company should possess. The Actuary and his assistants should have a full grasp of the details, with technical knowledge to solve the more intricate problems; but general principles should be mastered by the other officials, so that all departments of the work may be conducted in harmony. LIFE ASSURANCE PRIMER CHAPTER I. PRINCIPLES OF LIFE ASSURANCE, AND OF LIFE ASSURANCE Mutual COMPANIES. The general principle of Insurance consists in the Protection. combination of many persons to protect each one against unforeseen loss. The principle is perhaps most easily understood in connection with such contracts as those of Fire Insurance. The risk of fire is slight, and the loss when a fire does occur is frequently heavy. If this loss were borne by one person alone it might mean ruin; but if he had combined with some thousands of other persons, all holding property, and all insuring against fire, then the loss when spread over the whole number of persons would be the merest trifle to each. It is assumed that the danger of fire in each case is the same. When one class of property is more liable to fire than another, a suitable variation is made in the premium. The same principle runs through life assurance, though in a more complex form. If all persons who combine for life assurance were of the same age, the position would be simple, and much the same as fire insurBut although any individual of whatever age may die at any moment, yet the general fact remains that young men live on the average for many more years than old men, and to secure equity the premium payments must be graded according to the age at entry—that is, the age when a policy is first taken. Then, too, different people want different kinds of assurance, as is explained in the next chapter, and each kind of policy has its own scale of rates, so that there is a good deal of complexity even in the simpler phases of life assurance. ance. Means While the principle of mutual protection is at the of foundation of life assurance, one very forcible arguSaving. ment in its favor at the present day is that it affords one of the best means of saving money. Human nature is weak and good resolutions to set apart regularly a portion of one's income are seldom carried out. Even if a considerable saving has been effected, the temptation of luxury, or a speculative investment, may nullify the self-sacrifice of years if the money is lying there ready at hand. The premiums under a life assurance policy come round with unfailing regularity, and when once they are paid the consideration that the money is set aside for good reduces the chance of its being spent. Insurance The words "insurance" and "assurance" are gen or erally used with exactly the same significance. Assurance. Probably the most useful distinction which has been drawn between the two is that the word "assurance" should apply to protection against an event which is certain to happen at some time, the date of happening being unknown. Of such nature is Life Assurance. And that the word "insurance" should be applied to an event which may or may not happen. Of such nature are Fire and Marine Insurance, where the property may be insured for an indefinite time without there being any necessity for claiming compensation for loss under the contract. This distinction is, however, purely arbitrary, and is only occasionally used, although suggested by Charles Babbage early in the nineteenth century. "Assurance" is used here because this word has more of an international character, and we should do all we can to promote the universal use of the same word. The initial letter "A" is used in actuarial works with a definite significance, now understood over the whole world. Origin and Life Assurance has grown up gradually, and it is difficult to trace its exact origin, which may have been in the old funeral and burial societies, as these are of very ancient date. They provided that all members of the Society Growth. |