Report of the Royal Commission on National Health Insurance

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Monograph

Identifikator:: 1740277147

URN:: urn:nbn:de:zbw-retromon-132094

Document type:: Monograph

Title:: Report of the Royal Commission on National Health Insurance

Place of publication:: London

Publisher:: Stationery Office

Year of publication:: 1926

Scope:: XII, 394 S.

Digitisation:: 2020

Collection:: Economics Books

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APPENDIX A. 335 the reserve values bear to the total assets of the Approved Societies must be materially diminished, and the average rate of interest realised must be correspondingly improved. It is impossible to make a precise estimate of the future rate since the proportion of the total assets which, at the outset of the new arrangements, will be represented by reserve values cannot be ascertained until the details of the new arrangements have been settled. It has, however, been found possible to make certain experiments, involving the probable receipts and expenditure over a con- siderable future period, and as the result of these we are satisfied that an average rate of 4 per cent. per annum on the whole of the funds and credits of the Approved Societies will be realised in any circumstances likely to arise over the next 25 or 30 years; we consider, accordingly, that this rate may be adopted, instead of the present rate of 3 per cent., in revising the financial basis of the system. It is, however, an integral part of our proposals that the rate of interest credited on the Reserve Values should continue to be 3 per cent. We rely on the high rates secured on the actual investments to produce the average rate of 4 per cent. 8. In coming to this conclusion we have considered it unnecessary to look beyond the period, estimated at about 380 years, over which the redemption of reserve values will extend. As soon as the completion of this operation becomes imminent, the question of the future use of the contributions applied to the service of reserve values will arise, and an opportunity for meeting any difficulty, should such have developed, in connection with the continued maintenance of the basic rate of interest will thus present itself. 9. One further point requires attention in connexion with this subject. If the current rate of interest falls the value of securities yielding high rates of interest will rise above their cost prices and if, in this event, investments are realised with the object of increasing surplus, and the proceeds re-invested, the average rate of interest earned will be reduced. The same result will follow if securities which have appreciated in value are written up to the market prices. If, therefore, so high a rate as 4 per cent. be adopted as the basic rate while a substantial part of the assets, namely the reserve values, is only yielding 3 per cent., it will be essential to place a measure of control upon the results of any operations by which the average rate of 4 per cent. might be endangered. We take it that the power to vary their securities is an integral part of the self- governing functions with which the Approved Societies are endowed ; and that to discourage unnecessary or perhaps ill-timed realisation of investments the valuation regulations must continue to include a provision under which investments are taken at their market values for the purpose of the quinquennial valuation. Taking a long view therefore, it would seem that further capital accretions to Approved Societies’ funds are to be expected from the future appreciation of security values. In our opinion these accretions should be reserved for the purpose of supplementing the interest income of the Benefit Fund so far as is found necessary to secure the rate of 4 per cent., and only the balances remaining, after this purpose has been served, treated as realised assets. This is a matter for regulations the precise form of which, having made the purpose clear. we do not regard as falling within our province, Tarr PROBABIITIES OF SURVIVORSHIP. 10. The element of survivorship from age to age exercises an important influence on the liabilities arising under the National Health Insurance system, and in reviewing the financial basis of the system the assumptions made in this respect must be carefully examined with reference to present experience and tendencies. It is perhaps unnecessary for us to enter upon a lengthy explanation of the effect of variations in mortality upon the finance of a system of insurance against incapacity. but it will

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