The Portland daily press. [volume] (Portland, Me.) 1862-1921, 1872-12-14
erens Panic among che Old Policy kAoid-
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I7leV
in the opinion of three eminent Actuaries. the
reduction of premiums as proposed is unjust
to existing policy-holders and prejudicial to
their rights and interests, and deserving our
unqualified disapproval."
Then also suggest to tho Trustees that any
experimental revolution by them (of doubtful
legality)in the system of the Company's bust
ness, and the use and hazard by them OF the
funds accumulated by the present policy hold
ers for the security of new obligations enuring
to the benefit of new members, is calculated to
shake the confidence of the community in
direction where, by every means confidence
should be strengthened and not weakened.
They protest against such an unjustifable ex
ercise by the Trustees of the functions of their
office.
Ne0 York Herald Dec. 18th, says: Hundreds
of policy holders of the Mutual Life who are
opposed to the threatened experiment of that
company in the reduction of its rates have
signed the protest, and additional names are
received by every mail in great numbers
The leading New York papers already have
columns filled with names of influential policy
holders who decidedly oppose reduction OF
rates.
Opinions of Distinguished Actuaries on
the Course OF the Mutual Life INSURANCE
Company.
NEW YORK, Dec. 4, 1872.
Messrs. Elizur Wright Sheppard Homans, and
d. Parks Fdckger, Consulting Actudries.
GENTLEMEN AS the public mind is agitated
upon the subject of the reduction OF rates III
Life Insurance by the Mutual Life Insurance
Company of this city, we respectfully request
from you your views upon the circular issued
by that Company, and which we enclose here
with.
Your long connection with life insurance,
and your character as trusted experts in the
business, together with the fact that as actua-
ries you occupy positions Independent OF indi-
vdual companies will give your views great
weight with the public and with us. We are,
gentlemen, yous obelient servants.
VIM, II Beers, Y; p r y. Lie l.. G e.
John Z. De Witt, Pres't United States Life;
Lewis C. Grover, President of the Mutual Ben
eft Life ms. Co.; n. d. Morgan, Pres't North
America Life Insurance Co.; FL. b. Hyde, Y.
Prest Equitable Life Assurance Society; Rob.
L. Case, Pres't Security Life ms. and Annuity
Co., L. W. Frost, Acting Pres't Cent'l Life
Insurance Co; G. Stanton, Pres't Knicker-
booker Life Insurance Co.; Andrew Gill, Pres't
Guardian Life; James A. Taber, Secretary Mer
chants Life; Fred. Schwendler, Vice President
Gcrmana Life ms. Co.. Geo. B. Satteree,
President Eclectic Life Ins. Co.; +. E. Morse,
Vice-President Commonwealth Life Ius. Co.;
Jas. H. rockingham, President World Mutual
Life ms. Co.. Chas. n. Morgan, President EX-
celsior Life Insurance Co.; Edward A. Jones,
President of the National Life lns. Co; Z. W.
Bouck. President Brooklyn Life ms Co.
New YORK, Dec. s, 1872.
GENTLEMEN: We are in receipt OF your Ia
vor of the 4th inst, asking our opinions in re-
gard to the reduction of premiums to be charged
for life insurance by the Mutual Life Insurance
Company of New York, as set forth in the pub
lished letter Of its AcUuary, Prof. BARTLETT to
which our attention is specially directed.
We have examined that circular with care;
its precise meaning is not clear, while some OF
It's statements seem inaccurate.
1t is gravely proposed to reduce the cost Of
life insurance by reducing the rates of pre-
MUM. But the Actuary of that company, of
all men, ought to know that in a mutual COM
pany the cost to the insured can only be re-
duced by reducing the working expenses. For
the premium, 50 far as it is found to exceed the
actual cost, is returned to the insured, with in
terest from year to year.
