466 GILBERT E. ROE 



gate surplus of these companies was approximately two and 

 one half times greater in 1904 than it was ten years previously. 

 If this proportion of increase is continued within the life of the 

 present generation, the surplus of these three companies alone 

 will amount to more than the present interest bearing national 

 debt. During the ten years from 1893 to 1903, the national 

 banks of this country showed a combined surplus increase of a 

 little more than thirty four per cent, while the forty one life 

 insurance companies reporting to the New York department 

 during the same time showed a surplus increase of one hundred 

 and ninety five per cent. Under the system of surplus accu- 

 mulation now practiced, every hamlet and almost every home 

 of this country pays tribute to this fund. 



There seems to be a popular idea that in some way the 

 surplus adds to the security of insurance. The opposite is 

 true. As we have seen, the surplus is wholly unnecessary for 

 the payment of death losses or legitimate expenses. That is 

 why it is surplus. It is the fund that is left after the death 

 losses and legitimate expenses of the business are met, and 

 should be returned to the policy holder from year to year, or 

 time to time, as the amount of this over payment is deter- 

 mined. Because it was never contemplated that such a fund 

 would be accumulated, the law makes no provision for its 

 earning anything, as it does in the case of the reserve. With 

 no surplus the reserve must be carefully invested and com- 

 pounded in order to earn the amount which the law requires. 

 With the surplus on hand, the life insurance officials may spec- 

 ulate even with the reserve, instead of investing it in the se- 

 curities required by law, and if any portion of the reserve is 

 lost, make it good out of the surplus. 



It is the surplus that is being used to-day to pay fabulous 

 salaries to incompetent life insurance officials, who, according 

 to their testimony, know less about the business of their com- 

 panies than the average policy holder knows. It is the surplus 

 that is being used for speculation for the personal gain of the 

 officers of the companies. It is the surplus that the officers 

 are loaning to their friends and themselves at one to two per 

 cent interest. It is the surplus that is being used to control 

 the legislation of the state and nation, not only where life 



