It is difficult to say exactly when the Continuous Mortality Investigation began, beyond saying that the first report of the Committee was on the experience of assured lives in 1924–29. There are, however, some earlier developments which are worth following, although it is still difficult to know where to start recording the process of evolution.

If we start in the Institute of Actuaries Year Book we find that the Bureau was established soon after the 1914–18 war. However, in the Presidential Address of the late W. P. Phelps published in J.I.A. 54 there was a reference to a decision having been taken by the Institute and the Faculty in 1912–13, and a perusal of various Minutes of the Institute Council during the period immediately prior to the 1914–18 war yields much information. But perhaps we should start even earlier than that.

1.1. A longer title to this paper might be ‘Reflections of a Consulting Actuary on his professional relationship with Friendly Societies’. The term ‘Friendly Society’ is defined by law, but from the actuary's point of view it can be divided into a range of organizations, summarized as follows:

(a) Large Collecting Societies with assets exceeding £1 million. Many of these Societies operate on a national basis.

(b) Medium to small Collecting Societies. Most of these Societies serve a fairly localized area, and some are very small, being linked to churches to provide for burial expenses.

(c) The large Friendly Societies known as Affiliated Orders which have a large number of branches.

(d) The smaller Affiliated Orders with branches.

(e) Large Friendly Societies with assets exceeding £1 million.

(f)The smaller Friendly Societies with assets of less than £1 million including many with assets of less than £500,000.

When we were asked to present a paper to the Students' Society we were asked to bear in mind the need of the actuarial student for a simple up-to-date paper on this subject. The impossibility of this task hit us immediately—the subject is not itself simple and the currency of the paper is dependent on the whims of Government. However, we write of the current situation as we see it and we shall try to bring out the basic facts of life office taxation whilst at the same time giving, for the benefit of those without first-hand experience, some feeling for the practical as well as the theoretical aspects of the subject.

We shall in sections 1–11 of the paper take the reader through the main points concerning the computations of tax for a proprietary life office, then in sections 12–18 give brief notes about some of the complications and finally in an Appendix give a simplified computation.

The reader of this note will know well the method used in the U.K. for the verification of technical reserves (i.e. the net liability) in life assurance. The net liability must be calculated by a qualified actuary and the methods and bases used must be described in sufficient detail in Schedule 4 of The Insurance Companies (Accounts and Forms) Regulations 1968 for their suitability to be apparent from a careful scrutiny of these and the other financial statistics submitted in accordance with the Regulations. As the data are made public, this scrutiny can be made not only by the Government Actuary in advising the supervisory authorities at the Department of Trade and Industry, but also by any other qualified actuary who cares to do so, which is an equally important discipline. Under this system, the maximum freedom can be allowed to the company and its actuary, but there has hitherto been no equally satisfactory method available for the objective scrutiny of non-life technical reserves. However, the new Claim Frequency Analyses and Claim Settlement Analyses prescribed in Parts II and III of Schedule 3 to the 1968 Regulations should go a long way towards remedying this deficiency. These analyses are to be supplied separately for each class of insurance in each of a company's main markets, and separately for such risk groups within each class as the company decides to be appropriate.

There are two methods of dealing with the actuarial features of sickness insurance—the collective method and the reversionary method.

Unfortunately, perhaps the two methods have developed quite independently of each other, for historical reasons.

The collective method was used in Great Britain to investigate Friendly Society experience. The pattern for all subsequent investigations was set in the 1820s and brought to its culmination of refinement in Watson's Manchester Unity Experience still in the Institute's examination syllabus, 66 years after publication. No investigation of insured lives has yet been made in Great Britain. In the rest of this note the term ‘Manchester Unity method’ will be used to describe the collective method.