Mutual Rates are designedly, and certainly
ought to be, higher than the probable cost; the
excess forms the capital, the balance-wheel, the
perennial reservoir which exalts contingency
into certainty. This has been most abundantly
vindicated in the history of the Mutual Life"
itself
The language of Prof Bartlett's letter is
quite inaccurate when it speaks of reducing the
margin of the premiums from forty per cent. to
ten, and may have misled many as 1t has puz-
zled us. For in only one of the present premi-
um columns is the margin as high as forty per
cent, and in some it is only tweLty-one per
cent. so that only q few Of the margins are re-
dueed to the extent he mentions. 70 state it
accurately, all the various additions to the net
premium for expenses and contingencies are to
DC T6uuCbu 10 TEL per CeUU., anu Inc Tdbe per
thousand for an ordinary life policy on person
aged 30, which is now S22 70, will then be $i782,
while for fve-year endowment policy the
charge will be from S22 to $780, the proportion
ate reduction being thus greatest where the pre-
MUM is least and the risk of the company the
heaviest self-evident error which needs no
further exposure from u.s.
The next section of the Professors letter pro-
vides for the retention of the surplus-accruing
from these new rates-until it amounts to one
Originally stated as two) annual premium,
which is to be retained as margin for contin-
gencies not provided against in the lower pre-
miums; but this very course will make the az
erage outlay of the insured for the first ten
years greater than now, and cause the compa-
ny to retain on hand a much larger surplus than
it now does. At present the average surplus
on hand for each policy is only about forty per
cent. of the annual premium, while on the now
plan it will in time become at least one hundred
per cent.
The following sections may be regarded as
necessary sequences to the one just mentioned,
They are as follows:
2. That these credits be held to be assess
able to meet any deficit that may arise from
any circumstances whatever.
8. That in case of death the whole of the
reversionary credit to be paid to the heirs, as at
present
The fourth and last we would fain belevs
misprnt, but we are assured to the contrary as
it is the same in all the publications, viz:
A. That existing polcy-holders may have
the option either to leave their policies undis-
turbed and pay their old rates, receiving, of
course, their proportional dividends and rever-
sionary credits, or to take out new policies, with
their existing credits added, and pay the new
rates corresponding to their then present age,
provided they subject themselves to a new
medical examination, and are pronounced as
surable.
1t is difficult to properly characterize its
terms, and we are quite sure that no intelligent
present policy-holder will care to accept the
second option it affords as he would thereby
forfeit all his share in the present reserves ex-
cept as to dividends.
As to the general plan, it is virtual aban
donment of those careful principles of security
and equity upon which the claims of the Mu-
tual Life Insurance to the confidence of its pol!
icy-holders and of the community have rested.
1t cannot be. carried into effect without injus
tce to existing policy-hol1ers and decrease in
their security. If carried out at all, the reduc-
ed rates should apply not only to future mem
bers, but also to existing policy-holdcrs, sick
and UeU, without neeessitating changes iii eX
listing contracts by imposing new conditions,
VIII CHI may be prejudicial to their interests, as
well as to their security.
The reserves of the old policies are in effect
to be used as capital stock to bear the eX-
penses OF getting new business at stock rates,
which must considerably exceed the margins
of the new premiums. But this expense to the
old members cannot be reimbursed TO them by
profits derived from the at any fu-
ture time, because they are mutual members.
and entitled to any surplus that may ever ac
crue from their own premiums.
How far it is competent for the trustees of a
strictly mutual corporation to admit persons to
membership upon terms more favorable than
have been, and contioue to be, exacted from
existing members, is a question of law, as well
as of mathematics and equity; but if new
members are to be admitted into the Mutual
Life at the expense of those already insured
as will be the case if the plan is carried into
effect, and the security of the latter be lessen
ed thereby-then it is an injustice, Of which
every policy holder in that company has a
right to complain.
Nothing can express our views better than
the language of Life Company only second to
the Mutual in size, which thus announces
its intention not to reduce its rates:
Nothing containing any element of hazard is
truly safe unless more than apparently safe
purely mutual company has no resource what
ever beyond the premiums charged upon its
policies; wherefore these premiums must be
apparently higher than any forseen contingent
cy will exhaust, or future solvency is in peril
The cash premiums of the Mutual Life re-
ceived from 1913 t., 1871 were $64, 677 ,770.23 as
shown by its published statements, and the
working expenses were $40, $50 IS, or IS 20
per cent The expenses could not well have
been much less if the premiums had been low
er. By the reduction proposed by Prof Bart
lett, the premiums would have been about
$53,000,0 900, which would have made the ex-
penses not much, If any, less than 20 per cent,
or double the margins now proposed for new
policies A company to be composed entirely
of such policies could not stand without a