The subject of Surrender Values is a wide one and it will be impossible in the course of these remarks to give more than an outline of a few of the points which arise. I shall, therefore, deal in the main with broad general principles and leave the lesser details untouched.

The scales of surrender values actually allowed by offices in this country differ widely, and an examination of the figures indicates that some offices still retain the view that a policyholder who surrenders his assurance should be fined heavily. It is difficult to reconcile this view with present-day ideas, for if a policyholder is so unfortunate as to be unable to continue his premiums owing to financial or other reasons, it is surely harsh treatment on the part of the company to impose a heavy fine, the whole, or practically the whole, of which merely goes to swell the bonuses allotted to those more fortunate individuals who are able to continue and who could well dispense with this additional benefit.

When a premium on a life assurance policy falls due, a certain time, known as the Days of Grace, is always allowed in which it may be paid without loss or fine. This period is usually 30 days, but a calendar month may be allowed and in one case 15 days only are given. During the days of grace the policy is fully in force and should a claim arise, it would be paid in the ordinary way, the premium that has fallen due merely being deducted.

If the premium is not paid within the days of grace, it is said to be overdue and if the policy has acquired a surrender value the non-forfeiture regulation then comes into operation. The regulations usually apply only to ordinary life business; for special policies special schemes are sometimes in force and in some cases, such as Sinking Fund Assurances, where the office is running no mortality risk, no regulation is called for. These remarks, throughout, will deal only with the ordinary non-forfeiture regulations as applied to Whole Life and Endowment Assurance Policies.

The following remarks refer to the determination of Non-Profit Whole Life Assurance and Endowment Assurance office premiums; many of the principles raised apply to the premiums for other types of policies.

The office premium depends on the rates of mortality, interest, expense and loading for profit used in its calculation; we shall be concerned mainly to determine what values to give these factors, and the values chosen will form our premium bases. There is no reason to assume that we should give the factors the same values for all policies; for instance we might be justified in taking a lower rate of expense for policies of large sum assured than for policies of small sum assured.

A bonus reserve valuation may be briefly described as an attempt to approximate to reality in estimating the proper reserves to be held in respect of a life office's participating policies. The usual methods employed by life offices at the present time depart widely from reality in nearly every respect. The rate of interest used is considerably below what is being realised on the invested funds at the moment and what may be reasonably expected to be realised in the future. The mortality table used represents the experience on an average of some forty or more years ago (and occasionally seventy) and in the case of business in this country nearly always considerably over-estimates the mortality experienced. The loading reserved for future expenses frequently bears no definite relation either to the probable rate of such expenses or to the office premium valued, as for example in the case when premiums have been constructed from one table of mortality and the policies are valued by a net premium valuation under another.

It is scarcely necessary in a Society such as this to prepare any defence of the practice of collecting statistics although we know that among those whose profession does not involve the use of figures, statistical tables are regarded with a certain amount of suspicion.

If I were in need of any apology for upholding the need for systematic collection and analysis of data I should refer my questioner to page 83 of the Report of the Royal Commission on National Health Insurance where he would find a strongly expressed opinion in favour thereof.

I wish to make it quite clear that in the remarks which follow there is no mention of modern statistical methods of the Karl Pearson type. It occurred to me, however, that a short description of some of the processes employed in dealing with the masses of figures involved in the operations of large Approved Societies might be of interest.