When an application is received for a policy on a certain plan of insurance, we must, therefore, consider what the reserve on that policy will be from year to year. We can then tell what amount will be at risk each year, and can thus form an opinion as to whether the plan is one upon which the insurance can be granted. If we consider that there is too much at risk around those ages at which we suspect that there may be an excessive rate of mortality, we must change the plan to one which shows a smaller amount (if any) at risk around the dangerous ages.

For example, let us suppose that an applicant is applying for a whole life policy at the age of 35, and that there is a strong tendency to, say cancer in the family history. It would be felt that while the life was insurable at ordinary rates for the next twenty years, it would be well to get off the risk around age 55. In such a case the whole life policy would be refused and a twenty year endowment insurance offered. In this way the policy would mature before the life reached the age when the extra mortality would be expected.

If it were thought that there was only a slight tendency to cancer, a twenty payment life policy might be offered. In this case, although the policy would not mature at the end of the twenty years, still, as all the premiums would have been paid in by that time, the reserve on the policy would be considerably higher than on the whole life policy, and the amount at risk at the end of the twenty-years would consequently be less.

On the other hand, if there was a history of tubercular trouble in the family, and the applicant was of good physique, a policy would probably be granted on the whole life plan; but as, on the average, a heavier mortality would be expected in the early years of the policy, owing to the tubercular history, a lien or contingent debt would be placed upon the policy remaining level for perhaps five years, and then running off in equal instalments during perhaps the next ten years. If the life dies during the first fifteen years from any cause other than accident, the amount of the lien standing against the policy at the date of the death of the insured, would be deducted from the face of the policy in paying the claim. In this way only the poor lives pay any extra premium, and this is one of the strongest arguments in favor of the lien system.

The British practice of meeting the case of a sub-standard life of, say, 35 years of age, who applied for a whole life policy, is to accept the life and grant a policy on the plan applied for; but the policy would be issued at a premium as for a life aged perhaps 40 years, instead of 35. This is what is meant by "rating up a life five years."

A moment's consideration will show that the method of rating up lives a certain number of years, provides for an increasing extra mortality. This plan is only satisfactory in certain cases where an increasing extra mortality is expected, and it is now very seldom, if ever, used in Canada or the United States.

So far as we in Canada are concerned there are but two methods generally in use for the acceptance of sub-standard lives. The first is that of changing the plan of insurance; the second is that of imposing a lien. We might add a third which is simply a combination of the two just mentioned.

A method now used by at least one of the big American companies is that of issuing policies to sub-standard lives at the regular with-profit rates of premium, but the policies are placed in a special deferred dividend class, The profits, which will be paid on those policies, will depend upon the rates of mortality experienced by the policies in that class. Needless to say, the formation of a special class for sub-standard lives would only be feasible where the business of the company was sufficiently extensive to warrant there being a sufficient number of lives in the special class to give average results.

I might give some actual examples of the application of the lien system, or of changing the plan of insurance, but the two or three cases. I have mentioned will illustrate the principles to be followed. The amount of lien to be imposed in any particular case can only be learned by experience, and is, to a great extent, a matter of guess-work. We have not at the present time any statistics to tell us just what extra rate of mortality we may expect in every case of doubtful family history, etc.

It may be well to point out that, while the imposition of a lien will cover some cases, and the changing of the plan will allow us to accept other cases, still, the imposition of a lien is not equivalent to changing the plan, nor vice versa. If a man applies for a whole life policy, and the medical board offers the applicant his choice of a whole life policy subject to a lien of 50 per cent. of the face of the policy, decreasing by 2 1-2 per cent. for twenty years, or a twenty-year endowment policy without any lien, one of the offers would be improper in most cases. If the extra mortality is expected in the early policy years, the life policy with the lien covers the case; for if death occurs in the early years the lien is deducted from the face of the policy when paying the claim, and if the insured lives beyond the ages when the extra mortality is expected, the policy will then be free from debt, and on the same footing as any similar policy granted to a first-class life. The twenty-year endowment policy does not cover an extra mortality in the early policy years, as the

largest amounts are at risk in the first years, and there is nothing at risk in the twentieth policy year. If the mortality in the later years is expected to be heavy, the twenty-year endowment fits the case: for, as just mentioned, the amount at risk is greatest in the first year, and it gradually decreases, so that finally there is nothing at risk in the twentieth year. The life policy, subject to a lien, will not cover the case where a heavy mortality is expected in the later years, as by that time the hen will have run off.

Occasionally a life is so much below the standard that it is not insurable on any ordinary plan. The actuary will then very often endeavor to arrange some special plan that can be safely offered. The offer of a modified p'an is apt to cause much less annoyance to the agent and the applicant than a simple refusal to accept the application. A twenty-year pure endowment policy with the return of the premiums paid in the event of death during the twenty years, is an example of a special plan that can be offered to a decidedly poor risk. If the applicant lives for, say, ten years, the company has the interest on the premiums paid, which will be sufficient to offset the expenses, provided the commissions are properly adjusted. If the applicant lives to the end of the twenty years, the full face of the policy is payable. Under this plan, therefore, the company can lose very little by the early death of the applicant, and he will have the satisfaction of maturing his investment if he lives to the end of his twenty years.

