, 1872-12-12
President Kuickerbocker Life Ins. Co.. Andrew

r. L.
INSURANCE Co.. James 81. rockingham, Presi-
dent World" Mutual Life ms. Co. !; Charles n
Morgan, President Excelsior Lite Ins. Co.:
Edward A. Jones, President Of the National
Life 1n,. Co. !. c. W- Bonck. President Brook
1yn Life ms. Co. ..-...-
NEW YORK, Dec. 6, 1879.
GEST1EMEx: Wo are in receipt Of your favor
Of the 4th inst, asking our opinion in regard to
tho reduction Of premiums ! to . be charged Tor Life
pany OF New York, as set forth in tho published
letter Of its Actunry, Professor Bartlett, to
which our attention is especially directed.
We have examined that circular with care; its
precise meaning is not clear, while some Of it's
Btatements seen inaccurate.
It is grayely proposed to reduce the cost OF life
insurance BY reducing the rates Of premium
But the Actuary OF that Company, Of Ill men,
ought to know that in Mutual company the
cost to tho insured can only be reduced by re-
ducing the working expenses. For the premium,
80 far Is it is found to exceed the actual cost is
returned to the insured, with interest from year
to year
ought to be, higher than the probable cost /; the
excess forms the capital, the balarce-wheel the
perennial reservoir which exalts contingency IN
to certainty. This has been most abundantly
vindicated in the history Of the " Mutual Life"
itself.
The language OF Professor Bartlett'a letter is
cutie inaccurate when it speaks Of reducing the
margin of the premiums from 40 per cent to 10,
and may have misled many, as it has puzzled u.s.
For in only one Of the present premium columns
is the margin as high as 20 par cent, and in
some it is only 81 per cent so that only few Of
the margins are reduced to the extent he uen-
tons. 70 state it accurately, all the vnrious ad
ditions to the net premium for expenses and
contingencies are to be reduced to 10 per cent,
and the rate per thousand for an ordinary life
policy on a person aged 80, which is now
822.70, will then be 317.82, while for . fVe-year
endowment policy the charge will be from 322 to
+11 90 r,o5r Hofre %Nr1r
greatest where the premium is least and the 1isk
OF the Company the heaviest-a self-eYident er-
ror which needs no further exposure from US.
The next section Of the Professors letter pro-
vides for the retention Of the surplus-accruing
from these new rates-untl it amounts to oua
Originally stated as two) annual premium,
which is to be retained as q margin for contin-
genciea not provided against in the lower pre-
1niums; but this very course vii make the aver
age outlay Of the insured for the first ten years
greater than nov, and cause the Company to re-
tain On hand much larger surplus than it nor
does. At present the average surplus on hand
for each policy is only about 40 per cent OF ths
annual premium, while on the new plan it will in
time become at least 100 per cent
The following sections may be regarded as
necessary sequences to the one just mentioned
They are as follows:
ss5. That these credits be held to be assessab1e
to meet any deficit that may arise from my cir
N3. That in case OF death the whole Of the re-
versionary credit to be paid to tho heirs, as at
present"
The fourth and last VIC would fain believe q
uaisprint, but we are assured to the contrary aa
it is the same in all the publications, viz:
~. That existing poicy7holders may have the
option either to leave their policies undisturbed
their proportional dividends and revereionary
credits, or to take out new policies, with their
existing credits added, and pay the new rates
corresponding to their then present age, pro-
vided they subject themselves to new medical
examination, and are pronounced assurable."
It is difficult to properly characterize its terms,
and We are quite sure that no intelligent present
policy-holder will care to accept the second op-
ton it affords, as he would thereby forfeit all hia
share in the present reserves except as to dis'-
dends.
As to the general plan, it is . virtual abandon
ment Of those cardinal principles Of security
and equity upon which the claims Of the Mutual
Lifo insurance Company to the confidence Of it's
ed. It cannot be carried into efect without in
Justice to existing policy-holders and decrease
in their security. + carried ont at all, the re-
duced rates should apply not only to future
SICK and ,ceN, without necessitating changes in
existing contracts by imposing new conditions,
which may be prejudicia1 to their interests, es
well as to their security:
The reserves OF the Old policies are.1n effect to
be used Is capital stock, to bear the expense
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 new ones at any futura
time, because they are mutual members, and en-
titled to any surplus that may ever accrue from
their OWL premiums.
How far it is competent for the Trustees of
strictly mutual corporation to admit persons to
membership upon terms more favorable than
have been, and continue to be, ezacted from e1-
ieting members, is question Of law, as well az
Of mathematics and equity; but # new mem
beIs are to be admitted into the Mutual Life at
the case if the plan is carried into effect, and
the security Of the latter be lessened thereby
then it is an injustice Of which every policy
holder in that company has 3 right to complain
Nothing can express our Tae%s better 1fan al ne ne
s*Mutaa" in size, which thus announces its ln~
tentioa not to reduce its rates:
s.Nothing containing any element OF hazard
is truly safe unless more than apparently SAFES.
purely mutual company has no resource what
ever beyond the premiums charged upon its
policies wherefore these premiums must be ap-
parently higher than any foreseen contingency
will exhaust, or future solTency is N peri"
The cash premiums Of the Mutual Lite re-
ceiyed from ls4s to 1871 we're e., ,677, ,77o.23 as
shown by its published statements, and - TIE be
working expenses were SIC, $50, ,660.58, or l629
per cent. The expenses could not well have Deem
much less i the premiums Ead eeen taeat loHer. ),
tuo 16AANLAoA P40f06NA ~ AASA"
premiums would have been shout $50, ,000, DOL
which would have made the expenses not much
if any, less than 20 per cent, OF double the mar
gins now proposed for new pohc1es: a COM
pany to be composed entirely Of such policies
could not stand without large capital behind
it, and no person Of much common sense can
contend that what is too weak to stand alone
can add strength to anything,
We are unhesitatingly OF opinion that the re-
duction Of premiums rs proposed by the Mutual
life Insurance COMPANY of New York is un-
wise, deficient in security, unjust to existing
policy holders, and prejudicial to their rights
and interests, and deserving our unqualified d3s- rs
approval We are confident, however, It the
Trustees Of the Mutual Life should carefully
reconslder the matter, they will see that they
are about to take step nnwaI1anted by their
own experience or that Of any other company
and viii decide to refrain from it.
EIIzuR WRIGHT,
SHEPPARD HoMASs,
D. P. FAcKLER,
Consulting Actuaries-