The Minneapolis journal. [volume] (Minneapolis, Minn.) 1888-1939, 1905-12-09
LARGE INVESTMENTS
DIFFICULTY TO MAKE
--
While the Man with a Few Thou
sands Has No Trouble to Place
It in Perfect Safety, It's Differ
ent with Millions.
ONE OF THE PROBLEMS
OF LIFE INSURANCE
Their Management of Funds as
Compared with the Savings
Banks Contrasted Frequently, s
but Not Always Justly.
BY HERBERT vANDERHooF.

BY HERBERT VANDERHooF.
One Of the arguments which the enemies
Of the life insurance companies are ex-
tremely fond OF using against them is the
cost OF their management and the divi-
dends paid to policy holders as compared
dress delivered before the Commercial
club of Boston one Of the speakers dwelt,
upon this topic for some time. and OF
course to the disadvantage of the In
surance companies. Comparing results
by the savings banks of that
state. and those achieved by the greatss
life insurance companies. he found that
the former did much better with their in-s
vestments of money than did the latter.
This is but another of the specious pleas
that are meant to appeal to the un-
every reflective person will indorse this
statement, such thing as a comparison
between the savings banks and the life
insurance companies is impossible and
unjust. Why this is 80 I will endeayor
briefly to point out.
In the first place, the expenses con-
nected with the operation of savings
bank are compare lively insignificant The
man or woman who has little money to-
save does not have to be importuned
to place 1t in the keeping Of the bank.
On o. the contrary hsn he or she first decides
money, and then walks up to the bank
and does so. After the account is once
begun it is a matter of adding to it
may be-. Every six months the bank
credits the depositor with interest, gem
orally at the rate of per cent per an
mum, and as the funds entrusted to its
care accumulate loans them out at the
best rate of interest it can obtain. The
only loss it is possible for the bank to
sustain is from bad investments or the
dishonesty of its employees and officials.
If properly conducted it takes no risks of
any kind, and being restricted by the
laws OF the state as to the securities infg
which it may invest, its career is certain
to be prosperous if 1t obeyS the laws
regulating its conduct
Exceptions to the Rule.
It may be said that, as a rule, the saw
ings banks do obey these laws, and there
are many in the country whose credit
eminent itself But there have been
many cases where the greed Of officials
and their lack Of right moral standards
have engulfed not only themselves but
their institutions in ruin. When such
disaster takes place the unfortunate de-
position is the sufferer. The savings Of
years are swept away in one moment
and the record is that very little is ever
| recovered. ---
| Contrast with this the business of life
insurance. The money that the policy.
holder pays in the way Of premiums is
dends that are paid by the companies
are in lieu Of the per cent per annum
that the savings banks pay the depositor.
| buI d uld11 uOeS not Walk up the IN
surance company and say: 7 want to
take out a policy for $4,000. How much
Will have to pay year"' The man
may be a good business man and keenly
| alive to the benefits of insurance, but it is
! the rare exception when he voluntarily
goes to the company and applies for
policy. He has to be "drummed" and
more industry is displayed and more
perseverance on the part of the insur-
ance agent before he succeeds in getting
that mans application than is displayed
in any other business the face of the
earth.
| That is the first expense on the part
of the insurance company. Solicitors
have to be paid, and generally get a
MUM paid by the policy holder. In adj
dition to this source Of expense agencies
have to be maintained all over the coun-
try, and this entails large expenses for
rent, advertising and other incidentals.
I Benefits to Policy Holder.
But with all this the policy holder has
no concern. Once in the company, aeZ
cepted as a sound risk, he has nothing
to do but pay his yearly premiums, with
the absolute certainty that if he does his
part of the contract entered upon, the
insurance company will do its part. II
| he lives for fifteen years, say, he has the
option Of taking back all that he has paid
in and liberal sum in addition, con-
sisting of the dividends which have ac-
cumulated during the life Of his policy.
1t he doesn't care for the money he is
offered a paid up policy for still larger
amount. But, if he had died at any time
during those fifteen years, even If it had
been during the first year of his policy,
he would have done SO with the consola-
ton that his family was not left en-
tirely destitute; that there was $4,000
that would be paid them as certainly as
y the earth reyolves.
a Without doubt there have been need
! less espenses in the conduct of some life
insurance companies, but that is not an
argument against life insurance COM
, panies as a class. There are plenty of
people in this country who have deep,
; rooted distrust of savings banks, because
some of the latter have failed. and who
. prefer to keep their money in stock
. it when SO disposed. Their distrust OF
banks is just as sensible as is the attempt
, to besmirch the business of life insur-
, ance, which is, after all, the most benefi-
cent institution known to our modern life,
AS to the relative returns received from
invested funds, in which the savings
: life insurance companies, the COMPARE
. son is especially inapt. 1t is well-rec-s
ognized condition with fnancier and men
who handle large sums of money that it
is much easier to invest small sums at
lucrative rates than large sums. The
! small merchant or borrower finds this out
markets s sos he wants o or $500 s
!, has to pay the full market rate for the
accommodation, and not infrequently a
little more which is tackled on under the
I head of Commission
The Favored Borrower.
/ But let the big merchant or manufao-
| turer come to the same bank or capital
Il list for accommoda ton, and then note the
/ difference. He wants to borrow $l00, 900.
| or $500 ,00O and the banker falls over him
| self almost in the avidity with which he
| tries to secure that business. When the
| big man leaves the bank after having me-
l gotiated the loan he has generally OBJ
| tanned it several points under the mar
| ket rate, and he has not paid any COM
L mission, either.
The speaker at the Boston meeting did
/ not dwell on these fundamental facts in
his address, yet they are all cogent ones
i He did show what the income Of the saw
/ | ings banks of Massachusetts, had been
for the year preceding and gave the fig
ures. The figures are instructive in this
year in question the total income Of the
1873 savings banks in the state, the great
/ err part of which they had to find means
Of investing, was sos, 466, 1855. In
| other words. their total income was a.
/ little more than half as much as the
l three greatest insurance companies.
While the unthinking public may be led
j to believe that it's premiums are being
l squandered and it's dividends dissipated,
1t is we'll to recall few concrete in.
stances to the contrary. One which should
carry weight is that of the late Henry ":
Blodgett, for many years on the federal
being closed up. Judge Blodgett took out
II a $4,000 policy many years ago in one OF
the big insurance companies. He allowed
I his dividends to be used for the purchase
ID OF added insurance, and on his $4,000 poll
81 Ivy shis estate has recently been paid