1.1 There are three starting points for this paper. The first is Marshall Field's challenging Presidential Address to the Institute of Actuaries in 1986 on the subject of ‘Risk and Expectation’. The second is the example, still fresh in our minds, of a medium-sized mutual life office which overstretched itself and found it necessary to merge with a competitor. The third is the impending requirement, stemming from the Financial Services Act 1986, to give an investment client, including the holder or prospective holder of an insurance savings contract, what is described as ‘best advice’.

1.1 In recent years insurance companies have begun to employ marketing techniques in search of greater success in an increasingly competitive market place. Several companies have Marketing Departments. However, those who have used marketing techniques most efficiently are not necessarily those with the largest departments.

The Decennial Supplement on Occupational Mortality published in 1978 commented on mortality differences between the social classes (Chapter 8) using data from the 1971 Census and the deaths in the period 1970–72. The analysis was based on life tables prepared for the individual social classes from which derived indices, for example expectations of life, were calculated. It is proposed here to repeat this exercise using the data for males recently published in microfiche form by the Office of Population Censuses and Surveys—OPCS. This time, the Decennial Supplement has omitted to provide an analysis and commentary and we propose to make some attempt to remedy this deficiency. In our analysis, the Decennial Supplement data have been supplemented by data from the OPCS Longitudinal Study.

By courtesy of Robin Michaelson, data derived from a United States of America life insurance experience (1970–75) for individually insured lives was made available. The data consisted of the proportions of smokers in the population and the ratio of smokers' mortality to that of non-smokers. In both cases separate data was collected for males and females and at integral ages from 15 to 84. From these data it was possible to construct separate life tables for smokers and non-smokers, which were subdivided for males and females. These tables are shown as Tables A–D at the end of this note.

1. With reference to the Actuarial Note by Messrs Hathaway, Rickard & Woods (HR&W) J.I.A.113, 509–520 there is a simpler way, which is much easier to calculate, of approximating from the gross yield to redemption to the net yield, with taxation on the basis assumed by HR&W.

This paper proposes a simple model for studying the variability of contribution rates and fund levels, when rates of return are random. The funding methods considered are those which (1) produce an actuarial liability (AL) and a normal cost (NC), and which (2) adjust the latter by a constant fraction ‘k’ of the difference between AL and the actual fund (this discrepancy is known as the ‘unfunded liability’; for a description of actuarial cost methods the reader is referred to Trowbridge (1952), Winklevoss (1977) or Turner et al. (1984)). Thus at every valuation date

total contribution = normal cost + k × (unfunded liability).

This note continues a regular series on mortality rates in Great Britain; the previous note in the series appeared in J.I.A.114, 135 and dealt with mortality in 1984 and 1985.

Following the 1981 Census, estimates of the resident population have been produced on a new definition. This includes residents temporarily outside the country but excludes foreign visitors. It includes members of both H.M. and foreign forces stationed in the United Kingdom but excludes members of H.M. forces who are stationed abroad. The figures for deaths are not precisely consistent with the new definition of the population, since they do not necessarily include all deaths of residents temporarily absent from the U.K.