Pittsburg dispatch. [volume] (Pittsburg [Pa.]) 1880-1923, 1891-01-15

| terest could take the same premiums, pay
the same losses, and return at the end of 20
years S14, 174 instead of the life insurance
compaDy's S1o,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 investor when
| he paws life insurance expenses for the accu-
mutation of his money, or for any other
| purpose than providing his family the pro-
lection they need and cannot get otherwise
than through life insurance. 1t is imam
cisl absurdity.
But the question still remains, how do
! these companies which spend one-ffth of
their entire income for expenses and can
| earn certainly no more than per cent. for
| the next 20 years, and so cannot safely prom
| Use to return more than $40, ,8l7-and really
| do contract to return only $40 000-expect to
make the Sc, 243 more than their true appar-
ent ability to earn, and $1,000 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 20 years; they expect that
some, possibly a considerable number, will
nave to let their policies lapse during that
time, some of them, perhaps, 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 30 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 forteits about one
| third of his reserve in addition to all his
| surplus.
This is the speculation; and, for the sake
of it, the insured paws each year more than
the yearly cost OF his insurance by the
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 a
considerable part, of the paid-up insurance
| which be 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 thereby.
Evidently, the scheme is totally opposed
in spirit TO true lie insurance, and could
not be beunderstandinglye engaged in BY any man
solicitous for the thorough protection of his
family, or at all scrupuious about stripping
| other families OF their protection, or by one
at all careful to pay ior his insurance only
Z
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 f. 90
per cent annual interest on his payments,
WHAT ARE THE PROBABILITIES OF sue
CESS?
We can Judge only BY the past. Two of
these companies have been engaged almost
exclusively in this speculative life insur-
ance for 20 years already. For nearly all
that time they forfeited all the reserves of
lapsing policies as we'll as all the surplus.
But they are settling now the surplus on
policies which have received, or are sup
posed to have received, the forfeitures of the
entire reserves and surplus from lapses for
the last 20 years; and the surplus being now
paid is only about 30 per cent of the "esti-
mates" of surplus on which these policies
were sold 20 years ago. Either the forfeit
ures have been much less than was esti-
mated, or else the expense account has
! overcome the speculation; one or the other.
But these companies now profess to forfeit
on policies now being written only about
one-third of the reserve instead OF the whole
of it, as formerly. Yet they are ''estimat-
ing" that the results of these policies 90
years hence which can share In the forfeit
ure 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 re-
serve for the last 20 years. They estimate
that part will produce as much as whole.
The old Full Tontine'' policies-iu which
all reserves as well as all surplus on lapses
were foreited-are yielding only SO per
cent or less Of the estimated" surplus. And
this 80 per cent result on Full Tontines is
now used as an estimate of the probable
nF ha ;o,
! forfeit all the surplus, but only third of
the lapsed reserves. For all these invest
ment policies, bonds, " "consols," or what
ever else they may be called. are merely
varieties of Tontine or Semi-Tontine.
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 much less proportion of
them goes to the pool; and certainly the rate
of interest is not likely to increase in the
next 20 years.
The true question would seem to be this:
II the old Full Tontine estimates based on
full forfeitures have received only one-haIf
the expected surplus why is not an equal
shrinkage to be expected in the result of
present ''estimates" or illustrations" which
are themselves the disappointing results of
the old Full Tontines, and which must be
realized, if at all, from the only partial in
stead of full forfeitures?
How can partial forfeitures produce as
large Surplus rs full iorfeitures?
And it is ioreitures alone that can make
these policies an investment to those who
don't happen to forfeit, for the expense ac-
count kills the interest account
Or apply the test of history to this very
policy:
The old Full Toutine estimate was that
the entire cash value at the end of 20 years
would be S23, 500-a surplus over the face OF
the policy of S1S 500. But the actual sur
plus settlement in sight is-if no further
shrinkage takes place such as has been con-
stantly going on-S7, 060 instead of the S13.-
800 promised to the hope. And now the
$1,000 result OF a S13, 500 Full Tontine esti-
mate is used as semi-Tontine estimate for
20 years hence. If it has as good luck as its
predecessor, it will settle at about So, go in
stead of 81 ,060, making total settlement of
the policy s13, go instead of SIT ,06O; this is
less than 81 per cent on the premiums paid
'wLEWEW ,,Se