National Republican., 1877-09-15
BoW TO PROTECT POLICY DERS

HOW TO PROTECT POLICY HOLDERS
TIE two great desideIata of life insurance
are: first, plan which will afford the de-
sired protection at o fair price; and, second
absolute security that the contract entered
into by insurance companies will be faith
fully executed upon their part. As TO the
6rst requirement there can be no practical
difficulty. The vast amount of insurance
business which has been done within the
last quarter Of q century has been the means
Of collecting abundant data from which the
principles of sound insurance can be de-
duccd. In the new system excessive salaries
md extrayagant expense accounts must be
eschewed Contracts must be so modified
rs to give the assured in cash ut the end of
each and every policy year the equitable
surrender value of their policies, if do
manded.
We anticipate no trouble whatever in es-
tablishing life insurance upon an equitable,
scientific and safe basis But, however cor
rect the theory may be upon which life in
surance companies are organized, it will be
vain to expect them to be successful unless
some method can be devised Of rendering
the vast amount of assets which they must
necessarily control safe from being squan-
dercd or embezzled by the officers of the
companies The attempt to do this by
means Of State supervision has been
wretched failure.
The utmost which the officers of the
State insurance departments have been able
10 do has been to detect the insolvency OF
companies. Such detection affords but little
protection to policy -holders, since such dis
coveries only result in throwing companies
into the hands of receivers o process which
generally proves the ruin of all the hopes of
policy-holders. State officers have long
complained Of the inadequacy Of the pow
ers possessed by them on this subject. In his
last annual report the New York commits
sioner Of insurance says:
Il h not uncommon 10 blame the insurance supcr,
intsndent when companies fall; but The truth Is
thsi hs omeiAi P9wers over life company arc eI.
an W TEan en ~, Tnen lne SseS ot company p
the company Is almost past redemption.
The lesson which the history Of life in
surancc in America teaches is that the grand
cause Of their failure has been the loss Of
their trust funds through imprudent or un-
wis investments of them, and In many
cases by outright embezzlcment The pres
ent system makes the insurance companies
great money lenders, not Of their own funds,
but Of those of others The temptation to
hvoriiism In the disposition of such vast
sums Is too great TO 10 resisted by ordinary
men. The manner In which the Charter
Oak was ruined by the investment OF mil
Hons in worthless railroad bonds is fresh in
the minds Of all. Similar breaches Of trust
have been the means OF bankrupting dozens
Of these corporations.
An examination into the details of the
manner in which the assets of insurance
companies arc invested is an instructive
study. For example, q considerable portion
Of the assets of q company which recently
failed was found to consist of mortgages
upo" worthless swamp lands in Iowa and
Wisconsin. Set these mortgages had been
accepted as good by SUITE iusnrince de-
partments year after year. Mortgages uron
real estate constitute the chief item of as
sets Of all the companies. Owing to the
large shrinkage which has taken place in
the value OF such property within the last
few years these investments are Mt the best
exceedingly unsatisfactory, especially in
view of the fact that nearly ali the COM
psnies have greatly overyalued the worth
OF the securities held for this class Of in
vestments. The report of the Mutual Life
Of New York illustrates the extent to
which mortgages are held by life insurance
companies. The mortgages owned by that
company on the LIST of January, 1876,
amounted TO $6o,07l, 1891. How nearly
adequate the security held for this enor-
nous sum is no mortal man can tell.
The total assets OF the Mutual Life, of
New York, on the lst Of January, 1876, were
$7S,534,O76.1I As human nature is consti-
tuted no such enormous sum can be safely
intrusted to the management of any set of
men. The pOlicy-holders, rs Mr.. GLAD
STONE says, have nothing to depend upon
but the prudence, the high honor and the
character of those concerned in its manage
ment." 1t is not safe to expose humanity
to the temptations incident TO the unlimited
control of such enormous sums of money.
II will inevitably breed corruption. fiaud,
mismanagemcnt and betrayal of trusts. As
ELIzUR WRIGHT says, such q system "is
specially contrived ior the propagation OF
rogues and enormous lceches."
1t is useless to talk of any plan of insur-
ance as safe which does not place the assets
which these corporations hold for security
oil pOlicy-holders beyond the control of the
company. The sums which must I've held
for this purpose must necessarily be large
II Is, therefore, matter Ofprime importance
that the security should be rendered a,sO-
lutely certain. This can be done by re-
quiring all such corporations to convert their
assets into Government bonds and deposit
them beyond the control of the officers, ex-
cept for the payment Of actual losses duly
authenticated. In other words, IL is possi-
BILE to give policy-holders the same seculiiy
which the holders Of national bank notes
possess No remedy will provo to be ale-
quato which stops short OF this require.
ment, which is so simple and reasonable as
to commend it to every company which
really desires to afford policy holders that
security which they are now everywhere SC
loudly and emphatically demanding
AN ABSURD PROPOSAL.
The proposition TO abolish the Presiden
tial Office and substitute in lieu thereof an