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mits of Europe, which has rendered life insurance difficult of attainment by perso48 under such circumstances. Indeed, the sufferer from disease has found it impossible to obtain insurance on any terms; and the traveller has been only able to procure it at a price, which was held to greatly exceed all possible risk of loss from the effects of a climate, the influence of which on an European constitution no pains had been taken to ascertain.
These have heretofore been the leading difficulties in the way of granting indemnity to the families of travellers, or of persons of declining health; but, in addition to these, it has been found that a large majority of the Life Assurance Societies are so constituted as to be unable, with even the common appearance of justice, to grant such assurances. This difficulty may be illustrated by an example.
Suppose an Institution so constituted as to give one portion of profits to shareholders, and another to policy-holders; or suppose the whole savings or profits to be divided amongst the policy-holders only. In either case, no just distribution of bonuses could be made except in proportion to the amount of premiums paid by the respective parties assured. If then 20 Englishmen, respectively aged twenty, were insured for equal sums, each would pay a corresponding premium; and all being healthy and resident in England, all would have the same probable duration of life; which probable duration would be ascertained by an estimate of the mortality of the whole kingdom amongst persons of that particular age. The same degree of certainty could be obtained as to the probable duration of life of 20 men aged forty. Consequently, there would be no difficulty in distributing bonuses so as to do perfect justice to all, because all would be subject to the same law of mortality, and the premiums would have been calculated, according to the respective ages, under the same law. But the moment any one of the assured
go to a climate, in which a higher rate of mortality prevails amongst Englishmen, he should in fairness be charged a higher rate of premium; and as, in most cases, the law of mortality amongst foreigners in that climate cannot be ascertained with the same degree of certainty as the mortality amongst natives or in England, it follows, that the same principle of division in bonuses ought not to be adopted; and the want of the same degree of certainty will prevent the substitution of any other just mode of division. One instance will suffice to prove this.
. Suppose 1 of the men, aged twenty who in England should pay £1 130 per cent., and 1 of those aged forty who should pay £2 19 4 per cent. were to go the West Indies for a year-it would be absurd to increase each man's premium according to the sum he paid in England; because whilst in Europe the life of the younger man is more valuable than the life of the elder, and consequently he would have been properly charged a smaller premium: whereas, if in the West Indies, the mortality, for a year, amongst Europeans aged twenty, be higher than amongst Europeans aged forty, the
younger man's life in Jamaica would be less valuable than the life of the elder; and consequently he should be charged a larger premium. But suppose both men should die within the year, the fund of premiums contributed by those who remained at home must sustain the loss; and the chance of bonuses to the survivors would be thereby greatly diminished, if not altogether extinguished; whereas, if both the travellers should return with unimpaired health, to England, the others would not derive advantage, from the excess of premiums paid, corresponding with the risk they had run; as that excess would, on the distribution of profits, be carried to the credit of the persons who had paid it, and they would receive proportionate bonuses accordingly. On this statement, gross injustice towards the persons quietly remaining at home is manifest, as they would have been made to run the risk of loss, without a corresponding chance of gain. This injustice, it must also be observed, does not work a corresponding benefit to the travellers, for the very uncertainty as to the rate of mortality to which they are about to be exposed, induces the directors to ask a premium, which they think much more than sufficient; consequently, if the two assured
die abroad, they would have paid a higher premium than the true law of mortality required; and if they return, they only obtain a partial bonus on the excess paid for their voyage.
These observations apply, with equal force, to persons of delicate health who seek insurance from a Company so constituted, because the probable duration of the lives of twenty persons of the same age under chronic diseases, cannot be estimated with the same degree of certainty as the probable duration of the lives of twenty healthy persons of the same age. These considerations lead to the inference that persons should not enter into partnership with each other in bonuses in a Society for life insurance, unless they are all subject to the same law of mortality, or to laws that may be determined with the same degree of accuracy; in other terms, to a rate of mortality deduced from observations as satisfactory as enumerations of population and the certificates of burials of the people of a whole nation.
The practice of charging a round sum to all persons going to the West Indies, in addition to the premiums paid for the respective ages in Europe, is manifestly absurd: and to charge the man of forty a higher rate for the West Indies, than is charged to a man of twenty, for the same climate, merely because the elder life was less valuable in England, would be a still greater absurdity. In fact, the rates of mortality have no connection with, and bear no analogy to each other; and to admit healthy and diseased persons, or those who are subject to different climates, into one institution, as partners, is to be guilty of injustice to all.
These are the considerations by which invalids and travellers have been prevented or deterred from insuring their lives, and there ought to be no question that such insurances should only be granted by a company of proprietors who assure a fixed and settled sum, without increase or diminution to the policy-holder dependent on profit or loss, at rates of premium calculated from tables of the mortality among Europeans by certain climates and by various diseases. Such tables will be sufficiently accurate for the purposes of a proprietary company, who do not increase their engagements by making additions to the sums insured, but might involve the members of a .society participating in bonuses in inevitable ruin.
The situation of proprietors and partners, in unincorporated joint-stock companies, has been so fully' discussed, during the last year, that further remarks would be superfluous; the form of a deed, however, by which such institutions, for the business of Life Insurance, may be safely established, without the aid of Parliament, and without the encumbrance of an Act to sue and be sued, is given in the Appendix.