Omaha daily bee., 1907-03-31
WAGE FARMERS INSURANCE
Excessive Cost of Frsssrt Systems sf In-
dustrial Insurance,
GOOD BUSINESS FOR SAVINGS BANKS
Legislature of Massachusetts Urged to
Grant Necessary Authority 60 the
hanks Features of the
Plan Proposed.
% BUSINESS FOR SAVINGS BANKS

Of life Insurance as revealed in the New
York investigation two years ago, Louis D.
Brandeis, an insurance expert, called par
ticu.ar attention 20 the excessive cost OF
Industrial life insurance compared with
ordinary life insurance. His latest con-
tribuuon on the subject In the March Re
view Of Reviews is an appeal to the legis.
lature OF Massachusetts to grant authority
to savings banks to inaugurate a life in
surance system for wage earners, and bill
embodying his suggestions Is in pTepara-
ton for action by the lawmakers Of the
Bay state.
Mr.. Brandeis asks. ''why Not Savings
Bank Life Insurance for Wage Farmers? p
and answers his question as follows:
On December 10, 1915. Massachusetts, laid
the foundation for the admirable savings
bank system Of the eastern states. by char
tering the Provldent Institution for Savings
In the Town of Boston. Half a century
! later Massachusetts established for America
the scientific practice Of life insurance
by the work Of Its insurance commissioner.
] Elizur Wright. Massachusetts, seems de-
termined to lead in another great forward
movement for the development through
thrift Of general prosperity--by extending
now the functions Of savings banks to the
issuing Of life insurance in small amounts.
| Insurance Abuses.
Amidst the revelations Of the Armstrong
committee in New York, the greatest Of
| life insurance abuses-the present system
| Of so-called industrial nsurance"-escaped
| almost unnotced. This class Of insurance,
which is merely life insurance in small
amounts, the premiums on which are coll
lected weekly at the homes Of the insured,
constitutes nearly three-fourths in number
OF all level-premium policies outstanding in
the United States On January /, 1906 the
| number Of such policies was 1857, $50, a
number equal to one-hfth of our inhab-
| tants. In the eastern states the number
| of persons insured is particularly large.
! New York, with a population of S067, S0S,
held 3.S $40 such policies In Rhode Island
they number 24s. 4ss. being more than one
policy for every two of its 4s0.0S2 inhabi-
| tants.
The Armstrong committee found that this
! insurance is furnished Eat twice the normal
cost by those least able to pay for IT."
found that "a large portion, If not the
greater number OF the insured receive no
money return for their payments" and de-
| clared that the enormous waste incident
to the present methods" raises in connec-
ton with the lapse rate a serious economic
! question" But the Armstrong committee
did not suggest any remedy, and the New
York legislature adjourned without taking
any action on the subject
Then the Recess Insurance committee NJ
the Massachusetts legislature took up the
| problem. and in a Unanimous report re-
Gently filed, has recommended that savings
banks be permitted to establish depart
ments for the issuing OF life insurance in
small amounts.
The regular premium charge on indus
trial policies Is about double that charged
for ordinary level-premium life insurance.
But in the initial periods the disparity is
even greater. rising as high as eight times
that paid for ordinary insurance; for in
most Industrial policies will be found a
clause providing that If death occurs within
the first six months one-fourth only OF the
face OF the policy win be paid. and II
death occurs within the second six months
payment will be made of only one-half.
So heavy are the burdens cast upon those
least able to bear them.
Disparity Of Dement'S.
The disastrous result to the policy holder
Of this system OF life insurance may be
illustrated from the following data. drawn
| from Massachusetts Official reports:
In the fifteen years ending December 81,
1905, the worlsingmen OF Massachusetts, paid
to the SPECIALIZED Industrial life insurance
companies an aggregate OF 81, sS7 In
| premiums, and received back In death
benefits, endowments OF surrender values
an aggregate OF only s21.s19eOs. The in
surance reserve arising from these pre-
miums still held by the insurance COM
panies does not exceed Ss,sss.Oo0. II thus
appears that In addition to interest on In
vested funds about one-haIf Of the amounts
paid by the workingmen in premiums has
| hao nh In ha -
ing the business and In dividends to the
stockholders OF the insurance companies
II this $61,29ASs7, instead OF being paid
TO the insurance companies, had been de-
posted in Massachusetts savings banks
and the depositors had withdrawn from the
banks an amount equal TO the aggregate
OF s2l. $40 COS, which they received from the
insurance companies during the fifteen
years. the balance remaining in the saw
ings banks December 81. 1905, with the
accumulated interest, would have amounted
to $40, 154S.S5-and this, although the saw
ings banks would have been obliged to pay
upon these increased deposits in taxes In
the commonwealth more than four times
the amount which was actually paid by
the insurance companies on account OF the
insurance.
So widely different Is the result to the
other OF the two classes of savings invest
ment which are open to him; and yet. life
Insurance is but method Of saving.
II Is obvious that the community should
not and win not long tolerate such a sac
rihee Of the worldngmen's savings as the
present system OF Industrial insurance en-
tails: Cor the causes OF this sacrifice art
easily determined and remedy lies near.
extraordinary WastefulneHs.
The extraordinary wastefGlness OF tn,
present system Of Industrial insurance 1,
due IN large Fart 10 the fact that the bUst
ness. whether conducted by stock or by
mutual companies. II carried on for tn,
beneht OF others than the policy holders
The needs and financial ineSperience. of II,
wage Garner are exploited for the beneh
OF stockholders OF oniclals
The Prudential pays annual dividends I,
its stockholders equivalent TO more thar
2la per cent upon the capital actually pal,
in. According to the testimony Of It's vic,
president. Forest f. Dryden. stockholiei
who on October 49, 1876, paid IN s2.9OO. hai
received in the Aggregate a return upOr
his investment OF SS2s $500 or about i5.o0
ner cent. The annual dividends Of tn
Metropolitan are equivalent 70 only p pei
I crut 81, fha eapTfol aotr,otIx psgd In M