[Skip to content]

Sign up for our daily newsletter
The Actuary The magazine of the Institute & Faculty of Actuaries
.

Life: The more things change

Last year, our office was set to close and be relocated to another part of the country. These things happen. One small element of the closure was the dissolution of the Actuarial Library; a dusty archive of books, papers and reports. We actuaries were invited to help ourselves to any material we wished to take. As a hoarder of books and someone who would not wish to see unwanted books destroyed; I took as much as I could carry. I found some fascinating material, including actuarial books written in the nineteenth and early twentieth centuries.

A particularly intriguing and exciting tome was ‘Jones on Annuities and Reversionaries’, published in 1843, five full years before the Institute of Actuaries was formed. It is this book which I discuss here.

The Institute and Faculty archives contain many more papers written by historians and commentators. I am not such a historian; I approach this sort of subject in the same way that I approach the BBC show QI; with interest, an open mind, and the curiosity of a ‘lay actuary’. As such, I believe the conclusions, hypotheses and writing style of the author provide more interest than how the work fits into actuarial history.

For example, it was noted that women are supposed to live longer than men, the explanation being that: “males are more subject to untimely deaths, by accidents of various kinds, and also, in general, more addicted to the excesses and irregularities which shorten life.” This is a fine explanation which would, with suitable expansion and examples, satisfy a marker for CT5. Other factors which have become known since 1843, such as the effect of testosterone affecting mortality, would be more marginal in that exam. Curiously though, there is no specific mention of the higher mortality in the male-only occupations such as those in the army or navy.

The main body of the book is taken up with rather glum-looking actuarial tables, which on the face of it do not reveal much that is particularly exciting, however the base for the mortality tables is quite interesting. Two main sources are used; Northampton and Carlisle. The former is based on thorough accounts kept in four Northampton parishes from 1741 onwards; an examined population of around 11,000. The Carlisle table is constructed from Bills of Mortality over a shorter period (1779-1787), which show the age at death, split by sex. Around 3,800 deaths were observed for these Carlisle tables.

It should be noted that no mention is given to potential inaccuracies in the underlying data or the problems in using such small populations to determine values of annuities. Any current exam question worth its salt would require the student to bring out points regarding these inaccuracies, as well as the appropriateness of using Northampton or Carlisle experience to value annuities in other parts of the country. For additional marks, a good student would mention the validity of using pre-1800 mortality experience to reflect actual experience for policies written after publication (1843). In this half-century intervening period, medical advances as well as the Industrial Revolution may have radically changed the mortality profile. These concepts are not mentioned in the author’s commentary.

Would this omission be a result of an oversight, possibly because such distortions were not thought to be serious? Or was there an implicit understanding that the user of the tables would suitably adjust them? We cannot be sure.

Despite its name, the book is not limited to annuities, nor is it without editorial influence; Mr Jones does comment in honest fashion on the different qualities of life assurance offices that existed during that time. When discussing insurers who offer terms at unsustainably high interest rates, a footnote reads: “This paragraph, which refers to the Independent West Middlesex, was written before that nest of swindlers had run its race, and exposed in its true colours the gross fraud upon the public.” It seems as though mis-selling was a problem back then.

Another example of what we today call ‘policyholders reasonable expectations’ not being met is shown in this case: “where policies have been many years in force, [and” accidental omissions to pay the premium within the limited time, [caused” the policies to be forfeited.” Such clear parallels with the recent history of life insurance are fascinating.

Agents do not escape comment: a long section discusses the favourable mortality experience of the Equitable [yes, the Equitable” not being repeated at other companies. Mr Jones explains that this is due to competitive influences regarding the selection of lives by the directors, and ‘in the judgement and integrity of agents whose remuneration depends on the quantity of business they transact’. The implication of irresponsible agents is clear.

The discussion on the generic operation of life assurances mentions the ‘warranty’ that a potential life proposed to be insured is in good health. Again, this section would not look out of place as an answer in today’s ST2 exam, except for a statement that ‘... the policy is forfeited in the event of death by suicide, duelling, or the hands of justice.’

A list of London Assurance Offices is surprisingly illuminating for a modern actuary. It contains short details on the business provided by each of the 74 insurers, and it is amusing to see that Legal & General receives a six-line entry, whereas the ‘Protestant Dissenters’ get twelve lines. The different distribution amounts are curious, as the following examples show:

Company Proportion of profits distributed
>> Farmers’, Freemasons’,
Protestant Dissenters’ One-tenth
>> Guardian, Sun, Victoria One moiety (half)
>> Crown, Edinburgh Two-thirds
>> Legal And General, Eagle Four-fifths
>> Scot. Wids., NU, Scot. Am.
and other well-known
mutuals of the time All profits are distributed

This section also contains a list of prices of each insurer. Strangely, the rates are not sex-specific; it could be that such a high proportion of policyholders were male so that cross-subsidisation was not thought to be important. Out of interest, the annual premium for assuring a sum of £100 for a whole life policy, for a 30-year old applicant, vary from £1 19s 8d from Licensed Victuallers, up to £2 13s 5d from Globe.

The final and most intriguing element of the book is a description of some key legal cases of the time. Many concern claims not being paid by an insurer due to non-disclosure of medical conditions. In almost all cases, the insurer was defeated in the case, even where there is significant evidence of prior medical conditions. It is the nature of the conditions that makes for fascinating reading. For example, Sir James Ross died in 1760 of a malignant fever, but had previously “...received a wound in his loins at the battle of La Feldt in 1747... which was not mentioned to the insurer.” The judge stated that it “must be proved that the life was a good one, even though he had a particular infirmity. The only question is whether he [the insured” was in a reasonable good state of health”.

A second such case found against the insurer even though one of the insurer’s witnesses stated that “Cochran would drink sherry and water, brandy and water, ale, rum, shrub (sic), gin and peppermint, it did not matter what.” The author goes on to state that he “cannot give a twentieth part of the voluminous evidence taken on the trail of this cause”. Despite this, the claim had to be paid. A principle that is constant throughout the book, and continues to this day is that only non-disclosure of items relevant to the cause of death will result in non-payment of a claim being accepted by a court.

The secondary theme concerns insurable interest; in particular whether a debtor has an insurable interest by taking out a policy on the life assured. In general they do and the claim was paid, even in the case of several debtors of William Pitt the Younger. Curiously, one exception was a case where a father took out insurance upon his son that was not considered to be an insurable interest. Mr Justice Bayley stated: “Now what was the amount or value of the interest of the [father” insuring in this case? Not one farthing certainly.”

Although not directly relevant to our work today, these are the cases that would have evolved into today’s practices and obligations. As such, they are unexpectedly absorbing. These volumes sat innocently in the Actuarial Library and I only discovered them upon its dissolution. If you work for a large insurer with a deep history, I urge you to take a look through the more cobwebbed areas of your actuarial department; you may find something rather interesting.

Graeme Cluskey is a valuation actuary currently taking a short career break