Saving from Loading

Prudent management in life insurance dictates that the gross premium should be more than sufficient to just meet normal requirements so that the company may be protected against exceptional conditions. In fact, one of the avowed purposes in loading is the provision of a definite dividend to be returned to the policyholder at the end of the year together with the gains from other sources. Competitive conditions, however, especially in the matter of agents' commissions, brought about a situation which until recently meant that the average company was just about able to keep its aggregate expenses within the aggregate loading on its premiums. Within recent years there has been a marked tendency towards economical management in life insurance and at present a large number of companies manage, by exercising rigid economy, to make their annual expenses much less than their allowance (the loading in the gross premium) for expenses and contingencies. Hence they are able to credit a very considerable saving to surplus, and this saving renders the twofold purpose of protecting the company against financial disturbances and of furnishing a substantial fund out of which to pay dividends.