Surplus: Two Hundred Years of Actuarial Advance

Synopsis

The paper is in the nature of a summary of the authors' book “Surplus in British Life Assurance—Actuarial Control over its Emergence and Distribution during 200 Years”. Copies may be purchased direct from the Institute of Actuaries (price 17s. 6d.). Members and Students of the Faculty may obtain a copy for personal use at the reduced price of 11s. post free. It begins with a survey of the principal factors that have influenced the development of theory and practice in regard to surplus throughout the years. It describes the manner in which surplus first arose in scientific life assurance, and traces how this and other historical developments have had an important effect both in the early days and later as a valid standard of equity was gradually evolved. At the same time the influence of long-dated contracts and of the expectations of the public has been a stabilising factor in spite of rapid changes in the economic and social scene.

The characteristics of the nineteenth-century image of equity are described, and the history of the twentieth century in regard to surplus is seen as one of attempts to preserve that image through sharp and contrasting vicissitudes. This idea is explored in some detail for both ordinary and industrial life business.

The problems of the present day are reviewed one by one and the paper touches on such matters as economic inflation, the public demand for pension schemes, the introduction of computers and data-processing devices and the prospect of Britain joining the Common Market. Against this background, various modern concepts of equity are contrasted and brief reference is made to matching, immunisation and gearing. Equity in with-profit pension schemes and systems of variable policies are also considered.

This general survey leads the authors in the end to ask some critical questions about the performance of the profession throughout its history. These questions relate to the success or otherwise of actuaries in foreseeing the future, in attaining equity and in progressing with the times. The authors attempt to answer them and are able to end on a cheerful note as regards past achievements and to express great hopes for the future, which may well bring a new era for the profession.