Copyright
D. S. (David Samuel) Margoliouth.

The Popular science monthly (Volume 19) online

. (page 60 of 110)
Online LibraryD. S. (David Samuel) MargoliouthThe Popular science monthly (Volume 19) → online text (page 60 of 110)
Font size
QR-code for this ebook


told that the molecule of mercury contains only one atom, which
neither rotates nor vibrates.

Nor can it be of advantage to science to pass silently over this
difficulty, or to neglect it as unessential, as is often done by modern
writers. The late Professor Maxwell, at least, was well aware of
its importance, and has often expressed in private conversation how
serious a check he considered the molecular theory of gases to have
received. This is not the place to enter more fully into this point, and
to consider how the vibratory forces may affect some of the suppo-
sitions on which the theoretical consequences are founded.

However important the effects of concentration or dilution on the

* Lockyer, " Studies in Spectrum Analysis," p. 140, draws attention to the fact that
an admixture of a second element dims the spectrum of the first, and he expresses this
fact by saying, " In encounters of dissimilar molecules the vibrations of each are
damped." Later he has shown that the lines of oxygen and nitrogen, which are wide
at atmospheric pressure, thin out when the gases are only present in small q\iantitics.
Lecoq de Boisbaudran in his "Atlas" gives several examples of the differences in the
relative brilliancy of lines produced by concentrating or diluting the solution from which
the spark is taken. The complete parallelism of this change to the changes produced by
increased temperature has, however, never received suflBcient attention.
VOL. xi.\. — 31



482 THE POPULAR SCIENCE MONTHLY.

spectra may be, they render the spectroscope less trustworthy as a ther-
mometric instrument ; for, if the company in which a molecule is placed
changes the spectrum in the same way as temperature would, it will bo
difficult to interpret our results. But, although the discussion of our
observations may be rendered more arduous and complicated, we need
not on that account despair. It is one of the problems of spectroscopy
to find out the composition of bodies, not only qualitatively, but also
quantitatively, and, when we shall know in what proportion different
bodies are distributed in the sun, we may reduce the problem of find-
ing out this temperature to the much simpler one of finding out the
temperature of a given electric spark.

I hope that the few facts which I have been able to bring before
you to-night have given you some idea of the important questions
which have been brought under the range of spectroscopic research.
Many of these questions still await an answer, some have only been
brought into the preliminary stage of speculative discussion, but the
questions have been raised, and the student of the history of science
knows that this is an important step in its development and progress.
The spectrum of a molecule is the language which that molecule speaks
to us. This language we are endeavoring to understand. The inex-
perienced in a new tongue which he is trying to learn does not distin-
guish small differences of intonation or expression. The power over
these is only gradually and slowly acquired. So it is in our science.
We have passed by, and no doubt still are passing by, unnoticed dif-
ferences which appear slight and unimportant, but which when prop-
erly understood will give us more information than the rough and
crude distinctions which have struck us at first. We have extended
our methods of research ; we have extended our power over the physi-
cal agents ; we can work with the temperature of sun and stars almost
as we can with those in our laboratories. No one can foretell the
result, and perhaps in twenty years time another lecturer will speak
to you of a spectroscopy still more modem in which some questions
will have received their definite answer, and by which new roads will
have been opened to a f ui'ther extension of science.



OEIGIX AXD HISTORY OF LIFE INSUEANCE.

Bv THEODORE WEIILE.

LIFE insurance is based upon the theory that there is a law of
mortality governing life ; that is to say, that at all ages from
birth to the utmost limits of life a certain proportion of indiv^iduals will
die during fixed periods. Not that the precise duration of an individ-
ual life can be predicted, but that the ratio of deaths out of large aggre-



ORIGIN AND HISTOR\\ OF LIFE INSURANCE. 483

gates will remain the same under similar conditions. This conception,
so self-evident to-day, was slow to dawn upon the human mind. An-
cient pagan belief, various forms of superstition, as well as theology,
all assumed life to be under the special control of a mysterious and
arbitrary power. The conviction that it is subject to laws, as unalter-
able as those that govern the physical universe, has only gained ground
within a comparatively recent period. Nor could such a view assert
itself until mathematics and statistics had reached a certain degree of
perfection ; for, previous to that, the law of averages and probabilities,
as applicable to social problems, could not be understood.

