Some Remarks on the Application of the Principle of Non-Forfeiture to Ordinary Policies

Extract

As the principle of non-forfeiture has now been adopted by several British Life Offices, and will probably, in the natural course of competition, soon be adopted by many others, it has occurred to me that it may be useful to bring under the notice of the Institute some of the practical points that will have to be considered in the application of the principle.

If the idea of non-forfeiture is accepted to its fullest extent, it follows that no profit, properly so called, should be made by a life office through the forfeiture of policies, in consequence of the inability or neglect of the assured to pay the premiums as they fall due. The surrender-value of a policy is calculated according to certain rules, which should provide for the office receiving an adequate compensation for the loss of the policyholder's contributions to future expenses, as well as for the disturbance in the rate of mortality caused by the withdrawal of a presumably healthy life; and it is in no way necessary for the prosperity of the office, that it should also make a profit, by the forfeiture of the surrender-values that would be paid to the proper parties on application. In fact, if policies are to be strictly non-forfeitable, the calculated surrender-values should in no case be forfeited, but should be applied, in one way or other, for the benefit of the assured or his representatives.