The evening times. [volume] (Grand Forks, N.D.) 1906-1914, 1906-02-28

members old and young, must pay an
amount per lannum nearer the actual
cost of maintaining their liability?
Answer. Every member of every in
surance company, be it fraternal OF
old line, must pay premium rates
commensurate to the risk imposed by
him upon the institution; this is alb
solutely essential If the institution is
to be permanent; for time the in
stitution can divert the funds paid by
one man to defray the costs imposed
by another, but this must be merely
temporary; sooner or later the true
situation will be exposed and become
intolerabie.
Here let ME call attention to the
fact that every mans membership is
a source of actual cost mortality to
the institution; man need not die to
impose a mortality cost upon the in
surer. BY the very fact of his mem
bership he imposes the risk of loss,
because the money that he contributes
on account Of this risk, is Immediately
paid out to the beneficiaries of some
member who has died. Therefore,
every member imposes for every day
he is such member an actual mortal
ity cost upon the institution; let me
illustrate: A thousand men are men,
bers at the beginning of the year and
five die before its expiration; each of
the thousand men contribute $500 in
order that the beneficiaries of each OF
the five who died may be paid adhou-
sand dollars; at the end of the year
the mortality cost of the thousand
members, i. e., the loss imposed by the
death of the five, has been paid by the
institution and there is no money on
hand; therefore, the mortality cost of
each man of the thousand, TO the in
stitution is $500; now suppose that
one of the thousand members paid but
$500 it is selt-evident that the balance
would have to be made up from among
the others; this mortality cost differs
Of varies with the age of the members,
but it is an actual cost to the institu-
tion for every hour he is such member
Question 5. What, if any, is the act.
ual profit in the Endowment rank by
has such revenue to the true protec-
ton of the insured?
Answer. There should be no profit"
from lapses. The net premium is the
amount paid by the insured to com.
pensate the insurer for the risk i'm
posed during the period of the insur
ance which is usually fixed at one
year, to which sum (of the net prem
ium) there is an amount added or
loaded for expense; if more than
this is charged or received by the in
surer it is done either by misleading
the insured or upon the theory that
the insurer will hold that amount to
the credit of the insured. the same to
be used during the later years of life
to defray the excess of cost (mortal-
ity) above the amount of the premium
paid.
All payments made by the member
to the Endowment rank in excess of
the present mortality cost imposed by
him upon it, are, therefore, made by
him for the purpose of having such ex-
cess, with the incriment thereto held
by the rank to his credit; the MORTAL
ity cost increases with the age of the
member; eventually such cost will ex-
:eed the cash premium paid by him,
at which time the excess, with it's ac-
cumulations, will be drawn upon by
the rank to make up such deficiency 1
say. therefore. that all moneys paid
by the member to the rank, outside of
the amount specifically agreed upon
or expenses, is paid by him to defray
his mortality costs and the institution
has no more right to divert that money
to any other purpose than to divert or
inappropriate any other sum of
which it was trustee. 1t is negotiable
and unjust to confiscate it or to call it
profit" or to use it for any purpose
except to defray the mortality costs
imposed upon the institution by the
member. If he lapses, that sum should
be returned to him or he should be
credited with it as paid up insurance,
less an estimated amount to defray
cost of computation, handling, invest
ment, ETC.; so much for the moral
side of the question.
(b) do not believe there is any actual
profit" to the Endowment rank by
reason of lapses; let me illustrate by
taking new member aged twenty
one; his rate is $10.34 per year; there
must first be deducted the mortality
cost of $5.04; the organizer who OBJ
tains the business receives in the ag-
gregate at least the full amount of
the first years premium, but it is paid
to him in installments; he receives one
half of the payments us they are made
until in the aggregate they equal the
first years premium or perhaps more,
thus out of the first years premium
he would receive $5.17; the law al
lows 10 per cent for expenses; but this
is over-run to about IL per cent, which
would be 1924; we have then out of
the first year business these pay
ments to be made, mortality costs
$5O4, organizer, $5.17 mana cement ex-
penses, $1.24, making9a total of $11.45,
or an actual loss to the institution Of
something more than a dollar; this is
true also of the second years bust
ness. q am not positive that manage
ment in addition to organizers ex-
penses should be added; the average
duration of membership of those who
lapse is about two years; after the
expiration Of the second year there
might be some profit" until the time
when the mortality cost equals or ex-
ceeds the premium, but the profit can
Lot be very large because the N. F. C.
rates contemplate investment at a per