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THE SURVIVAL OF THK FITTEST"
B-
TRUTH STRANGBR THAN FICTION
-BT-
Revd. J. Thomson Paterson.
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THE GEORGE HI SHOP
Engraving and Printing Company,
MONTR i; A L.
== = 1888. k.
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PRICE 25 CENTS.
=0
EAI) Ol
KDWARD P.. TIARPKR.
President of tlie Mutual Rtserve Fund life Association, of New York,
E*\v York,
EAI) Ol KICK OF THK MuTUAL KksERVE FlNI) LiFE ASSOCIATION,
, Porter Huilding, Park Row, lieekmain^ Nassau Sts.,
■ > New York City.
CONTENTS.
CHAPTER I.
Cost of life insurance ; how determined
Page.
7
CHAPTER II.
Expenses of life insurance companies j buildings, salaries of
officials, agents' commissions, dividends to stock-
holders, 6^c., &*c ., lo
CHAPTER III.
Economy, security, efficiency ; the three combined in the
Mutual Reserve. System explained. Importance of
the Reserve Fund; how accumulated, utilized and
protected , , , 13
CHAPTER IV.
Cost of insurance and security in the Mutual Reserve
compared with that of ordinary life companies 18
CHAPTER V.
Life insurance in the Mutual Reserve tor less than one-half
the rates'charged by ordinary companies. The secret
explained. Exorbitant commissions to Agents, <2r»c.. 21
CHAPTER VI.
$3,000 re'.urned to every i.ooo paid by the insured.
Where the money comes from. The history of lap-
ses; this feature utilized by the Mutual Reserve.... 27
■
^
CHAPTER VII.
Page.
1
>•■
Deceptions practised in order to mislead and impose upon
the public. Extracts from •♦ Monetary Times" and
"Insurance Chronicle. The deception explained....
36
CHAPTER VIII.
Misrepresentations of the rivals of the Mutual Reserve.
Adjustment of death claims. Official reports
of insurance Commissioners. Report of death claim
department. „ 44
CHAPTER IX.
Attempts of old line companies to defraud the widows
and orphans of their deceased policy-holders. Lapsed
policies restored, and thousands of dollars paid to the
representatives of the officials of old line companies
after they were dead. "Dead co-operators." How
the list of 408 is made up. Dead "old liners;"
1,0004 have gone within the last 20 years. British
Medical-Misstatement of " Monetary Times." 47
CHAPTER X.
Banking in an insurance cjiupany, is expensive and unsafe.
From one to two per cent, of the money handled is
lost by bad management. Endowment insurance as
an investment, 922 out of every 1,000 insured on the
endowment plan, fail to realize on their investment....
5»
CHAPTER XI.
Objections : "It is an assessment company ; — " It is a
Mutual,^' "Member's liable." Concluding remarks.
Post Scriptum Charter Oak, $1,000,000 lost Buildings
as security, »Sr»c., *5r*c
58
I
THE SURVIVAL OF THE FITTEST,
OR
TRUTH STRANGER THAN FICTION.
BY Rev. J. Thomson Paterson,
MONTREAL, QUE.
PREFACE.
In many instances the wife and childrim are
dependent on the husband and father for support, and if
he is cut down they are left to earn their Hving as best
they may. How most efficiently* to provide for such an
emergency is a question which engages the attention of
every true man.
And that this desire may be stimulated and its
accomplishment more easily attained is the writer's
object in tne publication of this pamphlet The state-
ments contained in it are facts substantiated by the most
incontestable proof, and no amount of sophistry, however
ingeniously applied, can confute them. J. T. P.
I.
n are
and if
s best
ich an
ion of
id its
Titer's
state-
I most
wever
P.
CHAPTER I,
In any life insurance company the necessary expenditure may
be summed up unddr two heads ; — expense of management and
amount required for the payment of death claims. If these can be
defined, the cost of insurance can easily be determined. That the
expense of management can be defined, is self evident. The re-
muneration of agens, book-keepers, clerks, etc., in connection
with an insurance office is definitely fixed, and if exorbitant, it is
clearly the fault of the officials. And that the amount required
for the payment of death claims can be, even more accurately,
determined is evident from the following facts. The Legislature
of the state of New York passed an Act in 1859 compelling all
life insurance companies doing business in the state to send in an-
nual reports to the Insurance Department, giving a statement of
the amount expended in the payment of death losses, the income,
insurance in/orce, etc., etc. The statements contained in the re-
ports are subscribed and sworn to by the chief agents of the differ-
ent companies, and are published at the expense and under the
supervision of the Legislature in the Annual Reports.of the Super-
intendant of Insurance. Thh following table, compiled from these
Official Reports, shows the actual amount per $1,000 required to
provide for death losses, at all ages facA year, and the amount
received for each $1,000 of insurance in force, as stated in the
annual reports of the New York Life, and Mutual Life, covering
a perioa of twenty eight years, beginning seventeen years after
they commenced business. Keeping these points in view the table
will be both interesting and instructive.
