The "Brown Book of Life Insurance Economics" shows that the sum laid by annually for future tontine or other dividends ranged in the ten years ending with 1903 from $2,936,026 to a minimum of $956,597, these amounts being savings after payment of dividends. In 1904, however, for the first time in the tontine history of the company—also the first year of maturity of non-forfeitable tontine contracts with their largely reduced dividends—the dividends paid and credited, $6,018,202, actually exceeded the year's earnings, as shown by the company's sworn statement, by $76,595.
I want to call policy-holders' attention right here to what this means to those who are now being beguiled into taking policies on the strength of "adjusted" estimates placed by the company in its agents' hands, showing dividend results ranging from fifteen to fifty per cent. higher than those of 1904, with, however, the saving (?) clause that, depending upon future unforeseeable conditions, the same "may be higher or may be lower." It may be added that, but for a profit realized from sale of securities, the company's gross surplus would have shown shrinkage.
In order to realize what such a showing means, let us make a comparison, using the figures of a well-known Western company (partly tontine, but operated on diametrically opposite lines from the New York Life), for the three years 1901-03, this company being barely four-tenths the size of the New York Life as regards outstanding business:
Comparison of Totals, Three Years, 1901-03
| Dividend earnings. | Dividends. | Laid by for future dividends. | |
| New York Life | $16,826,289 | $13,189,278 | $3,636,091 |
| Western Company | 17,788,820 | 12,284,255 | 5,504,565 |
| -$962,531 | +$905,023 | -$1,867,574 |
After mulling these over, I dug further in regard to the "prosperity" as shown by the business of 1904. The company boasts of its enormous volume of new business, $345,722,000, which is $15,000,000 in excess of the 1903 business. Here is the story: While this new business was being secured, the
| Total terminations were | $162,326,114 |
| Less those inevitable terminations by death or maturity of endowments | 26,767,873 |
| Waste by lapse, surrender, etc. | $135,558,241 |
| And when we add the lapsed policies which continued in force, under the "extended-insurance" provision | 89,938,500 |
| We have the total waste of | $225,496,741 |
and this, reduced to its actual significance, means that of the total actual terminations, 83.6 per cent. was actual waste and only 16.4 per cent. legitimate terminations, while the great bulk of the last item of $89,938,500, upon which premium payments have ceased, must run off the books in the near future; and this is what goes on from year to year, more than keeping pace with the boasted increase in volume of new business. The public never sees this side of the question.
When I got to this point in my deductions, I was brought face to face with the tremendous expense of acquiring new business. Then I saw the light—why it was necessary to wipe off the books nearly two millions of what were considered good assets, that is, pledges from agents of their renewal commissions against which advances had been made, and where the new business came from, and how it was possible to make rebates when the law says they shall not be made. An agent induces a friend to have a policy written, for which the agent practically pays the premium out of his commission, and thereupon has advanced to him large sums against the future premiums which are to be paid by the policy-holder, who has no intention of paying them, and allows his policy to lapse. Heavens! What a vista of plundering opportunities the bare thought opens up! Somebody has to pay.
THE MILLION-DOLLAR POLICY