Alliance, Norwich Union, Economic, European, Atlas, } added to policy, or applied to diminish premium. } Law Life, } added to policies in proportion to amount of premiums paid. added to policies and interest on bonus paid annually. a reversionary sum equal to present bonus added to policy. applied to diminish premium, or paid immediately. a sum equal to the average annual payment, received by the society during the last five years, divided amongst those who die in every year. added to policies on the most equitable principles of division. } unknown. 'Those offices which merely add the bonus to the policy are wrong on both the grounds which interest the public. In the first place, they appear to give as a bonus a larger proportion than they in reality do give, and they also distribute that bonus very unequally; the older lives having a much larger portion than the younger. In some cases, an old life will receive twice as much as a young one, and yet the same rate per cent. is awarded to each.'-pp. 84, 85. 3. Of the Periods at which the Profits are assigned. This is also a most important point to the assured, as the longer the intervals are, the fewer will the members be who have a chance of sharing in the surplus profits. The most equitable mode would undoubtedly be that of striking a balance annually, by which the state of their accounts might be accurately known. But the Assurance Offices object to this, alleging the difficulty of the calculations requisite to ascertain the value to be assigned to the several assurers. Mr. Babbage, who must be allowed to be a competent judge of such matters, sees no difficulty in doing this. The offices, however, have other and more potent reasons for adopting long intervals; one of which is, that the longer the interval, the more largely and quickly the capital accumulates, and the greater will be the sum to be assigned to the assurers, and consequently, the greater the eclût which the office derives from it; but so far is the bulk of the assurers from being benefited by this specious appearance, that they run an additional risk of being seriously injured by it. Another reason is, that annual divisions of profit would be liable to fluctuations; but, as Mr. Babbage observes, the remerly is ob vious. Instead of determining the bonus by the profits of the preceding year alone, it may be made from an average of any given number of preceding years: the larger this number the more uniform its amount will be.' This method, he says, has been adopted by the Amicable Society, and may be considered as a valuable addition to their plan. It may be so; but when the numbers and ages of the assurers are perpetually fluctuating, any annual average, we conceive, must be loose and erroneous. It would be quite sufficient, for all the ends of justice, if, at short periods of three, five, or seven years, the ascertained sum to be appropriated should be added prospectively from year to year to each policy till the next succeeding period. The following table shews the periods at which the division of profits takes place at the respective offices mentioned therein : Upon this part of the subject, Mr. Babbage makes the following judicious remarks: The whole object of assurances is, to render that certain which nature has made uncertain. A person in health and employment knows that, if he lives a few years, he will be able to leave at his death a competence for his family; but he knows also that, from the uncertainty of life, he may be cut off in a year or in a month, and leave that family unprovided for: thus situated, he has recourse to an assurance on his life, and he is now certain of leaving a provision for his family. It is this certainty with regard to pecuniary affairs, which it is the object of every prudent man to attain, that as it causes all assurances, so it ought to be our guide in arranging the plans by which they are effected. In accordance with this maxim, of rendering everything certain which the nature of such institutions will admit, it is right that the periods for dividing the profits should be fixed, as well as that their occurrence should be frequent. The inconveniences arising from indefinite periods are, that the value of policies, subject to such additions, is less than if those periods were fixed; and that it is possible for those who may have a knowledge when such divisions are about to be made, to purchase at an insufficient price the policies of other persons, who may not possess the same information. The 'The periods of dividing the profits at the Equitable have varied at different times; they are, however, now fixed at intervals of ten years. This distance considerably diminishes their value; for if a person commence insuring at fifty-four, his chance of receiving a bonus at the first decennial division is about three-fourths, and his chance of gaining a second is nearly one-half. The greater the age of the assurer, the more injurious to his interest are such distant periods of divisions. 'The tendency of long intervals between the times of declaring a bonus, is to cause too much to be paid to one class, by giving too little to another class of assurers; those who live longest will be the gainers, whilst those who are short-lived, or who die immediately before a division, will be the losers.'-pp. 105, 107. We shall only observe in this place, that the office which assumes the name of Equitable is the only one in existence which extends its period of division to ten years; and, if our readers adopt the reasoning of Mr. Babbage, which we most decidedly do, the Equitable must be considered, in this respect, the least of all others entitled to that name-but more of this by-and-by. 4. Of the Periods at which Assurers become entitled to partici pate in a Division of Profits. Most of those Assurance Companies which divide any part of their profits with the assured, require the latter to have paid up a certain number of annual premiums before they can be allowed to participate in those profits. As it is quite right and prudent that the offices which divide the profits should take from the assurer a considerable excess of premium, in order to prevent the fluctuations in the number of deaths rendering any further call necessary, or, which would be still worse, causing the insolvency of the office; so is it also prudent to defer, for a short time at least, the division of profits, say for three, five, or seven years, as the circumstances of the particular office may seem to require. The number of payments which qualify to a participation of those profits we will suppose to be six; after which, at the periodical declaration of a division, a certain per centage is to be added annually to the policy. Then, an