NEW YORK LIFE.
No. I.
ORGANIZED
1842.
Total I)«'«th
Receipts
?>
Loaa to eitch
for each
c s
Tears.
$1,000 Insur-
$1.000111-
ance in forc«)
surunce in
H -s
Yearly Cost.
forcf.
M
ISfiO
•15 38
36 93
18
1860
12 45
37 13
19
1861
10 83
37 30
20
1862
7 64
40 10
21
1863
11 34
44 37
22
1864
9 16
49 65
23
1866
10 83
61 65
24
1866
8 07
60 96
25
1867
8 16
61 74
26
1868
8 67
52 00
27
1869
7 46
60 91
28
1870
11 35
69 16
29
1871
11 72
63 46
30
1872
12 71
63 07
31
1873
12 23
69 13
32
1874
11 49
66 10
83
187S
18 10
62 08
84
1876
12 70
60 60
36
1877
13 20
69 21
36
1878
14 24
61 08
37
1879
11 66
61 89
38
1880
13 49
66 00
39
1881
14 08
68 08
40
1882
11 32
67 00
41
1883
11 62
66 40
42
1884
10 21
60 31
43
1886
11 09
61 26
44
1886
9 76
61 87
46
Average amount of death claims
per 7«ar for each $1,000 of insur-
ance $11.40
Average amount of income per
year for each $1,000 of insurance
in force $60.89
Average excess of income per
year over Death Losses on each
$1.000 , $49.49
MUTUAL T.IFE,
ORGANIZED 1842.
Total Death
LoHS tn each
$1,000 Innur-
ance in force
Yearly Cost.
Receipts I
for each
$1.0(»0 In-
surance in
force.
8
• 9 07
41
05
17
8 01
38
30
18
9 61
41
72
19
11 62
43
82
20
12 18
39
70
21
11 22
42 38 j
2-2
8 61
42
00
23
8 45
60
17
24
6 88
59
00
25
6 13
64
10
26
9 68
71
43
27
8 66
no
52
28
10 15
08
04
29
9 10
67
00
30
10 03
74
82
31
9 93
fift
78
32
7 99
66
87
33
10 90
06
43
34
10 44
64
22
35
12 06
61
37
30
12 80
5-)
01
37
14 13
5(5
06
38
14 16
54 60
3ft
14 53
54
40
40
15 08
53
9fl
41
14 64
54
25
42
16 09
64
80
43
14 23
o3 «7
44
Average of death claims
per year for each $1,000 of
insurance in force ,"fl1.76
Average > f income per
year for each $1,000 of in-
surance in force $59.59
Average excess of in-
come per year over Death
Losses on each $1,000. ...$47.83
An examination of the above table reveals the fact that during
the last twenty-eight, of the forty-four years, that the New York
Life, and Mutual Life, of New York, have done business the
average amount required for the payment of death losses
at all ages has been less than twelve dollars ($12.00) per
year for each $i.goo of insurance in force, and that their income
8
i
t
t
during the tame twenty-eight years has been over sixty dollars
($60.00) per year for each $i,ooo of insurance in force. That is,
their income has l)een over five dollars ($5.00) to every one dollar
($1.00) paid in death claims.
It is interesting and important to notire that there was only a
difference of thirty-six cents (36c.) in the aver.npe amount required
for the payment of death losses in the two companies above quoted
during the twenty-eight years of which we have official returns.
There are at least six other companies that have l)een in busi-
ness for over forty years the experience of each one of which coin-
cides with and corroborates the experience of the New York Life
and Mutual Life of New York,
That an average of twelve dollars ($12.00) per $1,000 of
insurance in force is more than suihcient to pay th': ileath losses *
proved beyond the possibility of a doubt by the fa^ts above ' aied
which facts ar . fumed by the official returns of at least l. irty com-
panies «*xtending over a i^eriod of nearly thirty years tro n which ii
appears that the actual cost incurred in the payment -^f death
losses, at all ages has averaged less than $11.00 per $1,000.
