PRESENT PROBLEMS IN INSURANCE 245 



which belong to the policy-holders, and their use for excessive and 

 unnecessary expenses is a misappropriation of trust funds. The 

 problem of the disposition of the surplus has been thoroughly dis- 

 cussed in a well-known insurance case still pending in the courts. 

 It is asserted that under present methods the companies are not 

 held to a rigid accountability regarding surplus funds, and that 

 the accumulation of great surpluses for long periods of time is the 

 chief, if not the sole, cause of all the evils which exist in the life 

 insurance business. Without affirming or denying the validity 

 of these assertions, there can be no reasonable differences of opinion 

 concerning the desirability of a rigid accounting for every dollar 

 held in trust for the policy-holders as a part of the surplus to be 

 distributed during subsequent years. There are various types of 

 policies providing for the accumulation of funds in the hands of the 

 company for the benefit of the policy-holder or his beneficiaries. 

 Policies generally provide for the distribution of these funds at the 

 termination of specified periods of time. According to some, these 

 periods of time should be short, say, one year; or, at least not to 

 exceed three or five years. The representatives of this line of thought 

 are opposed to every scheme of surplus distribution which projects 

 the distributing period five, ten, twenty or more years into the 

 future. Their opponents ardently defend long-term distribution 

 periods. The practice of some companies furnishes a satisfactory 

 middle ground between these extremes. Instead of distributing 

 surplus funds annually or once in three or five years, they keep a 

 careful account of the surplus earnings of every deferred dividend 

 or analogous policy, usually apportioned on the contribution plan, 

 and then make a single payment to the policy-holder at the termina- 

 tion of the period. Each policy-holder knows from year to year 

 what his share in the surplus is; hence no amount of future extrava- 

 gance or mismanagement can deprive him of this money. The 

 company is not tempted to use the funds thus assigned to policies 

 in paying excessive commissions or doing other doubtful things, 

 because this practice would be detected. If a man desires to employ 

 an insurance company to accumulate a single large sum at a future 

 date from many small contributions, there is no reason why he should 

 not do so. On the other hand, every consideration of good public 

 policy demands a rigid accountability on the part of the companies. 

 The plea that the accounting required under such a method is im- 

 possible for a great company may be met by the statement of fact 

 that some great companies have been doing this very thing for many 

 years. Strong arguments can be advanced in favor of short periods 

 for the distribution of the surplus; but with proper restrictions the 

 long period plans offer advantages which the short ones do not possess. 

 The arguments are not all on one side. 



