New-York tribune., 1872-12-07
THE NEW POLICY REVIEWED.
OPINIONS OF DISTINGUISHED ACTUARIES ON THE
COURSE OF THE MUTUAL LIFE INSURANCE

NEw-Y YORK. Dec. 4. 1872.
Messrs ELIzuR WRIGHT sHErPARD HoMASs, and d.
PARKS FAcKLER. Consulting Actuaries.
GENTLEMEN: As the public mind is agitated
upon the subject OF the reduction Of rates in Life Insur
ance by the Mutual Life Insurance Company OF this
city, respectfully request from you your views upon
the circular issued by that Company, aud which we in
close herewith.
Your long connection with Life Insurance. and your
character as trusted experts IN the business together
with the fact that Actuares occupy positions in
dependent OF individual companies will give your views
great weight with the public aud with Us We are, gen
temen, your obedient servants.
VIM H. Beers, V. p. y. Y. Life l. Co.; John T. De Witt.
Prest United States Life; Lewis C. Grover, President
Of the Mutual Benefit Life Ins. Co.; n. d. Morgan
Pre,'t North America Life Ins. Co; H. sB. Hyde, ".
Prest Equitable Life Assurance SOcety; Rob l. Case
"resI Security Life Ins. aud Annuity Co.; l.. W.
Frost, Acting Prcs't COntl Life Ins. Co Henry
stokes, Pres'ta Manhattan Life Ins. Co.; c.
stanton, Prest Klickerbocker Life lnS. Co.;
Andrew Gill, President Guardian Life; James ~ Faoer'
Secretary Merchants Life; Fred Schwendlcr, Vice
President Gegmania Life Ins. Co.; Geo B. satterlee,
President Eclectic Life las. Co.. f. f. Morse Vice-Pre'i-
deut Commonwealth Life las. Co; Jas II Frothingham
President World Mutual Life Ins Co.. Chas. NJ Morgan
President Excelsior Life Ins Co.. Edward Jones, Presi
dent of the National Life Ins Coz c. W. Bonck, Pre'i
dent Brooklyn Life Ins. Co.
NEW. YORK, Dec g. 1872.
GEN11EMuN: We are in reeeip, OF your favor Of the
lh inst asking opinions u regard TO the reduction
of premiums TO he charged for life insurances by the
Mutual IAle Insurance Company Of NewYOrR. as set
forth in Tie published letter of its Actuary Prof Bart
lett, to which attention is specially directed.
We have examined that circular with care its precise
meaning is not clear while Of its statements seem
inaccurate.
Ii is gravey proposed TO reduce the cDs Of life nsur
ance by reducing the rates of premium. But the
Actuary OF that Company, OF al men, ought to know
that in mutual company, the cost 20 the insured can
only reduced by reducing thewOrkne expenses For
the premium. Ear Is found 10 exceed the actual
cost returned to the insured, with interest from year
to year.
Mmua rates are desgnedly ana certainly ought 10 be,
hi cher than the probable cost; the excess forms the
capital. the bllance-wheel. the perennial reservoir
which exats contingency into certainty This has been
most abuudantly vinicated in the history of the Mu
tual Life" itself.
The language of Prof Bartlets ietter quite inac-
curate where it speaks OF reducing the margin ,o the
premiums from forty per cent to ten, and may have
mised many it has puzzeiu For In only one Of the
present premium columns is the margin high forty
per cent and in 1t only twenyOne per cent; 80
that only Of the margins reduced to the extent
he mentions To state it accurately, all the various ad
dtons TO the premium for expenses and conngen-
cie reduced TO 10 per cent and the rate per
thousand ordinary life policy person aged 80
which S22 TO- will then be 81 80, while for five
year endowment policy the change will be from S220 81
S99 90 the prOpOronae reduction being thus greatest
where the premium least and the risk OF the Company
the hcaveSta selfeyident vhchneeds no further
exposure from us.
The next section OF the Professors letter provides for
the retention OF the surpus-accrung from these new
rates-uni it amounts annual premium Originally
stated two annual premium which is 10 be retained
margin for contingencies not provided against IN
the lower premiums; but thsvery course will make the
average outlay OithennSured for the first ten years
greater than now. and the Company To retain
hand much larger surplus than it does At pres
ent the average surplus handifOr each policy only
about 40 per cent OF the annual premium while on the
new plan it will in time become at least 100 cent.
The two following sections may regarded
sary sequences to the just mentioned They are rs
follows:
. That tcsa credits be held to be assessable to meet
any deficit that arise iromany circumstances what
g. That in case OF DEATH whole OF the reversionary
credit 10 be PAID to theihelrsas at present.
The fourth and last would fain believe misprint,
but we are assured the contrary, it the u
all the publications, viz.
4 That existing policy-holders may have the option
either 10 their policies undsturbed aud pay their
Old rates. receiving, OF course, their proportional dly
cies with their existing credits added and pay the
rates corresponding their then present provided
they subject themselves To new medical eXaunatl0n
and pronounced assurdDe.
1t difficult properly tOicharaeterize its terms and
We are quite that no intelligent present policy
holder will accept the second option II affords as
he would thereby forfeit all his the present
serves except as TO dividends.
As to the general plan, it Is a virtual abandonment OF
those cardinal principles Of security and equity upon
which the claims OF the Mutual Life InsuranceCompany
10 the confidence Of its pOcyholders and Of the commu
nifty have rested IL CapuOt be carried iutO effect without
Injustice to existing policy holders and decrease in their
security II ALL the reduced rates should
amply not only TO future members but also TO all existing
policy holders SICK and ceH, without necessitating
changes in existing contracts, by imposing new cond
tons which may be preiudcia to their interests, as well
10 their security.
The reserves OF the old policies in effect TO be used
as a capita stock, ~ bear the expense of getting
new business stock rates, which must considerably
exceed the margins of the premiums But this eS
peuse to Old members cannot be reimbursed to them
Dy profits derived from the at any future time
because they mutual members land entited.to any
surplus that may ever accrue their premiums
How far it il competent for the trustees OF strictly
mutual corporation 10 admit persons TO membership
upon terms more favorable than have been and continue
To be- exacted from existing members, question OF
law as well as Of mathematics aud equity bat, II new
members are be admitted Into tae Mutual Life, al the
expense OF those already nsuredas will be the case #
The plIn is carried into effect, and the security OF
the latter be lesened thereby it Is injustice Of
which every policy holder in that Company has right
10 complain.
Nothing can express our views better than the Ian
guagv a Life Company 0nlg second to the Mutual" in
sze which thus It's intention not 10 reduce
It's rates:
uho,s mOrt thih apparently sale purely mulu'l
COMPANY has resource whatever beyond the premiums