Morning journal and courier., 1891-01-17
er rate of interest than they have any rea-
sonable hope of doings
THE EXACT EFFECT OF THE EXPENSE AC-

1 ~0o'
THE EXACT EFFECT OF THE EXPENSE Ac
COUNT OF THE INVESTMENT.
| These companies, having to use 18th O.
every premium and interest payment fo1
expenses, and earning, say even per cent
interest, can be certain of producing nc
more than s1o,e17 in twenty years.
A savings bank, paying its depositors
per cent interest, after paying its slight
expenses, could take the same premiums,
pay the same losses, and return at the end
of twenty years $15, 1897 instead S1O,917.
A savings bank, paying only per cent.
interest, could take the same premiums,
pay the same losses, and return at the end
of twenty years $14, 174 instead of the life
insurance company's $10,S17.
THE WHOLE TRUTH IS
that no financial operation which has to
bear life insurance expenses can or ought
to be called an investment; and that no
man can justify his Judgment as an inves-
tor when he pays life insurance expenses
for the accumulation of his money, or for
any other purpose than providing his fam
lily the protection they need and cannot
get otherwise than through life insurance
It is financial absurdity
But the question still remains: how do
these companies which spend one-fifth of
their entire income for expenses and can
earn certainly no more than per cent
for the next twenty years, and SO cannot
safely promise to return more than SIC, ,S17
and really do contract to return only
$40, ,0OO-expect to make the So, ,243 more
than their true apparent ability to earn,
and 81, ,060 more than they dare contract
to pay?
THIS IS WHERE THE SPECULATION COMES IN.
And it is this: they know that some
will die during the twenty years; they ex-
pect that some, possibly considerable
number, will have to let their policies
lapse during that time, some of them, per-
haps, after making large payments. So it
is agreed that each policy-holder will
leave all his surplus earned on his policy
year by year with the company for twenty
years; if he dies during the time, it is to
be forfeited to the company; if he lapses,
it is also forfeited; and there is forfeited
besides, all of his reserve unless he applies
for paid-up policy within six months, in
which case he forfeits about one-third of
his reserve in addition to all his surplus
This is the speculation; and, for the sake
of it, the insured pays each year more than
Gu6 yearly COSU u LIS Dy Cn6
amount of surplus earned or saved, and
runs the risk of losing it all if he dies or
lapses; and he also runs the risk of losing
all, or q considerable part of the paid-up
insurance which he would otherwise get
for his family in case of lapse, in the hope
that he won't die or lapse, and will share
the forfeitures of those dying and lapsing;
and in the hope that these forfeitures will
be so large that he will make money there
by.
Evidently, this scheme is totally opposed
in spirit to true life insurance, and could
not be understandingly engaged in by any
man solicitous for the thorough protection
of his family, or at all scrupulous about
stripping other families of their protection,
or by one at all careful to pay for his in
surance only what it costs, or desirous of
knowing what it is costing year by year.
But granting a mans willingness to
speculate with family protection, for the
sake of result which, if realized, is only
492 per cent. annual interest on his pay
ments
WHAT ARE THE PROBABILITIES OF SUCCESS?
We can judge only by the past. Two of
these companies have been engaged almost
exclusively in this speculative life insur-
ance for twenty years already. For nearly
all that time they forfeited all the reserves
of lapsing policies as well as all the sur
plus. But they are settling now the sur
plus on policies which have received, or
are supposed to have received, the forfeit
ures of the entire reserves and surplus from
lapses for the last twenty years; and the
surplus being now paid is only about so
per cent. of the Estimates" of surplus on
which these policies were sold twenty
years ago. Either the forfeitures have
been much less than was estimated, or else
the expense account has overcome the
speculation; one or the other
But these companies now profess to for
felt on policies now being written, only
about one-third of the reserve instead of
the whole of it as formerly. Yet they are
estimating" that the results of these poll
cies twenty years hence, which can share
in the forfeiture of only one-third, will be
as great as are the present results of the
policies which are sharing in the forfeiture
of the whole reserve for the last twenty
years. They estimate that part will pro-
duce as much as the whole. The old 'Full
Tontine" policies-in which all reserves as
well as all surplus on lapses were forfeit
ed-are yielding only SO per cent. or less
of the ESTIMATED" surplus. And this SO
per cent result on Full Tontines is now
uBcu DIS I'LL csGlmdtO VI GuO PlOUtbDlo Ic-
suit of the Semi -Tontines-which are to
forfeit all the surplus but only third of
the lapsed reserved. For all these invest
ment policies, "bonds," "consols," or
whatever else they may be called, are
merely varieties of Tonttne or Semi Ton
tine.
How Semi-Tontine is expected to accom-.
plish as much as Full Tontine has never
been explained. The expenses are increas-
ing; the forfeitures can hardly be expected
to be greater and a much less proportion
of them goes to the pool; and certainly the
rate of interest is not likely to increase in
the next twenty years.
The true question would seem to be this
| if the old Full Tontine estimates based or
| full forfeitures have received only one.
half the expected surplus, why is not an
equal shrinkage to be expected in the re-
| suits of present 'estimates'' or "illustra
| tions" which are themselves the disap
| pointing results of the old Full Tontines
| and which must be realized, if at all, from
only partial instead of full forfeituress
| How can partial forfeitures produce a,
large surplus as full forfeitures2
| And it is forfeitures alone that can max,
these policies an investment to those wht
don't happen to forfeit, for the expens
account kills the interest account.
! Or, apply the test of history to this yer.
policy:
The old Full Tontine estimate was tina
the entire cash value at the end of twent,
years would be $23, ,500,-a surplus owe
the face of the policy of $13, 800. But tn
actual surplus settlement in sight is-if n
further shrinkage takes place such as ha
been constantly going on-$7 900 instea'
of the $13, 800 promised to the hope. An
now the $1,000 result of a s13,5 800 Ful
Tontine estimate is used as Semi-Tontin
estimate for twenty years hence. If it ha
as good luck as its predecessor it wi
settle at about So, $40 instead of 81, ,O6(
making total settlement of the polio
$13,6 $40 instead of $17 ,060; this is less tina
81 per cent. on the premiums paid in; an
to attain even this the companies must d,
pend on forfeitures equal to p per cen
compound interest on the premiums pait
Is that speculation worth hazardir
all, or any part of what one pays for il
surance and making his family haza1
losing it ala
: JACOB L. GREENE,
President.
| u.p-uoDr1 Tar-orx, ~ 1OQf