NORTH AMERICAN AMERICAN REVIEW. No. CCI. OCTOBER, 1863. ART. I.1. Contributions to Vital Statistics; being a Development of the Rate of Mortality and the Laws of Sickness from Original and Extensive Data, with an Inquiry into the Influence of Locality, Occupations, and Habits of Life on Health. By F. G. P. NEISON, F. L. S. Third Edition. London: Simpkin, Marshall, & Co. 1857. 4to. pp. 630. 2. Eighth Annual Report of the Insurance Commissioners of the Commonwealth of Massachusetts, January 1, 1863. Part II. Life Insurance. Boston Wright and Potter, State Printers. 1863. 8vo. pp. lxii. and 38. 3. Nineteen Annual Reports of the New England Mutual Life Insurance Company of Boston. 1844 - 1862. 8vo. pp. 158. THE business of life insurance in this country, which can hardly be said to have existed a quarter of a century ago, has suddenly assumed great extent and importance. Before 1840, the only company in New England, or even, as we believe, in the United States, formed for this purpose, was the Massachusetts Hospital Life Insurance Company, an admirably managed institution, having the control of very large funds, but insuring very few lives, for the excellent reason that its charter compelled it to contribute one third of the profits derived from this source to the support of the Massachusetts Hospital, and of course very few persons were willing to pay fifty VOL. XCVII.—NO. 201. 26 per cent more for a policy than it was actually worth, even though the addition to the natural price was a contribution to a very deserving charity. But in 1844 the New England Mutual Life Insurance Company, chartered in 1837, commenced business in Boston; and at about the same time several other companies were established on similar principles in New York, New Jersey, and Connecticut. Through the activity of these companies the peculiar nature of life insurance, and the inducements for effecting it, were made generally known; and the consequence was, that the business immediately began to grow with astonishing rapidity, and soon far surpassed the expectations of its founders. The number of rival companies was quickly enlarged, and is even now increasing every year, in the hope of sharing this great wave of prosperity. The statistics of the business for the whole country have not yet been collected; but it appears from the Annual Report of the Insurance Commissioners of Massachusetts, dated January 1, 1863, that "the amount insured by the twenty-four Life Insurance Companies [five chartered by Massachusetts and nineteen by other States] now legally doing business in this Commonwealth, falls very little short of two hundred millions of dollars in more than seventy-five thousand policies." "These companies hold cash funds, from premiums and interest thereon, to the amount of over $ 20,000,000. Their cash income during the last year exceeded $6,000,000, and they paid more than $2,000,000 for losses by death. Notwithstanding the agitation of the times, their business has continued rapidly to advance during the year. The amount of policies issued by these companies, from November 1, 1861, to November 1, 1862, was over $ 38,000,000. Those of them that were included in our Seventh Report as doing business here the previous year made a net increase last year of $13,000,000 in the amount insured, against a net increase of $2,000,000 in the year before.” Report, p. iv. But this great financial success is not to us the most interesting feature of the business. We look rather at its moral than at its commercial aspect. As an institution admirably adapted to develop habits of prudence, economy, and forethought among all classes in the community, and especially among those who have most need to practise these virtues, fit ted also to alleviate and to render less numerous the sudden and distressing alternations of fortune that are unhappily so common in our community, to take away from families at least one pang caused by the death of a father, brother, or son on whom many were dependent, to promote family affection and to lessen family anxieties, to increase the willingness to assist by loans industrious and energetic young men who require a helping hand only at the outset, and generally to diminish the number of calls upon public and private charity, we know not any recently organized undertaking which so richly deserves to be fostered and carefully guarded as this same business of insuring lives. Strictly speaking, it is not at all a commercial enterprise undertaken for the purpose of profit. Seldom elsewhere, and never in this country, except for a short period at its outset, and as a means of overcoming the first difficulties of its establishment, has a Life Insurance Company been based upon an independent capital, the owners of which must have their dividends. It is an association open to all, in which no one pays anything more than the exact cost of the benefit which he receives. The insured constitute the company, its accumulations are theirs, its success is theirs, and the ostensible managers and directors are only their agents and trustees, empowered to invest and protect the funds for their benefit. With a fair degree of economy and skill, as we shall have occasion to show, even the expenses of management can be reduced to as small a fraction of the annual receipts as is common in the best-conducted Savings Banks. The comparison here suggested is an