Even after science had taken the initiative, and formulated the law
upon such data as were accessible, a long period elapsed before steps
were taken to apply its principles to practical ends. The conditions
of society were as yet too unsettled, property and life too insecure, to
permit such experiments. Not until after the middle of the eighteenth
century did the desire to provide for widows, orphans, and other de-
pendents, become so general as to lead to the establishment of a life-
insurance society in London.

Since then the system has been steadily perfected, and has grown to
considerable dimensions all over the civilized world. At present more
than 600,000 lives are insured in the United States alone ; and the
usefulness of the institution is only beginning to be properly appre-
ciated. In view of this fact, and of the general interest that co-
operative enterprises are attracting just now, it may be well to point
out that life insurance must be reckoned among the grandest and most
successful efforts ever attempted in that direction. It has, moreover,
a century's experience to attest the strictly scientific principles upon
which it rests. Such an institution well deserves to be better and
more generally understood ; but, however large the number directly
interested, it is strange how few have correct notions about it. This
is probably attributable to the character of the literature on the sub-
ject, which, addressed to specialists, employs many technical terms,
or', intended for soliciting agents, contains mere platitudes. Thus the
impression prevails that it is either too dry or veiled in too much mys-
tery to deserve the attention of even the educated classes.

It will be the aim of these articles, while giving an outline of the
origin and history of mortality-tables, the results attained, and an ex-
planation of the practical working of the whole system, to present it
in so plain and popular a manner as to be readily understood by Qvery
intelligent reader.

I. Origin and History. — Among the nations of antiquity, the
Romans were the first to make an effort to arrive at a law of mortality.
To this they were led indirectly by their highly developed system of
jurisprudence. It became necessary at times to fix the value of life-
estates, i. e., property owned during lifetime only, without the right of
alienation or bequest, and to do so the probability of life had to be



^"^"^^



484 THE POPULAR SCIENCE MONTHLY



estimated. It appears that the method in common use was about
equivalent to assuming that all persons who attain the age of thirty
would certainly live to the age of sixty, and then. certainly die. This
purely arbitrary assumption was probably accepted by jurists as the
simple solution of a difficult problem.

A great improvement was introduced by the Prsetorian Prefect
Ulpianus, one of the most eminent of Roman jurists. He published a
table of mortality, in which a distinction was made between the differ-
ent ages, and the probable number of years of life for each given. The
rate of mortality assumed for the middle ages approximates to that
probably prevalent previous to the seventeenth century. "Whether
this table was based upon actual observation or was purely speculative
is not settled ; but, if its estimates were correct, the chances of life
above sixty years were very poor indeed among the Romans. How-
ever, these early efforts do not seem to have exercised any influence
toward a proper investigation of the subject, and, having been forgot-
ten, they only possess a passing interest for us.

The real germs from which life insurance ultimately developed were
life-annuities and tontine annuities. These latter derived their name
from a Neapolitan adventurer, Tonti, who came to Paris in 1653, in the
reign of Louis XIV. He formed associations based upon the agree-
ment that members should pay a certain sum of money into a fund,
which was to be managed by him or other founders. The interest on
this capital was annually divided among the surviving members, and,
as their number grew smaller, their income became larger from time
to time, until eventually the last survivor enjoyed the whole annual
proceeds, which often were considerable. An instance is given of a
widow who died in France in 1726, at the age of ninety-six, as the last
survivor of a tontine society, having an income of 79,000 francs ; her
husband had been a surgeon, and had paid 300 francs for her member-
ship in the association.

Such schemes were naturally attractive, and spread rapidly over
Europe. Various modifications were introduced, adapting them to
changing circumstances. Even governments had recourse to them as
a means of raising money, when credit was low. The English Gov-
ernment made a tontine loan in 1693, comprising 1,002 members,
the last of whom died in 1783. The other, known as the Great
English Tontine, was started in 1789 for £1,000,000, embracing about
3,500 lives.

