Kinds of Tables and Important Tables Used in the United States

There is an important classification of tables of three kinds dependent on the data used in their calculation. They are known as select, ultimate, and aggregate tables. These terms have reference to the question whether the data used have been affected by medical selection. It is a well-known fact that lives which have been newly examined by an insurance company and have passed the medical tests required before becoming policyholders show a much lower rate of mortality than lives not so examined. The number of deaths occurring, for example, among 10,000 policyholders aged 40 who have just passed the medical examination will be fewer than among 10,000 aged 40 who were insured at age 30, and have been policyholders for ten years. So it is important for a company in estimating the probable mortality to know whether it has a large number of newly selected lives. An unusually low mortality is to be expected among the risks of a new company, but such a record in the first few years furnishes no basis for assuming that the low mortality will continue.

Since newly selected lives, therefore, furnish a lower mortality it is generally considered the safer plan for a company to compute premium rates on the basis of the mortality among risks with whom the benefits of fresh medical selection have passed. A select mortality table is based on data of freshly selected lives only; an ultimate table excludes this early data, usually the first five years following entry, and is based on the ultimate mortality of insured lives. Aggregate tables include all the mortality data, the early years following entry as well as the later.

The tables most used in the United States to-day by insurance companies are three. The Actuaries, or Seventeen Offices table, was calculated from the experience of seventeen British life-insurance companies and was introduced into the United States by Elizur Wright as the standard for the valuation of policies in Massachusetts. This table has at the present time been largely supplanted by the American Experience table, the one found on page 132. The latter table was published in 1868 by Sheppard Homans and was calculated from the mortality experience of the Mutual Life Insurance Company of New York. Most premium rates for American companies are to-day computed with this table as the basis. It is what was described heretofore as an ultimate table.

The National Fraternal Congress table was derived from the experience of two American fraternal orders and was first published in 1898. It has been adopted by the National Fraternal Congress and by a number of states as a standard for the computation of premiums and the valuation of policies among the fraternal societies.