LIFE INSURANCE AS A SCIENCE 



BY FREDERICK L. HOFFMAN 



[Frederick L. Hoffman, Statistician, Prudential Insurance Company of America, 

 b. Varel, Grand Duchy of Oldenburg, Germany, May 2, 1865. Lecturer on 

 Insurance, University of Wisconsin and Wharton School of Finance, Univer- 

 sity of Pennsylvania. Member of American Statistical Association; American 

 Academy of Political and Social Science; National Geographic Association; 

 International Congress of Tuberculosis, London, 1901 ; International Congress 

 of Actuaries, New York, 1903, etc. Author of Race Traits and Tendencies of 

 the American Negro, New York, 1896; History of the Prudential Insurance 

 Company of America, Newark, New Jersey, 1900 ; Tornadoes and Windstorm 

 Insurance, 3d Edition, Spectator Company, New York, 1901; also of a large 

 number of papers and public addresses on insurance, statistics, mortality, social 

 problems, etc. Contributor to the Encyclopedia Americana, article, " Insurance 

 Science and Economics."] 



FOR the first time insurance is included in an authoritative classi- 

 fication of the sciences and properly so as a branch of the department 

 of economics, which, broadly defined, is " the science of the relation 

 between private property and public wealth." The honor of having 

 been the first to assign a definite place to insurance in the science of 

 economics appears to belong to Mr. Henry Dunning Macleod, whose 

 conception of economics comprehends first, material things; second, 

 personal qualities, both in the form of labor and credit; and third, 

 annuities. Most of the works on political economy and social science 

 are barren of references to the third department which, for want of 

 a better term, Macleod defines as annuities, or " the right to receive 

 a series of future payments." Such rights he terms " negative eco- 

 nomic quantities," comprehending all mercantile and banking credits, 

 checks, bills of exchange, terminable annuities, leaseholds, policies 

 of insurance of different kinds, and many other valuable rights, 

 amounting in value to thousands of millions of dollars, of which 

 there is scarcely any notice in the text-books on economics." He very 

 properly remarks that by introducing this class of incorporeal pro- 

 perty, he has doubled the field of economics. 



To establish the relation of the science of insurance to the other 

 great divisions of accurate and systematized human knowledge is 

 the purpose of this address, and the more definitely this relation is 

 established, the more clearly we shall comprehend the true nature, 

 possibilities, and results of insurance as a vast and indispensable social 

 institution of to-day. 



Insurance, reduced to its simplest term, means the application 

 of the principle of association to the equalization of losses resulting 

 from the inherent uncertainty in human affairs. This is the risk of 