Voluntary associations for specific purposes were also quite fre-
quent. One of a later date, originating in this city, may be mentioned
by way of illustration. The Tontine Association of New York, estab-
lished in 1794 by prominent merchants, upon 203 shares, applied its
fund of about $40,000 to the erection of a coffee-house at the corner
of Wall and Water Streets. There was an agreement that, when the
nominees (mostly young children of the originators) should be reduced



ORIGIN AND HISTORY OF LIFE INSURANCE. 485

to seven, the association should come to an end. Accordingly, in 1870,
the requisite number being reached, steps were taken to have the prop-
erty (which was then valued at $i200,000) divided.

The advantages the tontines seemed to offer made them very en-
ticing. The larger the number of deaths a prospectus would promise,
the greater the expected gain to the survivors. No reliable calculation
or precise prediction of the mortality was necessary, since they were
to be guided by the actual experience only. But the very ease with
which they could be formed tended to make them deteriorate into
little better than mere lottery schemes, used by designing men to plun-
der the credulous.*

At present the tontine principle does not enlist our sympathy, being
too selfish for our times, but it probably answered a good purpose in
its day. Life and property were insecure, the investment of small
sums difficult, the usury laws stringent : how natural for men to look
to immediate enjoyment, when provision for the future was surrounded
by so many uncertainties !

Nor is it likely that Tonti was the real originator of the idea.
There is reason to assume that similar customs had taken root in
Italian cities long before his time. Probably the same conditions
and needs of society also led to the practice of purchasing life-annu-
ities. It seems to have been a favorite mode of raising money, among
the flourishing towns of the Netherlands, since the early part of the
sixteenth century. On the payment of a certain sum to the party
granting the life-annuity, a fixed annual income could be secured dur-
ing lifetime.

Two other methods of making loans wore also known to these old
communities, namely, terminable and perpetual annuities.

Terminable annuities are such as are redeemable after a fixed num-
ber of years, and bear interest until maturity. That is the usual mode
of investing funds at present.

Perpetual annuities are those that bear interest for ever, while the
principal never becomes payable. Many European governments have
funded their debts upon that principle, the most noted being the French
rentes and the English consols.

The people of the Netherlands, that so early displayed commercial
and political activity, continued to grow in importance until, by the
middle of the seventeenth century, they ranked among the foremost
nations of Europe. The freedom tliey enjoyed fostered material pros-
perity and encouraged the arts and sciences. Tlieir statesmen and
officials were often men of the highest attainments.

* These tontine associations must not be confounded with the so-called tontine life-
insurance policies issued by some companies at the present day. These latter have simply
borrowed the name, while in other respects they are like ordinary life-insurance policies ;
only that, instead of having dividends declared annually, they are held back for fixed
periods, say ten or fiftceu years, and then distributod anion'.' the surviving members.



486 THE POPULAR SCIENCE MONTHLY.

One of the greatest among these was Jan de Witt, Grand Pen-
sionary of Holland and West Friesland, a disciple of Descartes, and
author of a mathematical work of note.

About contemporary with him, the eminent French thinker, Pas-
cal, had laid down the first principles of the doctrine of chances. The
celebrated Christian Huygens enlarged upon these inquiries in a trea-
tise \\Trtten in Dutch. When, in 1671, the States-General applied to
De Witt to elaborate the best plan for raising a loan, he was the first
to apply the principles of the science to a practical subject. In a mem-
orable report he states that, for reasons given, it is better to negotiate
funds by life-annuities, which by their nature are terminable, than to
resort to either perpetual or terminable annuities. He shows that it
had long been the practice in Holland to grant life-annuities at double
the rate of interest current. That is to say, if four per cent, was cus-
tomary, a loan of one hundred florins would bring four florins per
annum, while one hundred florins applied to the purchase of a life-
annuity would yield an income of eight florins. He goes on to
prove that the practice of making no distinction between the ages,
the selling a life-annuity on the same terms to the young and the
old, was based on a fallacy. He then applies the doctrine of chances
to data, most likely deduced from former annuity experiences, and
proceeds to construct a mortality-table. This table, though erroneous
in many respects, is still the first application of mathematical prin-
ciples to questions of this kind, and, as such, deserves the highest
consideration.

