The sun. [volume] (New York [N.Y.]) 1833-1916, 1878-04-08
LIFE INSURANCE LOOKED AT.
A pETERfN NAV TORN GIrING the pun
nc IN INTERIOR JIET

NOUS business OF the insurance companies.
To THE EDIroR OF THE Sun Sir As your
journal has from time to time been leader in
reforms and has necessarily been outspoken.
| and free to uncarth the wrongs you have as
sailed. trouble you with an article concerning
the topic you are now discussing. life nsur-
ancc. state supervision. and the acts OF its SUI
pcrvising officers.
When State supervision was inaugurated It
was done without single petition for it to any
State Legislature in the United States
The accumulation OF money by life insurance
companies had attracted attention, and there
were more politicians to support than offices
and salaries To- distribute Thus insurance
companies became the victims Of legislation
such as on the face was protective to policy
holders. In flling the Offices of Insurance
| Commissioners. no regard whatever was paid
to qualifications. and the laws did not prescribe
any standard whatever for solvency, either for
fire. marine. or life companies.
For years the whole thing was farcica and
ridiculous-only an annoyance to the compa-
| MES. from whom voluminous reports were re-
| CURED all Of which were congregatcd In print
| ed volumes. under such blanks and forms as
| the several Commissioners adopted for the pur-
pose. Next. the fee system was introduced.
| Then in some States, taxes were levied on the
| capital stock. or accumulations so that in time.
as ia the State of Connecticut. twenty per cent.
| of the whole State expenses was derived from
taxes on the assets OF insurance companies.
or course these Commissioners must do
something more; they must exercise their
| power to investigate. and Investigations once
| commenced. vicious men had only TO point out
a company, because. perhaps. they would not
do this or that-incrcase agents fees. adj
vertse themselves to financial death. or make
an attorney out Of this lawyer or that lawyer. or
give to another man the supervision OF agen-
cies or claim to have made unreasonable loans.
| etc.-to induce the Commssioner to set about
| Investigations, which. ho being incompetent to
make himself. must employ experts and law
| yers to make for him. Weeks must be thus
| consumed before one can be concluded the
results Of which were, in many cases. largely
o and se n
| announcing. over the signature and seal OF
office, that the company was sound.
| The company IN MS examined having paid large
lees for this certificate and desiring 10 turn the
expenditure TO good account, would advertise
agents to have the world know that State OH
| cial twho knew nothing about life Insurance.
had examined their company and certified II sol
vent to its bottom dollar. and this. too. when
there was no law which established any stand
| ard of sovency whatever.
Very soon this legislating and examination
| business became an epidemic. hardly escaping
any State or company. so that state Insurance
| Commissioners reports needed bookcase To
The expenses thus inaugurated have been in
|
they amount TO us much ms the current salaries
and office expenses.
But here the evil did not stop. The managers
themselves began to look around to see how
they could get their slice. for II II was right for
money T. be paid out i9r purposes Ike !, those
easy when the conscience had become bunted
to contrve way.
They began 10y voting percentage on new
business Ia onccrs-over and above their sal
arcs-giving them vacations. and charging the
expenses to supervising agencies" for trips TO
Cape Cod fishing. with the State Superintendent
or COMMISSIONS; Ana then again another set
acts for legislatures to consider. to modify
or defeat which second brood of lobbyists put
in claims Tor services they can render. to defeat
or modify. II not 10 buy of the mover. and stop
his mouth.
And further, this disease gets into both
Houses OF legislation among the members. and
side arrangements must be- made with this
Senator and that. and members who are law
yers. or leading men and smart. all OF which
expenses fall upon the insurance companies.
me wheel IL so large, ana INC power is SO
great. that the COMPANIES think that paying Is
! thr cheapest. and 10 a.
Finally, state standards. Of solvency nre es;
tablishcd one stat" adopts one standard. and
another state another standard. and the com
panies must meet the lowest or they will be
thrown 9ut OF tlihi Ntate ahi mus srt one oiark
eye; ana on masking up tneir actuarial account
company finds TINT their schedule Of assets
VIII not equal the liabilities. True. they would
have had enough. but foes. taxes, and the new
scale OF expenses used NJ the money. and go
much is gone. What then Is to be doney The
day Of account is at hand and the depressed
assets must be graded up.
II the company Is premium note company
premium notes held on lapsed poll
cies. and put part Of them in the tin box
with the premium notes on running policies.
andthc assets are graded up to The level line. or
a little over-the statement is sworn TO and goes
70 the great head centre; is accepted: Ned and
in due time appears In the new printed volume.
In case however tho institution Is cash
company. some liability must be left on. or as
sets must be borrowed, and subsequently re-
turned.
These things having become forced. MS ii were.
on insurance companies. they know Of no
way out, or how TO bridge enormous expenses,
but to lend their money at high rates. speculate
lttlc rush on western yen per cont, m2rlsas, !,
In bonds, state, county, ana city. bearing high
rates OF interest and low market values Hc. -,
Then their agents, being pushed 70 the wall
for new business, become less careful. and I'M
desirable risks are allowed To creep IN, and then
heavy losses follow and the companies. for pop
ularity must pay and ask but few questions.
| Then come shrinkages in values the coun-
try over, real estate falls, stocks, bonds, and
collaterals become weak and a new harvest for
investigating officials is next in order. The
company's feet are tender the investigator s
sword is ready for the slaughter, and he must
show that he Is n vigiant officer which can be-
done only by attacking the weakest and crowd
them to the wall and pass them over 10 the
sands Of policy holders whose contracts are
slaughtered by law. The receivers. lawyers
referees. appraisers. and EMPLOYEES live on the
assets M long rs they can and tie poor policy
holders are lost in the fog
me one man power swdys signt anu i ,i ah1
. borrowed from defunct premium note policies
assets. or OF outside parties, and Is victim OF
perjury; and the court and Jury are appealed 70
TO send him TO prison. when the prosecutor. in
r fact. has i'll gotten fees and payments himself
and leads the poor man To the temptation OF pom
looming his annual statement for once or more
hoping the new year will be less oppressive, aud
| the company Will grade itself up.
| Then again. the big companies must be in
vestigated too, or partially will be shown
| therefore. one. two. or three are selected, and
thes come out OF the ordeal in marvellous
short space of time with surplus and 10y and
| by II is proved that the examination cost them
from s32 OOOto $50 900 and hero may say. iftht
} | companies of New York State alone were pul
, to the rack and made 10 tell truly how much
STATE supervision and legislation cost them an
nualy, directly or indirectly, in money, and VIII,
had it. the answers would vary from 81 400
, up to $50, 900 each; and II is more important
now to secrtain these facts than 1t is to amend
| old laws or tO pass new ones.
The writer knows precisely what he Is writing
about for he has been familiar with the work
ings and prOgr'ss Of all this business for about
! | thirty years, and he Is prepared 20 prove that
= up to the time Stat" reports and SUPERVISING
officers were originated. zach company pub
l lshcd truly thelrHs in their own prthphlets
their OH - were honest, their Agents cNHctcd
, but reasonable commissions, and expenses were
moderate.
J Look now at the spectacle. The whole bust
81 .asa. a tl,