New-York tribune., 1899-10-15
AMERICAN LIFE INSURANCE IN GERMANY.

A recent event which deserves more than passing
notice is the visit this country Of commits
sion sent In behalf Of the Minister OF the Interior
Tor Prussia 10 investigate the methods OF busi-
ness and the general condition OF certain Ameri
can life Insurance companies. This is the first In
stance In which such a commission has ever been
sent TO the United States In behalf OF foreign
government and 1t contains suggestion with re-
gard TO commercial questions that arise between
governments so far-reaching that the President
OF the United States quickly recognized the pos
sble significance OF IL. and repeatedly expressed
his deep interest in the issue OF the commissions
work
Four American companies have first and last
been involved in the action Of the Prussian Gov
ernment. including the three so-caled giant COM
panies" in New-York City-the New-York Life. the
Mutual Life and the Equitable As the business
the books Of these three companies alone prob
ably now exceeds s. 90 900 OOO-or about one-haf
of all the business in force In all American COM
panies-the Importance and far-reachlng effects
Of the work Of the Prussian commissioners can be
readily understood
In passing upon the condition and methods OF
business Of the New-York Life. the Mutual Life.
and the Germania the commissioners did by
the request Of those companies. they were prac-
tically criicisng great American enterprise. ana
their conclusions will necessarily have impor
tant bearing upon the future. 1t is proper 10 add
right here that the Equitable Life was not ex-
dfnlneO py tne commissioners. because IL mas
never asked for a renewal Of the concession which
II voluntarily surrendered years
After completing their labors. the commissioners
returned to Berlin. and their reports will be sub
mtted 10 the Minister Of the Interior for his final
action. II is quite possible that their detailed
port will remain a part Of the records OF the In
terror Department and will never he given to the
public The character of their work. however. has
been somewhat indicated in recent publications.
1t will b" Of interest TO notice OF the rulings
OF the Prussan Bureau Of Insurance. which had
most TO do with the retirement from Prussia OF
the three great American life insurance companies.
and with bringing about the present condition OF
affairs:
l. A life insurance company shall, not hold stock
In private corporation.
. A life insurance company shall limit It's total
management expenditures to a not In excess
Of the loading provided for expenses In its
premium income
3 A nfe insurance company issuing policies In
which division Of surplus is deferred beyond the
second year shall keep It's books that II can
know how much Of It's total surplus $50 called Is
derived from the policies issued in each year. and
these amounts must be shown as Liabilities In It's
reports 70 the Prussian Minister Of the Interior.
In order to make these rulings clear. It is neces
sary 10 explain that life insurance policies are
usually paid for by premiums which fall due an
nualy. or more frequently than once year. AT
specified dates. These premiums must. or course
be sufficient. when accumulated WIN coHPouHu
interest 10 enable the company 10 pay the sums
insured under the policies as those policies mature
and in addition 70 this they must provide for the
expense of managing the company. An elaborate
mathematical calculation. taking into account the
probable annual mortality Of human beings and
the proba BILE rates Of interest 10 he realized on
perfectly safe Investments in the future. is neces-
sary in order 10 determine the former amount. As
thus determined Il is aed the net premium or
4)ure" premium The actual premium payable by
the policy holder ia equal 10 this net premium TO-
gsther with addition. as already explained 10
cover the cost Of administration This addition is
technically termed the loading OF the premium
As Il is impossible 10 predict with perfect ac-
curacy the future rate OF mortality and the future
rate OF interest 4 Is OF course necessary. IN
order TO make nfe insurance absolutely SAFE 70
charge premium somewhat higher than that
which will be actually required for the payment OF
claims and cost OF management The whole OF
this extra charge. in the case OF mutual Ire
insurance company. Is returned 10 the pohcy-hod-
ers in the shape ot dividends. Before being al
located 10 Individual polcyhoders as DIVIDENDS, II
is carried on the books and published 10 the world
as surplus" While al mutual companies DIVIDE
I'D amongst their policy holders the entire overplus
OF premiums as above described there is much
difference as 70 the manner Of division. Companies
vary in regard 70 the degree OF fairness observed
as between different sections OF policy-hoders IN
their division Of surplus and II must be said that
IN this respect American companies are. as a RUE
superior 70 European companies. There Is also
variation az 70 the time or times. In the history of
a policy when dividends alloca ted. In some
policy contracts small dividends paid 70 the
poNcy-holder year by year. so that he gets oacK
the ovprrlus of MS premium almost as fast as ne
paws H. but has not the opportunity or avaliins
himself of the special financial ADVANTAGES pos
sessed by large company for investing money IN
the most profitable way consistent with aosolute
he
,orad nv the three great American companies IN
the most ot their policy contracts Is TO Accumulate
these dividends for the benefit OF the policy -hooe'
FOR a specified number Of years. selected by MIN
IN advance These dividends then paid either
in cash or In the form Of future insurance or
annuity benefits at the policy holders own choice
according 70 system OF options when the COM
panies have devised in order to suit the con-
venience Of policy-holders under all SORTS OF
changed circumstances that may have taken place
IN the interim in their family or business AFFAIRS
II may be said. perhaps. that the above rulings
OF the Prussian Insurance Bureau are rather OF
the nature of regulations than OF principies' Ou'
there IS a principle behind each rule In the case
OF stocks the principle is security. WINE soit-
stocks may ne better than some bonds. yet bonhs
are A first lien and stocks second hen, me m
come on bonds is fixed while that on stocks yaries
with the prosperity Of ne ISSUING and more
uniform OF income Than stocks ms pr,J,,ps ,,
nvest in sfocks Moreover the holders
Of stocks are the managers Of the corporations is
suing them. and in some instances they carry a q
doube LIABILITY as for example in the case OF
the stock Of national bank. ~ -. ,..,
The question Of expenses Is one thht mas pee'
oster discussed by life underwriters. The ques-
ton is one too. which there Is current s'ea'
dssi ~ rnisirformaticn. Whether or not the ex-
penses OF any NE company are too high; is not
absolutely proved by It's expense ratio IL the com
many has ability and vgOr in It's management ana
does a very large new business, the expense ratio
will be high. II Is to be borne In mlnd-thougn ~ -
no. credttahe 10 human nature-tnat a demand lot
life insurance does not exist among the pupHc d,
large 70 any considerable extent until IL is aroused
nv energetic solicitation on the part or an army
OF canvassers organized by life insurance com
paries These canvassers can command hieh PaS
order 70 persuade men 10 take out HE insurance,
and -he pay is naturally dependent In the main on
the rayrnert of the first premium There are other
expenses such "a the cost of medical examination
I'll. ..a..t tel