New-York tribune. [volume] (New York [N.Y.]) 1866-1924, 1873-10-30
A DEFECT IN LIFE INSURANCE.


THE LARGE PROPORTION OF LAPsED POLICIES INDI-
CATE POPULAR OBSERVATION-DISCLOSURES OF
THE BUSINESS GRADUALLY DDfINIsHING-A CURE
FOR TIE EVIL
To me Edftor OF The Tribune.
SIR: A life insurance policy is usually
contract between corporation and individual,
erng the whole life Of the latter OF his nominee,
considerable part OF II, preceding specified age The
corporation, or party OF the first part has perpetual
charter, and is assumed to be immortal, though known
to be not nfallibe. 1t has studied the of human
mortality and will make its bargains such that good
will be sure TO overbalauce the bad. 1t has
casiOn therefore, to include in the bargain stipulation
by which, in consideration OF certain paid to the
party Of the other part it at its pleasure at any
time be released from its obligation and have the
tract annulled. Such stipulation would simply defeat
its purpose which is TO insure against loss by death
For if at approach death the company could,
by the terms OF the policy escape paying the whole sum
insured by paying much smaller sum, the policy would
be comparatively worthless 1t would be sort Of
tradction in terms.
But with the individual the party OF the second part,
the ease is widely different He undoubtedly wants To
bind the corporation insure him. sick WELL so long
his death would bring pecuuiary loss TO those for
whose benefit he is insured, and he shall continue to
their protection from such loss in other words.
long he continues TO need insurance. But, In re-
gard TO the usual policy, there is far than
chance that the party will need insurance be-
fore death occurs; and til more that he will desire to
cancel the contract According TO the experience OF
life insurance in this country the chance of policy
holder OF middle age dying within any given time has
always been than that Of his disseminating his policy
alive within that time In 1870 out OF 63iO policies ter
minated in the Mutual Life Insurance Company OF New
York. only 5Gl by death. few may have expired
by their limit, but more than ten times many
euded by lapse surrender Ia other ways. Taking
Of oil 1tc in than
fifteen times as many policies dropped alive ex
pired by death or limitation 90
II one drops out early and before he has ceased TO
need Insurance. his loss Of money thereby may not be
any larger than if he had stipulated the best he could
the terms OF such retirement. But he holds on for
number OF years, till more urgent reasons for retire
ment have occurred, it VIII be sure to cost him consd-
cradle sum, which, without any injustice or detriment
to the company might have been saved TO him by
proper stipulation in the policy Some corporations as
stable ana trustworthy any, will insure him with
sueh stipulation, II he insists upon IT, aud pays for his
own medical examination. This being the state OF the
facts as regards the individual the folly OF his taking
long policy which not stpuate the terms of its sur
render cash, is OF course greater than the wisdom OF
his taking policy on any terms.
But 1t Is also folly for the Company 10 issue such
policy without such stipulation Whatever will largely
trouble their constituents will surely trouble the com
panies themselves No trade can permanently flourish
which does satisfy t customers far as their sat
isfacon is practicable. II there are really two conn,
gencies that need provided for in every case ana
both reasonably be proylded lOr IN the sale DdI
gain, why insist oh worspul corporation on proVidg
for only one them, and that the smaller Of the two
What these corporations want most OF all is puDc APP
PROBATION and confidence. They trustees But what
Is the use of trustees people can't or won't trust them
Here is question OF vast Importance to the pune,
How the fidelity OF public ana corporate uus
The fidelity of private trustee, other things being
equal VIII be proporoned to the AFFINITY OF me ttustor
hin, IL "a
pected where the rustor has by written contract pun
~ Out ~ i own nc nfe insurance corporation as
uubic trustee, differs from private trustee IA ~ COM
monty thought this that 1t lacks soul. possibly con.
science Hence greater need that shond be held
accountable Yet III practice 1t receives rom every
p0cyholder money in trust for certain purpos5, 10
take effect only after the termination OF the irustor
fe or after long specified period During TINS period
the trust money Is constantly accommodating III tnS
trustees hands. But. according to the usual policy t
the expiration of the life or the period, he cannot Do
The history of life insurance demonstrates, as one
would naturally expect That the Violation OF ags9 VI
trust under such circumstances Is the rule and hleny
The exception. This so notorious that IN our country
the state after creating corporations, with full powers
to all sorts OF life Insurance pOhcles, wnout
restriction as 10 terms has rather arbitrarily bteppe"
In and required expensive annual valuations and re-
ports the condition OF the trust Iuhds anu tnS
sufcency, certain assumptions OF nOrtAltY ana lh-
teres to the obligations of the policies This Inter
ference is to say the pest OF ~ e1eeeusly - m
and aw kward and when multiplied states exercise H. as
tho interests of the hapess rstors fare almost wo-
fully as did a legendary lady VINO was shielded
In this state Of things the following question has
strong claim to public as well as private
e6ecue responsibility OF the trustee 10 me HnS9r, Win
out at all defeating ts beneucent purpose Or IN other
TO interfere between promise and performance than
the Of exercised by corporate trustees
IL would be better 10 say cOnmonsense That II the Ius
tor by the of the contract retained To himself tho
right 10 revoke his trust any anniversary of his policy
the sum he should then be entitled to withdraw being
distinctly and exactly stipulated, the state w0ud nave
| mn
ance than IL has do with fire insurance or lnsttu-
tons for the investment OF savings III the latter hour
| ian under far stringent accountability 10 the
Individual depostor 1t cannot be pretended with much
sense that II would be fatal 10 lie insurance ANA as
little can IT be ea tTat 70 he trust mat in
fact is why It Ia much dreaded more even tah the
state which is consuming the substance OF
the policy-holder without securing his rights. The
mere Of the proposition 10 stronger thah any
| ARGUMENT Indeed IL is strong enough
STATISTICAL survey OF life Insurance in this country
for the last years Will show that some cause or
other is operating 10 impair public confidence IN IT, ana
mat IL is becoming ana more Important for more
than one reason provide the policy for the eontn'
rency OF the insured party wishing ~ terminate the con-
~ wo refer 70 the Massachusetts Life Insurance
ports we shall mud that there were omttns the Mas
nsn,cs that did business IN that continuously FROM
isG7 tsis72 inclusive period OF SIX years. though tne
~ sT Ia as I'm 1870 and fell 10 Al In 1871 Connnng our
selves to the companies found in all the reports from
oSn Of lnsurance outstanding at the END o. each
year, and the net increase 9nr.Ss sne year
ises ...'.'.'' a ss5 s99Sa9 iSssos isS
is70........,....... l76Q4S05sS sleSS999iiSS
@ ......,......: iisss sSSSffsSS9 7sis6SsS
| rhs siaekenpg rate increase 10 obvious enough
But the most ss Emmanuel and thew Include
the most successf to obtain new business nave ln-
creased rather than ns new sns
on wile tho old business has drQpped away at more