Pittsburg dispatch. [volume] (Pittsburg [Pa.]) 1880-1923, 1892-01-25
Matthew Marshall Shows Why Life
Companies and Their Agents
ARE USUALLY EXTREMELY FLUSH.
Profits Made on Each End of the Line.
and Very Often Doubled.
WHY AND WHERE INSURANCE PAYS
ESPECIAL TELEGRAM TO THE prsPArcB.,

ueIuOnStIaIlOn OF ID6 cOWphny1S aDunuaHt
solvency, Notwithstanding the mismanage-
ment of its officers. The immense sums
they have lost in unlucky real estate and
other speculations. and by unfsithful agents,
OF have squandered in extravagant COM
missions and in the publication OF costly
books to no purpose but to crafty personal
vanity, have not suffced to exhaust the
revenue they have received from premiums
and from the income of their good invest
ments Personally, have no interest in life
insurance, either as policy holder or other
wise, and, beyond the facts furnished by the
report of the State Insurance Department, L
have no knowledge of the merits OF the con-
troversy which has been going on for the
past six or seven months in regard to the
New York Life Insurance Company.
When l was younger man was often
beset by life insurance agents to take out
policies on my life, but as often refused;
No one was dependent on me Tor whom
was under oblisation 20 make provision in
case o: my death, and to the suggestion shat
as method Of investing money she pay
meat of premiums WIS more profitable than
any other valable TO men of small means,
Invariably answered first, that like tie
Weste-ner did not care TO play game
where had to die to win, and, second. what
little money saved ont of my salary pre-
ferred TO put into a savings bank, where
could draw upon it for any sum needed at
any moment that required it.
= Wise Decision for Some.
As things have turned out, made wise
decision. 1 have lived long enough 20 ac-
cumulate on my own system far more shan 1
could have got from tie most generous life
policy, and now what money have is my
own, to do with as please, without having
either TO leave it to my relatives or to ac-
cept whatever sum in cash the company
mirht choose to allow me on my policy.
None the less do 1 recognize She advantages
of life insurance in the case OF men with
wives and children depen5ert on their
earnings for support, and liable TO great
suffering if their bread-winncrs should
suddenly he taken away. Young men,
especially, Just starting in business or il
professions. are almost criminal IL they
neglect so serious duty as that of provid-
ing by this means against the calamity OF
their death before they have succeeded in
laying by a sufficient fortune for their fam
lilies. II, now, after having stinted them
miums, they should find, by the insolvency
of a prominent insurance company, that
their privations may possibly lave been to
no purpose. it would be q great discourage
ment to their continuing the effort.
Enormous Profits for the Companies.
still, the question suggests itself to me as
it doubtless has suggested itself to many OF !
my readers: How large must be the profits |
of insuring when the New York Life Insur- |
ance Company can suffer the enormous |
losses which Superintendent Pierce finds |
they have suffered and yet show q still more |
enormous surplus? One OF the losses re-
ported by the superintendent is $3.50, 900 on
HolBrook Hall, another OF S2S4,00O on the |
Plaza Hotel another of at least $4,000 and
possibly $500 600 on real estate in Paris, and
upward OF Sl,j510OO by defaulting agents. be-
sides Tany comparatively unimportant bat
still considerable sums wasted in various
WAYS.
In spite of all this. the same officer finds
that the company has surplus of available
assets and property exceeding its present
liabilities of nearly Sl5,000, 600. Now, If this
is the -esult of a life insurance managed as
extravaaantly as that of the New York |
Lie Company has been, what must be the
surplus income of the other great insurance
companies which have to bear no such
depletion.
The consideration of this point recalls to
my mind one OF the arguments which used
very much TO strengthen my resolution not
10 insure my life in the days when was ex-
posed to the solicitations of agents. / had
learned-and. indeed, some of the agents
were frank enough to acknowledge .it-that
the commissions paid to these gentlemen
were far greater than any paid for similar
services in any other business Not only
did they get sometheng like one-half of the
nrst years premium on each new policy
they obtained. but they were allowed a
further percentage upon every succeeding
annual premium on the same policy as long |
as IL was kept alive.
Profits From Father to Son.
One of the stories 1 heard, but which
never was able to verify. was that the son OF
one Very successful former life insurance
agent was living IN afhuence upon the COM
missions ne drew from the numerous poii-
cies which his father in his lifetime had Sc
cured for various companies, and which
bad not yet expired or lapSed.
On Studying into tie problem how tire
companies could stand this enormous tax
and Ees thrive. came 20 the conclusion that
it was because of an underlying fallacv In
their system .: fixing premiums which WAS |
not visible 20 a careless observer Life in
-lIrance, like lire insurance and marine in
ls.a.
a@es-tbougn 1 am sorry to say that for the |
last few years fire insurance has been |
conducted Ill defiance of that prin-
ciple, and, indeed, of every other
principle conducive to success. with
The result that most of the sound companies
are going into liquidation and the others are
ascertained by observation that, taking one
ear with another. just so many people in a
hundred die at such and such ages, just as
IN series of wears just so much property is |
destroyed bv fire or lost by shpwreck Il is
a public problem of arithmetic. therefore,
10 compute how much money any one man |
must pay Tor lnsurlng certain amount
uoon MS lie in order that the aggregate
sums paid by h1T and Others like him shall be
sufficient 10 meet the sums required 20 meet |
tie paymenls apoh deaths, just as IL is a
on the average Will cover the risk Of the de- |
struction OF property by IRE or by ship
wreck.
Rolling Up the Surplus.
In the case OF lie insurance, which is
usually not for fixed period, like fire and
marine insurance, but for the indeterminate |
period of life, conditioned upon the contin-
uance of annual premium payments, there
is the further problem OF the amount likely
to be obtained by investing the surplus of
premiums received over losses paid in inter-
est or dividend bearing securities. Evident |
", If there is any such surplus a. all, it rolls
up by being productivity invested, and the |
lapldlty of Its increase varies with the |
amount of income derived from it.
The fallacy to which 1 have reference is |
that, as a rule, life insurance companies as |
sumo too high an average of deaths and too |
low an average of revenue from invest |
lnents. Undoubtedly their tables of NOR
tality are as correct as they can be made, |
and are based upon the most thorough in |
vestlgatlOn possible. Only those tables are |
for all sorts Of lives-good, bad and indiffer- |
in practice a life insurance |
company picks its lives by subjecting every !
applicant for insurance to a severe physical /
examination by its medical adviser, and py
rejecting every one that he pronounces not
perfectly healthy.
1t Is as If a marine insurance COMPANY |
should underwrite Al vessels and no others |
Mt rate of premium fairly enough applica- |
bic to every sort of vessel that floats |
and as, If fire insurance company should |
accept risks only upon fireproof office build |
ings, and those at a rate required to cover
losses on manufactures, drygoods ware |
houses and theaters.
Good Rates of Interest for Money.
On top of this, the life insurance com
panies, after assuming that they can get on
an average only say 4 per cent per annum
from their investments, proceed to place
them where they yield not less than per
cent il not 6, T. and even 10 per cent. No
wonder, then, that the New York Life
Insurance Company comes out safe |
md sound after all its losses, and | ,