In the early '80's the Tontine bubble burst. The first policies reached maturity; and the Equitable was called upon to make good its agents' promises. As all the authorities had anticipated and predicted, it paid the surviving members only small proportions at its estimates. Its failure, indeed, was even greater than general expectation; and unexplainable on the grounds apologetically put forth.
From that time the Equitable has been called upon annually to redeem its pledges and has invariably failed, A few quotations from its own official publications sufficiently illustrate its deficiencies. In 1871, for example the Equitable issued to one "J. B.," aged forty-three, a $10,000 policy maturing in 1886. The agent estimated that Mr. "J. B." would obtain, at the end of his Tontine period, cash "profits" of $5,328. In fact, the Equitable paid him $2,931. In the same year it issued a $25,000 policy to one "J. S. T.," also maturing in fifteen years. The agent estimated cash profits of $12,142.50. The Equitable paid $6693.50. Thousands of similar instances could be specified. In general, the Equitable has seldom paid more than sixty per cent, of the estimated profits. It has averaged in the neighborhood of fifty; and frequently has ultimately paid only forty and thirty. The other New York companies have made records similarly bad. The Northwestern Mutual, although it also has failed to realize its anticipations, has made a much better showing. The Northwestern, on the whole, has played he game fairly and honestly. Its managers have run the company, not for their own advantage, but for that of their policy-holders. They have held themselves to a strict accountability. While the New York companies have gone to extremes to avoid accounting, and have paid at the conclusion of the Tontine periods whatever winnings they chose, the Northwestern has willingly rendered precise statements to every policy-holder every year. Dishonesty, under these conditions, was practically impossible.
Statistics give no adequate idea of the suffering these Tontine settlements involved. Hyde's comparatively small dividends were realized by forfeiting the policies of unnumbered smaller and more unfortunate members. Mr. "J. S. T.," whose record is quoted above, represented a class especially attracted by the Tontine scheme. He was evidently a man of large means. The New York companies have always preached Tontine, on the ground that many men were thus persuaded to insure who ordinarily would not have taken out policies at all. Such men, that is, entered the company, not for the insurance, but for the "investment." In other words, men of wealth have taken Tontine policies in order to get the profits made by closing out those less affluent than themselves. In 1878 Elizur Wright declared that, up to date, 100,000 policy-holders in the Equitable and New York Life, who had dropped their policies, "found themselves in no better position than if the companies had failed." In 1885 John K. Tarbox, insurance commissioner of Massachusetts, declared that forfeitures already set apart and divided under the Tontine system, "would have provided for dependent family support to the amount of tens of millions of dollars." In the main, lapsing members were those overtaken by misfortune. Others ceased through carelessness, misunderstandings concerning the days of payment or days of grace allowed; or temporary illness. Others had taken Tontines with inadequate notions of what they were, and then afterwards abandoned them in disgust. Many, in the hope of inordinate gain, had taken much larger policies than their circumstances justified; and after paying several large premiums, dropped out. All, of course, had absolutely no redress.