Evening journal., 1910-12-30
CRASH AHEAD FOR
The FRATERNITTES
New York Insurance Commits
SiOner Predicts Receiver
ship for Orders
MAKES STATEMENT
In PYT4IANS CASE


the various States in the enactment
Of reasonable mandatory laws for
State regulation and by the societies
their rates as well as in other di-
rections, fraternal insurance is sure
TO end in receiverships, with heavy
losses to its millions OF members and
their dependents. This warning is
sounded by State Superintendent Of
Insurance Hotchkiss, who yesterday
denied an application for the concel-
lation of the license of the Supreme
Lodge, Knights of Pythias, to do busi-
ness in this State.
The application was made by T.
Barber, OF New York, aged rs, who
holds a so-called fourth-class insur-
ance certificate in the order. He COM
planned because his monthly assess
ments were increased. Superinten-
dent Hotchkiss holds that it was ne
cessary for the order to increase the
rates.
Can't Last Much Longer.
THE truth is" he says in a memo
randum accompanying his decision,
that while many advocates of fra
ternal insurance have long shut their
eyes to it, unless prompt and wise ac-
tion be taken by the States in the en-
actment of reasonable, but at the
same time mandatory laws, and by
the societies themselves in the read
justment of their rates as well as in
other directions, fraternal insurance
will in the next decade or two end in
receiverships, with heavy losses to
its millions of members and their de-
pendents.
"The Supreme Lodge, knights Of
Pythias has long been conscious Of
this condition and some years ago es-
tablished a new class having what
was thought to be adequate rates.
into which class most of the members
Of the fourth elias have already gone
It now seeks to take another, and, in
the opinion of this department an
absolutely necessary step; namely
the collection from the surviving men,
bers of the fourth class of rate
actually sufficient to make the GER
tificate Of every one, even to the last
of such survivors, worth to him and
to his dependents the amount stated
on its face. Such action surely is
not inexpedient, nor is the society
which takes It unsafe"
Nearly 100000 Affected.
The officers of the knights of Pyth-
las realized the necessity for increas-
ing their rates, and in 1906, after ex-
pert examination, adopted a basis Of
Wolfe, the actuary. A new class Of
membership in the order, called the
fifth class, was created, and all the
old members were given the option of
transferring to this class without
medical re-examination. At present
about S90,OO000 of Insurance is in
this fifth class and $40 100000 is still
outstanding among the old members
who have not made the transfer
Under the resolution passed by the
Supreme body of the Pythias last sum-
mer these untransferred members
must pay, beginning to-day rates
which the actuaries say are adequate
II was this change which Barber, one
of the older members of the order,
contested, his rates being raised from
an average since 1885 of $500 per
month to S24.70.
Assessment companies and frater-
nal societies have in force approx
mately S9,000,000, 900 in insurance on
the lives of nearly 100000 members,
while the legal reserve, or so-called
regular life insurance companies,
have outstanding some 26,000, 900
policies for insurance approximating
$4,000, 100000
Natural Conditions Overlooked.
IN denying the Barber application
for a Pythian receivership, Superin-
tendent Hotchkiss also said that fra
ternal insurance has ignored natural
conditions in fixing its rates. He
said:
1T is, perhaps, proper to add that
the main difficulty here is that mem
bers of most similar societies have,
both at the time they became mem
bers and most of them ever since,
overlooked the self-evident fact that
life insurance is a commodity, the net
cost of which is fixed by the laws
of nature. In a given mass of men,
certain number of a certain age will
die each year. The net cost of in
surance is well known, has been we'll
known for nearly a century and can
be ascertained from books or from ex-
perts by anyone seeking the informa-
Z
ternal principle societies of this class
might be built up and managed at an
expense considerably less than that
( incident to old-line insurance, the
earnest men who founded the system,
and many of their successors who
have carried it on since, fixed the net
cost arbitrarily and in most instances
much less than the net cost as proven
by the experience of millions of
lives.
"Thus the members of these socie-
ties have many years been paying for
insurance less, and in some cases con-
siderably less, than such commodity
cost or could cost. The earliest to
die have thus had too cheap insurance,
and they and their beneficiaries have
! profited accordingly.
Survivors, Must Foot Bill.
"The survivors who have thus had
protection all these years at a rate
which was inadequate now face the
inevitable result; namely. that they
must during the rest of their lives
both pay an adequate rate and an ad-
ditional sum which in the mass in
each society represents the total of
the inadequacies of the rates previ-
ously paid by the members, whether
now dead or living. That this is
unjust is true; but that the member
so situated and who has shared in
plan of insurance based upon in
adequate rates may now properly
complain cannot be conceded. He
heretofore has been getting his insur-
ance too cheap, as have his dead
brethren"