The Mitchell capital. (Mitchell, Dakota [S.D.]) 1879-1918, 1905-11-24
THIS INDUSTRIAL INSURANCE

Why are the poor poor! The turning
of the New York Insurance inquiry
into the matter of so-called industrial
insurance brings out facts helpful in
answering that question. Industrial
insurance differs in nc essential par
ticular from ordinary life insurance
1t lnsures for small sums among peo-
pie who cannot afford SO much as q
$1,000 policy, and who think they can
not afford to pay premiums in quar-
terly, s%emi-annual or annual Jumps,
but must make payments i'm weekly
dribleIs OF nickles or dimes or quar-
tiers. This insurance among very
poor people is further carried to the
point Of insuriDg the lives of little
children under ~ years OF age, which
have no economic value and-hence no
insurable interest. This infantille
insurance is offered on the plea of
providing for the funeral expenses of
the child in case of death. lit has
been frequently and warmly opposed
on the ground that, among very poor
people, struggling to get along and
overburdened with children, the temp
tation to the parents Of a money
value is placed upon the death of the
child, ana it down right murder is
not invited, neglect leading to death
is apt to be. Time aud again Amer
lean legislatures have considered bills
to prohibit child insurance, and
among them the Massachusetts, legis-
Ilature in 1895, but the companies
interested have generally succeeded
lie defeating them. So the business
goes On In expanding volume. and
along with it the small insurance of
adult lives which is paid for in week
liz premiums collected by agents going
about in person among the insured.
1T can be readily inferred that such
Insurance Is very expensive. Bad as
ordinary life insurance has been
shown to be in this particular. in
dustrlal insurance is much worse.
To an expensive agency system Of
IRetting new business is added a
Ipremiilm collection system nearly OF
equally as expensive. The result is
that while well to 60 people pay for
more than is necessary for their in
surname, the very poor pay twice as
much. 1t is the differnce, says Presi-
dent Hegeman Of the Metropolitan
Lie Insurance company. which is
the largest Of the industrial compan-
les, between wholesale and retail
transactions. 1t is the difference be.
tween buying coal by the ton and the
bucket.
Take his own company, it has ar
expense ratio of some 35 per cen:
against 20 per cent for ordinary life
companies, and the 20 per cent is SC
needlesslJ excessive as to raise a great
Ioutcry a mong well-to-do %insurants.
Think, then, Of a 35 per cent expense
ratio for the very poor. For example,
this same Metropolitan Life will sell
la $1,000 policy on the ordinary plan,
according to President Ilegeman's
testimony, for $685. a year GAGE 22),
hut will charge s3l 20 on an indus.
trial policy for $685., weekly prem i ~
payments; and smaller policies ale
proportionately expensiye-Justiyine
the assertion that the very poor pay
about twice as much for their insur
ance as the well.to-do, and the latter
pay some 20 per cent more than ]!
necessary.
Take again Mr.. Hegeman's com
pany. Last year it collected $50, 500.
O00 from policy holders, most OF tEl
very poor or weekly premium pay
ment class, and it returned to polio.
holders in death claims, dividends
etc. only S16. $50 600. 1t expended "
salaries, commissions ana other ex
penses, almost 500. 900. 900, or a goo
Ideal more than was returned to polio
holders. What a fearful waste 9
the substance OF the poor in the on
matter Of insurance! The LAPSE pei
centape In this insurance is enol
nous, and last year the Metropolita
company gained over $3,O0O.OOO frol
this source, according to Wednesday
! inquiry. Even With weekly premium
, payments apparently a majority
those insured throw up their policit
within two or three years, and
] lose all collected from them for r,
] serve. And the poor will have 1t ST
says Hegeman; they will not con
. to the company with their pTemlul
payments, the company must 90
E them through an army OF c~ollectin
E agents.
But it is q great business to thos
. engaged In 1t. Mr.. ll%eRenan's con
pany is a stock concern OF g., COO, OO'
/ paving Z per cent dividends. II
whole establishment might have bee
Z bought out years ago fer s250,oot