The Portland daily press., 1870-02-05
a Bs' of Common Sense about Life fu-


sssEaGct.
10 the Editor q the Press.
Al YOUR issue OF Feb. 4th an item finds place
IN winch the statements of Mr.. Paine, the IN
surance Commissioner of Maine, before tie
Legislative Committee on Mercantile Affairs
and Insurance, at recent hearing, are given.
These statements are similar to those of his
official report, and so far as they relate to Life
Insurance companies, while they may be true,
| they are but part of the truth, and are put in
| such a way as to convey an absolutely false
| impression to the Legislature and to the pub
| lie. Permit me very briefly to call attention
| to some of these statements of Mr.. Paine, and
| to put the matters to which they refer in their
true light.
In the item in your columns Mr. Paine Is
represented as stating that our Life Companies
paid losses to the extent of only 10 per cent. OF
their premiums-in his report he says lo.o'-
and then he asserts in relation to the prohta-
bleness of the business, that the companies
bava maid their stockholders dividends ranging
from 10 to 40 per cent.
The obvious intention of Mr. Paine is to
have the Legislature suppose that 50 per cent.
OF the premiums received by our Life Comma
mes has been absorbed in expenses and diyi-
dends to stockholders. Another effort of the
same kind may be found on page Sc of his Off
clal report, where the assets of the Union Mu-
tual Life Company are given as over So 100000
and their liabilities as $22,0OO!! The income
OF this company is stated in round numbers as
Sl,5O0,OOO and the expenditures as 100000,
from which the otherwise uninformed readers
could only gather that this company has sur
plus of more than $3,700,000, and that in 1868
its net profits were almost $9OO,OOO!
Now the merest tyro in hife Insurance
knows the absolute falsity of any such conclu-
slons, and other companies may well rejoice
that Mr.. Paine could not make similar exhibi-
tons of his ignorance 1--WE will be charitable)
in publishing exhibits of their standing
What, now, is the aohoie truth?
1st OF the 1896 policies which Mr.. Paine
reports in force Dec. 31st, 1861 1897 were issu-
ed by purely mutual companies and the profits
and surplus therein belong exclusively to the
policy holders, there being no stockholders to
receive either 10 or 40 per cent. dividends. On
ly 3J8 of these 1896 policies are in purely
stock companies, the policy holders having
plus of 0,39S of them.
ID, Mr.. Paine would have the Legislature
and the public believe that of all the money
paid for premiums only the IS per cent. paid
for losses has been or can be returned to those
who paid it or their heirs. What now are the
facts? Take the Mutual Benefit Company as
an example, for the simple reason that it is
one of those having the largest number of
risks in Maine-13S5, according to Mr.. Paine
The premium receipts of this company in 1868
were 81 952, S5793. OF this losses were paid
to $1026,012 67, and there was re-
turned, to policy holders in return premiums,
ST. COG, 212 S5-a total of So, 932 ,225 81 or nearly
60 per cent. of the premiums returned to those
who paid them or to their heirs.
The Connecticut Mutual Company is anoth-
or company largely patronized in Maine, hav.
ing 1920 risks, according to Mr.. Paine. Its
premium receipts in 1868 were 81, 1873, 25O. 70.
1t paid losses 81, 221, 355. co. and return premi-
ums to policy holders 1928, 2S4 90. Total re-
turned to those who paid the premiums, ST.
149, 63900, or about 80 per cent. of this amount
Precisely similar result will come from an
examination of the real facts pertaining to eve.
ry mutual or mixed company doing business in
the State.
Sd. But what is the fact as to the large |
amount still remaining in the hands of the |
companies? Has the Union Mutual surplus |
nearly S4,000000 or the Mutual Benefit Zap
plying Mr.. Paine's methods) of more than $14,-
600, 900? Mr.. Paine and every other man who
has given an hour of intelligent attention to
the subject knows better. In the language of
Elizur Wright, the greatest of American In
surance Actuaries: ''The vital principle of the
system is that Life Insurance, when the policy
covers more than one year, consists of two dis
tinct processes combined under one policy.
One of these processes is insurance pure
and simple-so much indemnity guaranteed
to survivors inscase of the death of the in
sured within one year; y the 9TH
er process in an accumulation of savings
"ln other words the premium of each year is
partly mere deposit to be returned at death
with certain interest added, and partly an
insurance premium to compensate the COM
pany for the risk of having to pay within the
year what the amount OF the aforesaid deposit
may lack of being the whole sum payable at
death"
point clearer render more evident Mr..
Paine's blunder in excluding the entire
amount of these deposits from the liabilities
of the Company Let US apply this principle
to case in practice. A party aged 50 effects
an insurance for $1,000 on the ordinary life
plan. He pays premium of $26 SO per an
mum. Of this sum 81 Y goes by the first
part of the contract for pure insurance, or to
pay the policy during the year, in which it |
may become due, while 50 50 goes to the second |
part of the contract-is the deposit mention
ed by Mr.. Wright to secure the payment of |
The policy at the time when it n,ust become |
iue while 81 81 remains of surplus to be re-
turned to the policy holders as return premi-
ums in mutual company, or make dividends
for the stockholders in a stock company. With
each additional payment of premium this
deposit is increased, reaching hundred
five hundred and finally thousand dollars
the face of the policy. Yet Mr.. Paine utterly
ignores this deposit as liability of the COM
pany. He pays no regard to the So, 053, 600 of
just such deposits held by the Union Mutual
or the $12 1921 eco held by the Mutual Benefit,
nor from the beginning to the end of his re-
port does he refer to them or intimate that he
knows there is such a thing as reserve in
the business of life insurance, or that there ex-
lists any necessity whatever for providing for
the obligations of the company maturing be-
yond the present year.
This communication is already too extended,
and L leave other points for future notice.
Enough has been said to show that the present
Insurance Commissioner of Maine is either
blindly or wifully ignorant of the first princi-
pies of the business of life insurance, and that
his statements before the Legislative Commit |
tee are tissue of the grossest misrepresenta-
tio2s.
Portland and Rutland Railroad Conn
pany.
Extracts from the records of the Executive
Committee:
PORTLAND, Feb. 4, 1870
The Chairman laid before the Board a COPY
of correspondence with G. Moliison, ESQ,
chairman of committee in charge of the New
England and Oswego railroad company an