ble, shows the positive side of security as no figures of speech could portray it. But to this let me add a similar comparison bearing upon the relative advantages of large or small companies to the policyholder. The three largest New York com reports from which I quote, received as premiums $363,538, 414, and paid to policyholders $241,126,401. Their assets, less capital, were $163,972,414, making the past and prospective net profits to policy 812 of re-insurance reserve. This is the This statement, which is incontrovertiamount necessary to cover all liabilities under contract. But besides this there were $65,277,721 75 of surplus as regards policy-holders. All this is the property of nearly six hundred thousand outstanding policies, or, besides security for the amount pledged to each, the companies, during the period covered by the panies hold as trustees an average sum of $110 for every policy at risk. The case is still stronger if the three largest New York companies are considered in their separate responsibility. The wider the scope of business, the better do the aver-holders derived from interest, over and ages work, and the greater the security of the assured. These companies report $136,129,390 of re-insurance reserve, and $26,075,465 49 of surplus applicable on policies, or absolute security for all risks, and $137 84 held as an average additional property of each policy. The moral integrity of the managers being assumed, there can be no reasonable doubt of their financial ability to fulfill to the letter every maturing contract. An additional and most impressive enforcement of both these factors of confidence is gained by a long look through the past. The figures make an argument for the reliability of the system which no rhetoric can overturn. From the New York life-insurance reports, since the organization of the department to its last report, as of December 31, 1879, I glean my statistical compend. The thirty-one companies of this and other States, whose figures appear in the tables of the twenty-first annual report, received from policy-holders in premiums, cash and note, during the twenty-one years, or such portions of that period as are covered by their reports, $898,376,032. During the same term these companies paid to policy-holders, for death claims, matured endowments, annuities, for lapsed policies, surrendered and purchased policies, and for dividends, $603,073,118. The assets of the same companies on December 31, 1879, amounted to $401,515,793, less amount of capital stock, $4,306,900, or a net sum of $397,208,893. Let this be added to the amount distributed, and we have $1,000,282,011 as the total paid to, or now held in trust for, policy - holders. But if from this latter amount be deducted the receipts from policy-holders, there remains, as the past and prospective gain over the payments by policy-holders, $101,905,979. above premiums paid by them, $41,560,436 -or more than forty-one per cent. of the gain to policy-holders of all the thirty-one companies. These enormous assets and gains make the contract of life-insurance "double sure," unless rogues are in the direction of the companies. LIFE-INSURANCE FAILURES. As a matter of history, I think it will be admitted by all critics that in no series of facts has "the law of the survival of the fittest" been more undeniably illustrated than in the record of life-insurance companies. During war times and in the after "boom," there were many abortive attempts on the part of adventurers to embark in this business, and by men who were ignorant of the principles of the science, and inexperienced in the details of the system, and who, moreover, had been unsuccessful in other fields. But competition with the old and sound companies compelled such moribund institutions to close their doors and books.* Not all of them were dishonest. Not a few volun *There were, in 1859, only fourteen life-insurState, eight of them being New York companies. ance companies authorized to do business in this In 1871 this number had increased to forty-one New York companies, and thirty from other States-a total of seventy-one companies. Of these seventy-one companies, only thirty-one (twelve of which are New York companies) are now actively engaged in business in the State. Meanwhile fifty-one companies (thirty-three New York companies and eighteen other State companies) have lapsed by failure, withdrawal, amalgamation, or, as in the case of three companies, by the department's estoppel upon their taking new business. It is safe to say that, of more than one hundred and seventy life companies which have had a name to live all over the United States, only some forty-five survive. In fact, a standard in surance authority publishes the names of one hundred life companies which have retired during only the last twenty years. Nor do we know of more than one or two life companies organized since 1868 which have survived to this time. But taking all companies, good, bad, and indifferent, into account, it is claimed that "less than one per cent. of all the money ever invested in life-insurance in the United States has been lost through mismanagement, dishonesty, failure, or other cause."+ tarily retired from business after making | cause dishonesty, taking advantage of inadequate provision for all their liabilities. flation, has tainted their past ?