246 INSURANCE 



Little unanimity of opinion exists regarding the equities of policy- 

 holders in the reserve and accumulated surplus in case of lapse or a 

 surrender of the policy. The early hard custom of absolute for- 

 feiture has gradually given away to more liberal privileges; and, 

 to-day, there are not wanting those who advocate perfect freedom 

 of withdrawal and surrender. Where the policy is a contract of 

 pure and mutual protection, the withdrawal of a policy-holder theo- 

 retically weakens the bonds which support the whole, and to this 

 extent it appears to be in the interest of all the policy-holders to 

 impose a moderate fine or surrender charge upon the defaulting 

 member. The well-known argument of adverse selection or the 

 withdrawal of the better risks with its concomitants is generally 

 applied at this point. Where the policy, however, is a protective 

 contract coupled with endowment or other investment features, 

 a different treatment of the surrendered or lapsed policy is de- 

 manded, it being assumed in this discussion and taken for granted 

 that any extra expense incurred by the defaulting member on the 

 part of the company be charged to his policy. An examination of 

 the columns of statistics headed " Lapse or Surrender Values " shows 

 conclusively that many companies levy fines on the surrender of 

 so-called investment policies which have no more justification than 

 if a bank were to levy a fine upon the withdrawal of deposits. In 

 fact, deferred dividend and similar funds are very much in the nature 

 of bank deposits, and to fine the withdrawal of the one is as unjust 

 as to make a special charge for the reclamation of the other. The 

 justice and expediency of a reasonable surrender charge may be 

 admitted for the reasons usually stated in support of such charges, 

 reasons which, it should be remembered, are discredited by com- 

 petent men who take a different view of the question, without 

 sanctioning a practice of mulcting depositors which rests upon 

 nothing but the arbitrary dictates of an insurance company and the 

 extravagance of a bad administrative system. It is no justification 

 of this system to say that the companies have been struggling with 

 agency, publication, and other reforms, which have been considered 

 many times. This abuse exists, and it will continue to exist until 

 policy-holders rise against it and the attendant evils which it directly 

 supports. 



At various intervals in the history of company development in 

 the United States attempts have been made to secure for a single 

 company the legal privilege of engaging in a variety of enterprises. 

 Within recent years this tendency has been, perhaps, the dominating 

 one, and companies with omnibus powers are numerous in the indus- 

 trial field. Among the companies which are devoted to the newer 

 branches of insurance, such as fidelity, casualty, plate-glass, tornado, 

 and other relatively recent developments, there are those which 



