The Indianapolis journal. [volume] (Indianapolis [Ind.]) 1867-1904, 1885-06-09

the language of their Estimates" it is, better
that what seven-tenths of their policy holders
have paid. over and above the cost of their in
surance up to the time of lapse should be lost;
that the $40 600 900 of lapses out of every $780,,
600, 900 should lose the $500, 900 which it had
paid over and above the actual cost to the COM
pany for carrying the $40 900 900 in order that a
few more men may persist in paying premiums
in the hope of winning part of that $1,000, 900,
and that incidentally few more families may be
insured during the Tontne period. The equiva-
lentot 50 900 apiece of padup insurance for ), 400
families is to be lost to them in order that few
more families of the men who are after that
$7,5OO,OO0 may be insured longer than they
otherwise might. Do wrong to many that un'
usual good may come to few, and to the few who
are after, not the good oe their own families but
the price of the losses of other families. Let
them gamble for the 81, 500, 900, because som O.
what greater number will keep up their in
surance.
'PREPOsFEROUS TO PAY DIVIDENDS TO THOSE
WHO DIE EARLY.
Mr. Hydes second point is this He ''lays aside
the refnements of calculation" of actuaries,
but simply ignores, and says that it is ''prepos-
ferrous to pay dividends to those who have paid
in only few premiums and then die and their
families get good many times from the policy
what has been paid for premiums. That is,
man who lives but few years ought to pay
more each year than one who lives longer; and
if that is a sound and practicable principle in
insurance, then the cost of mans policy ought
to be adjusted to the actual number of years he
has lived In order to carry out this, we shall
have to lay aside, not only ''the refnements of
calculation" but the very bases of the whole
business. The preposterousness is not in divi-
dend which, in the case of one dying early,
varies the proportion of the premiums paid to
the policy collected by only an almost infnitesi'
NAL fraction, but in not so arranging matters
that no one man should get more by dying early
than the that dies late. For example,
man takes policy for $4,000 and pays pre-
MUM of say $3.50, and dies the first year; his
family collects $lO 900. or 1000 per cent. of his
premium; another pays five premiums, or ST. 900,
and dies, and his family collects 1000 per cent.
of his premiums; another pays twenty years. or
S.. 900, and dies, and his family collects 200 per
cent. of his premiums.
INSUFFICIENCY OF Mr.. HYDES REMEDY
Suppose, now it has cost the company only so
per cent of the premiums to carry the insurance,
and it has, therefore, returned to each man 20
per cent of his premiums dividend; then
the first man will have really paid out only 5000,
and his family will have collected 5000 per cent,
instead of 1900 per cent; the second will have
paid $500, and his family will have collected
I
third man will lave paid s., 900, and his family
will have collected go per cent, instead Of 200
per cent Giving each man his own dividend
simply increases the percentage of collection
just one fourth in each case. And if the div-
dends of the two who died first had been with
held from them and given to the last, he would
have paid out So. $50 and his family would have
collected but 267 per cent. instead Of 250 per
cent; an attempt at equalization amounting to
only IL per cent, as against 1000 per cent still
in the first case, and 1000 per cent. in the sec
ond. If it be preposterous to have the one dis
proportion, it is equally so to have the other; if
disproportion be preposterous it ought to be
done away altogether not infnitesimally
varsrG; it must be the very basis of
calculation that is wrong, and not
tell US that the perpetually varying dispropor-
ton between premiums paid and insurance col
lected in both fire and life Insurance is wrongs
If so, will he tell US how it is wrongl Will he
indicate and develop the proper basis of calcula-
tons for both kinds? Will he tell US how, if
dsproportion be done away, there can be any
such thing as insurance at all! Will he tell us
how the premiums paid can be adjusted to the
policy to be collected on any other basis than the
current risk of loss2 And if risk be the basis of
premium and the only possible basis, will he
tell us why any man should pay more than his
risk costs the company, in order that another
may pay less than his risk costs them? If dis
proportion be preposterous why does he still offer
to issue policies by plan which leaves it at
maximum Why does he stop reform at plan
which only scratches the surface and leaves the
body of the thing untouched! A ten-year Ton
tine goes onehalf as far in this reform as
twenty-ye and a forty-yea Tontine would go
twice as far still Why does he use ten-year
Tontine at all, and stop short at twentyl
No; Mr.. Hydes defense ignores. not the ''re-
fnements," but the very alphabet of the bust
ness; and presumes upon the complete ignorance
of his readers. He practically denies that the
true individual share in the yearly gross cost of
insurance is known, or that the premiums he
charges have any relation or proportion to it.
THE TRUE BASIS OF ADJUSTING COST.
His company is carrying gross amount of
insurance on a large number of men of different
ages and a consequently different risk of dying
in each year, and he charges each premium pro-
portioned to that risk; at the end Of the year he
finds that the losses have been less than he ex-
pected; that is, the cost of insurance has not
been as much was expected; the risk was not