay being less than the "load ing " provided to meet them ; and (4) from miscellaneous sources, such as profitable investments, the cancelment of policies, &c. Supposing a valuation to have been made on sound data and by a proper method, and to have resulted in showing that the funds in hand exceed the liabilities, the surplus thus ascertained may be regarded as profit, and either its amount may bo withdrawn from the assets of the office or the liabilities may be increased in a corresponding degree. Bonuses. Various methods are employed by assurance companies in distributing their surplus funds among the assured. In some offices the share or " bonus " falling to each policy- holder is paid to him in cash ; in others it is applied in providing a reversionary sum which is added to the amount assured by the policy ; in others it goes to reduce the annual contributions payable by the policy holder. A method of more recent introduction is to apply the earlier bonuses on a policy to limit the term for which premiums may be payable, thus relieving the policyhokler of his annual payments after a certain period. Another method is to apply the bonuses towards making the sum assured payable in the lifetime of the policyholder. The plan of reversionary bonus additions is most common, and when it is followed the option is usually given of exchanging the bonuses for their value in cash or of having them applied in the reduction of premiums. Not only are there different modes of applying surplus, but the basis on which it is divided among the assured also varies in different offices. In some the reversionary bonus is calculated as an equal percentage per annum of the sum assured, reckoning back either to the commence ment of the policy in every case, or (more commonly) to the preceding division of profits. In others the rate is calculated, not only on the original sums assured, but also on previous bonus additions. In others the ratio of dis tribution is applied to the cash surplus, and the share allotted to each policy is dealt with in one or other of the ways above indicated. The following are some of the ratios employed by different offices in the allocation of profits: (1) in proportion to the amount of premiums paid (with or without accumulated interest) since the last preceding valuation ; (2) in proportion to the accumulated " loading " of the premiums so paid ; (3) in proportion to the reserve values of the policies ; (4) in proportion to the difference between the accumulated premiums and the re serve value of the policy in each case. Some offices have a special system of dealing with surplus, reserving it for those policyholders who survive the ordinary "expectation of life," or whose premiums paid, with accumulated interest, amount to the sums assured by their policies. This system is usually connected with specially low rates of premium. The various bonus systems which have been mentioned yield different results to policyholders of different ages, and whose assurances have been in force for longer or shorter periods. A person seeking to effect an assurance may exercise a wise discretion in selecting that office whose bonus system appears most advantageous, considering his own age and circumstances. From a paper by Mr A. Hewat in the Assurance Maga zine (xxii. 286) it appears that the average amount of surplus annually divided .among the assured by seventy- seven offices which have rendered valuation accounts to the Board of Trade since the passing of the " Life Assur ance Companies Act, 1870," has been 2,285,000, cr 23 per cent, of the annual premium income of the offices. The following average specimens of reversionary bonuses are taken from the returns of forty-one of those offices, whose average rate of annual premium is shown in the second column. Ago at Entry. Average Premium. Average Specimens of Reversionary Bonuses, per cent, per annum. Years in Force. 5 10 15 20 25 20 30 40 50 s. d. 1 18 11 292 348 499 f. d. 127 1 3 7 1 5 1 1 7 8 s. d. 5. d. 130134 1 4 1 : 1 4 6 1 5 8, 1 6 7 1 9 3 1 11 10 s. <t. 1 3 11 153 182 1 15 1 .1. d. 1 4 5 163 1 10 10 2 5 Surrender Values. In those branches of insurance Sui where the contract is one of indemnity against loss, the risk val remaining the same from year to year and where the consent of both parties, insurer and insured, is required at each periodical renewal no question of allowance in respect