In the construction of a table of premiums, three points must be left to the judgment of the constructor, the rate of interest, the table of mortality, and the addition to be made for expenses of management. and probable fluctuation, or discrepancy between the predictions of the table and tho events which actually arrive. The third point would not arise if, as was once the case, the table of mortality made life much worse than the actually prevailing state of things shows it to be. Security against adverse fluctuation is thus taken in the choice of the — — table; and this was done by the older offices, which chime the North amide° Table ;—by the Equitable, fur instance. (Compare the mean duration of life In the Northampton Table with that of the Equitable experience, in ilORTALITY.) But we hold decidedly Ly the method of choosing a true table, and augmenting the premiums given by it as a safeguard against fluctuation ; and for this reason, that wrong tables are usually unequally wrong, making different errors at different ages, and thus augmenting different real premiums by different per centages According to the Carlisle Table (which we prefer for the purpose), of 5642 'lemons alive at the age of 30, 301S are alive at 65, whence the chance of living till the second age is 3018+5642 or '5525. Now, by appl,v1ng calculation to this we find that an which would have practiatl certainty (thousaude to one for it) that, so far as this instance is concerned, the office should not be injured by adverse departure of event. from tables, must make provision for twenty-five deaths, at least, in the period above-mentioned, more than the tables Predict. And this even on the supposition that the table itself can be certainly reckneed ills° as representing the law of mortality of the whole Maur-able population. It would be a very long process indeed to apply calculation in detail, so as to form • well supported idea of the kiruper amount of precaution against fluctuation ; and the question is mixed up with another, to which we proceed.
The rate of interest to be assumed is an element which requires the greatest caution. lt, must be a rate which can actually he made, and therefore prudence requires that it should be something below that which may reasonably be looked for. To show how powerful an agent it is, we shall repeat the example already given, of the 5642 insurers for twenty years, on the supposition that the office which charges as for 3 per cent, finds itself able to make 3i per cent.
It thus appears that the office leaves off with an accumulation of 15,4411. nearly ; and if it be lucky during the first years, it may be said to be safe (as we find) against any fluctuation for which there Is an even chance, by the increase of interest alone.
Take what amount of precaution we may, an office must, at first starting, depend upon something either of capital or guarantee. Even a mutual office must raise something nt the outset. Tables must be constructed with very large additions to the calculated premiums. which are to meet the very earliest contingencies alone; indeed it is difficult to say what addition would be too large. But this point It is unnecesary to insist on, siuce we can hardly suppose it possible that any set of men would found an office with no resource except premiums from the very commencement. Supposing proper precautions to be taken, we imagine that an addition of 25 per cent. to premiums cal ! ciliated from the Carlisle Tables at, 3 per cent. per annum, is ! to place a mutual office upon a sound footing, and to give a very great prospect of a return in the shape of what is called profit. It never has been found that an office charging at this rate has been without surplus of some kind.
This surplus has been called by the inaccurato name of profit, whereas it is really that part of the security against fluctuation of interest and mortality which has been found to be unnecessary. In mutual offices it is to be returned to the assured in an equitable manner; in purely proprietary offices it is really profit to the pro prietors, whose capital has yielded them the ordinary interest, since by hypothesis none of it has been necessary to meet claims, and they therefore share among themselves the residue of the premiums. It is impossible to avoid this surplus in a well-constituted office, for the mathematical line which separates surplus from deficiency cannot be expected to be attained, so that those who would not have the latter must take care to have the former.
The questions connected with life assurance, kc., have become so many and so important that it is impossible to enter on the subject, with reference to the points actually discussed in our own day. The scientific reader will find in the pages of the Assurance Magazine,' materials for thought on most of these subjects. For others, we know of no work which gives so mach information, and which so well enables the reader to refer all stateffients to their real sources, as an anonymous work, 'The Assurance Guide and Handbook,' London, 8vo, 1857 (published by W. S. D. Pateman, pp. 440). This work professes to be intended for insurance agents, and, so far as we can find, has no leaning to any particular offices or systems.