It will be interesting to watch the effect of the new law, as it relates to dividends to policyholders, upon the kind of policies which will be most popular in the future. In recent years, a large percentage of the business of some companies, probably of many, has been written on the deferred dividend or accumulation plan, whereby no dividends were declared until the end of the accumulation period, which for a twenty payment life policy was twenty years. On account of the glowing prospects held out to the insuring public by unscrupulous agents in the past as to the profitable investment features of such policies, there is coming to be an increasingly large number of men who are dissatisfied with the settlements offered by honest companies as their deferred dividend contracts have matured. Such a state of affairs was inevitable for, in far too many cases, the actual cash value of the policy at the time of its maturity often falls short by hundreds of dollars of the amount represented by the agent. This cannot fail to prejudice the public against the socalled accumulation policy, and even against insurance as a really desirable form of "investment." The principal criticism of the deferred dividend contract is that there is too great a margin of uncertainty respecting the amount which the policy will actually be worth at the end of the accumulation period, provided the assured elects to take a cash settlement.

The new law makes a sweeping prohibition against the estimation of profits by providing that after the first of January, 1911, no life insurance company and none of its officers, directors, or agents "shall issue or circulate, or cause or permit to be issued or circulated in Canada any estimate, illustration or statement of the dividends or shares of surplus expected to be received in respect of any policy issued by it." This clause promises to put an end to the intentional or unintentional deception of policyholders on the part of a certain class of agents respecting that feature of the policy contract which deals with prospective dividends or profits.

Turning now to a consideration of rebating, it is hardly necessary to enter into a discussion of its evils for these are only too well-known, especially by those who have even a slight

knowledge of the practical operations of field work in the insurance business. It is always a difficult problem to measure the extent of the practice within any given territory, but it is believed that rebating had reached proportions in Canada so considerable as to be injurious to the business of life insurance. The Royal Commission assembled abundant evidence which tended to show that agents gave away a large share of their remuneration in rebates, and it was computed that the agents did not actually realize, on the average, more than 50 per cent of their commissions as set forth in their contracts with their respective companies." The old law did not undertake to deal with this problem; the Canadian Life Officers' Association and other insurance organizations, the management of numerous companies, and others were desirous of the necessary legal enactment to check the evil. The draft bill of the Royal Commission undertook to deal with the problem in what was afterwards regarded as a most impracticable manner. It provided for the imposition of a fine of $1,000 upon the directors and managers of companies whose agents had paid or offered to pay to any person insuring a rebate of premium. The original administration bill entirely disregarded this proposition and drew up certain clauses dealing with rebating which, with slight alterations, were enacted into law. No direct or indirect rebating is now permitted, and a substantial penalty is imposed upon all offenders. For the first offense, a fine of double the amount of the annual premium on the policy in question may be imposed, and in no case is the penalty to be less than $100. For a second or subsequent offense, the penalty is double the amount of the premium with a minimum amount collectable of $250. It is further to be noted that a rebate under the present statute embraces not only the payment of a monetary consideration or a reduction in the amount of the premium, but it includes any benefit or privilege, that is held out as an inducement to insure, which is not extended by the company to all policyholders of the same class and equal expectation of life. Furthermore, the recipient of the rebate or special privilege as well as the giver are alike See the report of the Royal Commission on Life Insurance, p. 178.

subject to the penalties which have just been mentioned. But the application of the statute does not necessarily end here. In case it can be shown that any director or manager or other like official violates or sanctions the violation of the law concerning rebating, he is liable to a fine of $500. Moreover, no part of the penalty imposed in any case may be paid out of the funds of the company. These features of the new law, sweeping as they are, seem to be rather generally looked upon with favor. For some time past, the management of several of the best companies had endeavored to prohibit rebating on the part of their own agents, but it seems with only partial success. Naturally, such companies welcome a law involving a principle which they individually have labored to establish.

