MANAGEMENT OF AN INSURANCE OFFICE. 287 



page ; and having ascertained the amount of what each 

 person has paid over and above what was necessary, to 

 consider each person as entitled to the sum which his 

 overplus would purchase at his death, if the bonus be 

 made by addition to his policy ; or to a diminution of 

 premium answering to the annuity on his life, which the 

 overplus would buy, if the bonus be made by diminu- 

 tion of premium. 



The knowledge, therefore, of the real premium is 

 necessary for an equitable distribution of the surplus, 

 upon the supposition that the said distribution is made 

 on the principle of dividing the surplus fund among the 

 contributors in proportion to their contributions. Every 

 plan which, ceteris paribus, makes equal additions to the 

 policies of different ages, is inequitable. I repeat again, 

 that in the preceding cases, the principle of division 

 ought to be considered as arising from the combination 

 of an insurance office and a savings' bank ; the por- 

 tion of premium which covers the risk of life being 

 paid to the former, and the remainder to the latter. 



The third method of division supposes the establish- 

 ment to be entirely an insurance office, and not at all 

 a savings' bank. Its object is to make the returns to 

 the different members both equal and equitable. Con- 

 sidering that the real risk of life is not perfectly ascer- 

 tained, and that if it were it would not be safe to re- 

 duce the premiums to the lowest theoretical safety-point, 

 such an office, instead of demanding a premium avowedly 

 too high for the sum insured, and engaging to return 

 all or part of the surplus, considers the sum insured as 

 indefinite, except only in so far as a minimum is named., 

 below which it is not to fall. Thus such an office, 

 receiving, say 3L of premium, from a person aged 34, 

 for what is called, in compliance with custom, a policy 

 of 100/., does in fact make the following bargain: The 

 office engages to return, at the death of the party, let 

 that take place when it may, such a sum as will represent 

 the average accumulation of an annuity of 31. continued 

 during the life of a person aged 34, be that sum more 



