allowing for the profits of those who carry on the undertaking. But of course when we take into account the occasions upon which the insurers get their prizes, we see that there is all the difference in the world between receiving them at haphazard, as in a lottery, and receiving them as a partial set-off to a broken limb or injured constitution, as in the insurance society.
Again, the language of betting may be easily made to cover almost every kind of insurance. Indeed De Morgan has described life insurance as a bet which the individual makes with the company, that he will not live beyond a certain age. If he dies young, he is pecuniarily a gainer, if he dies late he is a loser.[4] Here, too, though the expression
is technically quite correct (since any such deliberate risk of money, upon an unproductive venture, may fall under the definition of a bet), there is the broadest distinction between betting with no other view whatever than that of risking money, and betting with the view of diminishing risk and loss as much as possible. In fact, if the language of sporting life is to be introduced into the matter, we ought, I presume, to speak of the insurer as ‘hedging’ against his death.
§ 9. Again, in Tontines we have a system of what is often called Insurance, and in certain points rightly so, but which is to all intents and purposes simply and absolutely a gambling transaction. They have been entirely abandoned, I believe, for some time, but were once rather popular, especially in France. On this plan the State, or whatever society manages the business, does not gain anything until the last member of the Tontine is dead. As the number of the survivors diminishes, the same sum-total of annuities still continues to be paid amongst them, as long as any are left alive, so that each receives a gradually increasing sum. Hence those who die early, instead of receiving the most, as on the ordinary plan, receive the least; for at the death of each member the annuity ceases absolutely, so far as he and his relations are concerned. The whole affair therefore is to all intents and purposes a gigantic system of betting, to see which can live the longest; the State being the common stake-holder, and receiving a heavy commission for its superintendence, this commission being naturally its sole motive for encouraging such a transaction. It is recorded of one of the French Tontines[5] that a widow of 97 was left, as the last survivor, to receive an annuity of 73,500 livres during the rest of the life which she could manage to drag on after that age;—she having originally subscribed a
single sum of 300 livres only. It is obvious that such a system as this, though it may sometimes go by the name of insurance, is utterly opposed to the spirit of true insurance, since it tends to aggravate existing inequalities of fortune instead of to mitigate them. The insurer here bets that he will die old; in ordinary insurance he bets that he will die young.
Again, to take one final instance, common opinion often regards the bank or company which keeps a rouge et noir table, and the individuals who risk their money at it, as being both alike engaged in gambling. So they may be, technically, but for all practical purposes such a bank is as sure and safe a business as that of any ordinary insurance society, and probably far steadier in its receipts than the majority of ordinary trades in a manufacturing or commercial city. The bank goes in for many and small transactions, in proportion to its capital; their customers, very often, in proportion to their incomes go in for very heavy transactions. That the former comes out a gainer year after year depends, of course, upon the fact that the tables are notoriously slightly in their favour. But the steadiness of these gains when compared with the unsteadiness of the individual losses depends simply upon,—in fact, is merely an illustration of,—the one great permanent contrast which lies at the basis of all reasoning in Probability.