But whose money is it? Who paid it to the company, if not the policy-holders? Still, if the business were confined to simple endowment insurance in connection with pure life insurance there would be less objection, although banking is properly no part of insurance; but the fact is, a far more speculative business is done, called Tontine insurance. This form may be fitly characterized as the gambling form, inasmuch as the only hope of profit to a few is that the many will be robbed of their savings. Tontine insurance is profitable to the few in just the proportion that misfortune shall overtake those who participate in it. No man would risk large payments with the certainty of losing all if he should fail to make one such payment in a term of years, if he were not tickled by the hope that others would be the unfortunate ones compelled by circumstances to discontinue and lose all, while he would be the exception and profit by their loss.
But he should consider that, even if he persists in paying through the specified term, he is still at the mercy of the company in the division of the spoils. They may use as large a part of the plunder as they please in the expense of the business, and the experience of many will attest that, while for the company it was "turkey," for them it was "crow."
President Greene, of the Connecticut Mutual Life, in a series of able articles, has exposed the injustice of this system, and shown, to the satisfaction of unprejudiced minds, that it is no part of legitimate life insurance. Still, some companies are making Tontine and Semi-Tontine insurance their specialty.
There is one other form of insurance practised by level-premium companies that demands brief notice here. It would seem that to mention it would be to call down upon it public reprobation: we refer to what is called prudential or industrial insurance. The peculiarity of this form is that its patrons are found among the poorest and the lowest classes of our population, and, in the judgment of others than the writer, it appeals to the very worst instincts of those unfortunate people. The insurance is effected upon the lives of helpless infants and children to the amount of one hundred or two hundred dollars or more, ostensibly to provide for suitable burial expenses in the event of the child's death. While, doubtless, in some cases the motive is a worthy one which prompts to such insurance, one's thought shrinks with horror from a contemplation of the crimes which it must, in many cases, suggest to the minds of the low and depraved. How many children are there in our large cities whose lives are not worth even one hundred dollars! How many are there whose death would be hailed as a deliverance from an expensive and unwelcome burden! The simple suggestion is enough to carry with it a sense of obligation to lovers of humanity to see that a premium is not placed upon infanticide and kindred crimes. If such insurance is to be effected at all, which is extremely questionable, it should be under the strictest restraints of law.
Another serious objection to the system is that it necessitates nearly double the cost of even regular level-premium rates, from the fact that weekly collections of five and ten cents must be made by agents employed for the purpose.
Of course a large part of these collections, wrung from the poor, are absorbed in agents' fees, the balance going to the company. The lapses also must be very numerous, and but little benefit is ever realized by those who part with these pittances from their scanty earnings. It is a well-known fact that companies realize very large profits from this business, and in some instances the writer has been credibly informed the expenses of the general business are met by the profits of this branch. This article is written in no spirit of hostility to level-premium insurance; it is simply a criticism upon its defects and its abuses. Properly administered, there is an ample field for the prosecution of its business. There will always be those who will prefer to pay the larger price, for what to them may seem the better form of insurance; but there will be large numbers, as now, who will prefer assessment insurance in reliable companies.
There is an ample field for both assessment and level-premium companies to prosecute their work. There need not and should not be antagonism between the two systems. Each will and should be criticised, but always in a spirit of fairness. To some extent modifications in both systems may be desirable, and doubtless a healthy competition will bring such changes to pass. Perfection is a quality of slow growth, but it should be the aim of those who administer the far-reaching and sacred trusts of either system of life insurance.
Such companies can undoubtedly be made permanent by providing for the entrance of new members at any time in the history of the company at a cost for mortuary assessments substantially as low as in the earlier history of the company. This may be accomplished in either of two ways:—
1. By advancing the rate of assessment with advancing age, by what is called the step rate process, or,—
2. By the accumulation of funds to meet the increased assessments beyond a fair or normal rate.