As was the case with the question of the distribution of dividends to policyholders, the old law, as it related to expenses, was largely negative in that it did not specifically place any restrictions upon the expenses that might be incurred in procuring new business, or in the management of the affairs of the company. As a consequence, it is hardly too much to say that the forcing of new business resulted, in many cases, in wasteful expenditure and extravagance. This statement is based not only upon personal observation and exchange of opinion with others who have remarked upon the question, but also upon the findings of the Royal Commission. It is stated in their report that the net premiums received in 1905 by twelve companies amounted to $2,699,915.68 of which the commissions alone which were actually paid to agents totalled $1,676,066.65. The average rate of commission, therefore, upon the total first year's premiums collected amounted to over 60 per cent. Of course a goodly percentage of this commission remained in the hands of the policyholders as rebates or allowances. But the enormous sum above mentioned did not constitute the total payment made by the companies to their agents as a reward for the new business. "Prizes, bonuses, rewards, allowances, salaries, and advances" to agents swelled the total cost to the twelve companies for their new business to

the handsome sum of $1,994,352.16. This was about 74 per cent of the total premiums for the first year.

It was believed by many that such a state of affairs was in need of immediate correction. The Canadian Life Officers' Association did not seem inclined to endorse any restrictive legislation in these regards, it being believed that publicity might be made an effective remedy for whatever evils really existed. The Royal Commission was of the opinion that both publicity and legal regulation were required and the commissioners' recommendations, in a somewhat amended form, were followed in the framing of the administration bill. In general, the main principles established by the commissioners were included later in the Act of 1910. It is now provided that officials at the head offices of the companies and all other officials excepting duly authorized agents who are employed to solicit insurance shall not receive a commission on any portion of the business of the company. Moreover, all compensations to agents, brokers, or associations for procuring new business, for collecting premiums, or for any other service must be determined in advance. Thus, it would appear that specially announced bonuses, prizes, and rewards which sometimes have been offered by certain companies as additional compensations, obtainable under certain specified conditions, are no longer permissible. Respecting the services of directors, they may not be paid for unless payment is authorized by a vote of the members in the case of a mutual company, or by vote of the shareholders and other members, if any, where the company has capital stock. No salary of more than $5,000 per year may be paid to any agent or employee without the approval of the board of directors; and no salary agreement may be made by any company with its officers or trustees for a period greater than five years.

Inasmuch as the accumulated funds of life insurance companies belong, in the last analysis, to the policyholders, they are, essentially, funds held in trust until payment must be made. It requires, therefore, no special demonstration to establish the fact that such funds should be invested in a high grade of securities from which the speculative element has been eliminated.

According to the old law, it was permissible for life insurance companies to invest their funds in a wide range of securities including, among others, those of the Canadian, British, and United States governments; the stock of any chartered bank in Canada; and the debentures, bonds, stocks, or other securities of a large number of specified classes of companies incorporated in Canada. Investment in the bonds or debentures of steam railway companies was limited to those of such companies as had earned and paid regular dividends upon the "ordinary preferred or guaranteed stocks for the two years next preceding the purchase of such bonds or debentures." The Royal Commission, in discussing in its report the then existing insurance law as it related to investments, drew attention to the fact that in modern financial practice the stocks of many public utility or industrial concerns were doubtful sources of investment for trust funds. Accordingly, in the draft bill, although the provisions of the existing law were followed in many particulars, investments in stocks were limited to those of chartered Canadian banks, or those of Canada, of any province of Canada, or of any municipal or public school corporation in Canada. Under the terms of the law which went into operation on the first of January, 1911, these recommendations were somewhat modified, but the law was framed so as to eliminate, as far as possible, speculative securities from the classes of investments which now may be made by life insurance companies. It is not necessary to catalogue here those which a company may now legally purchase. It goes without saying that those which may properly be designated as "gilt-edged" are not tabooed. A limit is placed upon the acquiring of preferred and common stocks which it may be well to mention. A company may invest in the preferred stock of a concern which has paid dividends regularly upon such stock or upon its common stock for not less than five years preceding the time of purchase. Furthermore, it is permissible to secure a certain amount of the common stock of a company in cases where regular dividends have been paid on the same for the seven years preceding the time of purchase. In certain other cases stocks may be