The New York herald., 1877-03-15
LIFE INSURANCE ETHICS.

To THE EDITOR OF THE HERALD:-
The Hon. John A. Finch, Special Insurance Com
missioner Tor the State OF Indiana, has submitted to
the underwriters OF America series of tturty-one
queries for the Information and benefit OF the insur
ance committees of the several State Legislatures.
These queries have been answered In detail by Mr..
Charlton 7. Lewis. Secretary of the New York Cham
bcr Of Life Insurance, in printed pamphlet of twenty
pages. Coming from this the answers OF Sec
rotary Lewis may airy be assumed as representing
officially the views OF the nagcrs Of the companies
composing the Chamber, which includes nearly all of
our largest institutions.
In general the statements OF Secretary Lewis
tcrse clear, and even JUDICIAL They bear marks
Of the literary culture and ability for which the author
Is Justly distinguished His views OF the injustice and
wrong to the pocy-boldcrs OF a company which. by
real or technical insolvency, has been placed in the
hands OF receiver, by pro rata distribution OF the
assets among them ALL sick and well, very forci-
ble Whatever the deficiency may bo IN such cases
tho remaining assets should be applied to continue
The ,nsuranccs, in whole or part This impor-
tant matter now, when so many companies are IN pro-
OF liquidation
Tho answers of Secretary Lewis to tho sixteenth
query-that relating 10 surrender valuesarc those to
which call attention. They derive Importance from
the fact that they the carefully prepared and Official
opinions of the Chamber Of Lille Insurance upon sub
jcct material interest to every polcy-hoder These
official Opinions, moreover have been widely circulated
among the members of different State Legislatures
with view OF moulding opinion and OF influencing
legislation upon this subject.
The sixteenth query OF Mr. Finch reads as follows:-
"wnat protection equivalent do you think the law
should secure to tho holders OF life policies which
must lapse Tor non-paymcnt OF premiumsy'
Before examining the statements OF Secretary Lewis
In answer TO this query, brief explanation OF the real
nature OF lie insurance contract may not be amiss
Life insurance is based upon our knowledge OF the
laws governing the chances OF living and dyng.
Thanks to the carefully prepared mortuary statistics
OF different companies and 10 some OF the census
turns the rates OF mortality at different ages among
large number OF persons similarly situated MS regards
habits and conditions OF life. cai within well defined
limits be predicted with great precision and confidence
In other words the cost Of insurance at each age
be accurately determined In advance.
SO long as lite insurance is purchased by Uniform
average premiums by any payments in excess OF the
requirements for the current year alone there must,
legally and necessarily be reserve each policy OF
such excess THIS reserve or excess IS simply and
solely deposit or payment Ia advance for insurance
promised To DO furnished In future by the company
The e'ndividual dcpositor. II the company relieved
from its Obligations To furnish such insurance, 1t
refuse to return portion at least OF such payments
made in advance to secure itg The injustice OF allow
ing company TO retain and TO conascate
trust funds for which consideration has
been, or be, rendered is 100 obvious for valid
defence Yet II is shown % By the last repor; Of The
ment that IN the year 1878 alone less than 81, O55
policies insurng $142, ,oo3 4s3, forfeited for
payment Of premiums and every dollar of reserve or
payments in advance thereon conlscated. Tho
losses to individuals every year from the forfeiture OF
their policies have been fearful while the gains to the
companies have been neutralized in whole in part
by the odIum justly attaching TO such fragrant wrong
and the consequent enhanced cost of procuring new
business
Let US now examine some OF the official state ments
OF the Secretary OF the New York Chamber Of Lie In
Mr.. Lewis states that person desiring to
effect an insurance may pay the price down, and
In this case the sale Is absolute. But the
Insured usually prefers not 10 pay the whole
price at once and for his accommodation the company
accepts IN Its place the annual payments during his
life" OF its equivalent "In other words, the company,
Instead OF investing the proceeds OF It's sale OF
upon the life OF the policy holder himself II he should
die very soon II not only pays the insurance sod
but loses all that part OF the price which Of
Inc expected future payments OF tho annuity.
ANY law which should undertake to guarantee TO each
member OF company the righta any tlmc to withdraw
and TO tako with hlm his share oil the common fund
would be destructive TO the business
The single premium, at age ioriy, necessary TO Sc
cure $40 900 al death by The '.Muuai Life, rates,
which those charged by the majority OF the New
York companies, rs s4455 suppose, instead Of paying
hits premium 10 the lite insurance company, the IN
dtvIduai, aged forty should deposit the amount
in the Scainan's savings Bank or ir trust
oil undoubed credit and should apply the
interest thereon each year payment OF insurance
on his life for sum sufficient TO make up the 900
desired, less than iour per cent per annum Of this
or $175 o. would suffice 10 pay the full
nuai premium Tor an insurance of S5,5i5 In case
Of bis death the heirs would be entitled TO receive
rom the savings bank 81 400 principal, augmented by
interest accumulation IN excess oil The annual prem-
ims aud 10 receive from the company 50, $40 nsur-
augmented PERHAPS 3o Sy dyaehds 50 mat they
II tho savings bank should allow SIX per cent interest
IN tho dc post $267 80, there would be nm excess
,acn wear OF sol 30 The annual premium In tho
.ourse of time. however, money may become moro
or necessary, than insurance, and the policy
Older NAV wish 10 terminate his contract aud
o withdraw his funds In the company he may
lot do So but by the course ABOVE suggested
10 NAV withdraw the whole accumulated deposit
rom inc Swings bank at his pleasure, without
'rendicc to the Insurance. which may may not be
nntinuc1 The reserve on any policy purchased BY
inform or average premiums. being deposit or
ay mcnt in advance for something PROMISED W De iur.
sned in future ought to be held as u would be held
deposited 10 savings bank tas, IN act II might be
4 anv case without prejudice 10 the insurance. Yet
ravev tells us that 40 withdraw and to take with
Inn his share of the common fund would pc ucstrrc-
i've 10 the business" business conduc'ed on sucn