or. LIFE ASSURANCE OFFICES.
object of Life Assurance, which was to encourage habits of prudence in
individuals, by enabling them to make provision for their families.
When we consider the important nature of the trust undertaken by
the conductors of a Life Office, and reflect upon the exposure to fraud, or
to unexpected difficulties upon the part of the securities, to which, not-
withstanding the most careful vigilance, an office is liable, it will be
readily conceded that loans upon personal security form by no means a
legitimate mode of investing the funds of an office.
Another circumstance deserving attention is, the prospect held out by
offices connected with the British colonies in Australia, that, in conse-
quence of the high rate of interest which they are enabled to make by
investing money in the colonies, they are enabled to base their calcula-
tions upon a higher rate of interest than that which is usually adopted.
This system we consider to be a dangerous one ; for, whatever the rate
of interest that may be obtained at the present time (and a high rate of
interest is generally accompanied by commensurate risk), prudence dic-
tates that the minimum rate should form the basis of operations which
extend over a period of more than half a century.
The advocates for low rates base their arguments generally on the rate
of mortality at the Equitable, without reflecting that the Equitable has
advantages not common to a great number of the other offices. The
spirit of competition amongst offices generally has its influence in pro-
ducing a less careful selection of lives by the directors; and in the
majority of instances dependence must be placed on the judgment and
integrity of agents whose remuneration depends on the quantity of busi-
ness they transact,—circumstances which mav reasonably be supposed to
affect the rate of mortality.
The experience of the Amicable, published a few years back, is by w
no means so favourable as that of the Equitable; and it is very pro- t
bable that other offices have experienced a greater rate of mortality
amongst the lives assured than the Amicable. Operations under the
superintendence of some of the most able actuaries are now in progress
for ascertaining the experience amongst assured lives, by combining the
information derived from various offices.
We may here state that the ruinous effects of charging too low pre-
miums will be many years in developing themselves so as to become
apparent to the public generally, owing to the continued addition of fresh
assurers, and to the premiums on policies for the whole period of life :
being more than sufficient to cover the risk for many years after the |
policy is effected : for instance, if we take the premiums charged by the i
Equitable at the age of 30, we find that £2 13 3 per cent would be a
charged for the whole term of life, but only £1 13 3 per cent for the w
risk for one year only ; nor would the value of the risk for any one year 3
be equal to the annual premium charged, until after the age of 49,
from which period the value of the risk in each year will be greater
than the annual premiums to be received by the office, Assuming the
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