NEED OF CAUTION IN EFFECTING LIFE ASSURANCES.
No small amount of responsibility rests upon him who advises the humbler classes of society to intrust their hard-earned savings with a Life Assurance Society; and that responsibility is greatly augmented if the society recommended professes to depart from the usual and established plan of action. Mark the nature of' the most frequent bargains between the assurers and the assured. The assurance company, in return for certain payments, gene- rally annual, agrees to furnish a sum proportioned to the premiums, on the death of the assured. The company gets the money—all safe: the assured relies upon the ability of the company to dis- charge the annually-increasing debt to 'him, perhaps at the end of thirty or forty years. (A very usual age for insuring is from twenty-five to thirty, when the expectation of life is about thirty years) The actuary points to the means of payment, arising from the average accumulation of the premiums, which the expe. rience of several generations proves to be sufficient to meet the engagements of the company. The assured presumes that for a long period the affairs of the company will be conducted regu• lady, prudently, honourably, and on tried principles. Ile has no absolute security for his money. Heavy losses may occur through the roguery of some ROWLAND STEPHENSON Or FAUNTLEROV Ill the capacity of trustee or director of the company. In a violent Political convulsion, the National Debt may be swept awsy, and with it the greater part of the company's funds. To future mis- management and unexpected losses the best-established assurance company in the world is liable ; and he who invests his savings with such an establishment, cannot be perfectly secure. There is, then, a degree of risk to the assurer, greater perhaps than is
apparent or has been suggested, let him select the soundest and best-conducted office that can be named.
Of course the hazard is much increased when the company is in its infancy, and professes to depart from the usual method of transacting the business of a life assurance office. This remark applies to the National Loan Fund Company. The Morning Advertiser, in two articles founded on our paper on Life Assurance in last Spectator, intimates a design on our part to exalt the Pro- moter Company at the expense of the National Loan. Nothing of the sort. The Promoter was mentioned because we happened to have a series of tables published some years ago by that Com- pany, on the same principle as those which the assiduous and doubtless disinterested puffers of the National Loan seemed to think original with the latter Company.* Cautiously (lid we ab- stain from recommending one at the expense of the other; and we can assure our contemporary that we should most unwillingly influence any person in the choice of an assurance-oflice. With respect to deferred nnnuities and contiegent payments, we believe that almost every life assurance-otlice in London will undertake that kind of business.
There are some parts of the scheme of tlie National Loan Fund Company which should render persons, not thoroughly acquainted with the subject, very cautious in urging th.: poor and ignorant to carry their savings to that office.
The premiums required are lower than those of most companies : the expenses must be greater in proportion to the business done, in consequence of the small and frequent payments of the premi- ums, and the great variety of' the calculations required ; while at the same time, two of the ordinary sources of' profit will be cur- tailed. The regular investment of premiums, as we have always un- derstood, and of the interest thereupon accumulating, is necessary to enable an assurance-company to meet its engagements : but the plan of advancing at any time two-thirds of the premiums to the assured, will render it necessary for the National Loan Com- pany to have a large sum of money at immediate command, which ordinarily would be yielding interest in the sh ipe of stuck or mort- gages.
The Advertiser says, " It is a fact not to be contradicted, be- cause it can be proved from the oflice-books of every insurance- office in London, that the major part of their profits are derived, not from the legitimate process of business, but from lapsed policies—the parties insured either declining to rem w them because they can receive no adequate compensatien, or not having the means of doing so. The Directors of the National Loan Fund provide for both these emergencies." If this is true, it follows that the National Loan Fund gives up the main source of profit arising from the business of life-assurance. We doubt very much the correctness of the Advertiser's statement respecting the major part of the profits of other companies; but, on the showing of its own not very discreet advocate, the National Loan Company is one which should be cautiously recommended to
persons utterly unqualified to judge for themselves in the difficult questions of life-assurance. Awl, though the scheme is so lauded by gentlemen who write confidently in newspaper s, we happen to know, that others, who are familiar with these sul jects, quite disinterested, and as anxious as any to extend to the labour- ing classes the benefits of a sound, safe, and iquitable system of life-assurance, yet profess their inability to see clearly the source from which the Loan Company will derive the means of doing all that its prospectus promises, or to cotnprehend the working of the complicated scheme. It by no means fellows that the scheme is not excellent; but it requires further explanation and develop- ment, which are not afforded by mere panegyrics.
• The 3brning Adrctliser asks, " Wtat i, the interest chargeable (by the Promoter) on the loan of the two-thirds ? " The late per cent, is not men- tioned in the published terms of the Promoter, but of course it cannot be more than five per cent. Dues the National Loan advance money, on such security, at less than five per cent ? Again, " Is the policy vitiated, or is the policy still good, while the interest, if any, upon the loan continues to he paid ? The object of the advance is "to enable the assured to maintain the integrity .of his policy." The other question of the Adrertiser is not quite intelligible tour : "Supposing neither interest or ptincipal to be paid or returned, what does the Promoter do with the money which it has received from the unfor- tunate party who has failed to complete his payments ? " If the "unfortunate party" obtains two-thirds of the value of the policy on loan, and neither repays it nor the interest upon it, we should suppose the remaining third would be retained by the Contpany in part payment of his debt.
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