New-York tribune., 1885-03-06
THE TONTINE. SYSTEM.
AN ACTUARps OPINION.
SOME AGGRESSIVE STATEMENTS AND OPINIONS
SUGGESTED BY THK REPORT OF THE ooSNEcrI-

SOME AGGRESSIVE STATEMENTS AND OPINIONS
SUGGESTED BY rHK REPORT OF THE ooyNEcrr-
CUT MUTUAL.
To the Editor Of The Tribune.
SIR: Now that you have brought tho Toatine
question prominently before your readers. you may
be willing to present the moral well as the bus
ness aspects of the matter.
The system was introduced sixteen years ago by
the Equitable aud the Mutual Life aud thony yh the
president of the former had been q useful business
friend of mine. and the actuary of the other
both a useful business and highly esteemed per-
sona friend my convictions as to the moral aspects
Of the question were strong that I felt nay pro-
fessional duty Independent actuary, working
In the general field of life insurance, required me
to oppose it, and did in language which beg
leave to quote below both because it was so disin-
terestedly spontaneous and also because further
experience has fully confirmed my original views.
IL said: "The TOntine Dividend System, intro
duced by two leading life insurance companies,
embodlcs some principles mt variance with those
of life insurance. and therefore challenges criti-
cism.
"It proposes in part to do away with forfeit
ure rulos and return to the dark ages Of life insur
ance, when those that kept mp their policies
joiced over the forfeiturs of such as failed to do
so. For present purposes it Will 30 sufficient to
understand that the whole system is optional, and
that those choosing it may enter any one of four
classes. In two of these failure to pay the annual
premium works entire forfeiture OF all payments
and rights and in the other two it deprives the n-
sured only of participation in the surplus and not
to tho right to paid-up policy. do not take ex-
cepton 10 the two latter CLASSES in which forfeit
only affects the dividend, bat to the two
former. in which all benefit from past payments
may be lost. The following example will show tho
operation of these total forfeiture plans
aged thirty takes out $4,000 policy on the
twenty-year endowment plan, and after paying for
eight years. during which he receives no dividend,
fails In business and is unable to pay his next
premium; he cannot borrow anything on his
policy because 1t has no surrender value-it is
therefore forfeited, and though. according to
the usual rnles Of the company, he should
receive a paid-up policy for $4,000, payable
in twelve years or at prior death. he must now
lose all, and the cash value of his policy,
81 900, goes to swell the profits of tho remaining
members.
III such O system becomes general will ii be
proper to call life insurance benevolent institu
tIonf Can companies thsn ask to have their divI-
deuds exempt from National and State taxation'
ut is idle to answer that no one should enter
these classes unless he can keep up his payments
or that such an one takes his risk. On such
pleas gambling would be jusiiable. A grave sub
ject requires grave language. Fancy az agent So
liciting an application on these plans and saying
1T will pay better than any other investment you
can make, net half the policies will be kept up to
the end. Mr.. A. has just taken one. and you know
he will not keep it uo; if he forfeits. all ms pay
l,ents go to you. etc. Is this proper language for
life agents foremost among the honorable workers
Of the civilized worl1t
"Ths system might moro properly be called the
forfeiture dividend plah. as the adjective Ton
tine scarcely applies at all. II is speculation In
forfetures. each man stalking his own annual pay
ments on his ability to continue them; and If 1t
should prevail life insurance will end. as 1t Is SAID
TO have begun. in gambling"
1t should be remarked that the Mutual Life gave
up the system shortly afterward and it was some
years before it extended much.
Some readers may ask, if the system is so wrong
why hasit prospered sof Many answers can be made.
Colonel Greene has given one OF the most obvious
the high commissions ii permits. and thus brings
business from the unthinking part OF the public.
Another explanation is the failure of the non-
Tontine companies puDlcly to attack the system,
as the Connecticut Mutual has at last thought tit
TO do.
Another answer is. the scheme would have been
greatly baked il the State Insurance Depart
ments had classed the reserved Tontine dividends
as Liabilities, along with other unpaid dividends.
All impartial experts agree that this should be
done III fact, the is clear to any man who can
say his soul his own without calling in lawyer
to examine his title. But the Tontine companies
got the Insurance Department 10 decide in their
favor. and the other companies allowed the matter
to stand SC from pure apathy. out OF which they
NAV awake too late, for though the race is not al
ways to the swift, they certainly have the best
chance.
IL IL the old story sef-interest is always smarter
and mere energetic than dislnterestedness but.
though the Tontlae companies seem to have the
best of it hus far. the question is rot yet decided,
even in that aspect :-Jndgment Day has not como
yet. Very respectfully yours.
DAVID p. FACKLER.
Consulting Actuary.
Ner- York Feb. % 1885.