The republic. [volume] (Washington [D.C.]) 1849-1853, 1851-10-21
Life Assurance.
PROPRIETARY AND MUTUAL oFFIcEs-DIsTRIBU.
TON OF PROFITS.

we are naturally led TO inquire into the utility
Of those large capitals which form the adver
tised bats of not few. Proprietary companies
originally consisted of bodies Of shareholders,
who, in consideration of guaranteeing the pay
ment of the sums assured, when due, retained
the entire profits of their transactions. This is
too plain an act Of monopoly for the present
day. Instead of strict proprietary offices, we
have now, for the most part, what are called
mixed mutual and proprietary offices, consist
ing of shareholders who profess TO guarantee
security, and who graciously give to assurers
the option of participating in profits arising from
their own payments, or of efecting policies for
fixed sum. In these cases assurers are re-
| garded as customers, from whose transactions
| profit will be obtained ''When such compa
MES are announced to the public" says recent
writer, (and the remark applies equally to
pure and mixed proprietary companies 'the
greedy capitalist is eagerly invited to become
partner, by showing the universally large profits
such companies make, and that the stocks Of
similar societies are selling in the public mar
ket at profits from one to some hundreds per
cent. As soon as the company is established,
such public announcements Of profit immedi-
ately cease. 1t is no longer how profitable are
such investments, but the constant tale to the
public is, see what large capital we are
riskng for your benefit" We think we were
justified in asserting, in our first article that we
cannot have more conclusive proof of popular ig-
norance upon this subject than is afforded by pub
lie advertisements. Nothing is more common
than to read, at the head OF these announce
ments, :" subscribed capital, half million
'.capital 5000, 000," and so on; and these are
ordinarily interpreted to mean sums actually
invested 10 guarantee the fulflment OF
the company's obligations. In reality, how
ever, very small portion of the advertised
capital is actually paid up and invested.
! All, therefore, that the term subscribed
capital" means is, that the proprietors en-
gage to raise the specified sum if it be re-
quired to meet the claims of assurers. But as
! Professor DE MoRGAN-the highest authority
we can quote-avers that ''there is nothing in
the commercial world which approaches even
remotely to the security of well established
and prudently managed insurance Office" and
as disposable fund is constantly arising from
the premiums received, which will be contin-
ually increased by the interest accruing upon
it, even after deducting the claims consequent
upon an average number of deaths, it is evi-
| dent that the capital for the use of which the
assured are made to pay is not necessary for
the protection Of their interests. The capital
is, in fact, paid for out of premiums; and it can
be shown, we think, that, after comparatively
short period, the accumulated dividends paid
to the shareholders out of the premiums will
have amounted to sum at least equal to the
proportion of capital which has been advanced.
Assurance having long ago ceased to be a
! speculation, and become certainty, the mu-
iual plan is that which 'commends itself to the
unbiased judgment; not only because the mem
! bers Of society are, and ought TO be, the sole
Possessors of profits created by their own trans
actions, but because it proceeds on that great
idea of voluntary mutual support which is the
snrest bond of social prosperity and peace, ad
hitting, as it does, of the admixture of every
class and circumstance of society, all uniting to
cheer the heart of the mourner, and to protect
the interests of the orphan, at period which
would otherwise be attended with ruinous EN-
| barrassment.
Bonuses-usually called proits-form an
other striking illustration of the extent to which
erroneous notions prevail. After the advertised
heading subscribed capital" and, in the ad-
vertisemehts of old-establlshed mutual socie-
ties, we frequently read, Large bonus de-
clared at last investigation" in other cases
] boI h,
that have been allotted 10 policies which have
existed beyond certain time. Numerous case
might, indeed, be cited in which the value of
policies has more than doubled before the death
of the assurers. Now, we do not dispute that
the advertised bonuses are granted just as they
are described; nor do we desire to be understood
to object TO the doubling Of mans wealth as
an unpleasant occurrence But we must not
suffer ourselves to be deceived by mere words
or figures. Let us see how these bonuses arise,
and we shall then be able to say in what light
they ought to be regarded.
Profits, in mercantile sense, are understood
to mean gain, derived from transactions to
which degree of uncertainty attaches; out OF
which transactions, IN the first place, man
must obtain remuneration for labor expended
and capital advanced. He enters into these
transactions with an expectation of gaining,
but with knowledge that he may lose. Here
the term profit is legitimate. But in assurance
societies there is, humanity speaking, no longer
this uncertainty. Unless we suppose that a
law of nature may be reversed, we are bound to
believe that rates of premium, founded on an
ascertained law of mortality, are safe; and all
that is acquired by societies, in addition to what
is needful to meet this law, must, strictly, be
regarded as evidence that higher premium
has been exacted than was actually called for.
The proper light in which TO regard these bo-
muses. is, then, this: They are the return to
assurers of those portions Of their premiums
which they ought not TO have been required TO
pay. Instead Of being profit, the bonuses have
been paid for in full. Except in extraordinary
instances. it may be said that when person