The sun. [volume] (New York [N.Y.]) 1833-1916, 1905-06-03

make no purchases Of securities where their
subsequent sale could ever be unadvisapIe
ior any other reason than general m y 10.
| conehuons. In other words. II shou'o 10
| me insurance company.
DEFERRED DIVIDEND POLICIES coNpEMShD'
On the subject of deferred dividend poh-
cies the report says:
.Ths Equitable, in common with several
Others Of the large companies. issues the
greater portion OF its policies on thg le
ierreo distribution period plan. onuel
TINS system the excess portion OF the p ~
mum IS not returnable to the policy hoi9ae e.
annually, but is retained by the society io I1r
various stipulated periods Of years casually
twenty years. and the accumulations tiieh
! paid in one sum. The advantage when
Is held out to the policyholder under TINS
system IS that he not only eventually To-
ceiyes al the natural accretions OF MS own
policy; but shares in those which were
earned by the policies Of those VINO "eFe
unable to continue them to the end. =,
The question as to the ethics Of extending
the hope TO one policyholder that ms pros
perity will be increased through the mis-
fortune of another policyholder is purely
academic and need not be discussed mere
As each policyholder understood the con-
ditions, and accepted them with the nope
that he would be in the fortunate class, ne
plant II events forced him into the unfortu-
nate class.
But. entirely aside from this question
as between the individual polioyhoIders,
there can be no doubt concerning the at
least potentially of evil which this system
OF deferred distribution possesses.
When annual dividends are paid the policy
holder has an immed ,ate and yearly re-
curing check upon the operations or ms
company. He Is enabled and Is quite apt
to compare his results with those OF his ac-
quaintances insured in other companies.
Extravaganza in mana gement and errors
IN investments are at once rehected IN
decreased dividends or impaired surplus.
"On the other hand. the holder OF a twenty
years, distribution period policy has no
ings OF his policy until the expiration OF the
twenty years. He cannot make COMPARE
sons with the results in other companies
because he does not know the results IN
nineteen years, and if dissatisfied with the
realization at the end Of twenty years u
is futile, for him to protest. The incident
ia closed.
.These conditions are mentioned for this
purpose-to illustrate the possibility OF
society into generally lax method Of h, nd,
ling its busire ss. The annual dividend
| company is held to accoun liability every
year. The deferred dividend company Is
body of its policyholders. and is so held
| by its individual policyholders only when
their opportunity for action has passed.
This absence of accountability makes
possible the pursuit Of rapidity of growth
at urdue cost because the eject of that
cost is not felt by the policyhoder VI til,
as said before, it is too late for his avail
ing protest Another embarrassing out
growth from the deferred dividend system
is the popular Misrepresentation OF the 80
called surplus.
POPULAR M1SAPPREHENsIoN OF THE SUR
PLUS.
THE society's published report shows
surplus as at Dec. 81, 1904, Of $50, 1914 2o9 GO;
and popular sentiment demands that this
holders. There is even seen a discussion
Of the ownership of the surpus-as be-
tween policyholders and stockholders AS
a matter Of fact the actual surplus OF the
society on Dec. 81, 1904. was appro xlmately
$40 zoe, 10000. OF the alance, $3.50 OOo.o0
was apportioned for dividends payar lie in
1905, and S63 800, 10000 is merely a reserve
against future contingent liaf ility. that
Is, 1t is the amount which has teen earned
by the total hunter OF deferred dividend
policies and which becomes direct La
bility as each individual policy natures;
1.-The soliciting agents OF those &C mpaniess
which write almost exclusively deferred
dividend policies hatitually state that the
superb rity Of that form Of policy is demon
strated by the fact that the public inyariat ly
selects it In preference to the annual dividend
policy. AS bearing on this statement, 1t
is Of some interest to know that the Equit-
able society allows its agents CO mmissiC ms
and CT 80 OF the
it allows them hut rs per cent. on annual
dividend policies.
-The rush for business has magnifed
the import ance Of the agent until we find
him assuming place in the councils of
the society never cont emplat ed in its in
| noTt and almost prCt eAOlla Its
tort ed proportions.
ar he general policy of the society having
been diverte from its true course it is
hardly to be wondered at that there is
| found throughout its official personnel
a sort OF moral obliqueness-a condition
| where personal pain seems to be at times
the paramount idea. 1t is this which has
led your commit ee to find that the society's
transactions with outside concerns have
so syst ematically been placed that the
profits fall into the hands Of those closely
connected with the society's officers; and
it is this which has led the officers of tho
society to say with undoubted sincerity
that they saw no wrong in accepting. profits
| from syndicate transact io ms in which the
society PLAYED an imrortant part
Concerning tire directors II e report sa Us:
@First-That the title of tie gre t maj ority
Of tie board to their office as directors Is
open to question under tt Q law Of the society
by reason of the feet that the shares OF
! stoc X held by them were trf nsferred 10
! them for the purpose Of qualifying them
as directors.
4Seoond-That this practise Of our lify ing
directors Is almost coeval with the existence
there has not been a time for years when
there were enough male stockholders in
! the corporation owning five shares of stock
to constitute the number of directors re-
CURED by the charter; indeed. at the present
date, not more than half enough for that
p,lrDOSa.