The midland journal., 1945-04-06

tors are keeping us alive longer,
you'd better read on.
At first glance it would seem that
under the new mortality table, life
insurance rates will be cheaper, but
that is not true. John S. Thompson,
vice president and mathema-
tician (actuary) Of the Mutual Bene-
fit Life Insurance company, speak
ing for all life insurance companies,
tells why. He says:
Policies now in force will not be
affected, nor is it expected that poll
cies sold in the future will be. That
is because the amount of interest
life insurance companies can earn
on their invested funds has dropped
sharply in the last few years, and
their operating expenses, wages and
taxes, have increased.
Fewer Investment Chances.
''The cost Of life insurance de-
pends upon three points: (D the
number Of claims paid on policy
holders who die in given year;
(2) the yield or earnings from in
vestments of reserve funds; and (3)
the cost of operating the company.
The war has sharply decreased
the field for profitable investments,
he points out. War industries are
financed by the government; and the
building industry, once big field
for loans, is now dormant. Thus in-
surance companies which formerly
earned from 4 to 6 per cent on their
funds, now earn only slightly more
than 8 per cent. From 40 to so per
cent of insurance company funds
are invested in war bonds at an
average yield Of about 21k per cent.
And many companies have guaran-
teed 3 per cent return to their
policyholders. That is why insurance
rates cannot be reduced.
It was dead cinch to earn the
good old 6 per cent back in 1845 and
lot more, too, even though Mutual
Benefits records show that Robert
L. Patterson, founder and first
president, and his directors, scorned
the possibility Of paying big divi-
dends by "grubstaking" a few Of
the gold-seeking '49ers. Sound, con-
servative investments were made
to protect widows and orphans. But,
conservative as the investments
were then, they paid handsomely as
compared with today.
Money Earns Less Than 2%.
Shortly after the turn of the GEN.
tury, returns on invested money
tightened up considerably. All this
Is readily reflected in overall returns
to policyholders. Between 19141928
Mutual Benefit policyholders were
getting about 81 per cent on their
dollars paid in. The 1929-1943 pic
ture was still trending downward to
about IL per cent per annum.
It was vastly different in 1845. In
those days the company president
drew 81 500 per year-just about the
price of fair cook or housekeeper
on today's market. The top insur-
ance salesman wasn't allowed to
earn more than $1,000, all other
earnings going back to the company
till. The rent bill was $25 per
month. One Of the ranking "assist-
ants drew the good Tin those days)
salary of $500 per year.
Today the taxes, alone, on a
building occupied by one large in
surance company exceeds 10 million
dollars per annum. And the char
women on the 31st floor would laugh
at an offer Of $500 year. Even the
elevator boy would sneer at the same
salary Robert Patterson was paid
in 1845.
Now you know why insurance is
going to continue to cost just about
the same as it has in the past. AS a
group, we're living a lot longer
and there is less risk In insuring
us. But, as a group we cost a
whale Of a lot to handle and
the days Of fancy interest returns
are over.