The Indianapolis journal. [volume] (Indianapolis [Ind.]) 1867-1904, 1901-02-27
Companies We'd with each other in doing
equity to a lapsing policy-holder.
Changes i'm Plans and Premiums.


AS an alternative to annual premium
payments during life. rates were made
for the payment of all premiums in a linn
tied period of years. as ten. fifteen. ETC.,
while the policy covered the whole term
of life.
Life endowment policies were introduced,
to cover certain term or years as an in
surance, and payable at their face at the
end of the term If the insured survived 1t.
Where the policy term was long enough TO
cover the period of life when one has
others dependent on him, and the policy
holder was so young at the outset as to
make the endowment part of his premium
comparatively small, and so long the
companies kept their expenses down, this
kind of policies served a fairly good pur-
pose, although the endowment feature costs
much more in a life insurance company
than in a savings bank. because of the
much higher rate of general expense.
Along these general lines, which, within
judicious limits, were mostly lines of dis
tfnct Improvement, the development went
on without any striking divergence from
certain indisputable universally accepted
principles governing sound and equitable
practice, until about 1870.
New Departures.
The previous decade had seen the forma-
ton of a multitude of new companies which
copied the plans OF the older ones and
promised to repeat their success. But, in
they found or felt themselves compelled
to pay such commissions to agents and to
incur such other expenses. to absorb.
not only all their surplus, but so much OF
their reserves as TO send the most of them
into bankruptcy. In the late SOS the cry
had been that no properly organized life
insurance company could fail. The early
'70s showed that conduct was quite vital
as organization, and that the expense ac-
| count could bleed TO death the most correct
ly organized concerns; and they died by the
dozen.
Motive for New Schemes.
| Conspicuous among the competitors of
| that time were certain companies which
were trying to fight their way to the front
| by such high commissions and other con-
siderations to agents should draw them
away from the more conservative COM
panies. and so build up agency forces that
should dominate the field. But their high
expenses made such low dividends where
those equaling the better companies had
been promised, that no agency force could
hold their policy-hoiders and their business
began to decline with alarming rapidity
The high expenses could not be gotten
| rid of without losing the agents. There
| was for them no other attraction. There
many others lay in some scheme to get the
| dividend question out of the way for at
| least long time; such scheme was soon
found.
Scheme Based ON Forfeitures.
The basis of the scheme devised was the
very forfeitures which the companies had
| We'd with each other in getting rid of in the
name of equity 'Inequity'' was re-
| vived for the sake Of its profits, put up as a
prize for somebody to win They tabulated
and exhibited the lapses of their own dis
| satisfied policy-holders, showed how large
an amount of money their contributions to
L reserve would
| sum these would aggregate at the end of a
long period of years. and how few would
be left at the end of the period, and how
| great a dividend each one of those few
would get If it were then divided among
them.
illustration.
| For typical example: Taking 1000 per-
| sons insuring at age 81, they calculated
| that in 20 years. ga would at one time or
| another lapse, and 103 would die, leaving
| only 1853 still insured at the end of the
time.
| So it was proposed that persons insuring
should agree that for, say 20 years, they
| should have no dividends. that whoever
lapsed his policy during this period should
| forfeit TO the company all his contributions
| accrued from his premiums, and that in
| case of those who died only the face of
| the policy should be paid. and whatever
surplus had accrued should be forfeited to
| the company; that these forfeited reserves
| and SURPRISES should be put in fund apart
until the end of the 20 years, and then
| divided among those then alive and still in
sured.
They calculated that with 1000 persons,
| aged 81, insured for $1,000 each, on an an
nual premium of SSH, the forfeited re-
serves and SURPRISES of the ga lapsing
! policy-holders and the forfeited SURPRISES
| of the 103 who died would, at the end of 20
| to be divided among the 1858 supposed to be
| then alive and still insured. giving each one
| 81, "a; just about double what each had
paid for premiums during the 20 years, not
| counting interest. And they got eminent
actuaries to indorse the estimate.
The Attraction.
| 1t was a bold scheme. The public had
| just been thoroughly educated to believe
| that such forfeitures were a gross injustice
and hardship to the policy-holder, whose
| payments were thus confiscated, and to his
| family, which needed the protection of the
| paid-up insurance which his forfeitures
would otherwise have purchased. The in
| justice was palpable, and perfectly unneces-
| sary in any healthy company. The hard
| ship was often notorious and severe; and
| none had been noisier prophets of equity
| than these very companies which now in
vited men to take their two chances out of
| three of losing all, for the one chance in
three of getting so great a slice of the
| fruits of the inequity which they had loudly
condemned immoral and cruel. The
scheme was offered in the belief that with
very many, the immortality and cruelty
would be lost sight of If sufficiently bril-
| liant speculation In their profits was pre-
| scented.
It's Popularity.
| The forecast was correct People could
| not at once turn back upon all their con-
| victions and sense of justice But the gilt
| tering estimates won their way, and men
| put their own payments and the protection
| of their families at the hazard of the game
for ten to twenty years, with the distinct
| agreement-still in use-that no account
ing shall be made; each is to accept as his
true share, and without question, whatever
| is then allotted him.
Agents no longer presented life insur-
ance for the protection of families. but
| holder himself The larger the estimate
the more eagerly it was taken. Success
made the companies promoting the scheme
| very aggressive. Instead of a struggle for
| existence ii became race for size. Hosts
of agents were employed to do the easy
work of selling speculation based on
| seemingly scientific figures. The scheme
| took so widely that for time 1t threat
| ened to completely supplant and drive out
| true life Insurance administered TO its own
proper ends So easily was ii worked that
gradually, one after another. most of the
| companies followed more or less completely
| in the wake of the originators of the
scheme until investment insurance, de-
pending for the investment on the for
| FIXTURES to be made during the period of
''postponement" of dividends, is the domi-
| nant feature with most companies. Their
contracts are no longer termed policies, :"