The report was never acted upon, and was lost before De Witt's
contemporaries had become acquainted with it.

Toward the end of the seventeenth century, the subject of calcu-
lating a table of mortality began to create interest in scientific circles
in England ; but the difliculty was, to obtain reliable statistics. A
few registers had been kept since 1538, and by 1600 they had been
introduced into probably one half the parishes of England. Unfor-
tunately, only births or baptisms had been entered. During the
plague, the government was induced to publish mortality bills, show-
ing the number of deaths ; but here, also, the ages were not stated.
The Royal Society, finding no data at home, turned to the Continent
of Europe.

The city of Breslau, in Silesia, had kept an exact register of births
and deaths for some time, and reliable copies for the five years from
1687 to 1691 were obtained. These were intrusted to the Astronomer
Royal, the celebrated Dr. Halley, renowned for having calculated the
orbit of a comet, which has been named after him. He published a
treatise, which appeared in the "Philosophical Transactions" in 1693,
giving the following mortality-table, the first that had ever been con-
structed on exact scientific principles :



ORIGIN AND HISTORY OF LIFE INSURANCE. 487
BRESLAC TABLE.



Age.


Living.


Age.


Living.


Age.


Living.


Age.


Living.


Ago.


Living.


1


1,000


19


604


87


472


55


292


73


109


2


855


20


598


38


463


56


282


74


98


3


789


21


592


39


464


57


272


75


88


4


760


22


686 '


40


445


58


262


76


78


5


732


23


579 !


41


436


69


252


77


63


6


710


24


573 1


42


427


60


242


78


58


7


692


25


567


43


417


61


232


79


49


8


680 1


26


560


44


407


62


222


80


41


9


670


27


553 !


45


397


63


212


81


34


10


661


28


546 \


46


387


64


202


82


28


11


653


29


539


47


377


65


192


83


23


12


646


80


531


48


367


66


182


84


20


13


640


31


523


49


357


67


172


85


15


14


634


32


515


50


846


68


162


86


11


15


628


83


607


51


385


' 69


152


.87


8


16


622


34


499


52


324


70


142


88


5


17


616


35


490


53


313


71


131


89


3


18


610


36


481


54


302


72


120


90


1



Considering the disadvantages under which he labored, it was a
wondei-ful production. He had no record of the whole population, and
only 6,193 births and 5,869 deaths of all ages from which to draw his
deductions.

The form of the table has been substantially retained to the pres-
ent day. It begins with 1,000 children, in the first year of Hfe, of
whom 145 die in the course of the year. At the beginning of the sec-
ond year there are 855 living, of whom 66 die in the course of that
year ; and so the table continues until, at the age of 90, the last one
of the original number will die. The probability of dying in any one
year of life is readily ascertained. For instance, in the first year of
life, 145 die out of 1,000. Therefore, the probability of dying is -^^^
= •145. In the second year 66 die out of 855, which makes the prob-
ability -g^j = -077. That is to say, according to Halley's table, 14^
per cent, of all newly-born children will die in the first year of life,
and about 7f per cent, in the second year. Another interesting de-
duction pointed out by him is what a modern actuary has called the
equation of life. It will be observed that, out of 1,000 at age 1, 499
will survive at 34, which indicates that the chances of dying or living
to age 34 are about equal for a child at birth. It may be applied to
any other age. At 19 the table shows 604 living, while at 54 there
are 302 ; therefore, a youth at 19 has, to age 54, an equal chance of
living or dying.

Whether Halley's table is a correct exposition of the mortality of
the time it is difficult to say, since his data may have been insuflicient ;
but the reasoning on which it was based and the conclusions drawn
were strictly scientific.

But, while Halley's treatise must have been highly appreciated by
mathematicians, the public at large seemed to have remained ignorant



488 THE POPULAR SCIENCE MONTHLY.

of its value. Life-annuities continued to be sold on mere conjecture.
Even the English Government made no distinction between different
ages in the early part of the eighteenth century. A child at ten years
could obtain a life annuity of £100 for £714, while it was probably
worth over £1,300 at that time.

