LIFE INSURANCE 433 Ms reaching 40. The only insurance resources are columns A and B, and these ought to be abundantly sufficient both for the claims and expenses of that branch of the business. The extra interest over 4 per cent, of the self -insu- rance part will suffice for its own expenses, and should generally return some surplus. But the company must be ill managed or ill con- structed which draws upon it for the expenses and claims of the insurance part. No. l.-DEATH OR 40. Gross Premium, $132 60. Net Premium, $108 09. AGE. INSURANCE. SELF-INSURANCE. A Margin, or " loading." B Normal cost of insurance. C Risk. D Insurance value. E Deposits. F Reserve at end of each year. 82 $23 91 23 91 23 91 23 91 23 91 23 91 23 91 23 91 $7 52 6 73 5 85 4 89 8 84 2 67 1 40 00 $894 79 78455 668 98 547 79 420 66 287 22 14715 00 $29 80 23 37 17 47 12 18 7 66 4 01 1 40 00 $101 17 101 96 102 84 103 80 104 85 106 02 10729 108 69 38 $105 21 21545 831 02 452 21 579 84 712 78 852 85 1000 00 34 85 36 37 88 39 40 No. 2.-DEATII OE 75. Gross Premium, $26 67. Net Premium, $19 05. 82 $7 62 $8 82 $988 84 $174 70 $10 73 33 . 7 62 8 38 977 80 174 60 10 67 $11 16 34 7 62 8 44 965 34 174 40 10 61 22 70 85 7 62 8 52 952 99 174 15 10 58 34 66 86 . 7 62 8 58 940 21 173 88 10 47 47 01 37 7 62 8 64 927 01 173 59 10 41 59 79 38 7 62 8 70 913 82 173 20 10 35 72 99 89 7 62 8 76 899 16 172 79 10 29 86 68 40 100 84 The "margins" of these two policies (column A) are those usually applied, the first being 22 per cent, of the net premium, and the second 40 per cent. Expenses are usually assessed ac- cording to these margins, with what effect will appear presently. Let it be observed that the insurance done by the company (column 0) is always the face of the policy less the " self- insurance " of the year. Let us suppose that the holders of No. 1 and No. 2 have lived through eight years. ' The insurance which the company has done for each is the sum of the numbers in column against the eight years. For No. 1 it is $3,751 14; for No. 2 it is $7,564 17, a little more than double. Suppo- sing the death claims to have been according to the table, and that the expenses have consumed half the margins (not an unusual experience), the insurance enjoyed by No. 1 has cost him the sum of column B plus half that of A= $128 54; and that by No. 2, $98 82. That is, at No. 2's rate, No. 1's insurance ought to have cost him only $49. If No. 2 paid enough, No. 1 paid at least $79 54 too much. As the pol- icy No. 2 that was to extend beyond the eight years had a much greater interest than the other in having the company enlarged, in pro- portion to the insurance it enjoyed during the eight years, it would seem it ought to have been assessed for the expenditures devoted to that object in a higher ratio. This brings us to the question, What is the measure of a member's interest in the company, as an in- surance company ? Plainly it is not the face of the policy or the premium, one or both, alone. A person who has a series of larger risks to be carried through 40 years, sick or well, if he should live so long, must have a larger interest than one who has a series of smaller risks to be carried only eight years, though the premium of the latter should be larger and the face of the policy the same. He may have a greater interest in it as a sa- vings bank, and this is measured by the depos- its. It is difficult to discover any nearer mea- sure of the interest of a member in the insu- rance, than the present value of all the insurance contracted to be done under the policy, and this is found by discounting both by interest and mortality all the normal costs in column B. This process, already explained, gives col- umn D, in which is placed against each age, under the head of "Insurance Value," the present value of all the future normal costs, including that just due. The insurance values given in No. 2 include, of course, the dis- counted normal costs of the 59 years of possi- ble insurance not included in the table. If the self-insurance fund accumulated on a policy can never be used properly by the company for any purpose but to pay the claim arising on the policy itself, it becomes an impor- tant question how far the company can just- ly appropriate it as a penalty for the non-ful- filment of the contract. The loss which the company will sustain by the non-performance of the contract can have no appreciable rela- tion to the self -insurance or accumulated de-
