LITERARY NOTICES. 



119 



Clearly, if the company retains more of the 

 " insurance value " than will compensate it 

 for bearing the risk during the five years 

 that have expired, it will exact pay for work 

 that it has not performed, and its proceed- 

 ing cannot be justified on any ground of 

 equity. The company is, of course, en- 

 titled to some compensation for the loss of 

 its interest in the "insurance value " that 

 it would have earned had the policy re- 

 mained in force ; but it is idle, as well as in 

 equitable, to contend that the compensation 

 should equal the " insurance value." It 

 seems to us that the present value of the 

 unearned " insurance value " would be the 

 just compensation. Mr. "Wright, however, 

 argues that it should be only enough to en- 

 able the company to procure as good a risk 

 as the one it has lost by the surrender of 

 the policy, and that eight per cent, of the 

 unearned " insurance value " would be suf- 

 ficient for this purpose ; that is, eight per 

 cent, would yield an amount equal to the 

 commission usually paid to an agent to ob- 

 tain a risk. Mr. Wright, it is seen, holds 

 that loss of the risk is that for which the 

 company should be compensated, but to us 

 it seems to be, as above expressed, loss of 

 interest in the " insurance value " which 

 would have been paid to it had the policy 

 remained in force. This " insurance value " 

 on the company's share of the premiums 

 is supposed to compensate the company for 

 the risk of undertaking to carry the policy, 

 and is clearly the only interest that the 

 company has in the transaction. The com- 

 pensation that the company receives in 

 case of surrender is called the "insurance 

 charge." As it is based on the " insurance 

 value " it varies proportionately, and is 

 therefore largest on " ordinary life poli- 

 cies " and smallest on " short-term endow- 

 ments," and on the latter class of policies 

 it decreases as the age of the policy in- 

 creases. To recapitulate, Mr. Wright con- 

 tends that life insurance is compounded of 

 insurance proper and the business of the 

 savings-bank ; that the premiums consist 

 of two parts, the " insurance value," which 

 belongs to the company when earned, and 

 the " reserve," which belongs to the policy- 

 holder, having been merely deposited with 

 the company for accumulation, to be with- 

 drawn whenever it suits him to return his 



policy ; that the company for its interest in 

 the risk is entitled to make a " sui-render 

 charge " when the policy is returned ; and 

 that this " surrender charge " should be 

 based on the " insurance value," but should 

 constitute only a very small part of it. 

 This is, without doubt, a just conception 

 of the nature of life insurance ; but, while 

 the companies agree with Mr. Wright in 

 dividing the premiums into "insurance 

 value " and " reserve," they disagree with 

 him as to the ownership of the " reserve," 

 half of which they insist on retaining for 

 themselves, in case of surrender. The 

 Mutual Life, of New York, retains from fifty 

 to seventy-five per cent, of the " reserve," 

 in settling for surrendered policies, and the 

 Equitable from fifty to sixty per cent., and 

 this is done on all policies alike, without 

 respect to age or class. Having just seen 

 that the " surrender value," usually consti- 

 tuting the difference between the " reserve " 

 and a moderate "surrender charge," and 

 sometimes exceeding the " reserve," varies 

 in amount with the class of the policy, and 

 far more so with its age, the reader is com- 

 petent to decide for himself whether the 

 company's uniform practice of retaining 

 from fifty to seventy-five per cent, of the 

 " reserve " on all policies is or is not equi- 

 table. For our part we think, with Mr. 

 Wright, that it is not. 



Mr. Wright further contends that both 

 the " surrender charge " and the " surren- 

 der value," at any period of the policy's 

 existence, should be ascertained sums, and 

 known to the policy-holder before he in- 

 sures, so that he can understand all the 

 terms of the contract he is making. For 

 this purpose he has prepared, and inserted 

 in the book, several specimen-tables show- 

 ing the " insurance value," the " reserve," 

 the " surrender charge," and the " surren- 

 der value " of various classes of policies at 

 the time of issue and in each year there- 

 after. This is precisely what the compa- 

 nies claim cannot be done. They say that 

 the " surrender value " at any future time 

 cannot be calculated, because it is impossi- 

 ble to foretell what the dividends or sui'^lus 

 above working cost will be. But, throwing 

 dividends out of the question as an un- 

 essential factor, the thing becomes easy 

 enough. For instance, no company will 



