I have always had a healthy and perhaps wary respect for actuaries since I was interviewed by the ‘Scottish Widows’ in Edinburgh after finishing my studies at Edinburgh University in 1949. During this interview, people were pointed out to me who were still trying to pass their examinations after 19 years and, when I saw what the examination syllabus included, reason took over and I decided to go down the easier path of accountancy.

These notes discuss the Proposal by the Commission of the European Communities for a Council Directive “On the implementation of the principle of equal treatment for men and women in occupational social security schemes”. Article 6, §§ 1(h) and (i) of the proposed Directive state that it would be contrary to the principle of equal treatment to provide for benefits whose level or amount differ or to set contributions at different rates, “by taking into account different factors of calculation, actuarial or otherwise, with regard to the phenomena of ill health, mortality or life expectancy”. These notes concentrate on this proposal, which is of considerable actuarial importance. Actuaries take into account different factors of calculation with regard to these phenomena, not simply by convention or through unjustifiable prejudice, but because of a sincere respect for the truth. To attempt to ignore the truth may have dangerous consequences, which are discussed.

1.1. An earlier paper by the author has attempted to describe the theories of multi-state life tables and inhomogeneous Markov chains in their application to the study of morbidity as introduced by Pollard. It is the purpose of this paper to extend the model to describe the relationship between the incidence and prevalence of a disease. The implications of certain assumptions about the presence of mortality and of differentials in the level of mortality are also discussed.

This paper is largely based on a Ph.D. thesis (Coutts (1983)) and provides an actuarial approach to the technical aspects of motor insurance premium rating, where equal weights are given to both the practical and statistical elements of the problem. The methods described are applicable to the competitive United Kingdom motor insurance premium market. However, it is also contended that in countries where motor rating tariffs are in operation, the analyses proposed are still necessary for management to judge where in the portfolio the business is potentially unprofitable.

1. The rise in the general level of prices that has occurred in Britain at varying speeds over the last half century has caused many investments to appreciate considerably in money terms, but without this necessarily representing any increase in the purchasing power of the monetary proceeds. It has for some time been desirable to adjust for changes in the general purchasing power of money, and to calculate returns on investment ‘in real terms’. The issue by the British Government of Index Linked Treasury Stocks provides investments whose future return is defined in terms of the Retail Prices Index (R.P.I.), and it is desirable to calculate ‘real’ redemption yields on these stocks. There has been some discussion about how such real yields should be calculated, and, as will be seen, it is necessary to make certain assumptions in order to produce explicit results. The Joint Investment and Index Committee of the Institute of Actuaries and the Faculty of Actuaries has asked me to prepare this note in order to explain the details of how real yields should be calculated, and what assumptions need to be made and stated. I am very grateful to the members of the Committee, particularly the Chairman, R. H. Pain, for their assistance in its preparation.

In Australia, the Insurance Acts 1973 introduced the formal requirement of a solvency margin. The solvency margin required by Statute is a proportion (15% in fact) of net premium written in the last completed financial year. Since then, there has been a certain amount of discussion on the means of funding that margin under expansionary conditions.

The vicissitudes of the discussion in Australia and the United Kingdom have been as follows.

At first, it appeared unquestioned that increases in solvency margin must be financed effectively by premium loadings. For example, Loader and Ryder (1976) state flatly that “The increase in solvency margin must be met from profit earnings”. The ideas of Loader and Ryder were adopted as a point of departure by Cooper and Long (1977). Basically the same theme was presented by Eriksen and Jones (1977).

This note continues an annual series on mortality rates in Great Britain; the previous note in the series appeared in J.I.A. 109, 447 and dealt with mortality in 1980. Table 1, below, shows central death-rates for Great Britain for the year 1981, together with the ratios of these rates to the corresponding average rates for the 3 years 1970–72, which have been taken as a standard. Death rates in this form for the years from 1966 to 1979 were published in J.I.A. 108, 413. The rates for 1981 have been calculated using the deaths recorded as occurring in Great Britain in 1981 and the ‘home’ population at 30 June 1981, i.e. the number of people actually in the country at the time, as estimated by the Registrars General of England and Wales and of Scotland.

1. In August 1982, a questionnaire relating to professional activities and earnings was sent to all members of the Institute in the United Kingdom who completed the examination between 1966 and 1981 inclusive. Questions regarding remuneration related to the year ended 5 April 1982.

2. Out of 970 questionnaires despatched 901 were returned, and of these 895 were sufficiently complete to be included in the analysis. Thus the effective response rate was 92%. The Council of the Institute is grateful to all those who participated.

3. The Council would also like to express their appreciation of the work carried out by Professor Bernard Benjamin, of the Centre for Research in Insurance and Investment in the City University, who arranged for the tabulation of the data and prepared a report on it.