Valuation of Ordinary Life Assurance Business Using a Medium-Sized Electronic Computer and Magnetic Tape Files

Synopsis

The paper describes the system used by one office to produce valuation and mortality statistics and to calculate bonus for ordinary assurances, using magnetic tape files and a Pegasus 2 computer.

After a brief outline of certain features of the office, the computer, and the previous system using punched cards, some of the factors that influenced the system finally developed are discussed. An outline of the main system is given, and of some of its subsidiary parts.

The policy data and movements system is discussed in detail, and some comments are made on the system of checking the data supplied to the computer. The principal routines to calculate the net premium and value the policy are described fully, and flow charts for the routines are appended. The calculations for analysis of surplus are also described in detail. Some features of the programmes peculiar to a computer system are also discussed, and a detailed example given.

It is shown how Flexowriter tapes could be used to replace punched cards for the input of data for new policies, and how new business statistics could be obtained. Finally, the possibility of using the computer system for an emerging costs valuation is explored, and some other possible future extensions of the system are discussed.