Papers and reports

The analysis of permanent health insurance data

The Institute of Actuaries and the Faculty of Actuaries have embarked on a joint planning exercise with a view to developing a more proactive profession, by focusing the attention and energy of members and ensuring effective use of scarce financial and human resources. ‘Strategy for the 1990s’ sets the overall framework of key objectives, which were agreed by a historic joint meeting of the Councils of the Institute and the Faculty on 4 March 1991.

The paper firstly examines the way in which UK mutuals operate and the forces which are leading mutuals to consider demutualisation. Demutualisation is normally accomplished by a Scheme of Transfer under Section 49 of the Insurance Companies Act 1982. The role of the directors and actuaries is discussed, including the impact of the Institute’s latest Guidance Note (GN15). The protection of policyholders’ reasonable expectations, the value of membership rights and the basis of dealing with any orphan surplus are the central problems.

The paper firstly examines the way in which UK mutuals operate and the forces which are leading mutuals to consider demutualisation. Demutualisation is normally accomplished by a Scheme of Transfer under Section 49 of the Insurance Companies Act 1982. The role of the directors and actuaries is discussed, including the impact of the Institute’s latest Guidance Note (GN15). The protection of policyholders’ reasonable expectations, the value of membership rights and the basis of dealing with any orphan surplus are the central problems.

The background which might lead to a mutual life office to consider restructuring is given attention. It is stated that the reasonable expectations of policyholders must be the overriding guiding factor when considering restructuring and this aspect is commented upon. The relevance of fuller disclosure is considered as is the effect whereby an office which has expanded rapidly, on returning to a steadier rate of expansion can be dominated by the premium income from the recently written business for many years. The restraints on investment in a closed mutual office are discussed.

The paper was prepared by an informal working party as an introduction to an open forum discussion. It considers from several viewpoints the relationship between the actuary and the computer, both in its function as a calculating tool and as a data processing and storage medium. The paper considers in detail the requirements of the Appointed Actuary for adequate data, the problems of allocating and pricing for computer costs and the increasing uses of computer modelling in financial reporting.