Baltimore commercial journal, and Lyford's price-current. [volume] (Baltimore, Md) 1840-1849, 1848-11-25
For The Commercial Journal

Merchants Magazine.
''Liie Insurance Companies are divided into three
classes:
"The FIRST CLASS consists of Joint Stock Compa-
mics, who undertake to pay fixed sums, upon the
death Of individuals insurimg with them Ihe P0ftS
made by such companies being ,choliy dirided among
the prOprictOrS. These are also called "PRoPRIEIA-
RY COMPANIES.
"Thc SECOND CLASS are also JOINT STOCK Com
| panies, with proprietary bodies. But, instead OF
Undertaking, like the former, 10 pay certain specI-
fled sums upon the death Of the insured they allow
the latter to participate along with the proprlctors
to certain extent, in the profits Of the business.
The mode in which this sort called mixed companies,
allut the profits granted 10 the insured is not the
in all, nor is the principle on which the ailot-
mcnt is made always disclosed; but usually, they
add, at such periods they find most convenient,
sum as ''bonus' to the policies. This is done by the
directors, who are, of course ockholders
"Thc THIRD CLASS is that which is formed on the
there is no proprietary body distinct from the in
sured. The latter share among themselves the
whole profits Of the concern, after deducting the eN-
penscs The directors trustees, are elected from
among the insured members, so that all have Greet
interest IN the management.
"Thc advantages to a person insuring in any one
company, compared with another, must PLAINLY
depend upon a comparison between the premiums
demanded, the conditions OF the policy, and the sccu-
rty it holds out for the payment OF the policy,
Ii is evident that if each of the three classes above
mentioned should charge the same premium, the M
surancc would be the highest rate with the Joint
stock proprietary companies, because hey Sice
no part Of The profits 10 the insured: 1t would be
cheaper with the mixed companies because they g'Ue
part Of the profits to The insured 1t would be cheap
est with the mutual companies, because all the H0ftS
are diri9ed among the insured, who are, in fact,
themselves the only notwithstanding their in
vcstments annually, and holding interest in proper
tion to their respective policies.
The security OF a proprietary company, depends
upon several contingencies:
|, The rates charged for Insurance.
.. The care used in the selection OF lives.
3. The amount and nature OF capital offered as
guarantee.
A. The manner of its investment.
5. The amount withdrawn from the premium fund
annually, to divide among the stockholders
q. The honesty and capacity oil the managing o.
icrrs.
Thus, that proprietary company would be most
secure which charged the highest ratcs-observed
most caution in selecting lvcs-had the greatest
amount OF puid up Stock safely and profltably IN
vested, so as to have least occasion TO draw from
the premium fund, 10 make dividends among the
stockholders, and was managed by the most honest
and capable officers And in proportion as II de-
flectcd from either of these conditions, il would be-
come weak, and finally unsafe.
The security OF a mixed company, which is essen
TALLY like the proprietary, depends OF course upon
the same cOuditions except that as IN mixed com
panes part of the profits are divided among the IN
sured, that company would be best prepared to pay
the claims against it which made the lowest dIvi-
dcnds the stockholders, and restricted the DIVISION
among the insured the long lives-the only proht-
able parties.
A strictly mutual company has no guarantee cap
ital other than the premiums paid Tor insurance;
therefore its security depends upon the rates char
ed for insurance, adapted TO the rate Of NOR
tally in the locality in which its risks are TAKEN
If the rates are too low 10 produce the sums pro-
missed by its policies, in the ''eTpectahon OF the
| insured the company must surely fall and the year
when il will fail TO pay, can be almost certainly pro-
phccied by any accountant. If lis premiums are TOO
high il will have the larger dividends for the mem
bcrs and, as in such company all the insured are
| in oil
policies il is evident that high rate OF annual pre-
mium is no obection-since each partner proper
ton Of the surplus is TO be returned 10 MIN III one
! form another.
| In considering the question, which of these sys-
tens is most valuable to the public, 1t Will at once
be perceived that, if the security offered by each Tor
the payment OF its policies were the same anu heir
rates of premium equal, then the mutual system
would be most valuable; because it returns to the
insured, in addition to the policy, all the excess Of
/ the premiums the actual cost The system Of
| the mixed companies would be next IN value, De-
cause they add part of the excess to the policy;
while the strictly proprietary system would DC least
valuable since they make no additions TO the poicy
This is on the supposition that the three systems
offer equal security for the lullmen OF their con-
tracts We shall now cndcavor to prove that, from
the nature Of things, the mutual system OF Lie lnsu-
rance is not only the most SGfe but the only system
in which the PUBLIC can have any interest, as So
cia institutions beyond that which 1t must feel IN
the credit of any moned corporation AS contracts
with Life Insurance Companies are not, IN majority
of cases. expected be closed until the death OF the
insured party the security offered that the company
will discharge its liabilities promptly becomes o
paramount Importance
1t is mistake to suppose that the amount of guar
antee stock subscribed, paid up and invested or the
amount OF the accumulated and accllmulatlhg pre-
MUM fund constitutes the security OF this sort OF con-
tracts But TO come at correct idea on TINS SUBJECT
the capital and income must be compared win tne
of liabilities. capital stock oil > ,ooo'ooC
would be no better guarantee for the discharge OF
| S990000 liabilities, than would capital STOCK oil
| s. 1000 be for the discharge OF Liabilities 10 the
amount of $500. And an income OF S3O0,Ooo per
annum from premiums at a given rate, is no greater
security for the payment of the policies upon which
| il was paid than income of $3OOO, at the same
rate of premiums, for the payment OF the policies
upon which ii was paid
pared with the mortality at the place in which the
risks are taken, that must Judge oil the ability to
pay. .. H.,
each an interest separate from the interests Of The
insured and this is the governing interest 1t elects
the managers; dictates the rates OF premiums as
ccrtains the profits, and draws to Itself whatever
share it thinks proper as remuneration ior us guar
antce; and in the case of the mixed company ii this
interest be not satisfied the insured can receive no.
thing in the way OF 'bonus
A proprietary, or mixed company, LOT they are
essentially the same, is well managed when II dis.
charges all its liabilities promptly, and pays liberal
dividends on the stock 1t is well known that SIM
| plc investments on bond and mortgage, do not one
/ year with another mel more thah ~ per I'"''' w
the directors of joint stock Life Insurance Companies
are able TO declare, annually, dividends OF from 10
| II per cent. This difference must then be made up
from the premium fund, thus weakening the nam
dependence of the insured. Should any losses occur
from bad investments of the capital stock II is eVi-
dent that the managing interest VIII repair 'stI
from the same source; and if any misfortune should
completely break up the company would not inc
same managing interest, according TO the universal
usage of monicd corporations, endeaVor 10 MAKE rn
whole, even though il were at the expense oil the
community of the insured!
II is TO be further considered that the capital stock
of Life Insurance Companies affords but small mar
pn of security to the contracts So certain are the