ON THE NATURE OF INSURANCE. 241 



the same hour in which the executors of a deceased 

 contributor received a claim of 100/. The hundred 

 pounds,, which, in the theory of the process, should be 

 sold out, or otherwise set free, to meet the claim, is in 

 its practice supplied by the new premiums, so that the 

 premiums of those contributors are making interest from 

 the hour in which they are paid. But there is always an 

 unemployed sum lying at the banker's. This is true; but 

 the interest of that sum is the salary of an officer of the 

 institution, namely, the banker himself. All such ex- 

 penses paid, I believe it may be stated, with correctness, 

 that an investment office can net 3^ per cent, compound 

 interest. Hence I/., improved during the average life 

 of an individual aged 20 years, would become 4*/. 

 The institution we have hitherto described is simply 

 an office for the investment of premiums and the equal- 

 ization of results : it becomes an insurance office when 

 it undertakes to pay a fixed sum for a fixed premium, 

 at the end of a given time after the decease of the party. 

 It then begins to incur a risk of a twofold character : 

 in the first place, the lives which it undertakes to insure 

 may not die, one with another, in or near the same 

 manner as those from which the tables were constructed ; 

 in the second place, the rate of interest, upon which it 

 calculates the premiums, may be higher than it is after- 

 wards able to obtain. According to the Carlisle table, 

 the premium which should now be paid to insure 100/. 

 upon the life of an individual aged 20, is one pound 

 seven shillings, or 1-32/., at four per cent. According 

 to the Northampton table, and at three per cent., the 

 same premium should be 2'2/. Taking the first pre- 

 mium, and assuming its table, the office will not be 

 sure of avoiding loss, until the party has lived 35 years; 

 by which time the premiums, with their accumulated 

 interest, will have passed 100/. It is a little more 

 than 2 to 1 that a life of such an age shall live beyond 

 32 years after the contract. Taking the premium of 

 the Northampton table, the party must live 28 years 

 before the office can gain by him ; and it is about 10 to 



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