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2 ' . Supplemcntjv the ' Leader uhdSiidurcU ^ if AncUy-st .- [ April 14 , 1860
Untitled Article
more likely from newspaper , and other condensed advertisements , which arc never put forward as the Ml balance sheets ; and on this array of figures the Companies are accused of withholding infonnation , and conjuring up delusive statements . Now , it is well known that almost every one of the Companies placed within this category , in terms of their deeds of settlement , furnishes from time to time , not only all the detailed information insisted on as necessary in the pamphlet itself , but generally a great deal more ; and , in fact , the Company which is most abusively treated of all , and to ' , which no less than twenty-two pages of virulence are devoted , has , within the last six ' months , furnished to the public and the American Government a more minute and detailed stater ment of its aftrtirs , and of its Assets and Liabilities , than has perhaps ever been submitted by any London Office ; for not only were the results of the calculations given , but the methods and all the details of the calculations for every policy , in such a form that any ordinary arithmetician could follow all the steps and check the result ' for himself ; the material documents ceasing to be matters of op inion , as is often the case , and becoming simple , statements of facts ; and yet this Company , whose only fault , perhaps , consists in its candour , and in furnishing superabundance of information , by which wranglers may quibble on details , is held up as the rank offender , and figures to the tune of one-sixth of the whole pamphlet as the ' arch-criminal , who is poisoning the public ' moral health with delusive balance sheets , which shall one day or another plunge the whole of trie prudential classes in the dire 3 t distress , desolation , and ruin . Again ; another Company , and which is perhaps one of the most enterprising caiid financially powerful in the empire , comes in for a large share of abuse , and is accused of adopting plans of valuation of the contingent assets and liabilities , as propounded by the well-known actuary Mt . Nelson , but which , it is complained , were not sanctioned by the eminent authority , Professor I ) e Morgan , to whom the question was submitted . It is patent to all in Assurance circles , andmust be ako so to the author , as was made fully known by the Company ' s advertisements and reports , that Professor De Morgan not only indorsed most emphatically and unconditionally Mr . jS eison ' s plan of valuation , but refused to sanction the methods proposed by the other actuaries consulted on the occasion . "We do not pretend to affirm that Assurance Companies are all in a thoroughly sound and satisfactory condition ; but what we with truth , and justice maintain , founded on long , extensive , and close study of their progress , is , that no class of commercial institutions have ever existed in this country which have , from their first establishment until now , been so well conducted , and which have set so good an exnmple to the public of those great essentials of commercial stability , strict integrity , and entire absence of pecuniary speculation . There is no case on record of im Assurance Company in this country having failed from rashly entering , upon pecuniary speculation , or even of the public suffering from their mismanagement . When Companies have been compelled to dose their doors and transfer their policy risks , it hns been from causes entirely different from those assigned in the pamphlet now under consideration . The author has completely overlooked the ' real causes of weakness in more than ninetonths of all Societies which have had to succumb tinder pecuniary pressure , but they were distinctly pointed out in the evidence given before the Pnrlin men tiny Committee of 1853 . The real causes of the want of success of many Assurance Companies , as explained before the Parliamentary Committee , are the want of a siufliciency of paid up proprietary or guarantee capital , prior to commencing business , and the management of the concerns being - 'intrusted , with few exceptions , to inexperienced and incompetent bonds . There needs no depth of judgment to understand flint , although some companies , under fortunate circumstances and experience , have become wealthy mid prosperous without capital to assist them at . the commencement , such results oflw the strongest reasons why other Companies , having little or no enpitnl to begin with , should aulfttr from tho opposite or adverse fluctuations , nnd bo compelled to hand over to somo stronger \ mdortnking the little business they may luive acquired . There is no want of n sufficient number of prnctic . nl examples to support this view ; nnd , ngnin , it is too notorious to stand in noocl of proof , tluit tho greater number of thoao who project Assurance Companies nro ( junlifU'd noil her by experience , nor npccinl uttninnu'nU , for tliu efficient , dischnrg'o of thfl duties which dovolvo on Ihom ns innungeri * . . In fuel , the projectors so often disnjvpoint tho directors nnd others ooncorucd in now projects , by their iucoinnctoncy , that their place soon grows too hot for them , nnd they hnvo to give way to others v —th « discon * tent nnd clisorgnnigntion thus induced , nro not unusually tho first
