Ottumwa tri-weekly courier. [volume] (Ottumwa, Iowa) 1903-1916, 1906-01-09

| mense sums now in the possession of
the insurance companies?
1t would serve no good purpose to
consider at this time the possibility
nor would 1t accomplish anything to
repeat the condemnation we all feel
for the fragrant breaches of trust
/, which have been exposed. I shall
deal only with practical questions
which concern the people Of our own
state, and I will confine myself to
! suggestions looking toward remedies
that we may apply.
Deposit of Reserves
This state long ago adopted the
policy of requiring all its own life
insurance companies doing business
upon the legal reserve" plan to de-
post securities with the state auditor
in an amount not less than the legal
reserve, for the protection Of policy
holders. 1t cannot be doubted that
this is wise system. We have seen
that the possession Of great volumes
of securities which can be changed,
manipulated. and used for Individual
profit and Interior purposes. presents
a temptation that most men cannot
resist, and constitutes menace that
ought not to be perpetuated. I be-
lteve, therefore, that from this time
forward all "old line" life insurance
companies organized under the laws
of other states and desiring to carry
on business in the state of Iowa,
should be required to deposit with the
state auditor securities equal in
amount to the legal reserve upon the
policies issued upon lives in this state.
for the protection Of such policy hold :
ers; the deposits to continue until the
state in which the company is orr
ganized shall require q deposit of the
entire legal reserve with some state
officer at which time our auditor
should transfer the securities so
placed with him to the officer Of the
ganized. If q few states would adopt
this plan. it would result in every
state having insurance companies, re-
curing the deposit. I earnestly rec
ommend to you careful investigation
OF this phase of the general subject.
As to Surplus
Another grave defect in the meth
DDS of life insurance developed by the
recent study of the subject, is the ac-
emulation of a so-called surplus,
which, in great measure at least,
represents deferred dividends; that is
| to say, the sum which the company
in a vague way, promises to distribute
at a future time to its policy holders,
specific agreement fixing the amount
of the distribution. The surplus SO
existing is not reckoned as a liabili-
| ty, for the reason that no policy, so
/ far as I have been able to ascertain /.
contains any more positive assurance
| of distribution than that the policy
4 holder shall be entitled - such share
Of the surplus as the directors of the
| company may determine. The whole
scheme of deferred dividends has a
tendency to lead the business away
from the field Of indemnity into the
| field Of Investment tendency which
| is altogether too prominent, and
(which should be checked by such rea-
sonable regulations as can be pre-
scribed without injuring the legiti-
mate enterprise Of insurance; but
to the practice.
Premium Charges
! AS is well known, the premium
charged by a legal reserve company
is made uD of two parts: First, NOR
tally; second, the loading for ex-
pense. The actual mortality is con-
siderably less than the Theoretical
mortality, and 1t might happen that
/ the share allotted to expense Is not
altogether consumed. From these
over charges in the premium, togeth
| CT With d pOTtlOH OIL Inc Interest edIll-
| ed. the surplus Is created, and the
general promise is, to return this sur
plus to the policyholder in the form
of dividends. I am speaking now OF
a mutual company, although 1t is like
wise true of a company having capt.
ltal stock, with the one exception o.
the diminution in the earnings caused
/ by whatever claim the capital stock
may have upon them. No company
1 Pa oolr ON Infrfta Yor0r11{ az
with respect to the surplus so &C
al1ired, for the obvious reason that Its
extent must always be uncertain. One
! of the issues in the insurance bust
mess at the present time. therefore
is, Shall this surplus be ascertainee
land apportioned and disposed of II
some manner at short intervals, OF
shall 1t be allowed to accumulate dur.
ing long periods, and then be paie
to the policy holders in such proper.
tons as the board of directors of the
company may think best? 1t seem:
to me that every consideration Of
safety and fair dealing requires tina
the surplus to be credited or paid tt
participating policy holders shall bt
disposed of. every year. In so say
! ing, do not mean, necessarily, tina
4 the first or second years of q polio.
shall be SO treated, because the ex'
pense Of getting the business, will
4 the mortality, quite consumes tn,
premium for those years. If tn,
dividends are deferred for lont
period, the policy holder is absolute
lily at the mercy Of the company
Even if he could override, by judi
fetal proceeding, the discretion Of thu
board Of directors In apportioning thu
surplus then due him (and the court
have decided that he cannot) the cos
of procuring the proof necessary t.
establish his rights would far exceed
any benefit that he could derive from
the litigation. If, however, the Law
imposes upon the company an i'm
perative obligation to ascertain ant
apportion the amount of the surplu
due to each participating policy-hold
er at the end Of each year, then tn
natural forces of competition between
companies, together with the option
on the part of the policy holder t
surrender his policy If the dividen,
be not fair and satisfactory, will pro
tect the Dolicy-holder from any seri
GUS wrong.
4 Annual Aceountings
4 I therefore recommend that the Law
be so strengthened as to require al
annual accounting between each com
! o,,1 pn1tcv-bo1 "a