286 



ESSAY ON PROBABILITIES. 



good system, however, the difficulty of managing the 

 details of such a scheme would not be so great as at 

 first sight might be supposed. Upon its principle hang 

 the two first plans of division mentioned ; namely, 

 periodical additions to the policies, and periodical di- 

 minutions of premuim. In both of these, the advantage 

 of the insured is increased by the length of his life ; 

 that is to say, the excesses of his premiums are placed 

 to his credit in the first, and considered as having been 

 prospective payments of his future premiums in the 

 second. But nevertheless there runs through the offices 

 which adopt these plans more or less of a practice which 

 prevents the surplus from being divided among the in- 

 . sured in equitable proportions. Suppose that there is a 

 septennial bonus, as it is called, which was declared in 

 the year 1830. Immediately after the award, two 

 persons, A and B, aged 30 and 60, enter the office each 

 upon a policy of 1001. , and were both alive when the 

 bonus of 1837 was declared. This bonus is generally a 

 percentage, not upon the amount of premiums paid, but 

 upon the sum insured, and both would have the same 

 addition made to the 1 001. for which they have insured. 

 But have both contributed to the accumulations of the 

 office in the proportion which would render this mode of 

 division equitable ? To consider this point, remember 

 that a promise to pay, say 5/., at the death of a person 

 aged 67? is of much more value than the same at the 

 death of a person aged 37. The older life therefore 

 receives much more than the younger life. But he has 

 paid much more. That is true ; but at the same time 

 he has occasioned a greater risk to the office, and it is 

 the excess of his premium above the risk (and not the 

 whole premium) which the office acknowledges in de- 

 claring the bonus. From page 270. it sufficiently ap- 

 pears that the premiums of the older ages are already 

 too small in comparison with those of the younger : 

 this mode of dividing the surplus, therefore, only tends 

 to increase the existing injustice. The only remedy is, 

 to make use of the process laid down in the preceding 



