BY M. B. PELL, ESQ. 233 



because the shareholder had contributed nothing to the surplus, 

 would not be more absurd than it would be to condemn as in- 

 equitable a system, under which a member of a Mutual Life 

 Insurance Society might, under certain circumstances, receive a 

 larger share of the profits than he had himself contributed. 

 When a man becomes a member of a Mutual Insurance Society, 

 he not only insures his life, but, to a certain extent, he engages 

 in the business of life insurance ; he is at once insurer and in- 

 sured, and as insurer he may be considered at any time to have 

 invested in the business a sum equal to the present value of his 

 policy, and is entitled to a proportional share of the profits in the 

 same way and for the same reason that a shareholder in a pro- 

 prietary company is so entitled. 



This present value is small at first, and increases with the 

 duration of the policy, but where the premium is paid in a single 

 sum. the policy has at once a considerable value. In estimating 

 the present values of the policies at any investigation, it is 

 necessary of course to take into account any previous bonus 

 additions which may have been m&de, every such addition 

 amounting in reality to a new paid-up policy. 



Any system of distribution which depends upon* the assump- 

 tion that the loading is the principal source of profit, the " bonus 

 producing power " of the policy, as it has been called, is quite 

 inapplicable in this colony. In England the rates of interest 

 upon good securities are tolerably uniform, and the probability of 

 any great fluctuation very remote, so that it is safe to calculate 

 upon a rate of interest a very little less than what may actually 

 be obtained. But here, although a comparatively high rate of 

 interest may be obtained, its continuance cannot safely be de- 

 pended upon, so that there is necessarily a wide difference 

 between the assumed and the experienced rates. This has been, 

 and will no doubt continue to be for many years, one of the largest 

 sources of profit to Life Insurance Societies in this colony. 



By a method explained by Mr. Meikle in a paper recently 

 published in the Assurance Magazine, the contributions from 

 interest alone by the several members of a Society may be cal- 

 culated with exactness upon the supposition that the members 

 die according to the assumed rates of mortality. By a similar 