If the cost of life insurance cannot be defined from data such
as I have given, it is still an unknown quantity and the business a
game of chance and not a science. It does jirove beyond the possi-
bility of a doubt, that an average income of $12.00 per $i,coo at
all ages exclusive of expenses, will more than provide tor the death
losses of a life insurance company tor the first 45 years of its exis-
tence, and this is probably longer than the majority of the present
generation will require tlie protection of life insurance.
That the premiums collected by insurance companies is much
higher than is necessary under proper management is becoming
more apparent every year. The great majority of men have nei-
ther the time nor the inclination to investigate the matter for them-
selves, and, though conscious that the premium is too high conti-
nue to pay it year by year while their family is depending upon
them for support. In order to settle the question let us again con-
sult the Official Reports of the Insuiance Commissioners or Super-
intendents of Insurance of the United States and Canada, from
which it appears that, while the average amount required for the
payment of death losses at all ages has been less than $12.00 per
J
$i,ooo, the average income of these companies has been from $58
to $60 per $1,000.
From the experience of the 30 companies already referred
to, collated from their own annual statements, attested and sworn
to by their own officials, and published in the Reports of the var-
ious Insurance Departments, it appears that the actual cost of in-
surance, in paying death losses exclusive of expenses, has been
$6.58 per $1,000 at 40 years of age. The premium collected by
these Companies at that age during the entire period of nearly 30
years was $31.30 per $1,000 or 450 per cent above the actual
cost of insurance for death losses. It appears from an examina-
tion of the Official Records of the Insurance Department of the
State of New York, that out of 1,600 millions of dollars actual-
ly received in cash during the last 20 years by old line companies,
they only paid out for death losses and matured endowments 408
millions of dollars ; or about $1,000 in death claims and endow-
ments for every $4,000 of income. In other words, they received
more than one million dollars every week of the entire period of
20 years in excess of death losses and endowments. And over
and above all expenses, dividends, losses and every other kind of
disbursements, appearing in their accounts, there are 75 mill'ous
of dollars entirely unaccounted for.
CHAPTER II.
In view of these facts it follows that life insurance companies
must expend enormous sums of money for other purposes than in
the payment of death losses. And that such is really the case is
self evident.
No other business could stand the enormous expense incurred
in the management of "old line" or Level premium life insurance
Companies. Buildings that might have stood for centuries are
taken down and new ones are erected and equipped regardless of
expense.
The most costly material and expensive sites are selected.
Ash, Elm, or Birch, are good enough for the offices of a manufac-
turing or wholesale establishment, however wealthy, but they are
too common to be allowed in the Head Office of an Insurance
10
i
t
19
'V
I
company ; Cherry, Walnut, or Mahogany must be used in the
conjunction of the Counters, Desks, Shelves, etc., of such
impo tant and wealthy institutions. Millions of dollars have
betn, and are still being, sunk in this way that have been
collected in the name of the widow and orphan, that never have
and never will, bring three per cent, interest.
Nor is this all. The salaries of the officials of life insurance
companies are as a rule, from three to four times higher than those
of officials of equal ability in other branches of business. In proof
of this statement I quote from the Report of the New York As-
sembly Committee of Insurance of 1877, from which it appears
th.at according to the statements of their Presidents then made,
under oath, the enormous sum of $1,067,565,72 were expended
in salaries to officers and othe -s, by the Mutual Life, the New York
Life, and Equitable Life, of New York in one year. And from
page 39 of the seme Report, it is admitted by one of these officials
that his salary and commissions amounted to $264,557,23 in five
years, and that in one year he received $77,500.00.
Another example of the lavish hand with which the funds
of life insurance companies are dispensed is furnished by the sworn
statements of their officials, as to the amount of dividends paid to
stock holders, and published in the reports of the Superintendent
of Insurance.
The two largest and oldest stock companies doing business in
Canadahavenow apaidup capital of $1,125,000.00, $l,ll6,ooo.co
of which were paid by the policy holders; That is the surplus over
the payments for death losses and expenses contributed by the
policy holders, instead of being handed back to them, or better
still, being left in their pockets, has been given to the stock hold-
ers, and now they are annually receiving dividends on $1,1 16,000.
to which they never paid one cent.
