Some Aspects of Life Office Administration

Abstract

These notes are concerned with the related subjects of expenses and their control, and forward planning in a life office. Little attention has been paid to the subject of expenses in the proceedings of either the Institute or the Students' Society in recent years, with the notable exception of the paper by Dyson and Elphinstone (1959), although expenses formed Subject 1 of the 17th International Congress. Forward planning of a life assurance company as a whole has received even less attention in our proceedings. This is in some ways not surprising since the problems are in the main managerial rather than strictly actuarial, but even if this is accepted they are nevertheless problems with which many actuaries have to deal, and this neglect is regrettable.

Measuring the Output of Life Assurance Companies

“…Productivity calculations should not, however, be given overstated importance. In particular a proprietary office which is aiming to maximise profits for shareholders would note that productivity and profitability may move in different directions, as mentioned by Corby (1967). In the following circumstances, for example, higher productivity as measured may be associated with lower profits: the input measure may be an incomplete indicator of the labour and capital services employed the output measure may be incomplete there may be changes in the prices of inputs or outputs which are ignored in the real productivity measure but affect profits (if productivity is the objective then profitable high-price services using low-price inputs may be ignored) productivity is an average measure but it still may be profitable to expand output at the margin even though the effectiveness of the additional inputs may reduce average productivity (y) a productivity rise may reflect the changing importance of high-and low-productivity activities in the company but relative profitabilities may be such that overall profits move in an opposite direction (vi) raising current productivity may conflict with long-term profitability by ignoring the impact on future operations.…”