Facts and Fictions of Life

by Helen H. Gardener

Many of the worst features in Life assurance contracts or
policies, mentioned in this essay, have been amended or
corrected since its publication, but there remain enough
other conditions of doubtful fairness to the policy holder
to, I think, justify including this essay in this book.
Among these conditions, is the clause, in all Tontine
policies,—and nearly all policies now issued are Tontine in
one form or another,—which puts all accumulations on
policies derived from "dividends," premiums, etc., on lapsed
policies etc., into the hands of directors or officers of
the companies, to do with as they choose, the policy holder
being made, by the terms of his contract or policy, to agree
to accept whatever proportion of surplus there may be
"apportioned by the Society" or Company, to his policy, when
it shall have matured. That is, the policy holder is not
represented as against the Company, in the determining of
what, if any surplus, his policy is or should be entitled
to. "At the end of the Tontine Period, if the person proposed
for assurance be then living, and the policy in force, the
policy shall participate in the accumulated surplus, derived
from policies on the Free Tontine plan, both existing and
discontinued, as may then be apportioned by the Society."
(Italics mine.) This leaves the policy holder absolutely at
the mercy of the Company, or its actuary who is, or may be,
the instrument of the officers of the Company. And it will
not do to reply that "the policy holders are the Company"
for it is well known, at least among insurance experts, that
this is one of the fictions of the business in its practical
management.
In illustration of certain other abuses in the management of
this beneficent and important business, I have also
included, brief, humorous sketch, which touches some of
these, a propoi of the fictions versus the facts.

Within the past twenty years the business of life-insurance has grown with such wonderful rapidity, and changed so radically in its methods and contracts, that it is to-day as unlike its old self as the railway-car is unlike the stage-coach.

The old life-insurance contract undertook to define burglary, riot, and rebellion, and the companies held themselves free from obligations which they had deliberately assumed, if the other party to the contract did not conform to the rules of conduct laid down under their definition and requirements. Nowhere else in the history of large business organizations has the debtor regulated his obligation by the morals of his creditor and liquidated his debt by acknowledging its existence, and then simply charging moral obliquity on the part of said creditor as the reason for not paying it.

If A owes B fifty dollars, and B is known to be a thief or a murderer, it does not liquidate A's debt to simply show that fact. But life-insurance companies have held, and some of them still claim, the right to so indemnify creditors, and, strange to say, they have been able to conduct business on that basis. They have even gone further, and said that a debt to B's heirs is forfeited in like manner—thus making the destruction of a man's reputation after his death of pecuniary advantage to the company. They have been enabled to do this because many men do not read the insurance contract which they sign, and hence have no idea of its complicated and, in many cases, unfair nature. If men insisted upon understanding the contract before they sign it, as they do in other business, the more unfair features would necessarily disappear from all insurance contracts.

If I deposit a thousand dollars in a bank, it is my money—I can withdraw it when I please, subject, of course, to business rules, which have nothing to do with my standing as a citizen. The bank has nothing to say in regard to my loyalty or my honesty in other affairs. My money can not revert to the bank on outside ethical or moral grounds. But in life-insurance—a business in which more money is invested than in banking—the opposite rule has been, and to some extent still is, in operation.

There are a few companies, it is true, which have rarely taken advantage of their reserved right to mulct a family of money actually received, upon the plea of outside ethical delinquencies of the dead—which had nothing to do with his length of life—and there are companies, at the present time, which have voluntarily eliminated the greater part of these oppressive regulations and reserved rights from their forms of contract. But in many of the companies they still remain in full force, and in almost all there are improvements of a most important nature needed even yet.

In other words, while one or two companies have made their contracts, in large part, what contracts purport to be, a guarantee of good faith—that, if so much money is paid to them during a stated interval, they will return to the party insured, or to his heirs, a stated sum at a given time—there are still many which have not so improved their contracts, and are doing business in the old way, depending for success on the ignorance of their applicants in regard to the unfair conditions of the contracts which they sign. A few have left out most of the thousand and one ifs and ands and provideds of the old regime, and have at last undertaken to conduct this important and rapidly-growing business on strictly business principles, and the results have abundantly attested the wisdom of the new departure and indicate the advisability of still more liberal measures. A man may now, if he is careful and wise with his choice of a company, insure his life, or, if insured, he may have the temerity to die, without a fairly-grounded expectation of leaving his family a lawsuit for a legacy. He may also be reasonably sure that he is not placing his own reputation (after he is unable to defend it) at the mercy of a powerful corporation intent upon saving its funds from the inroads of a just debt. And I question if it is too much to say that, given enough money, a strong motive, and a powerful corporation, on the one hand, and only a sorrowing family upon the other, and no man ever lived or died whose reputation could not be blackened beyond repair, after he was himself unable to explain or refute seeming irregularities of conduct or dishonesty of motive. No man's character is invulnerable, and no man's reputation can afford the strain or test of such a contest. Millions of dollars have been withheld from rightful heirs by threats of an exposure—the more vague the more frightful—of the unsuspected crimes or misdeeds of the beloved dead.

Thousands of cases never known to the public have been "compromised," and hundreds of heartaches and unjust suspicions and fears about the dead, which can never be corrected, are aroused in sorrowing but loving breasts by this method of doing "business." It is, of course, of the utmost importance that every precaution be taken by life insurance companies to protect against fraud and trickery, the funds held by them in trust for others. But with the agent, the examining physician, the medical directors, and the inspectors all employed by, and answerable to, the company represented, if fraud is committed in getting into the company, one or all of these paid officers must, almost of necessity, be party to that fraud. With all these safeguards in the hands of the company, if a man is accepted as a "good risk," if he pays his premiums, surely his family has the right to expect a legacy and not a lawsuit, nor a "compromise" which must cast reproach on the dead.

If it were not for the enormous value and benefits of this method of making provision for his family, surely no man in his senses would ever have risked—would not risk to-day—signing a contract which gives the other interested party not only an absolute fixed sum of his money, year by year, but also reserves to it the right to investigate and construe his actions and motives after he is unable to contest its verdict.

And not only this, but upon the finding of some slight, wholly immaterial flaw in his statements (which it failed to find when he was in the hands of its agents and officers), in some companies he not only forfeits the right of his heirs to their purchased inheritance, but the company retains his money which he has paid in besides! This is surely a dangerous contract for any man to sign. It is placing a temptation and a power in the hands of a corporation that it has never yet been in the nature of corporations not to abuse.