It is not within the province of this article to trace in detail the
progress made in the science of life contingencies. Nearly every
mathematician of note contributed to the perfection of the theory,
while it was left almost exclusively to England to apply it in practice.

Passing over minor writers, Thomas Simpson, a self-taught mathe-
matician, a mind of great originality, next deserves notice. In 1742
he enlarged upon the theory of Halley, De Moivre, and others, and,
deeming the Breslau table not applicable to English conditions, he
compiled and computed a mortality -table from the London mortality
bills from 1728 to 1737. For a number of years he published pam-
phlets and delivered lectures on the subject, attracting the attention
of the public at large.

Shortly thereafter James Dodson, also a very able mathematician,
employed Simpson's tables, and made many valuable additions and
suggestions thereto. He contributed a number of able papers to the
" Philosophical Transactions," and was the first to point out, in 1755,
how mortality-tables might be applied to the calculation of life-insur-
ance premiums.

Up to this time, it will be noticed, life insurance in the modern
sense was unknown. Both tontines and annuities had the very oppo-
site object in view, sacrificing the whole capital for an increased in-
come during lifetime. The reasons that made tontines popular have
been briefly touched upon. Similar causes applied to life-annuities ;
besides, they provided a convenient way of evading the usury laws,
and were often resorted to for that purpose. It was impossible to dis-
criminate what part of the high rate of interest paid was for the use
of money, and what percentage was due to the chance of death.

But, while life insurance as a system is of recent date, the practice
of effecting temporary insurance on lives had its origin with the rise
of marine insurance, probably as early as the fourteenth century. It
was no more, however, than a mere bet, not based upon any experience
or estimate, and led to many immoral devices. On that ground it was
declared unlawful, and prohibited in the Netherlands, Spain, and Italy,
together with other wager contracts, as far back as the fourteenth and
fifteenth centuries. In England, however, there was no restriction,
and, in the eighteenth century, betting on the lives of prominent
men was carried on regularly at Lloyd's and other coffee-houses in
London.

The spirit of gambling, that set in with the South-Sea bubble in
1720, continued to ebb and flow until the statute against wager con-
tracts was enacted in 1773. It gave rise to a large number of wild



ORIGIX AND HISTORY OF LIFE INSURANCE. 489

insurance schemes, most of wliich ■were ridiculous, while many "were
intentional frauds. The failures that necessarily followed created dis-
trust and retarded the efforts that were just beginning to be made to
introduce legitimate life insurance.

But a new era had begun in the history of the English people.
The cessation of internal strife, the settlement of fundamental, con-
stitutional questions, the increase of material prosperity, the greater
power and intelligence of the people, and the growth of large towns,
particularly London, had completely changed the conditions of society
as compared with previous centuries. Selfishness and brutality gradu-
ally yielded to more forethought and refined feeling ; family ties grew
warmer and more generous. Comforts were greater, life and property
more secure, and everything tended to a more vivid desire in thought-
ful men to provide for their families in the contingency of their own
death. The feeling was most pronounced among the clergy and other
professional classes, and associations began to form to accomplish that
purpose. The conditions on which they were based were somewhat
similar to those even now in vogue, with benevolent institutions hav-
ing the same object in view. On the death of a member, his heirs
would receive a certain contribution from the surviving members.

Such arrangements, when a mere subordinate feature of benevolent
societies, may work well for a time, but they can not serve as sub-
stitutes for life-insurance companies. These can only be founded on
scientific principles, and all other devices must be futile and short-
lived, as a century's experience has amply shown. The difficulties to
be encountered were clearly foreseen and explained by the mathemati-
cians of the day, and their labors did not prove in vain. In ITGl a
number of gentlemen petitioned Parliament for a charter for a life-
insurance association. They met with opposition, on the ground that
the undertaking was purely speculative, devoid of any merit, and
sure to fail. The charter not being granted, they organized in 1TG5,



Online LibraryD. S. (David Samuel) MargoliouthThe Popular science monthly (Volume 19) → online text (page 60 of 110)