Losing a mouthful

Patrick Marnham

One of life's keenest pleasures in a time of crisis is provided by the window of a carpet shop. People spend more money on a broadloom Kidderminster than I spend on a motor vehicle. Then they lay these valuable objects on the floor, a habit which has always baffled and distressed the Persians and Afghans who originally designed fine rugs to be suspended from the walls.

The carpet shop makes one feel rich, and reduces those jealous feelings against which the religious masters warn us. Every time one comes across some monstrosity for £500 one can mentally bank that amount as being a sum which will never be spent. Some of the objects are so hideous that one would pay twice their price to get them out of the house, and so one becomes twice as rich.

You do not see life insurance displayed in windows, and this is a pity, since if I had first seen any of my life policies displayed in their true colours I would be even richer than I already am. I have just surrendered my fourth policy in eighteen months.

The fundamental principle of life insurance was explained by Hilaire Belloc in his neglected masterpiece The Mercy of Allah, which satirised the financial enterpreneurs of that day (1922) and every day since. When the evil Levantine millionaire who was Belloc's anti-hero had become so rich that he was almost incapable of accumulating any more of the world's money he 'designed a scheme whereby every form of human misfortune, fire, disease, paralysis, madness, might be alleviated to the sufferer by the payment of regulat sums of money... I charged for 100 dinars worth of such insurance 110 dinars, and my benevolence was praised even more highly than my ingenuity. Men flocked in thousands to secure themselves from the uncertainty of human life by giving me of their free will more money in regular payments than I could by any accident be compelled to pay out ... Death itself at last entered into this design, and having found that young men just of age live upon the average for forty years, I asked them to pay for their heirs annual sums calculated as though that period were thirty, and thus I continued to accumulate wealth from a perennial source.'

My own good fortune started in 1970 when I answered an advertisement for a firm of City 'insurance brokers' with an old-fashioned name. I called on them (/ called on them!) and was received by a man of most exceptional elegance, 'the Life Manager', whom shall call Mr Carless. Within twelve minutes (for which time, busy as he must have been, he charged not one penny) I was committed to paying £150 a year for twenty-five years, with all sorts of good things promised in the event of my early demise. The bait in my case was a mortgage. I was assured that the policy which had been selected for me with such exquisite care, issued by the Scottish Provident Institution, might 'be used at any future time for house purchase.'

Shortly afterwards I wished to purchase a house, and was rather taken aback to learn that just at that moment the splendid Institution (assets then £161 million) had no funds available for my particular purpose. The building societies did not love me either, and so, eschewing my new friend, the Life Managing Mr Carless, I went to a 'mortgage broker', a Mr Gold, and obtained a mortgage—on the condition that I purchased a second life insurance policy (with the Scottish Mutual Assurance Society.) Again I was signed up for twenty-five years, this time at £250 per annum.

Unfortunately it came to pass that I had to sell my house (at a loss incidentally: probably the only loss registered on a London domestic property transaction in 1972). But all these Scotchmen continued to bear the risks of my death impervious to the sale, and the monthly premiums rolled merrily on.

It was about a year later, shortly after coming into a small legacy, that I permitted into my presence another gentleman from the distinguished old firm of brokers ( Mr Carless had passed on to lusher pastures), a Mr Stud. And (you may not believe this) he persuaded me to buy a third life insurance policy in the form of a Hambros Managed Investment Bond—a snip at £1500 with an estimated annual accumulation of fifteen per cent. Mr Stud shared with Mr Carless an Old Etonian tie and a quite remarkable luminosity of shoes, teeth and hair. But again there was no charge for the illuminations: he came and left without a penny changing hands. So there I was on 3 July 1973. the owner of two Scottish life insurance policies (combined value £18,000), one insurance bond (cover of £3750), and of course (something which I forgot to mention) my original policy, my birthright, the trusty little £2500 With Profits Endowment issued by the Friends Provident Life Company, a most excellent body of men. Dead, I was on that day worth £24,250—a figure of almost Stonehousian proportions.

It's all very well to point the finger of scorn. I am not the first to imagine that in some painless way I could set aside a little pot of money for my old age. Think of all those damn fools (or 'little old ladies', as they are called in Throgmorton Street) who participated in the Great Equity Boom, apparently in the belief that shares were not

a gamble, like going to the dogs, but An Investment. Such people (naturally not including any of the readers of this paper) were quite unaware that the only way to be sure of making money on the Stock Exchange is to buy when all the little old ladies are selling and to sell when the old dears come rushing back again, eager to buy: what Belloc described as 'the labour and risk of buying cheap and selling dear, and the duty of hunting the dupe and the incompetent.' I myself (yes, yes, I might as well admit it all: I have also owned stocks and shares) took some time to appreciate this simple rule.

