742 THE POPULAR SCIENCE MONTHLY. 



basis of calculation. This is no easy task in the present condition of 

 the money market, and exceptional skill, prudence, and forethought, 

 are required to secure safe and profitable investments. It must be 

 remembered, too, that theoretically all the funds on hand are supposed 

 to bring interest, while in practice a considerable part must always 

 remain unemployed, so that the average rate realized is less than the 

 current rate of interest. On the other hand, well-managed companies 

 accumulate a surplus over the net reserve, and have their interest in- 

 come largely increased from this source. Still more important is 

 the fact, as far as Xew York is concerned, that, since Massachusetts 

 and some other States have established four per cent, as the legal 

 standard for reserve, and all companies desire to transact business 

 in those States, they keep their surplus sufficiently high to be vir- 

 tually on a four per cent, basis. Whether a lower rate than this 

 will be realized on safe investments in the next quarter of a cen- 

 tury, expert financiers and economists seem hardly prepared to an- 

 swer ; but, should a reduction to a three and a half per cent, standard 

 become necessary, it would only temporarily incommode our sound 

 offices. 



With mortality tables as reliable as any human estimate can make 

 them, and with reserves based on a sufficiently low rate of interest, the 

 management of a life-insurance company does not materially differ 

 from that of other moneyed institutions. The proper selection of 

 business and the safe investment of funds require prudence and sa- 

 gacity, and devolve great responsibility upon executive officers. But 

 mutual-insurance companies (and nearly all stock companies in the 

 United States also embody the mutual j^i'inciple) have a margin far 

 above any probable exigency, in the excessive loading of premiums. 

 This very safeguard, it is true, may be perverted, and in some cases 

 has been a temptation to abuse and extravagance. A life-insurance 

 company once fairly established, however, ought to be as safe as any 

 other financial institution, and, where failure occurs, it may always be 

 traced to either gross mismanagement or intentional fraud. State super- 

 vision, which has been of great benefit to the system and to the com- 

 munity, can never supplant individual judgment or probity. In fact, 

 it ought to be limited to prescribing minimum reserves, the character 

 of investments, and the publication of truthful statements of the con- 

 dition of companies. 



While life insurance is of comparatively recent date in the United 

 States (the oldest company now in business having been organized in 

 1843), its development has been so rapid as to have probably surpassed 

 that of every other country. The following table shows the condition 

 of the business, as reported to the New York department, in its in- 

 fancy in 1859, its period of highest inflation in 1870, and at the lowest 

 point of reaction in 1879 : , 



