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On Insolvency in Life Assurance Companies

Published online by Cambridge University Press:  18 August 2016

A. H. Bailey*
Affiliation:
London Assurance Corporation

Extract

The question,—how insolvent Life Assurance Companies are to be dealt with,—which all who take an interest in assurance affairs have for some considerable time been aware could not much longer be evaded, has during the last three years assumed a pressing importance, and although the subject has lately been discussed in several pamphlets and essays by members of this Institute and others it can hardly be considered, exhausted. One of our most distinguished public men, himself one of the ablest lawyers of the day, after a searching and diligent enquiry has come to the conclusion that no better way can be found to settle the affairs of the “Albert,” than by distributing among its more than 20,000 assured a sum which, on an average, may be expected to yield about one year's premium for each. It is surely worth consideration whether it is desirable that this decision should be drawn into a precedent, and besides, the subject may interest the members of this Institute for its own sake, because it involves questions concerning estimates of liabilities with regard to which actuaries are by no means agreed, and at which lawyers are in the habit of looking from a different point of view altogether. Certainly we may learn something from the legal profession, possibly they may pick up a little from us, towards the elucidation of a somewhat intricate matter, and the solution of a by no means easy problem.

Type
Research Article
Copyright
Copyright © Institute and Faculty of Actuaries 1872

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References

page 390 note * In the ordinary phraseology a “loading” is put upon the “net premium.” Life assurance has not been fortunate in some of its technical terms. The word “loading” is neither elegant nor expressive, but, being in general use and not liable to mislead, it may pass. Not so the expression “net premium,” which cannot be allowed. Net is a mercantile term implying the result of a deduction from the gross; the gross never being arrived at by an addition to the net. Thus, net weight is defined to be the true weight of merchandise after allowance has been made for the cask or enclosure; the gross weight being the actual weight of goods and package. The so-called “net premium” of life assurance corresponds more nearly to the prime cost of commerce. Nor is this the only objection. The term has its proper signification in other branches of insurance. In marine insurance the net premium is the premium charged in the policy, less the brokerage; this net premium, and never the gross premium, being the amount passed through the books. The expression “pure premium” seems unobjectionable.