The Saint Paul globe. (St. Paul, Minn.) 1896-1905, 1898-01-04

from bookkeeping accounts extending over
These policies were known as tdiv.ds nd ac-
cret:cn POLICIES and were the only fern is
sued until early in 1895. AS before stated
/ the cash premiums raid were the same as
charged by ordinary companies, and it shcu.d
DC ADDED that the portions put into the
insurance iund'' were piae:ically the same
as the net premiums. which, are the bases
OF the gross premiums charged by ether CO n
panjes. Thus, fer example, at age 80 on the
the T9f fdr in s. the he Pro
s2G.49, CT which $17S9 would go to the in
surance fund latter the FIRST Year,. On a
s107 So of which s6s. 0s would 90 into the the
insurance fund. In both cases the real in
surance the first year would be only $5S1.S2
Tor Sl,eVO less S416.65) as Before shown.
TREATED AS FULL AMOUNT.
| company consider the risk Of insuring an
'under-average" life at age 80 for the net
amount of 1851, or thereabout, to be equiva-
lent to insurng a good OF, average life OF the
same age for S1C00, and. as the state insur-
ance department cannot examine the insured
decision to accept the ccmpany's own rat
ing Of the risk would seem ito be entirely
fair So 1t has been determined to treat all
these assurances of various amounts as though
they were for the full amount named and
then value on the basis of the ordinary
mortality tables. in this way the greater
mortality prevailing among the company's
than that actually payable.
Heretofore these dividend accretion policies
have been treated by the Minnesota insurance
department and other state insurance de-
partments merely as one year assurances. ad-
ding their share in the insurance fund and
bonus credit fund as additional liability.
This was evidently low assessment of the
liability particularly on those policies which
became paid-up after certain number of
| years. Inasmuch as the premiums charged
for each $1,000 of nominal insurance have
been as high as those OF other companies.
| while the actual insurance given has been
| only from about one-third to two-thirds as
much, 1t would seem that the company should
have been able to lay up the same reserves
provides for putting into the insurance fund
! each year latter the first an amount equiva-
| lent to the net premium on which ordinary
| Companies compute their reserves, so 1t Is
clear that this company should have on hand
at least as much as any other regular COM
pany would be required to have, and par
| icularly if the first years premiums be
| left out Of the calculation.
To illustrate this latter point: On one Of
| these temperament life policies of $1,000, Is
| sued at age 80, the company is REQUIRED
| by its contract to put into the insurance
! fund $40.G6 every year after the first; this
NAUTICAL premium on which other companies
base their reserves and pay $1,000 at death.
! while this company would pay in this case
| only about 1851. 81. So it GEMS that this COM
pany should certainly be able to accumulate
! as much reserve as other companies would
hold for similar policy, which has been in
year would thus be treated as though In their
second year. policies in their second year
as though in their first year and policies IN
| their first year would be valued simply as
| one-year term policies.
If such method of valuation be adopted,
| the insurance fund and the bonus credit
| bilities, as the portion of the premiums from
] which those funds are derived would be con-
sidered as going to make up the regular re-
serves.
After full consideration of the legal and
| equitable points involved, 1t appears that
| valuation the latter basis at this time
| might seem rather harsh. particularly as the
! Minnesota insurance department has hereto
fore computed the reserve in a much less
| exacting manner; SO the legal reserve for
| these policies has been calculated on the
! method first stated, that is, assuming that
they are one-year term assurances for. the
! full amount. A valuation has, however, been
made on the other basis to show how the
| company would be affected by it. and 1t is
| respectfully suggested that three years from
| now that Is, by the year 1900, the company
might fairly be required to show an amount
| of assets equal to the reserves computed in
| this manner.
All the foregoing refers to the dividend
accretion policies. the only form issued prior
to 1886 Except some paid-up polcies), but
now entirely discontinued.
In 1896 Tor November 1885, the company be-
| gan to issue policies for definite amounts and
with no provisions for an insurance fund
that these policies should be valued just as
those of other companies, for the maximum
amount. In nearly all these policies the
Of the person insured is supposed to be Off
set by giving little insurance the first year
| and gradually increasing the amount until
reached. On these policies the premiums are
| about the charged by ordinary
companies, which give insurance for the
| maximum amount from the first.
In 1897 the company began to issue policies
giving the maximum insurance from the date
| of issue, but charging an extra premium.
| These policies have been considered to require
an extra reserve somewhat proportional to
! the extra premium charged.
The insurance fund" was carefully exam
| ined. This fund is derived from certain por-
lions of the premiums ON each dividend &C
| cretlon'' policy that has been in force over
one year. The death claims are paid there
| from. and at the end OF the year the balance
| in excess Of all necessary reservations is
divided among the policies entitled to par
| ticipate.
The portions of the premiums which should
go into this fund, were found to have been
! properly credited thereto in all the large
| number of cases examined. with the exception
| Of two cases, which were evidently clerical
mistakes and have now been corrected. When
| this account was first opened 1t was credited
with its share of the interest earned on the
| company's investments but this was discon-
| tinued after the first year, though it seems
| clear that the insured are entitled to the
benefit of any interest earned on q fund held
| for them.
DIVISION OF THIS FUND.
| AS the division of this fund for the date
| OF Jan. l, 1897. has been criticised, the mat
| ter was carefully investigated. 1t Is claimed
| by some that the amount, which should have
| been distributed, was some $4,000, while only
| $1,000 was actually divided President Scott
| declares that he held back tho difference to
| provide for death claims, which had accrued
| during the year 1896, but were not yet paid.
| This would have been entirely proper, for
| accrued death claims should be considered
| in diminution Of the fund just as though act
| ually paid. On examining the books it was
! found, however that the difference in ques-
! ton, $4,1SS.55, had been transferred to sur
plus account and not used to pay the death
! claims mentioned, thus indicating it was not
set aside on that theory. 1t was directed that
| this amount should be credited back to the
| insurance fund. It also found that Presi-
! dent Scott had passed to the credit of sur
! plus account the amounts saved by COM
promising death claims; that Is to say, the
| insurance fund was charged with the gross
| amounts Of the claims and the differences be-
! tween those and the sums actually paid were
| credited to surplus account. This proceeding
| was clearly wrong, and it was directed that
| all such credits should be transferred to the
| insurance fund, and that in future said fund
| should be charged only with the amount
| actually paid.
| The mode of apportonng the individual
shares of the fund did not exactly conform
| to the provisions of the policies issued in
| 1892 and $685. but these provisions do not
| seem entirely equitable, and the method en-
| ployed seemed to give tolerably fair results.
no change has been recommended in this re-
| spect.
The bonus credit account required spe-
Value of all policies Observation-Disclosures.