National Republican., 1877-07-14
HOW LIFE INSURANCE COMPANIES
CAN BE MADE SAFE


The failure Of numerous life insurance
companies during the last year cannot sur
prise any thoughtful man who considers the
number Of the companies which have been
competing with each other, and the enor-
nous number OF risks they have succeeded
IN obtaining by an artificial and forced sys-
ten Of pushing the business. The disasters
which have overtaken so many of the com
pnnies were inevitable, for life insurance,
like every other branch Of business in
America, has been overdOne.
The chief evil effects of OVERRIDING life in
surance have been that many bad risks have
been taken through anxiety to secure busi-
ness; many persons were induced TO take
larger risks than they were able TO carry,
and by the pressure Of hard times were com
PEELED TO forfeit their policies; many per
sons Of financial ability were induced to
take large rlCies rs investments, whereby
large sums have been lost by the failure of
the companies In many cases. Moreover,
the sharp competition between the numer-
ohs companies made it necessary for them
to expond enormous sums in advertising,
and for the commissions Of agents and
special agents in addition TO high salaries
10 officers and the expense of maintaining
Injurious offices and branch offices for the
| transaction Of their business. IL is not sur
prising that such u disregard of all business
principles should have ruined companies so
oDducted.
II is well TO consider the real causes Of
disasters which have recently overtakcu 80
many Of these corporations. Life insurance
is in and of itself, highly beneficial, and
the happiness aud comfort of W many wives
and the education of 50 many children are
dependent upon the success and snlvency OF
these institutions that too much attention
cannot he given to the consideration Of plaus
Tor rendering them more secure.
Tho principal meaus by which life insur-
.nr- companies have been able TO impose
,i'" the public has been by misrepresent-
,ng the character and value of their assets,
The only security the public have in most
,z,ses is the affidavit Of an uili'r' Of the com
Inny to tho effect that the ,N:"pany pos
S,ss,s certain bonds n,"'tgag'N money and
other assets. Up"n the strength "i the afii-
divit Of IN Interested officer that ihe com
pany owns surh rnds and so forth, the in
sur,ince commissioners of the several States
proceed 10 appu,ise the value Of those securi-
ties, and hom such sppraiscn,ent they de-
cid. sS Ia the solv.ncy of the companies.
Nnw, there are two fatal defects in this
system which make it impossible to ever
render the rights Of the insured secure The
assets of the companies are under the con-
| troll of the officers, and may ut any time he
embezzlcd or imprudcntly Or ftaudulently
converted into worthless bonds and other
unsafe Investments The public, moreover,
have no assurance that the companies really
own the bonds and other securities they pro-
Tess 10 own, except the oatls of interested
officers. This system certainly leaves too
much to depend upon the integrity and
tI.lity nf the ,,IltT,.r ~ nI the ~
panies. The happiness and support Of thou
ssInds of widows and orphans are ut the
mercy of men who may bs dishonest and
who may choose to commit perjury. There
is We think, one method by which the hold
ers of life insurance policies could he eiiec-
tually protected. Let every company be
required soon n possible to convert all
their assets into United States bonds, and to
deposit those bonds in the treasury Of the
States in which the several companies are
located, to he held by the States in trust
for the benefit of the insured When thus
deposited, the bonds should, Of course, not
| be under the control of the companies or
allowed to be withdrawn M long AS the
companies continue to do business or have
any outstanding risks.
BY this plan the people would know the
exact value of the assets of the companies
There would be no risk of making bad in
vcstments of assets or that they would he
SIuandcr.d by reckless managers. The
public have a right TO security as nearly per
feet rs the ingenuity Of man can devise
since the losses from the failures Of insur
ance companies generally fall upon helpless
women aud children for whose protection {
vast majority Of the policies are carried
The question has recently been asked how
the lives OF life insurance companies coul'
lie insured. We know Of no better plan TO
accomplishing this object than the one pro
posed above