instructive one, and has been frequently pursued. A Life Insurance Company is a Savings Bank in this respect, that the sum annually paid into it by each of the insured is not so much money expended by him, but so much saved, and invested by him at compound interest, for the future benefit, generally of his family, but sometimes of himself or of his creditor. He can himself determine at the outset to which of these three the sum with all its accumulations shall ultimately be returned. Thus far, then, the two institutions are precisely on a par; the one offers just as much encouragement to frugality and forethought as the other; and the two are equally beneficial to the community, in that, by bringing together many small sums, it renders their aggregate, as one large amount, practically available as capital in great commercial and manufacturing enterprises, while, if taken singly, they would be nearly useless because so small. Like tanks and cisterns, they economize and preserve the water which as mere drops of rain would be wasted. In every other respect, that is, in all respects in which a Life Insurance Company differs from a Savings Bank, - the difference, both in a moral and an economical point of view, is to the advantage of the former. The savings successively deposited in the latter are, at best, varying sums, generally the results of immethodical economy, which may also all be withdrawn at any moment, as suits the caprice, the temptations, perhaps the returning disposition to extravagance, of the depositor. Hence, though the institution encourages frugality, it does not tend to form the habit of frugality, which is the greater good of the two. He who has merely put his savings into a bank can at any time become a spendthrift and waste the whole of them; at best, there is no pressing call upon him to economize and deposit an equal sum in each succeeding year. But he who puts them into a Life Insurance Company places them beyond his own control; he cannot withdraw them, except at the stipulated time, and under the stipulated circumstances; and the time and circumstances thus stipulated are precisely those in which the repayment of the accumulated sum will be most welcome to him, or to those dearest to him for whose sake he first made the investment. One can no more take back by caprice the savings thus originally devoted to a sacred purpose, than he can withdraw at pleasure the sums already laid out upon the education of his children. Many of us well remember the little closed box with a narrow slit in its cover, with which old-fashioned parents strove to cultivate the habit of frugality in their children by teaching them to deposit in it, out of their own reach, their little savings from pocket-money, the teacher secretly adding from time to time to the little hoard, and thus, after some months or years, when the treasury was forcibly opened, creating astonished delight at the magnitude of the sum disclosed, which was all fairly their own, the reward of their persevering economy. The lesson was a homely one, yet so wise a philanthropist as Dr. Franklin would have cordially smiled upon it, as a useful invention quite in his own way. Such a box is a Life Insurance Company, yet with this important difference. The box tended to make children frugal, but equally, it must be confessed, did it tend to make them selfish; the Life Insurance, when effected, as it usually is, for the sole benefit of one's family, is almost the only purely disinterested mode of saving. It is such frugality as can benefit him who practises it only when he appears at the last great reckoning; and as such, it may win the praise even of the Great Teacher, who applauded the poor widow when she cast her two mites into the treasury. Meanwhile, forethought and the habit of continuous and methodical frugality are best promoted by the necessity, to which every one who insures his life subjects himself, of depositing an equal sum on each successive year, under the penalty of forfeiting, if he fails to do so, a great part of what he has already invested. This penalty is not unreasonably severe, being in fact just enough to confirm the good resolution one has formed of practising systematic economy for the future. The liability to it is the price, and not a high price, which one pays for his admission into a fraternity of persons who are resolutely and methodically frugal, and who therefore cannot afford to share the common fund of their savings equally with others who are economical only for a time, or by fits and starts. A mechanic at the age of twenty-four- just about the time when he usually thinks of marrying-can insure his life for $2,000 by engaging to pay a net premium each year of only about twenty-six dollars. True, the actual payment required of him is nearly forty dollars; but as we have said, he is required to pay only the cost of the insurance; and as the experience of our largest companies, continued for over fifteen years, proves that this cost does not at present exceed twentysix dollars, the difference of fourteen dollars is sooner or later returned to him in the form of a dividend. If it be said that this young mechanic cannot prudently bind himself to put aside every year, out of his own reach, even this small sum, the answer is, that he certainly cannot in prudence bind himself to support a wife and children. Nay, the surest means of 26* |