TONTINE INSURANCE.

New Zealand Mail, Issue 933, 17 January 1890, Page 19

TONTINE INSURANCE.

TO THE EDITOR OF THE NEW ZEALAND TIMES. Sir, —Your article of this day’s date must be my apology for this letter. I have two policies under the “ Tontine System,” one for L3BO and one for L2OO, and have carefully read them both. Under the first I am insured against death for 20 years for L3OO. During that time, should I fail to pay a premium within 30 days from the due date the policy will not expire so long as the surrender value is sufficient to keep it in force for a period of three months. Should I live the 20 years I find I can then (Ist), draw out my share of the profits and surrender my policy ; (2nd), or draw out the profits only and continue the policy until death ; (3rd), or obtain a paid up policy, payable at death. There are other options, but these are the principal. Under the second policy, £2OQ. All the premiums that I have paid are guaranteed to my heirs, should my death occur within 15 years from the date of the policy, and I have exactly the same clause with regard to my failing to pay any premium or premiums, and the same chances of settlement at Che expiration of the 15 years as with the LSOQ policy. After paying premiums for several years it is alarming to read in your journal that “an insurer oan claim nothing till the tontine period for which he insures, and if he dies before that time he loses all.” I may lose all, but my heirs certainly will get LSOO cash, in addition to all the premium moneys I have paid on account of the L2OO policy should I die before reaching my 42nd year. I think 1 quite understand my policies, but if they are not as above (I am assured they are), I ■ have been woefully misled. I, however, 1 9£«nwt agree with you that I am gambling

in a legalised form. My tontine assurance policies appear to me perfectly just and fair to all parties. 1 enclose my card. Insurer. Wellington, January 11. [Tontine, pure and simple, is as we described it, viz., he who lives longest gains most, and he cannot claim any return until the tontine period expires. But as we also pointed out, there are several modifications of the original tontine in vogue.—Ed., N.Z.T.]

TO THE EDITOR OF IHE NEW ZEALAND TIMES. Sir, —I read with pleasure your article in this morning’s issue, and fully agree with your concluding sentence, where you speak of tontine insurance as a “region full of pitfalls.” I should like to point out, however, that from your description of the various classes of tontine you have omitted the one under which over 90 per cent of persons assure, namely, that in which the premiums are payable until death, the member himself drawing nothing whatever except profits. The case recently before the Court was quite an exceptional one, as Mr Bertie’s policy was one under which he was to pay premiums for 20 years only, and was known as a “limited payment semi-tontine,” the usual policy being called by various names according to the fancy of the office issuing it, but all requiring premiums to be kept up during lifetime. Briefly stated, the usual tontine policy differs in no way whatever from the ordinary life policy, except that instead of profits being divided every one, three, or fiv a years, they are not divided until the end of the 15 or 20 year period, the representatives of those dying in the meantime receiving the bare sum assured. The “tontine jargon,” as you so well express it, was apparently invented by the exponents of the system with the idea of casting such a glamour around as would decoy the unwary assurer. It is a very common method of the tontine agent to persuade his victim that he has a policy after the style of Mr Bertie’s, which will be free of premiums at the end of the tontine period, while the policy that he really has requires premiums to be paid until death, as under the ordinary whole life policy. It is interesting in this connection to call to mind that some years ago the two offices which, beside the American companies, issue tontine policies, endeavoured to work a class of insurance which they called the “ deferred bonus” system, a title wlvch of course explains itself. The public apparently did not take to it, and this clas3 of policy for a time ceased to be issued. A few years ago, however, these offices revived the discarded system, but gave it a new name —modified tontine and tontine savings fund, respectively. . Now we find that although the principle of the tontine is precisely that of the previously rejected “deferred bonus,” a large business is reported. Perhaps it would be unkind to suggest that these recent disclosures as to how tontine is worked may throw some light on this fact.—l am, etc., Policyholder. Wellington, 11th January.

TO THE EDITOR OF THE NEW ZEALAND TIMES. Sir, —Allow mete correct an error that appears in your morning paper, where you explain “ semi-tontine as a mede of insurance, whereby the amount assured is payable at death; but at the end of the tontine period the assured is entitled to a paid-up policy for the sum assured, plus profits. The system of insurance you describe is known and mentioned in the prospectus of their institution as the limited payment semi-tontine policies. Modified orsemi-tontine is nothing move or less than a deferred bonus system. Some of the institutions that are now doing business under the tontine system some years since started a table that they termed “ the deferred bonus system,” but the public, clearly understanding the meaning of this new table, decline to patronise it. Not to be beaten, however, the same table to all intents and purposes is offered again under the name tontine with several aliases. On this occasion, as has been clearly proved in Court, many did not understand that they were to be put in a far less advantageous position than under any ordinary life table, infact manvarestill under the impression that, at the end of their tontine period, if alive, they will draw the amount themselves for which they are insured. This is altogether an erroneous idea—unless under an endowment tontine policy. An ordinary modified or semi-tontine policy is one payable at death only, on which the assurer will have to pay his premiums as long as he lives. Should he die, say six months before the expiration of his period, his successor receives the bare - amount for which he is insured, no profits whatever being allowed. Under an ordinary life policy, at the close of even one, three, or even five years’ time, the assured receives his bonuses, which, should his death occur at any time, would be handed over, along with his original amount assured, to his survivors. In the one case the assured knows annually how his company is progressing ; whereas under tho tontine policy the assured must ask “no rude questions ” until his 15 or 20 years have expired. There is n<> better index of the prosperity or otherwise of- an association than these bonus sheets issued. Very few companies whose business is in a flourishing condition would care to tontine their bonus ; for, should these bonuses be good, no better advertisement could possibly be desired to enrol new business. To give a simile

explaining tontine : Presuming a capitalist wished to invest a sum of money for a term of years, would he entertain an offer from a would-be borrower, who, instead of agreeing to pay him his 61? per cent annually, proposed borrowing his money for, say, 15 years, and tontining the interest ? In other words not pay him any interest at all until the end of the term. Then as to the amount of interest to be allowed, that must be left an open question entirely for the borrower himself to decide. He might “ estimate ” he would allow him 20 per cent., but declines to guarantee him at the rate of 1 per cent, per annum. He blandly asks the capitalist to place implicit faith and confidence in his integrity. Could such a confiding capitalist be found who would entertain such a proposal ? Such, however, is%>ntine —modified, semi, or otherwise.—l am, &c., Masterton.