* The failure of so many life companies suggests another fact which sustains my argument for the strength of surviving companies. During the seventeen years of depreciated currency (1862–1878), when the mean average premium on gold was 30 per cent., the life companies doing business in New York received in cash for premiums $1,125,726,002, and expended $746,624,952. Excess of cash income over cash expenditure, $379, 101,050, or an average of $22,300,000 per year. Upon this excess the companies had to bear the burden of a 30 per cent. depreciation, or $113,730,315 (equal to $6,690,000 per annum from 1862 to 1878), up to such time as resumption brought currency to par. A careful examination has convinced me that, with hardly an exception, these failures have occurred in the life of companies which have not attained half the age of legal majority. Hardly one company of fifteen years' standing can be found in the black list. The marvel is not that so many companies have closed their doors, but that so large a surplus has been successfully carried over from a period of inflation by companies which all the assured recognize as firmly established. The scrutiny of the public press, and the increased vigilance of the insurance departments, have put life-insurance companies to a test beyond that to which any other similar institutions have ever been subjected, and they have come out from the trial with a reputation that other financial corporations might well envy. Taught by experience, the public have become more discriminating in the selection of the company to whose fidelity they intrust the interests of their dependents. There may have been companies constructed for the purposes of fraud. But they have disappeared, and the fittest survive. "Things refuse to be mismanaged long. Though no checks to a new evil appear, the checks exist and will appear. It is grossly unfair to discriminate against insurance companies in the application of this law. Banks have failed. Railroad companies have collapsed. Merchants have become bankrupt. We have just emerged from an era of fraud. Who condemns the bank system, the railroad enterprises, and mercantile ventures, be * Emerson. How is our conviction strengthened by the wise use made of the money which is the collateral of the contracts? Investments in buildings have been criticised. But the receipts for rent substantially offset the charge. Other applications of the assets come under the direct inspection of the department. In 1870, when seventy-one companies were contending in New York, at least 11 per cent. of the whole assets was reported as unproductive. The case is reversed in 1880. ery company now doing business in this State has not only all its reserve drawing interest, but all of them together have $44,600,000 in excess of their reserve productively invested. Of the gross assets, at least 93 per cent. is interest-bearing, the small balance being chiefly the moneys in course of transmission from agents, in process of investment, or in bank awaiting the payment of claims. Ev The last element of uncertainty in lifeinsurance is "the critical period of heaviest pressure." Have the companies that have survived the deluge of inflation made their way through this wilderness? The definition of such a period is a matter of pure speculation. It is, according to actuarial subtleties, not very far off for our oldest companies. But if it exist in fact, how are these companies prepared to meet According to a railroad journal, during 1880, thirty-one railroads, with a mileage of 3375, with In five years, 228 roads, with a mileage of 20,000— nearly 23 per cent. of the present total mileage-and representing a nominal investment of $1,236,000,000, became bankrupt. $166,000,000 in stock, were sold under foreclosure. "THE LOSSES BY FAILURES NOT ONE PER CENT.! -The life companies of this country have received, from the time the business was first commenced down to the present date, the enormous sum of $1,238,185,000. The losses by all the companies that have ever failed here will reach between ten and twelve millions, on a very liberal estimate. It is thus shown that 99 per cent. of all the money that has been intrusted to the life-insurance companies has been faithfully administered. have been failures-large failures and scandalous There ones-but the interest as a whole has been, and is to-day, as secure as any human institution the sun ever shone on."-The Insurance Monitor. it? If they should cease business to-day, their assets, if administered as heretofore, would more than suffice to meet every liability as it may mature. This ought to be enough, for "sufficient unto the day," etc. But practically there is no such thing as "a critical period" in a well-ordered company, after it has passed its infancy. During the first five years of its existence, the demand for $150,000 annually in death claims might have tested its resources; whereas the payment by one of the largest companies of $7,000,000 in death and endowment claims during 1879 passed as a mere incident of the business. force. This would be possible if competition were not so commanding an element in the conduct of the business. As a matter of fact, the centrifugal far outmeasures the centripetal force of the system. The attempt to unite all companies in such a representative chamber was long since a demonstrated failure. We are brought down, then, to the system as a simple whole. Notwithstanding its distracting and diverse influences, making combination almost impossible, we are asked to believe that the mutual principle is the source of danger to our interests. This is the reductio ad absurdum. For the policy-holders are the constituents. They are voters, and have a standing in court. THE RECOGNIZED DIFFICULTIES IN PROCESS From them proceeds the authority of ad OF SOLUTION. As one of the assured, I find the system begirt by objections just now. So far as they are based on real evils, there seems to be, on the part of the companies, an honest determination to grapple with and if possible to overcome them. Some of the criticisms relate to features which have been already corrected, whilst others anticipate the crystallization of questions still in solution. Let us look at some of these from the point of view of the assured person. IS IT A PLUTOCRACY? ministration, and they have swift meth- The facts bear out this theory. Paid dividends to policy-holders. 