Apart from sub-standard lives, we have cases of lives which are first-class, from a medical standpoint, but which on account of being engaged in a hazardous occupation, require to be carefully dealt with by the actuary. An extra premium, varying from $2.50 to $10.00 per $1,000 insurance is usually imposed to cover the extra risk caused by hazardous occupations. Some companies accept lives engaged in hazardous occupations at ordinary rates, and place these policyholders in a separate class, where the dividends will depend on the mortality actually experienced in that class,

I must now refer to one investigation which will, no doubt, have an effect on the acceptance of risks, namely, what is known as the "Specialized Mortality Investigation." This is the experience of thirty-four Canadian and United States companies, upon ninety-four special classes of risks, which was compiled by the Actuarial Society of America. A mortality table, which was thought to represent fairly the mortality of standard lives in America, was chosen as a basis of comparison for the results of each of the classes. The ages of entry were grouped into four classes. Ages 15 to 28 were referred to as young entrants; 29 to 42,

mature entrants; 43 to 56, elderly entrants; and 57 to 70, old entrants. The experience is also divided into the first five years of insurance, and from the sixth to the thirteenth years. Roughly speaking, the first group of years will include those where the mortality will be comparatively light, owing to the effects of the medical selection; and the second group will contain the years after the effects of selection have worn off. As the result of the investigation of the mortality of these various classes is very interesting, I will now quote from the report of the Committee of Actuaries who had charge of the investigation:

Lives insured for $20,000 or more on one application, notwithstanding the care always taken in the selection of such risks, have shown a heavy mortality, except at young ages at entry, the old entrants being the worst lives.

Lives insured for smaller amounts than applied for have turned out to be bad risks; while persons insured on a different plan than the one applied for, so as to require the payment of a higher rate of premium, were much nearer the normal.

Men born in Germany were good risks at young ages at entry, but poor risks at older ages of entry.

Persons born in Ireland proved poor risks during the first five years of insurance, but good risks after that time. The difficulty would appear to be one of circumstances rather than race, and the matter needs further investigation.

Lives born in Sweden and Norway have been excellent risks.

Colored people show up well after being insured five years, but poorly during the first five years. It must be remembered that great care has been taken in the acceptance of these risks.

Army risks in time of peace have not proved satisfactory. Officers in the navy have proved unsatisfactory at all ages. Civil officers, such as sheriff, marshal, police constable, etc., show unfavorable results except upon old entrants.

risks.

Members of paid fire departments in cities have been unfavorable

Physicians show an improvement over earlier statistics. Those insured below age 43 have proved good risks, but the result has been unfortunate upon the physicians insured at ages over 42. These remarks apply both to the earlier and later years of insurance.

Lives exposed to electricity, engaged in sawmills, working in iron and steel at high temperatures, house painters, printers, tailors, butchers, and meat dealers, travelling salesmen, such of them as heretofore have been accepted for life insurance, have proved good risks, in spite of the supposed hazardous nature of the occupations.

Steel grinders and glass workers have proved unprofitable risks.
Potters are, on the whole, favorable.

Laborers show a heavy mortality, except at young ages at entry.
Contractors are good risks at young ages at entry, poor risks at

older ages.

Lives engaged in theatrical occupations exhibit a very high mortality.

Cattle dealers and drovers have proved no worse than the average, excepting the old entrants.

Hotel-keepers, not attending bars, and wine and liquor dealers, who warranted it to be true that they were total abstainers, have proved to be poor risks. Those dealers who did not warrant that they were total abstainers have proved to be still worse risks; while still worse, on the whole, are the brewers and their employees. On the other hand, distillers and their employees may also be regarded as good risks, at least during the early years of insurance, the experience being less favorable after five years.

Railway passenger conductors show a mortality only slightly above the expectation. Railway express messengers exhibit favorable results, and railway mail clerks have been excellent risks.

In gathering statistics of railway passenger trainmen, only those lives insured since 1890 have been taken, in order to exclude those lives operating trains not fitted with modern appliances. The results of the limited experience taken have been decidely bad.

Locomotive engineers show bad results, while locomotive firemen are still worse risks.

Bad results have been experienced upon officers of ocean steamvessels; while the losses upon officers of sailing-vessels on ocean or great lakes have been still more heavy. The losses upon seamen and fishermen have not been excessive, except for young ages at entry. The small class of pilots has turned out well.

Lives who have been accepted for insurance notwithstanding an intermittent or irregular pulse have proved to be good risks at the younger ages, but not so good at the older ages.

Those who have been accepted, with more or less doubt, notwithstanding a pulse rate below sixty per minute, have proved to be extraordinary good risks at all ages of entry and for all durations of insurance.

Lives who have been insured after having reformed from intemperate habits show bad results, notwithstanding the extreme care taken in the acceptance of these risks.

Asthmatics appear to be good risks, except at the older ages of entry.