blow sustained by young Companies . There is no other situation of equal responsibility in the commercial world , in which tests of competency are not required . This evil has been brought on new Assurance schemes , mainly by the prevalence of the erroneous opinion promulgated by even great names , that no considerable amount of capital is really necessary to enable a Company to make a successful start * and , although this opinion will not bear one moment's scrutiny , still it has taken such hold of so many minds that it has been , and is now easy for any adventurous and speculative spirit to associate round him a sufficient number of persons of respectability to form a Company , with perhaps two or three thousand pounds of paid up capital . This is an error which nothing but the dissemination of principles derived from sound practical experience will correct . It is entirely beyond the control of legislative enactments , or proscribed rules of government . It would be quite as reasonable to define legislatively the ratio between the length of keel and the breadth of beam of a ship , the diameter and stroke of the piston of a steam-engine , the frequency of pulse to justify tin * beneficial administration of opiates , or the duration and force of storms under which lifeboats should be permitted to venture to sea for the rescue of lives . In all business operations , the only -safe and reliable guide is to be found in the ¦ personal tact and skill of those engaged in them . It is therefore not to be wondered at that so many young Assurance adventures should have been forced to transfer their policy risks to other Companies ; but rather that , in inexperienced hands , so many have been enabled to keep their ground , and be really successful . We have said that the failure of thenew Assurance Companies is not due to the causes to which they arc . attributed ' this pamphlet ; ... and now let us see whether the . suggestions offered for the improvement of the system would have the desired effect . There is but one Office in existence in which the author h ; is faith in the fulfilment of all its engagements , and the equitable discharge of its duties to the policyholders , and that is the Consols Insurance -Association , . projected' 7 th December , 1858 , and of which he is said to be a paid officer . There is no respect in which this 'Company differs from others previously established , except in the limitation put on the modcVof investing its funds . Every other feature is simply a copy of the scheme of some other Company . By the plan of Consols Assurance , 'however , it is compulsory to invest the money received in shape of pi'erniums in the name of trustees as creditors of the public debt of this country , or in what is commonly known under the name of " consols ; " and tins is the only distinguishing feature which enables the author to place his faith in the fidelity of tin ' s Company , and in no other . . Let us inquire into the financial merits of - this scheme .- H rests its claims entirely on the assumed greater value of ( jlovcrnment securities . Investments in every other kind of security yield a higher rate of interest to the lender . The lower rate of interest offered by the public , funds does not arise from ' fhcro being also a lesa risk of losing ' the capital by that mode of investment , but from the fact that it offers greater facilities for . selling out at short notice . This is a recommendation , however , of little or no importance to Assurance Companies , of whatever value it may be to those having the use of money for short periods of time only ; and Life Companies can , without difficulty , so regulate their investments ns never in any case to bo suddenly called upon to displace nny considerable portion of its investments , This being tho case , n compulsory condition of investing tho entire net premium fund , and also one-half of the paid up enpitnl in consols , obviously on first aspect of tho question , places tho operations of such nn association in a position of financial disadvantage , wljen compared with ordinnry Assurance Compnnica . Can it bo shown flint established Companies have been losers by the usual mode of investment employed by them ? jNo : on the contrary , ¦ while the public funds nro selling' at Three mid Three and a quarter per Cent ., all well-innnngcd Companies uir employing their funds nt from Four to Four and a Art // , or about . an inci'onsed profit of Thirty per Cent ., after wnking duo nllowanco for losses , nnd some Companies even u much higher rule of interest , nnd particularly one of tho Coinpnnies ho severely handled in the pamphlet , ' which is known to hnvo mili / ecl , on «• large amount ' of csipit ' ol / upwards of . Five per Omit , on the nvcrngo of tho last ton yenrs , pr nn inovonso of Sixty per < Vnt beyond tlint-obtainable IVom Consols . " What , then , nrc the ndvnnlngfs of tho peculiar spIioivic of the " Consols Insurance P" None , It suH ' ors a serious loss of interest on its crippled , means of investment } but that loss in compnrntivoly trifling to the loss nnd tlnngfors to which it w
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Citation
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Leader (1850-1860), April 15, 1860, page 2, in the Nineteenth-Century Serials Edition (2008; 2018) ncse.ac.uk/periodicals/l/issues/vm2-ncseproduct2343/page/2/
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