230 ON MUTUAL ASSUKANCE, 



insurance at all. My idea of equity, as applied to this subject, is 

 that the original contract should be rigidly adhered to, without 

 reference to subsequent events. A member contracts to pay an 

 annual premium calculated upon the basis of certain rates of 

 interest and mortality. If on the whole the rates of interest and 

 mortality prove favourable, a surplus will accumulate, and will be 

 the common property of the society, independently of the sources 

 from which it- may have been derived, and should be dealt with 

 in the same manner as if it had been caused by a rise in the 

 value of securities, or otherwise accidently. 



The observed rates of interest and mortality, and calculations 

 respecting the expense of management, may afford very useful 

 data for the formation of new societies, or for determining the 

 conditions upon which new members should be admitted, but I 

 cannot see that they have any relevancy whatever in estimating 

 the proportion in which an existing surplus is to be divided. 



I will endeavour by an illustration to make my meaning more 

 clear. Suppose that a number of persons should combine 

 together to form a society for the purpose of cultivating land, so 

 as to provide themselves with such quantities of wheat, maize, 

 and hay as they might require, each member agreeing to take so 

 much of each commodity at a certain fixed price, to be paid 

 annually in advance, the agreement to continue in force during 

 a certain time, and the profits, if any, to be divided equitably at 

 fixed intervals. 



If the profits were to be divided according to the principle 

 attempted to be applied to life insurance societies, it would be 

 necessary when a surplus had accumulated to make an accurate 

 estimate of the cost of producing each commodity, and to charge 

 each member accordingly, so as to ascertain how much each 

 had contributed to the surplus. If wheat were found to have cost 

 much less than had been anticipated, then the member who had 

 agreed to take wheat only, would receive a large share of the 

 profit. If the cost of hay agreed exactly with the estimated 

 price, then the man who took hay only would receive no profit. 

 If there was a loss upon the maize, then those who took maize 

 should, on the same principle, instead of sharing in the profit, be 

 required to make good the loss. It would be contrary to the 



