The pioneer express. [volume] (Pembina, Dakota [N.D.]) 1883-1928, 1905-10-13

tlOn, ana the manner OF payments, Dut
in all insurance companies the policy
holders pay the death losses and the cost
of management.
There are two general methods of life
insurance. The ''old line" and the pure
|y mutual assessment"
The "old'line" is usually a corporation
of stockholders, who undertake to do
insurance business. That is, they solicit
persons to become insured, pay death
losses and transact the general business
of the company. Some of these ''old-
line" companies are also mutual, in that
they admit all policyholders as stock
holders.
The assessment companies are purely
mutual, and elect their own officers to
do their business. Many OF these are
also in the form of fraternal secret So
cieties.
The most marked difference between
the 'old-line" and the Assessment"
companies is the method of payments Of
(
on account OF deaths or expenses.
The "oldline" collect annually or
semi annually fixed sum.
The death rate of large number Of
persons is absolutely fixed by nature
OF thousand persons of any age. so
many will die the first year and so
many the second year, and so on until
all are dead. If man at 20 years of
age buys policy for saw $1,000 and his
expectation of life" is 80 years, then
the insurance company will charge him
about 500 year as premium.
But this sum, at the age of twenty and
for quite number OF years after. is more
than his risk. That is, he is not likely to
die then. But for this over-payment he
is compensated by the fact that in later
y ears the payment is less than his risk.
The over-payments of the younger
policyholders form Surplus" which is
held to pay the increased risk of the old.
er policyholders, or for the poIicyhoIder
himself when he becomes old. sThis sur
plus of the company is invested in vari-
Gus ways to bring in interest and income,
which in turn is applied to make ex-
pense of insurance less TO the policy
holders, and profits to the stockholders
In some of the larger insurance corpora
tions the surplus becomes very great
sum OF money, amounting to millions of
dollars. 1t is the use and abuse in the
investment and disposal of these sur
plus funds that the legislative committee
are now INVESTIGATING
In the assessment plan the original
theory was to form an association OF in
dividuals who agree to pay certain fix
ed sum equal to each member, without
reference to age, on the death of an as
sociate. This Was later changed SO that
upon the death of any member the rest
OF the associates pay his heirs certain
sum. But up to a few years ago the
death losses were divided equally among
the members without reference to their
age. lhis method is now beng almost
universally changed again, SO the assess.
ments are paid by the living members
pro rata according to the attained age,
and thus the older members pay much
more than the younger members. Both
OF these changes have been forced upon
the assessment associations because ex-
perience has proved that old men cannot
insure each other, and all associations
become associations OF old men in time,
This fact has brought another change.
Most OF the assessment associations are
now assessing little more at each as.
sessment than is necessary to pay death
losses. This is carried to surplus ac.
count for the same purposes and reasons
as in the "old-line" companies,
| Both the ''old-line" and the assess
ment" plans have their defects. In at
tempts to eliminate these, both plans
have been gradually approaching each
other during the last twenty or thirty
years.
The assessment plan has failed in
not providing for the future. In fact ''as-
sessment'' insurance has been and in
most cases is yet too cheap. Without
any surplus from which to get income,
without profit from lapses, the assess
ment plan calls for increasing rates Of
payments from its members. because as
time goes on the average age Of the