New-York tribune. [volume] (New York [N.Y.]) 1866-1924, 1878-10-07
An EXPERIMENT IN LIFE INSURANCE.

An EXPERIMENT IN LIFE INSURANCE.
Whether the business of Life Insurance has
entered upon new stage of development may
depend on the result of the important step
Just taken by the Mutual Life Insurance Com
pany< of this city. 1t is desirable that this
step shall be clearly understood, for there
seems to be n little disposition IN some quar-
ters 10 miscOnstrue il. We do not perceive
that it is a step of hostility TO other we'll
managed companies. IL is an effort to make
wiser and safer use of fund which the Mutual
Life and other sound companies have hitherto
held for the protection of the assured. 1t Is
an experiment of which, while one company
assumes whatever risk there may be. Others
will be free TO share the benefits If 1t succeeds
The companies have claimed that, IN Justice
to their policy-hOlders, they cannot give back
the full cash value of his policy to any per-
son who wishes to retire from his contract OF
insurance. For, they have said, only those III
sound health wish to retire; those of impaired
health cling to their policies; and thus the
average vitality of those insured is lowered,
and the security of policy-holders diminished.
As lust protection for them, part of the es-
timated cash value has been retained, when
policies are surrendered. The vitality fund"
thus created ought to be applied only to the
purpose for which it exists, namely, the pro-
lection of remaining policy-hOldcrs against an
impairment of the average vitality Of mem
bers through Withdrawals Of persons in sound
health This fund is not so applied, IL has
been strongly objected, when il is distributed
in increased dividends. There is injustice, it
is said IN taking from those who are unfOr-
tunately unable To continue payments only to
swell the dividends of Others who have better
fortune. To meet these objections, the
company should hold back from the value
of a surrendered policy only enough TO secure
sound new life in place of each sound life
retiring and should apply that sum
sacredly to this end. If the sum is given in
increased premiums to agents the soundness of
the company is not necessarily mantained,no
the security of its members increased. III in
vested 80 that tho surplus swells, this fund
can only make the company stronger in
assets, while it becomes less safe, and may
even be destroyed, by the reduced vitality of
its membership.
Hence it is now proposed to apply this "vi-
"tality fund " directly to secure new sound
lives in place Of sound lives retiring. If this
can be effected, the condition Of tho company
must be better and the security of its mem
bers greater. than if the same sum were in
vested as assets. At the same time, the part
held back from the cash values of policies
surrendered will not be taken from the unfOr-
tunate to swell the dividends of the for
tunate, but will be strictly employed to MAIN
tain that average vitality which is threatened
by withdrawal of sound lives. Instead of pay
ing out this fund to agents, il is proposed to
give from it directly to those who may enter
the company, and add their sound lives to
! maintain it's standard of vitality. To them,
the cost of insurance will virtually be
lessened, and at the expense. not of
present members Of the company, but of those
who fail to keep up their contract of insur-
ance. In effect, the retiring member will pay
to the new member enough to secure him as
a substitute, and thus to maintain unimpaired
the proportion of sound lives in the member
ship. The payment of the bounty for new
business, not to agents. but to the new MEM
bers themselves, is the essential feature of the
plan adopted by the Mutual Life, which offers
to return to new members for the first two
years 80 per cent of the amount of their pro-
NUNS. In effect, of yearly premium o
800, the new member is to pay for two years
| only $40 each year, and a retiring member
pays the remaining $50 to secure his substi-
| tute, in order that other old members may
not suffer by his withdrawal.
This new application of old and well-estab-
! lished principles will be watched with interest
by the public. Being tried Ivy one of the old
est and strongest life insurance companies 1t
may more Justly be regarded as an effort to
place this important business on sounder
/ basis than as an act of rivalry or hostility, be-
cause any other company, when satisfied as
! to the soundness of the plan, can adopt it.
! Whether it will succeed, of course remains to
be seen, but the Mutual Life is able to give
| it thorough trial, and it doubtless has not
been undertaken by the managers of that con
seryatiye institution without full con
sideration. In 1873, when that CON-
pany was led by its experience of
thirty years to the belief that the premiums
usually charged are higher than are necessary
for safety, it proposed to reduce the rates ma
terially. But many of its members objected,
fearing that the security of their own insur-
ance would be impaired. The new plan is
not open to the same objection, because the
same rate paid by present members is 10 be-