The Eligibility of Aged Lives for Assurance

Extract

So far back as 1863 the Institute of Actuaries stated, in preparing the H^M Experience, that the most important question was the rate of mortality at the more advanced ages of assured lives. The information so collected has since been materially added to by the British Offices' Experience of 1893. At the same time the rates of premium charged by various life assurance offices for ages at entry 60 and upwards show large differences, which sufficiently prove that the rating of such lives does not yet rest on anything like a definite basis. The reason is clear enough, for the available facts are still necessarily scanty, and consequently the probability of fluctuation or accidental variation in the rate of mortality is considerable. As life advances the flame of vitality burns lower, the average rate of mortality increases, and frequently there are material changes from one year to another. While some lives of from 60 to 70 years of age have 30 years of life before them, a large number will certainly die within a much shorter period, even although the originally defective have been excluded. At such ages health suffers fatal impairment with greater rapidity than at younger ages, and the impairment can be less easily foreseen and provided against. Thus it is evident that if an office is to accept proposals on the lives of aged persons, exceptional care must be taken with the medical examination, that the average quality of the stock selected may be sufficiently good. It has to be recalled that the effect of variation in the average rate of mortality is greater at advanced ages than at young ages. If, for example, the premium at an advanced age at entry be 10 per cent, per annum, it makes a marked difference to the financial results whether each life contributes on the average for seven years or for eight. At young ages, with a premium of say two per cent, per annum, a variation of one year in the expectation of life is not so important.