Nearly twenty-two years have elapsed since the masterly essay of our President gave to the institute an opportunity for comprehensive examination of the British friendly society system. During the intervening period, phases of the subject have been occasionally before the Institute, but the period has been one of great activity amongst the friendly societies, and developments of interest to actuaries culminating, it may be suggested, in the co-operation of the State and the societies proposed by the Chancellor of the Exchequer, have emerged. In the circumstances it has seemed to me that the Institute might again survey this wide field of provident effort with interest to its members and profit to the community.

I propose accordingly to examine the more important groups of societies, paying particular regard in respect of the leading affiliated orders to the machinery by which it is sought to equip the constituent parts for the effective recognition of their duties; thence passing to some questions of special interest to ourselves. For the purpose of connected description it will be necessary to mention particular organizations, but I trust that nothing of what I have written may seem to depart from the excellent custom of neutrality which governs our debates. I venture indeed to say that so far from being unduly sensitive, all the societies which are striving for improvement (and I think this may be said of most of them) are receptive towards the stimulus of informed criticism.

This paper arose from a report prepared by a working party set up under the auspices of the Research Committee. The views in the paper are my own but they are, to a considerable extent, based upon work done by Messrs J. K. W. Davies and P. N. S. Clark. I am also indebted to Mr R. T. Foster of the Government Actuary's Department for clarifying points arising from the current Regulations.

2. The paper is concerned with the Returns made by Life Offices to the Department of Trade and Industry in accordance with The Insurance Companies (Accounts and Forms) Regulations 1968. The aims of this paper are:

(i) to discuss the objectives of the Returns,

(ii) to discuss whether the questions asked by the present Regulations and the answers currently being given in the Returns achieve these objectives,

(iii) to discuss possible changes in the Regulations, and

(iv) to discuss the role of the actuary in relation to the Returns and also in relation to the auditor.

Our principal focus in this paper is on ways that a Fast Close process (or indeed any reserving process) can be structured to maximise the value added within the process given the time and resource available. This builds on the use of actual vs. expected techniques investigated in our previous paper, and also looks at forces external to the reserving function that may derail smooth progress. We highlight a number of practical ways that the balance can be restored in favour of adding value rather than crunching numbers. This paper forms the second in the TORP series.

In the last three decades the life insurance industry was rocked by a series of mis-selling scandals such as endowment mortgage, personal pension and payment protection insurance mis-selling. Regulators have stepped in to try to address the underlying causes and improve customer protection by introducing more stringent regulation targeted at sales practices and remuneration, product design, disclosure and ongoing monitoring together with significantly larger financial penalties for non-compliance. Against this background, the paper considers whether customers understanding of risks and outcomes associated with life insurance products can be further improved and how poor customer outcomes can be avoided in the future. We acknowledge the complexity of these issues, which involve many stakeholders, covering all stages of the product lifecycle and customer journey and being impacted by a constantly changing regulatory landscape. We first review the current regulatory landscape across both the United Kingdom and other jurisdictions, concluding that whilst regulators have acted to improve customer protection, gaps still remain, particularly around the areas of disclosure and consideration of changing customers’ needs throughout product lifetimes. The paper then considers how the current situation could be improved for customers in a cost effective manner. We focus on improvements in disclosure, needs-based selling, ongoing assessment and communication as a means of ensuring that products continue to meet the customers’ needs and risk profile, and on introducing a duty of care which would force financial services firms to act in the best interests of their customers. In this paper we present our preliminary thoughts and recommendations. Some of the recommendations will cost something to implement, and should therefore be supported by cost-benefit analyses that would weigh these costs against the potentially larger benefits to both customers and the insurance industry.

In venturing to bring this subject before the Institute to-night, I am conscious of inviting attention to a matter which has been frequently treated before and by far abler hands than mine. I at once confess that I have little original matter to bring forward; indeed, the main object of this paper is to endeavour to bring into one focus and to a common standard of criticism the various formulas for ascertaining the rate of mortality, which have already been so often discussed in this room. The expression “rate of mortality” is advisedly used here instead of “exposed to risk”, because it would seem that attention has hitherto been unduly centred in the latter.

An allusion made by Mr. Jellicoe to this subject, in a paper read before the Institute of Actuaries on the 28th November, has induced me to place on record the conclusions at which I had arrived after a somewhat recent consideration of the question.

It appears to me that the buyer of a policy by way of investment, in considering the price at which he should purchase, should come to his decision entirely independent of what might be the Office value. The two values have no connexion whatever one with another. In the one case the purchaser is about to make an investment; in the other, the Office proposes to redeem a liability.

Supervision of Insurance Companies in the United Kingdom is based on the principle of ‘freedom with publicity’. For general insurance, publicity is provided through the returns required by the Insurance Companies (Accounts and Forms) Regulations 1968 (S.I. No. 1408) which was issued under the terms of the Companies Act 1967. If the principle is to operate successfully the returns must be scrutinized carefully if not by prospective and existing policyholders and stockholders then by those representing their interests, be they government departments, insurance brokers, stockbrokers, statisticians, accountants or actuaries. The nature of the information to be collected, as well as its presentation and interpretation requires special skills and experience. An actuarial training provides these skills and it is appropriate, therefore, that the returns should be discussed at a meeting of the Institute.

Some apology is needed, perhaps, for proposing to rediscuss a subject which has been handled so often, and by so many distinguished actuaries. But I am probably addressing gentlemen who have not had occasion to become familiar with all that has been written or said on the subject, and others to whom it may usefully be presented from a fresh point of view; and there are some important practical questions too on which the profession seem scarcely yet agreed, which will admit of further consideration. I shall not attempt to notice the various papers which from time to time have been contributed by actuaries towards the solution of the questions I am to consider. For many of the views I am to express I am necessarily indebted to those who have preceded me; and the aim of this paper is less to introduce what is new, than to enforce, and illustrate if possible, sound and correct opinions. I am anxious to set the subject in a light which will make it intelligible to others than actuaries, and to discuss principles rather than formulas.

The discussion on Assessmentism (J.I.A.104, 205) was opened by Mr. M. D. May.

The paper describes the main features of the market in traded endowment policies (TEPs) and the role of the main players in the market. The controversial, and related, issues of how to put a value on a traded endowment policy and the information given to investors are examined. The issues facing life offices whose policies are traded are discussed.

This abstract relates to the following paper:

DempsterM.A.H. & MedovaE.A.Asset liability management for individual households ‐ Abstract of the London Discussion. British Actuarial Journal, doi:10.1017/S135732171100016X