MORTALITY AND INVESTMENT EXPERIENCE 1. Factors in the prelnium.—In life insurance, the premium is commonly expressed by the amount charged for one thousand dollars of insurance for or dinary policies, and by smaller units for industrial in surance. The two great factors which determine the premium are mortality and the interest received from investments.
2. Mortality tables.—Newsholme described the mortality table as the picture of a generation of indi viduals passing thru time. Mortality tables are based either on statistics of the population as shown by the census returns, or on statistics of the life insurance companies, based on their own experience. The first table was compiled by Halley, the astronomer, in a paper for the Royal Society. He used statistics from Breslau, Silesia, where statistics of birth and death had been kept from a very early period. Hal ley's table lay buried for many years in the journals of the society and was probably never used by any in surance company. The first table that was actually used by any insurance society, is known as the North ampton Table, and was based on the statistics of some parishes in Northampton. This table became justly famous, altho it has been entirely superseded.
Another table, of far greater accuracy than the Northampton, is the Carlisle, based on the statistics of some parishes in Carlisle, England. The num ber of lives considered was less than fifteen hundred, but the table has proved to be remarkably accu rate even with the changes that have taken place since the table was compiled more than a century ago.
A table based on statistics of population is not satisfactory to an insurance company which has been in existence for any length of time. It does not represent experience in dealing with picked or chosen lives. The insurance companies have not devoted much time to the sub-standard life, as they have found a sufficient number of standard lives to build up their enormous business. As soon as the companies se cured a sufficient amount of experience on which to base accurate statistics, they dispensed with statistics taken from other less reliable sources.
3. What is a mortality table?—In the somewhat vivid picture which described it as "a generation of individuals passing thru time," we catch a fairly ac curate idea of what the table aims to present. It traces a group of individuals, taking their lives at an assumed period, until the entire group have passed away. It shows the number at the beginning of the period and also the number that pass away each year, and with these two factors it is easy to show the prob ability of dying within the year or of surviving within the year.
4. American experience table of mortality.— The table in common use in the United States is the Amer ican experience table of mortality, based on statistics taken from the experience of the Mutual Life Insur ance Company during a certain period in its history.
The table was prepared by the then actuary, Shep pard Homans, and altho the work was done at a com paratively early period in the history of American life insurance, the experience was so true and the work so accurate that the table has stood the test of time remarkably well.
5. Illustrations.—Let us illustrate what the table shows. It assumes that at the ale of ten years there are 100,000 lives and year by year it sets forth these (a) the number of living at the begin ning of each year; (b) the number dying each year; (c) the yearly probability of dying; (d) yearly prob ability of living or surviving. The last age repre sented on the table is ninety-five years. There was no experience to show any insured life living beyond ninety-five. There has been, of course, since that time actual experience in regard to insured lives be yond that age.
It is not necessary to reproduce the entire table; our purpose will be served by showing it at ten-year intervals.
6. How the table is used.—Let us assume that a person aged forty desires insurance for one year, two years or any number of years. At age 40, the table shows that there are 78,106 persons living. The number that will pass away in that year is 765; hence it would be for one year. For two years it would be the number 765 plus 774, which is the number ing away in the second year, over the number 78,106 as a denominator, or and for five years it would be 765 + 774 + 785 797 + 812 = NO data upon insurance experience were available, up to late in 1916, from which to ascertain the rate of mortality experienced to that date in the European War. The general effect of war claims upon the mor tality as a whole may, however, be observed by com paring the actual claims of the year with the expected, by the Standard Valuation table. Figures of nine Canadian companies for the year 1915 show that the total mortality, including war claims, was remarkably favorable in every instance, the ratio of actual to ex pected ranging from 42.6 per cent to 72.9 per cent, while for eight of the companies combined, it was 58.4 per cent. The net loss under war claims for the nine combined companies was 13.3 per cent of the expected claims. The gross war claims for the nine companies combined were .134 per cent of the mean Canadian business in force. The corresponding figures-for the Mutual Life of New York were .107 per cent for Canada and .196 per cent for the combined business in all countries engaged in the war. The gross Cana dian claims incurred by the nine companies were $5,834,822, of which $900,869, or 15.2 per cent were due to the war.