12,703,188 13,330,824 Total paid policy-holders, 1879... $56,007,146 were companies.. .... 52,721,720 $3,285,426 From this table it appears that the assured have actually received $3,285,426 more than they contributed in the same year. This does not look like oppression. There is really danger to the people in the creation of a plutocracy. The corporations of the land, and their vast accumulations of capital, are a standing menace to the personal and political rights of the community. The power that they are capable of wielding, and the monopolies of their franchise, may well excite anxiety. The opposition of the Grangers The thing for which each assured person to our railroad system is the most promi- bargains is the assurance of his life. This nent illustration of this popular unrest. he receives; and besides this, so long as Is life-insurance rightly placed in the his policy is in force, he secures as addisame category? There are now only one tional advantage certain dividends which or two strictly proprietary companies do- the critic calls "profits." But the word ing business in these States, and influen- "profits" is a misnomer, and misleading tial as they are, there is no reasonable when applied to life-insurance. Strictly ground to fear their oppressive growth. speaking, there are and can be no "profits" Others are formally constituted on the to either the company or the policy-holdstock basis, but are practically mutual in er. On the contrary, the whole business their methods. Nor is the comparative is based on the certainty of loss. This is business of all these combined a very its unique and anomalous position. The large factor in the system. We have not premium paid on a life policy is a loss of as yet reached a basis for this allegation. money, which the assured does not expect But a chamber of life-insurance, made up personally to recover. The dividends, so of representatives from all the leading called, are, in marine insurance, named recompanies, may prove the dominating | turn premiums. At the end of the year the account with each life policy is bal- | them with all their associated burdens, and anced. Whatever amount of the premi- withdraw the whole of his investments? um is not needed for security is returned to the assured. This rebate can scarcely be called a profit. If death should intervene, and the policy be made good, its adjustment is a loss of life to the assured, and a loss of so much money to the other members of the society. Fire and marine insurance anticipate but little loss among the number of their risks. The savings-banks are not thought to endanger the rights of the community, and yet they lack the mutual element of organization. They are administered by selfperpetuating boards. There is this fundamental difference in favor of life-insurance. But who fears that the millions of assets held by savings-banks will be made a power to grind the faces of their poor depositors? The only ground for such demagogism as that which decries the plutocracy of life-insurance is the practical disuse of the suffrage by the policyholders. It is in the power of the assured in mutual life-insurance companies to dethrone Mammon, if he have seized the highest place, and call himself president. That they do not often do this is the best evidence of popular unbelief in this aspersion, and the best testimony that the society can give to their satisfaction with their trustees. SURRENDER VALUES. The position of the company is in this matter mediatorial. It must deal fairly with both sides. The amount that it pays must be reduced by the ratio of accumulated risk which the withdrawing person leaves to the remaining members of the association. Whilst in common law the retirant has no claim, his rights have been sufficiently guarded by the recent legislation of the State of New York. He has, in the policy which he has read and accepted, voluntarily waived all surrender values. The commonwealth have secured to him an amount of paid-up insurance represented by a certain proportion of his reserve, or a cash compensation to be determined by the relative interests of those with whom he is associated in the company. The equity must be determined by circumstances. The company in following equity must not forget justice. comparison between the rights of one and all is the important element in its decision, for it is the interest of the society of the assured to have the payments continued to the end of all lives or terms. They can never consent to a premium upon breach of contract. The duty of a company to its faithful constituents often compels an appearance of close dealing with those who withdraw. LAPSED POLICIES. The The next inequity which demands ex- Cognate to the question of surrender amination is the surrender value of poli- values is the difficulty connected with cies whose holders wish to retire from the "lapsing of policies." A life-insurtheir contracts. This is admitted on all ance policy is a contract to which there sides to be a vexed question. But as in are two covenanting parties. On the one England, so here, competition will be its side there is a solemn agreement to pay cure. When an