Permanent sickness insurance was last discussed by this Society in 1952 when K. Medin submitted a paper on some of the theoretical aspects relating to this class of business (J.S.S.11, 76). At that time only a handful of offices transacted this insurance in this country and of these some did not seem to actively pursue the business. Since then its value, both in conjunction with a life assurance policy and as a separate contract, has become far more widely recognized and I therefore hope that a brief look at the practical considerations involved may be of general interest.

The name ‘permanent sickness insurance’ is possibly misleading. The insurance provides an income during total incapacity, terminating at an age chosen by the insured when the insurance is effected. It cannot be cancelled by the office solely on the grounds of an adverse claims experience. Accidents, provided they are not deliberately self-inflicted or excluded specifically by the policy conditions, are covered.

1. The level of real earnings in the insurance industry, as in most others, has increased considerably since the end of the war. The problems raised by this fact are of vital interest to the actuary, since the adequacy of his premium scales and the maintenance of bonus rates depend on expenses being contained within reasonable limits. The total amount of agency remuneration may be determined in the long run by forces outside the actuary's control, but he can have considerable influence on its structure. The purpose of this note is to set out the principal methods of remuneration at present in use and to suggest some modifications of the incentive element which might be of advantage to the offices and the policyholders without harming the interests of the agent.

In this paper, the main object of which is to promote a mutually helpful discussion, a deliberate attempt has been made to avoid going into detailed descriptions of methods of administration. These vary, of course, from office to office and it is quite reasonable that the difficulties which presented themselves should have been successfully surmounted in different ways. It is both interesting and informative to learn the various practices which have been adopted, but a close study of them may lead to an oversight of underlying problems and a disproportionate expenditure of time.

It should also be mentioned that the title would be really more suitable for a whole book rather than for a short paper presented for a single evening's discussion. Consequently, two restraints have been imposed, both of which derive from the dynamic growth in size and complexity of group pension business over the last two or three decades.

The purpose of this paper is not to consider the specific ratings that should be imposed on life assurance policies where the proposer is not acceptable at ordinary rates, but rather the methods used and problems involved in translating assessments of extra mortality into monetary terms. At times the two problems overlap so the division is not an absolute one.

The subject has been covered at various times in the past both at the Institute and the Faculty; since the war the subject has attracted more attention at the Faculty with papers by T. M. Springbett and then S. C. Keppie and A. C. Stepney (both in T.F.A.19), but there is also the well-known paper by W. Perks (J.I.A.78). An earlier paper is by W. P. Elderton (J.I.A.54).