Clearly, if the company retains more of the "insurance value" than will compensate it for bearing the risk during the five years that have expired, it will exact pay for work that it has not performed, and its proceeding cannot be justified on any ground of equity. The company is, of course, entitled to some compensation for the loss of its interest in the "insurance value" that it would have earned had the policy remained in force; but it is idle, as well as in equitable, to contend that the compensation should equal the "insurance value." It seems to us that the present value of the unearned "insurance value" would be the just compensation. Mr. Wright, however, argues that it should be only enough to enable the company to procure as good a risk as the one it has lost by the surrender of the policy, and that eight per cent. of the unearned "insurance value" would be sufficient for this purpose; that is, eight per cent. would yield an amount equal to the commission usually paid to an agent to obtain a risk. Mr. Wright, it is seen, holds that loss of the risk is that for which the company should be compensated, but to us it seems to be, as above expressed, loss of interest in the "insurance value" which would have been paid to it had the policy remained in force. This "insurance value" on the company's share of the premiums is supposed to compensate the company for the risk of undertaking to carry the policy, and is clearly the only interest that the company has in the transaction. The compensation that the company receives in case of surrender is called the "insurance charge." As it is based on the "insurance value" it varies proportionately, and is therefore largest on "ordinary life policies" and smallest on "short-term endowments," and on the latter class of policies it decreases as the age of the policy increases. To recapitulate, Mr. Wright contends that life insurance is compounded of insurance proper and the business of the savings-bank; that the premiums consist of two parts, the "insurance value," which belongs to the company when earned, and the "reserve," which belongs to the policyholder, having been merely deposited with the company for accumulation, to be withdrawn whenever it suits him to return his policy; that the company for its interest in the risk is entitled to make a "surrender charge" when the policy is returned; and that this "surrender charge" should be based on the "insurance value," but should constitute only a very small part of it. This is, without doubt, a just conception of the nature of life insurance; but, while the companies agree with Mr. Wright in dividing the premiums into "insurance value" and "reserve," they disagree with him as to the ownership of the "reserve," half of which they insist on retaining for themselves, in case of surrender. The Mutual Life, of New York, retains from fifty to seventy-five per cent, of the "reserve," in settling for surrendered policies, and the Equitable from fifty to sixty per cent., and this is done on all policies alike, without respect to age or class. Having just seen that the "surrender value," usually constituting the difference between the "reserve" and a moderate "surrender charge," and sometimes exceeding the "reserve," varies in amount with the class of the policy, and far more so with its age, the reader is competent to decide for himself whether the company's uniform practice of retaining from fifty to seventy-five per cent, of the "reserve" on all policies is or is not equitable. For our part we think, with Mr. Wright, that it is not.
Mr, Wright further contends that both the "surrender charge" and the "surrender value," at any period of the policy's existence, should be ascertained sums, and known to the policy-holder before he insures, so that he can understand all the terms of the contract he is making. For this purpose he has prepared, and inserted in the book, several specimen-tables showing the "insurance value," the "reserve," the "surrender charge," and the "surrender value" of various classes of policies at the time of issue and in each year thereafter. This is precisely what the companies claim cannot be done. They say that the "surrender value" at any future time cannot be calculated, because it is impossible to foretell what the dividends or surplus above working cost will be. But, throwing dividends out of the question as an unessential factor, the thing becomes easy enough. For instance, no company will
