MANAGEMENT OF AN INSURANCE OFFICE. 277 



there is then a surplus of 200,000/. ; which having been 

 accumulated out of premiums, and profits having been 

 regularly paid up to the present time, it may be pre- 

 sumed that the premiums themselves are capable of 

 maintaining this rate of surplus. The office must then be 

 presumed able to pay 120/> for every 100/. insured. 



But it is important to note, that the present rate of 

 profit must not always be assumed as that which can be 

 permanently maintained. Suppose, for instance, an office 

 which begins for the first time to divide profits : its 

 accumulations are therefore, in part, the reserves of profit 

 which should have been added to former claims, had any 

 division of surplus previously existed. The same remark 

 may be necessary when any change is made in the way 

 of dividing profits, since the surplus existing at the 

 moment of the change is the result of a former state of 

 things. Thus, an office which has proceeded injudici- 

 ously, in making too large divisions, may possibly, when 

 it adopts a more prudent system, be justified in forming 

 a system which would require a larger surplus than the 

 one which it actually possesses at the time of discover- 

 ing the error ; for the then existing surplus has been 

 unduly weakened, and is not to be considered as repre- 

 senting the permanent effect of the improved mode of 

 proceeding. 



I have stated, that the percentage which can be added 

 to each 1001. insured should be determined by the 

 average of a number of years. If this number be too 

 great, the incidental fluctuations of mortality may be 

 compensated ; but at the same time the real and secular 

 changes of mortality may be prevented from producing 

 their proper effect. As long as the value of life is in- 

 creasing, too long an average is a defect on the safe side : 

 but if it were diminishing, it might happen that the 

 mean of a number of preceding years would present a 

 higher result than would be consistent with security. 

 As yet the offices have had nothing to encounter except 

 the diminution of mortality, and its consequences ; but 

 T 3 