assurer at an office requiring six premiums, if he commence in the first year after a distribution of profits, where the period is five years, would not be entitled, according to the prevailing practice, to his first addition until he has been assured nine years (4+ 5); if the period be seven years, he will be required to make thirteen payments (6 + 7) before he can participate; whereas, if he had commenced his assurance in the last year of the period, he would receive his first addition, in one case, in six years, in the other, in seven years: should he survive to the next following period of distribution, however, it amounts to nearly the same thing, as the additions will have a retrospective effect. This difference, arising from the time when the the assurance is made, is an inconvenience that cannot well be remedied, unless the additions were, as indeed they always in justice ought to be, but are not, immediate and prospective; by any other rule, the widow and orphans of the deceased assurer, in nine cases out of ten, must suffer an injustice. The uncertainty of human life, and many other circumstances, render it impossible for most assurers to select their own time of becoming such; and this great inequality, therefore, in the periods, at which each is to commence receiving back some portion of the excess of premiums paid by him, makes the assurance on lives, according to the present practice, to partake rather more of a lottery than it is desirable it should; the only remedy for all which evil is, as we have stated above, that each assurer should have the addition made to his policy the moment he becomes entitled, and not be compelled to wait to the period when the division is made, before which happy day-to give one sufficient reason—he may have died. But if the inequalities of a quinquennial and septennial division be, in practice, so considerable, those of a decennial period must be enormously more so. 'An interval of ten years between the divisions of the profits of a society, combined with that regulation which allows those only to participate in them who have paid six annual premiums, is alone sufficient to postpone to a considerable distance of time any additions which can be made to the policies. If the first premium is paid in the fifth year, before a division of profits is to take place, then, as the sixth premium will be paid just after a decennial division, the assurer will not receive any addition to his policy until the expiration of fifteen years. 'If he had commenced his payments one year sooner, he would have had his first bonus at the end of six years.' This is the evil of a restrospective addition of which we have been complaining; and as the Equitable is the only office which adopts the decennial period, the case here stated can only be meant to apply to that office; but we are willing to think, that Mr. Babbage is labouring under a slight mistake: his interpretation of the rule gives what must be considered as little short of a gross fraud upon the assurer. The words of the bye-law are, that in case any order for an addition made to policies, &c., such order shall not take effect, with respect to any policy, before six annual payments shall have been made thereon; but as soon as six such payments shall have been made, such policy shall, for the time then to come, be within the effect and operation of the order for such addition, as if such order had been made immediately after such six payments.' Now, we understand the words within the effect and operation' to signify, that having made six payments, the assurer is immediately to have the benefit of of the annual addition ordered at the preceding decennial period, and that it is meant to be prospective. We are the more inclined to give it this interpretation, from what Mr. Morgan further states in elucidation of the order, viz. that if such order should be made to take effect generally, from the first day of January, 1820, for the space of ten years then next following, a policy effected in the year 1819 shall not be within the operation of such order, until a payment shall be made thereon in the year 1824; but such policy shall be within the operation thereof for every payment that may be made thereon, in the five years following the year 1824; and the like as to other cases.' If, then, the words within the operation' are not purposely meant to 'palter with us in a double sense,' to be used either prospectively or retrospectively, as the directors may think fit,' Mr. Babbage is wrong; if the latter interpretation, and the latter alone, was contemplated, he is right. Mr. Morgan, besides, in his address to the General Court, held in December, 1809, thus explains the operation of this intended order, which was to be promulgated on the 10th of March following, but which is now of little importance either to those who then were, or to those who subsequently became, assurers at this office; as, like many other salutary regulations, it has passed into a dead letter. It shews, however, the vacillating opinions and practices of those who manage this great establishment. From the 1st of January next (1800,) it is proposed that every person already assured shall have an addition to his claim of 21. per cent., for every payment after the one made in December, 1809, so that to all the claims in 1810 the sum of 21. on every 100l. shall be paid, over and above the addition already granted;-in 1812 the sum of 41. ; in 1813 the sum of 6l.; and so on, increasing 21. in every succeeding year, till in 1819 the sum shall amount to 187. on each 100l.: and at the end of the next decennial investigation, if the circumstances of the society should admit of a more extended addition, these lesser ones shall cease as to the preceding interval, and commence again in like manner in the succeeding interval, and be continued till another decennial investigation takes place; so that in no year will any member have reason to complain that he does not participate in some part at least of the profits of the society. And where shall another society be found that has done so much for its members, or that acts in a manner so truly liberal and disinterested? With an immense capital, and an unbounded credit-with profits continually increasing, and the prospect of new benefits every year, it claims no exclusive privileges for any of its members, but admits all on equal terms, and gratuitously allows those to partake of a surplus which has been accumulating for forty years before their admission! Should the additions now proposed be adopted by the society, every person who shall have been assured ten years will have 251. per cent. added to his claim,-if he shall have been assured twenty VOL. XXXV. NO. LXIX. C |