assured person deter- periodically a certain sum, and on the othmines to discontinue his risk, he is liable er an engagement to pay a much larger to lose sight of the fact that he is one sum on the death of the assured, or after a of a community, and has no right to limited number of years. The ability of press the equity of the one against that the company to fulfill its plighted agreeof all. He is tempted to look at the mat- ment depends largely upon the faithful ter too selfishly, and is surprised that fulfillment of his promise by the assured. so small a percentage of his payments is Here are all the conditions which are needfound in the offered price for surrender. ful to bring the transaction under the law If he be troubled about his health, he will of contracts. So far, then, from clamoring not think of withdrawal. If his chances. for clemency, the assured who faults in his for life be below the average, he thinks it part of the agreement, or seeks release no inequity to resort to any expedient from his obligations, is liable to a claim which will keep his policy in force, and for compensation from the company. His thus add to the risks of other persons as- failure, in so far as he is able, strikes at sured with him. What right, then, has the solvency of the company, entails ache, on the other hand, if his chances of tual loss upon it, and endangers the inlife be far better than the average, to leave | terests of all who share with him the ad vantages of the system. His breach of contract is a civil crime, which only desperate circumstances can condone. Moreover, there is an element of moral obliquity in it. He has expressly consented to certain conditions written in his policy, and now he falsifies the confidence which the company have placed in his promise. They have all this while held his "word to be as good as his bond"; but he evades his pledged obligation, and poses himself as a martyr, while in law, equity, and morals he is really a sinner. Whatever may have been the history of fraudulent companies in the past, it is the generally accepted theory of educated and honest life-insurance men everywhere that lapses are a loss, and not a profit. Companies, in the interest of those who abide by their contracts, at the cost of much self-sacrifice and self-denial, have a just cause of complaint against persons who for trivial reasons thus forswear themselves. For whom are the officers running the companies ?--the benefit of those who stay in, or of those who abandon their contracts and go out? Unquestionably for the former. Does not the outcry of policy-holders in fraudulent companies which have failed tell the story? If the company break its contract, "all the little dogs, Tray, Blanche, and Sweetheart, do bark" at it. No assured person, however many insurance agreements he may have shirked, is base enough to do it reverence. This is the other side to this matter, which intelligent and conscientious men should consider before they complain. But such strictures against the number of lapsing policies are both disingenuous and untimely. The year 1871 has been chosen as the extreme illustration of this evil. I follow the objector in the path of examination indicated by his references. New York reports for that year show the termination of policies: net. and important explanatory suggestions. In years when notes were protested by the basketful, when nearly two hundred railroads had made default in the payment of interest on their bonds, when banks closed their doors and suspended payment, when wages were at their lowest point, the percentage of failure in paying life-insurance premiums was about 67 per cent. of policies terminated in all ways. But now the tide has turned. The surviving institutions have been strengthened by the strain to which they have been subjected. Public confidence has been re-established in their integrity and resources. All industries are developing. Real estate is rising in value. Wages are at almost their highest mark. Of all this the diminution in the ratio of lapses in life-insurance is a significant exposition. But even this admitted percentage is not For it is the common experience of all companies that a large number of lapsed policies are revived and restored, sometimes after years have intervened. And even the resulting number, after deducting such, should be lessened by the subtraction of those for which some pecuniary consideration has been paid after the lapse. Indeed, it is the fault of his own carelessness if any policy-holder suffer his premium-day to pass without securing, in either paid-up insurance or a cash surrender value, some equivalent for his policy. This reduces once more the ratio of absolute loss to the assured. fant policies are more liable to lapse than those that have gained a stalwart life. The duration in the one case is the parallel of that in the other. More than half the terminations take place during the first or second years of the policy, as it is the nursery which is most often invaded by death. Indeed, a man can not fairly be said to have started on his insurance career, as far as his obligations are concerned, until he has proved his good faith by paying his second premium. An allowance should be made for this factor when calculating the average duration of all policies issued. The net number of policies terminated in 1879 was 60,503. The net number of policies lapsed, after deducting restorations, was 18,679. In The case is made much stronger if the amount in risk be the basis of ratio. For manifest reasons, the business of 1878-80 must form the elements of this computation. The amount lapsed, after deduct |