New-York tribune. [volume] (New York [N.Y.]) 1866-1924, 1871-02-03
SAFETY IN INSURANCE.

The recent exposures Of two life insurance
companies, forced to wind up their affairs by
the prompt action Of the State superintendent
Of Insurance, have unquestionably aroused
salutary excitement in the community respect
ing the condition of the many life insurance
companies doing business among us, and
intrustcd with such vast amounts Of money.
These that have fallen were small and young
companies; they fell in the struggle to obtain
4 foOthOld i'm the race with older and weather
organizations and it is not so much their
failure "a the desperate performances that led
to it, that challenges attention. In an article
elsewhere, some of these details are given.
OF one of these companies, the history is very
much that which used to be too frequently the
brief epitome of fire insurance companies They
were organized to give occupation and salaries
to men who had no seryiceable knowledge OF
that or any other business who hung on the
skirts of the incorpOrators until seats were
made for them. They took bad risks because
they knew no better, and because they en-
ployod INSCRIPTIONS agents. They expended
lavish sums in procuring business, and as with
those fire companies, so with this life COM
pany the risks "matured" with frghtful and
ruinous rapidity. The other life insurance
company probably did all this; but it did
great deal more. 1t departed from the recOg-
nized rules of the business and undertook
something elsa something which is at best
an experiment, with small, if any, chances of
success. And its officers falsifed their books;
cooked accounts by emitting losses, and by
fictitious records of business that had never
been transacted
As, therefore, il appears evident that more
safeguards are required to keep insurance
companies in the straight paths of good man
agement and rectitude, perhaps q few sugges-
tions may not be amiss while the Legislature
is in session. The Superintendent should have
power to limit the commissions paid to agents.
the salaries paid to officers, and other ex
penses to certain percentage of the cash
actually collected for premiums; if the agents
or officers must have more pay, let the direc-
tors of the company provide for it ont of their
own pockets. AS to the reality of the busi-
ness represented by the books of the COM
panics, let hint be borrowed from the
United States inspection of National Banks.
Give no warning beforehand when the
inspector is coming; but let him then and
there examine things in the rough" Exact
calculations and statements can be made after
ward Where the bulk Of the assets is invested
in Government bonds, they are easily counted;
and if the inspector comes unexpectedly there
will be no chance to borrow them for the
occasion. Mortgages are more difficult OF ex-
animation, but it might be well for an inSpec-
tor to pick out one or two of them for more
exact investigation as to value. When such
inspection is possible the temptation to so
wrong is wonderfully diminished.
The anxiety which now is created by the
disclosures of the companies that have been
forced into bankruptcy, will benefit the whole
business of life insurance by attracting atten-
ton to it. Sound companies will be only too
happy to show their position and affairs to the
public and increase their popularity and their
business thereby. The great principles which
underlie life insurance are as impregnable as
the first book of Euclid. The indirect benefits
which the system cOnfers upon a community,
by causing habits of economy and saving, rem
der life insurance an important element IN our
civilization; and AZ such we must guard 1t,
by legislation and otherwise, with jealous care.