On the method of comparing the Expected with the Actual Experience of a Life Insurance Company, as regards the number of Deaths and amount of Claims

Extract

The business of Life Assurance is founded on the principle that the number of deaths which will occur among a large number of persons in a given time is not a matter dependent entirely on what is called chance; but is subject to a law of average so uniform in its operations, and so trustworthy as to its results, as to be capable of forming the basis of calculations on which the shareholder may stake his capital, and the assured the welfare of those for whom it is his duty to provide. Proceeding on this principle, tables of mortality have been constructed,—from data collected at different places and under a variety of circumstances, and tabulated and adjusted with various degrees of accuracy,—which show, out of a given number of persons born, the number who survive each year of age, and the number who die at each age from year to year. From such tables, companies transacting the business of assurance calculate the rates of contribution to be required from their clients; and on the sufficiency of the rate of mortality founded on in any instance depends, of course, the sufficiency of the premiums which the company is to receive in consideration of its risks. It is therefore of great consequence that the company should ascertain from time to time how the rate of mortality actually experienced compares with that indicated by the table on which the calculations are founded, in order that there may be proper grounds for being satisfied that the basis is a correct one. For it is not sufficient that the mortality table founded on should be known to represent faithfully the death-rate prevailing among the general population, or even among assured lives generally.