'Hie life assurance business in England is carried on by proprietary and mutual companies. A " proprietary" company is one in which a body of share holders raise a capital and pledge it for the payment of claims, in case the premiums are insufficient ; for this security they receive dividends arising out of the profits of the business. A " mutual " company is one in which the members stand bound to each other and constitute the conipany itself; it has no capital in the same sense that a joint-stock or a proprietary company has, and consequently the profits of the business, instead of going to niake dividends for shareholders, are divided amongst the members. But in practice there is little difference to a policy holder whether his assurance is effected with a proprietary company or a mutual company. Iti both cases his premium contributes to the profits and, under the system of with-profit assurance, is returned to him less a small part allocated as dividend to the shareholders of a proprietary company, or less about an equal proportion which goes in higher working expenses in a mutual company. And, apart from with-profit assurance, there is practically no difference to him, for all the companies compete one with the other and strive to reduce their respective rates of premiums as near as possible to cost price. But froin the public point of view, judging from results, it is possible that the mutual system is preferable ; there is a more effective attempt at an extension of business. It may be safely said that all the increase in life assurance business in the United Kingdom is due to the efforts of the mutual companies, for the aggregate business of the proprietary companies is steadily declining. In 1898 they assured 60,000 fresh lives ; in 1899, only 56,000 ; and in 1900, they could count only 55,000.
But whatever may be said about the comparative lack of reasonable progress in British life assurance, it is a matter of congratulation that, generally speaking, the established assurance companies of the United Kingdom are undoubtedly financially sound. And that this can be said is due, no doubt, to a wise legisla tion which most effectively protects the interests of the public. The Life Assurance Companies' Acts, 1870 to 1872, require every company established in the United Kingdom, or established abroad but carrying on business in the United Kingdom, to ntake a public deposit of the sum of .V.10,000, which sum is not returned to the company until its life assurance fund, accumulated out of premiums, has amounted to X40,000. Assurance companies are also required to keep their life funds separate, render annual statements of their reventfe, and publish periodical actuarial reports and extracts of their financial condition. These statements and reports must be deposited with the Board of Trade, and supplied to every one of their shareholders ; they are also subsequently published as parliamentary papers.
The methods of Lif'e Assurance would now at first sight seem to have reached almost the high-water mark of development. But the same causes which have contributed to the progress already made are now contributing, and will continue to contribute, to a further and even more pronounced development. The needs of modern life are forever changing and becoming more and more complicated ; actuarial science continues its investigations, and is always proceed ing to more comprehensive and also exact practical application ; and the business activityof the assurance companies themselves—their competition one wit h another, all tend to improved and more generally beneficial modes of assurance. Other causes might be enumerated, but it is sufficient to have enumerated softie of the principal and most obvious. And the recent hiAory of life assurance is dis tinctly illustrative of this development—there is no need to hark back to the days when its practice was bound up with speculation and empiricism, and to note the subsequent great change to legitimate assurance and scientific method. That change had taken place. The lines of development were thenceforth in the direction of applying the principles of legititnate assurance so that it should meet, as far as possible, every form of contingency dependent upon human life. In the first place the policy and its conditions were the subject of attention, and in this connection all modern developments have been marked by a spirit of increasing liberality. The very nature of the contract of life assurayce has been permitted by the assurance companies to develop in a direction absolutely opposed to their interests as against those of the assured. This permission was perhaps unconscious ; perhaps merely an expression of negligence. But, nevertheless, it can fairly be urged that the insurance companies permitted, in the full sense of the term, the legal doctrine that a contract of life assurance is one of indemnity to exist so ineffectively, and with so great a disregard by them that it eventually gave way, once for all, to the modern legal doctrine that the contract is not one of indemnity but one of absolute assurance. This point will be referred to again hereafter. Then, also, it is now a growing practice for policies to contain no
restriction whatever as to the place of residence of the assured—a departure, most beneficial to the assured, from the old system of limiting his place of residence. In this matter of whole world Policies, the practice of all the companies is not identical, so an intending assured will be wise to pay special regard to the particular conditions of the company he is negotiating with. A very general practice is for a policy to be issued subject to the condition that the assured does not reside outside the limits of north and 30° south. But the most up to date policy is absolutely free, from the outset, from all restrictions as to foreign travel, residence and occupation, if the life assured is not connected with the Army, Navy, or Mercantile Marine, has a settled occupation, and satisfies the company that he has no intention nor any immediate prospect of incurring extra risk. A policy which is not free from restrictions from the outset should at least become so automatically after it has been five years in force, provided that the assured is not and has not been connected with the Army, Navy, or Mer cantile Marine, and no extra premium has been incurred in the meanwhile for foreign travel, residence or occupation. Officers in the Army and Navy can be insured, as a rule, against all risks of climate and war for an annual extra premiinn of 10s. per cent. Whilst on this subject we may remark that some objection was taken by a portion of the press to these extra premiums being charged to officers engaged in the recent Boer war, it being alleged that such extra premiums were too high, that the companies were consequently deriving a profit from this source, and that they were generally lacking in patriotism. "All these allega tions," writes the author of the Review of Life Assurance, in The Insurance Register, for 1901, "we need hardly assure our readers, can be proved to be absolutely groundless. In the first place, the published statistics, showing the mortality due in one way or another to the campaign in South Africa, are sufficient evidence that the Extra Premiums charged, so far from being too high, were quite inadequate to the additional risk sustained by the Offices, and we have reason to believe that in a large number of Offices these charges have not nearly covered the amount of premature claims during the war. Some Offices, indeed, like the Prudential, issued Policies for small amounts on the lives of those taking part in the campaign without any extra whatever ; it may be added that, at the close of the year, the Extra Premiums which had been generally agreed upon, were largely reduced, vhile to those assured who returned from the war with unimpaired health, a remission of a part of the extra which they had paid was made." Suicide of the assured was originally a reason for the avoidance of the policy. But even then, if the assured had bond fide assigned his policy and notice of the assignment had been given to the company before the suicide had taken place, the assignee would he entitled to the assurance money. And this is the law to-day, and can be relied upon in the event of the death of an assured by his own hand under such circumstances that his suicide is exempted from the risks assured against, provided, of course, that it is a bond fide assignee who makes the claim: But the modern practice of life assurance is either to make no distinction at all in the case of suicide, or to make only some limited or temporary distinc tion. The latter course is perhaps the most usual, for only very few offices en tirely dispense with the condition against suicide. In the policy of one company the suicide clause, which may be taken as fairly typical, is limited to thirteen months from the date of the policy, and during that period the beneficial in terests of assignees are expressly protected. Indisputable Policies are another example of modern progress. Their object is to preclude the issuing company from resisting any claim made thereunder. But as a rule such a policy expressly states that it does not become indisputable until the expiration of five years from its date ; and it is always provided that the company shall have the right to dis pute it in case of fraud. In obtaining such a policy, therefore, the assured should pay special attention to the proposal form and declaration, to the medical examination, and to his referees. All questions should be plainly and accurately answered, and no information material to the risk which the company is asked to undertake should be concealed. Wilful or negligent inaccuracy or concealment may easily be construed as fraud, and, consequently, may vitiate even an indis putable policy. And because the policy is indisputable, more than ordinary care should be taken. If the age has been incorrectly given, but not so incorrectly as to constitute a material misrepresentation, the company will be entitled to re adjust the premiums before paying a claim, and deduct from the amount the extra premiums to which they are entitled.