Assessment insurance is natural insurance as against artificial.
In the early establishment of life insurance companies, everything was
assumption, there was little or no experience to guide in formulating
the principles upon which the business should be conducted. There was
partial information, it is true, upon certain general facts pertaining
to longevity or to mortality laws, under certain conditions, but nothing
that could give substantial data upon which to base mathematical
calculations for the establishment of a science. Under those conditions,
rates of premium were fixed for insurance at the different ages which
the experience of many years has shown to be very much higher than is
required to meet reasonable expenses, and losses occurring from policies
maturing by death.
A rate of mortality was assumed greater than experience has shown to
prevail among well selected lives. The important element of lapses was
not considered, an element so considerable in its practical bearing upon
the requirements of the company to meet its liabilities, that of one
million of assumed liabilities upon say one thousand lives, only about
$77.
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