Anyway, you might suppose that in 1973 the Association of Life Insurance Touts filed my case. No man under thirty can be persuaded to believe that he needs more than lour life insurance policies. Can be? Well, it was in 1974 (just he/ore the end of the Great Property Boom, when prices we-e at their very highest) that I decided to re-enter the housing market. Lowering my gaze from the distant spiritual horizons on which it had been fixed, I thought I noticed that something was afoot. A letter from my broker explained: 'We are now witnessing the final collapse of the capitalist system in

Western Europe With very best wishes. Yours ever, Toby'. But I was engaged in a procedure which we financiers term 'scraping the barrel'. And so I sold my investments for just about purchase price (1959). Nominal profit : £5. Actual loss to be calculated by estimating the annual rate of inflation over fifteen years, multiplying by five per cent for non-existent capital appreciation and remultiplying ( I don't want to be greedy) by say seven and a half per cent for unpaid compound interest.

I also cashed in the Hambros Managed Investment Bond. Profit after one year at Mr Stud's estimate, £225; actual loss £407. Goodbye £1725 legacy, hello £1093 Hambros cheque. And I started looking for a mortgage.

Curiously enough the Scottish Provident Institution (assets by now £202 million) still had no funds set aside for my purposes. Nor did the Scottish Mutual Assurance Society. So I naturally turned to my original Friends Provident. The insurance tout who hands out all this company's -mortgage business was good enough to reply; 'I confess it is not going to be easy to persuade the Company to make an advance to an individual who derives income from freelance journalism.'

And so, for one last fling together. I returned to my wonderful old established firm. Gone by now was Mr Stud, off to join Mr Carless perhaps in the Promised Land. And in their place was a man I never met, but who sounded on the telephone even more beautiful than either of them: Mr Budd. And Mr Budd though( he could help me with a mortgage, if I purchased a life insurance policy. My fifth.

And so it came to pass that I surrendered my Scottish Provident policy (total premiums paid over five years, £495; surrender value £175. Thank you). And I surrendered my Scottish Mutual policy (total paid £550; surrender value £110. God bless you up there in Edinburgh or Dundee). And I raised a loan with the Friends Provident (total premiums paid £720; amount of my own money lent back to me £570 at twelve and a half per cent on the rock-hard security of the full sum. How do they do it ?).

And I signed up with the Sun Life Assurance Society for twenty-five years etc, etc. That was eighteen months ago.

The second great principle of all insurance is: 'If the risk is not worth worrying about, they will sell you a policy'. And, since I have now found a Building Society which does love me, I have surrendered on my Sun Life policy as well; and received back a cheque for £116.10 (against premiums paid of £360.) You might suppose, considering the extreme reluctance with which these venerable usurers lend their money, that when you rushed in with the good news that they could have it all back after only eighteen months, they would break into a thin smile. Quite wrong. They won't even take their money back without charging you a further £200. 'Redemption fees!' This would be to cover them against the appalling costs of reading your cheque, going to the filing cabinet and sticking down an envelope? No. No, that's 'legal charges', listed separately at £16.20.

The upshot is that Sun Life have loaned out £9000 for eighteen months, and received more than £2200 in interest—an annual rate of nearly seventeen per cent, which makes the building societies look sleepy.

The week after I broke with life insurance I read in the Daily Mail that, though I may

seem a little slow, I am not alone. Over hull the life policies taken out are surrendered within a lew years. Some companies do not repay a penny, and in every other case the amount repaid to the happy ex-policyholder is but a fraction of the amount he has donated to these altruists. I think I am now beginning to see how it is that the time and love of Mr Carless, Mr Stud and Mr Budd come so cheap. I have just noticed that in the year when Scottish Provident were only worth £161 million, they paid out £2.5 million in commission against a total of 28,000 new policies.

I am not asking for sympathy. 'The sheep in the meadow that lifts its face to bleat loseth a mouthful.' And it weighs less when it goes to market. The moral is, just as the rich have a duty to hunt down the dupe, so the foolish lean ones are obliged to sustain the plump and wise. I do not bear any grudge against Mr Carless, or Mr Stud or Mr Budd. I sincerely hope they prosper. Belloc's aphorisms are their inspiration. At the end of The Mercy of Allah the wise old Levantine looks back, 'his eyes full of frigid tears ... It is wealth and wealth alone, wealth superior to all surrounding wealth, that can procure for man that equal vision of the world, that immense tolerance of evil, that unfailing hope for the morrow, and that profound content which furnish for the heart of man its resting place.' Budd and Mr Carless? Conveyancing perhaps? Or selling second.

But it would be a bad thing if the timehonoured African custom, whereby after a bus crash the passengers gather round their driver and beat him to death, should ever be observed in Western Europe.