Page:The American Cyclopædia (1879) Volume X.djvu/431

LIFE INSURANCE 425 but we know that till a very recent period the " Amicable " placed no reliance upon the sci- ence of biological contingencies. It was pure- ly mutual ; each member, without regard to age, contributed to the common fund a fixed entrance fee, and also a fixed annual payment per share on from one to three shares. At the end of each year a portion of the fund was divided among the heirs of the deceased mem- bers in proportion to the shares held by each. Thus the amount insured depended on the number who died, subject to the vote of the members who survived as to the portion of the common fund which should be divided. At first, for the sake of accumulating a fund, only a small dividend was voted ; it was gradually enlarged from 30 to 90 a share. As the annual payment was 5 a share, this at best was very dear insurance, except for bad or old lives. There was no medical selection except so far as the members themselves exercised it in voting in new members. After some expe- rience this was done with considerable caution and judgment ; the age of admission was limit- ed to 45, and there were restrictions in regard to dangerous occupations, travel, and military service. After a considerable fund had accu- mulated, the dividends became larger by rea- son of the smaller proportion of deaths and the greater liberality in voting the amount to be divided. From 1760 to 1780 it averaged about 174 a share, which would have been a fair amount supposing the members had all entered at the age of 40. It was not till this society had existed more than a century that anything like modern equitable and scientific life insurance was engrafted upon it. Prof. De Morgan described it in 1838 as "founded rather on the principle of mutual benevolence than mutual insurance." It lived to a very respectable age by the wisdom of accumula- ting a considerable fund, and not promising a fixed amount of dividend or insurance, but died at last for want of science to graduate the payments according to the risks, and to exclude bad ones. In 1760 Thomas Simpson, who 20 years earlier had published a valua- ble work on life contingencies, in connection with Mr. Dodson, another mathematician, ap- plied for a charter of the " Society for Equita- ble Assurances," on the plan of graduating the premium to insure a prescribed amount accord- ing to the probabilities of living after the age of entry. But the crown refused a charter, on the ground that it would be unjust to existing companies which had paid large sums for their charters, and because it was an untried specu- lation depending " on the truth of certain cal- culations taken upon tables of life and death, whereby the chance of mortality is attempt- ed to be reduced to a certain standard." Mr. Simpson died the next year, but in 1762 the famous "Equitable" was founded, without a charter, by a deed of settlement. It does not seem to have achieved much success till it had called in the powerful aid of the Rev. Richard Price, the author of " Observations on Rever- sionary Payments " (1769). He gave the Equi- table its Northampton table of premium rates, as well as some excellent advice about the ne- cessity of not being led "to check or stop the increase of its stock too soon " through the en- couragement arising from the possession of a large 'surplus, meaning by this the necessity of keeping an adequate premium reserve. By a fortunate error in the Northampton table, the premiums were so high that the " stock " or re- serve increased rapidly, -and so much real sur- plus over the necessary reserve accumulated, that the society began in 1791 to make addi- tions to the policies, which, though small at first, were enlarged every ten years, till one who had entered in 1790, at the age of 30, for 100, in 1849, at the age of 89, was insured for 626, without any increase of the original an- nual premium, which was 2 13$. 4d. This large addition to the old policies is not so won- derful when we consider that Dr. Price had laid down the maxim that "the plan of a society ought always to be such as that the loss ari- sing from discontinuance of payments should fall on the purchaser, and never on the society." Hence, as any discontinuing member forfeited his share of the society's stock or reserve, the persisting members had the more ; and it must be remembered that 1 per annum at 5 per cent, will amount in 59 years to 353, so that the premium paid would amount to 940. A fair reserve on the increased policy for 626 would be about 556. The Equitable, arising amid a large number of bubbles, which were pricked by Dr. Price, and adopting his princi- ples and precautions, proved a great success. But whoever reverts to the writings of Dr. Price in regard to the various schemes for the relief of widowhood and orphanage by insu- rance, and for provision for old age by annu- ities and endowments, will be struck with the fact that he looked almost exclusively at the security and permanence of the society, and very little at the contingencies of the individu- al. It does not seem to have occurred to him that provision both for his heirs and for the old age of the insured himself could be secured in the same policy, or that the cessation of the necessity for either provision could be provi- ded Jor in the policy by a stipulation of terms of surrender. Dr. Price is justly regarded as the father of modern life insurance. What has since been done and what remains to be done are mere corollaries to his general propositions. By the writings of Dr. Price and the solid es- tablishment of the Equitable a large number of ill-advised schemes, possessing the same ob- jects and started about the same time, were swept away before they had done much mis- chief. But the great success of the Equitable some years later brought forth a new and nu- merous brood of imitators and rivals. A few of these became strong and healthy institutions, but their history for the most part is one of wreck and disaster. The "Insurance Hand-