Evening star., 1923-11-23
|NSUR|NG BRAINS
GROWS in FAVOR
Business Firms Paying Huge
Sums in Premiums on Lives
of Executives.
BY j. c. ROYLE.

special Dispatch TO The Star.
NEW YORK, November 23.-Execu-
tive ability commands greater pre-
MUM in the business of the United
States than ever before, according TO
insurance men and government officials.
In proof of this they point out that
the business concerns in ALL sections of
the country are paying tremendous pre-
miums to insure themselves against loss
from the death of their executives. Sta
tistics show that the practice Of insur-
Ing executives in favor of the corpora
tions which they administer has grown
tremendously in the last year.
100 Insured for 81 .OO0.0OO.
There are now 120 people in the
United States insured for 81 100000 or
more. The great majority of these poll
cies have been taken out in favor of
business or industrial concerns. Deputy
Commission Maddox of the internal
revenue bureau attributes this to the
desire OF corporations to be partially
reimbursed for the loss of the executive
ability of the men who steer their af-
fairs.
A number of the stars of the mo-
tion picture. musical. theatrical and
artistic worlds are heavily insured in
favor of the concerns holding them
under contract. and while this is not
r protection against the loss of exec
ut1ve ability, it is a measure cal
culated to reimburse the loss of
talent and artistic ability.
Movie Stars Protected.
Douglas Fairbanks. Mary Pickford
and Charlie Chaplin are insured for
sl,000,000 each. and policies for many
hundred thousand dollars are con-
stantly being taken out on the lives
n nfi irflr Gfa
periods long enough to cover the time
they are engaged on some particular
picture. During the filming OF Way
Down East the lives of David w.
Griffith. Richard Barthelmess and
Dorothy Gish We're heavily insured
in favor of those financing the pro-
duction. William Fox and Adolph
Zukor, motion picture producers,
carry policies for $2,64o.e0o and
so.000.000. respectively.
Samuel Nauclain. head of the Bald
win Locomotive Company, has gone
step further and in effect through
system of his own. has insured him
self against interruption of his business
duties by i'll health.
Tax Laws I'm such Cases.
mistaken idea has prevailed in
many quarters about the taking out
of these heavy policies in favor of
corporations. Many assumed that the
corporations paid the large premiums
taxes on the earnings involved, re-
ceiving. in return for these Sums. a
security which had both "A surrender
and a borrowing value as well as its
face value on the death of the person
insured.
Internal revenue officials today
made 1t plain that in fixing the tax
due deductions for these premiums
are not allowed if the beneficiary is
the corpora tion. If the policies are
payable to the executives themselves
and are considered a part of their
compensation, the premiums are de
ductable. provided the cost of the pol
icy is not out of proportion.
Largest Policy Ever Issued.
case in point. insurance men say.
would be the largest group life in
surance policy ever issued, which the
Southern Pacific Railroad has taken
out in behalf of its ninety thousand
employees and which becomes effective
January |. This insurance is expect
ed to reach a total of more than $780,
100000, and. as it is payable to the
estate Of the insured. would come
under the head of added compensa-
tion.
Insurance companies are making
strenuous efforts to cut down the
waste resulting from mot taken" poll
icies. These ire policies which are
Issued in the regular way for pros
poets, who. either because they are
not convinced by the agent or fail to
pay the premium. fail to take them.
As they are put on the company's
records. they must also be taken off
when they are returned, causing a
double cost This. in some companies,
is estimated to run as high as $1,000
600 year.
Costs Exceed Is Per Cent.
Howard p. Durham. insurance COM
missioner of Connecticut. declares the
ratio of mot taken" policies in liabil-
ity. accident and life lines exceeds Is
per cent.
"It is probably close to the truth to
say that the cost connected with the
issuance and cancellation of not TAX
en- policies in stock companies is
very appreciable amount" Mr. Dur
ham added: in mutual companies il
is reflected in decrease in the divi-
dends paid to policyholders. In the
ultimate analysis, in all cases it is
the honest insurers who foot the
bills"