From the Report of the Superintendent of Insurance of 1886
it will be seen that the stock holders of those two companies re-
ceived in thai year alone $187,500.00 in dividends, t. e. $78,500.
more in dividends in one year than the total amount originally
paid by them. The dividends etc., etc., appropriated by the
stock holders of these two companies alone, during the last six
years amount to over $1,000,000.00, a sum which is equal to
nearly $500 daily during the entire six years.
11
It is a fact that the average amount expended in manage-
ment, etc., by "Old Line" life insurance Companies, for the
last twenty years has exceeded $125.00 to each $100.00 paid in
death claims. If any one questions this statement, he can easily
satisfy himself by consulting the official returns of these com-
panies, as published in the annual Reports of the Superinten-
dent of Insurance.
And yet, notwithstanding all this extravagance the surplus
funds of these companies are increasing by the millions.
The Mutual Life of New York makes the boast that it
could cash a cheque for the whole amount of money in circulation
by the Bank of England and still have a surplus. To whom do s
this money belong ? It has been taken from the policy holders
and belongs to them, but the child is yet unborn who will ever
receive any portion of it, unless the State interferes and orders the
distribution of it.
In the annual Report of the New York Life in 1886, the fol-
lowing astonishing statement is made :
'•During each of the last thirteen years the interest earnings
of the New York Life have been more than sufficient to pay its
death losses, the excess since 1883 having been over six million
dollars. During the forty-two years of the Company's existence,
its interest earnings have exceeded its total death losses by over
three and a half million dollars."
That is, the New York Life has extorted from its policyhold-
ers during the last forty two years, in addition to the amount re-
quired for the payment of death losses and every other item of
expense, a sum the interest of which amounts to over forty millions
of dollars.
This fact alone should be sufficient to convince any one that
the rates of ordinary life companies are too high.
In the discussion of the question so far at least three impor-
tant points have been proved : First, that the cost of insurance
for the payment of death claims does not exceed $12.00 per $1,000
at all ages. Second, that the income of ordinary life insurance
companies averages from $58.00 to $60.00 per $1,000 insured.
Third, that the rates of ordinary life insurance companies are at
least fifty per cent higher than they need be. '
12
f
manage-
, for the
> paid in
an easily
lese com-
iperinten-
i surplus
millions,
that it
rculation
lom do s
' holders
*vill ever
rders the
the fol-
earnings
pay its
million
cistence,
by over
cy hold-
3unt re-
item of
millions
me that
impor-
surance
$i,ooo j
3U ranee
isured.
are at
i
CHAPTER III.
Having followed me thus far, I trustthereader will follow me
to the end. My aim is not to destroy but to build up, not to dis-
courage, but to foster life insurance. There are few men who appre-
ciate the good which it has done more highly than I do. I paid the
high premiums collected by Old Line Companies for years, before
I found the more excellent way, and would do so still if I could
not get it for less. I hold it to be criminal neglect, on the part
of any man, who can be insured, to run the risk of leaving his
family destitute, when such a calamity can be prevented by a little
forethought and the self denial involved in the payment of a life
insurance premium. I am now insured in the Mutual Reserve
Fund Life Association and have induced many others to do so also.
I did not take this step unadvisedly, but after a most careful study
and investigation of the question, and the more I know of the As-
sociation, its President and excellent Board of Directors, the more
I am convinced that my decision was a wise one.
Life insurance under any and all systems, consists in collect-
ing rom the living to pay the representatives of the dead, and,
that this is done as simply, directly and inexpensively by the
Mutual Reserve as it is possible to do it, consistent with security,
is evident from its past history. It has paid over $4,600,000.00
in death losses within the last seven years at a saving of over
$14,000,000.00 to its policy holders, as compared with what the
same amount of insurance would cost in old line companies.
Nathan Willey, actuary and author of *' Principles anji Prac-
tice of Life Insuraece," says : ** Whatever makes a person free
from care in regard to want and support, of his family has a
tendency to prolong life." Doubtless, this accounts for the fact
that the death rate of the Mutual Reserve is lower than that of
any other Company having the same number of members and
amount of business in force, for who could estimate the care and
anxiety of which the members have been relieved in tue saving of
$14,000,000.00 in the cost of insurance as above mentioned. In
all life insurance companies, in addition to the amount required
in caring for the old, there is always an extra expense in connec-
tion with the new business.
I 1
In order to meet these expenses, the Mutual Reserve Fund
Life Association collects an admission fee and $3 of dues per
$1,000; the admission fee defrays the expense incurred in get-
ting the new business, and is payable in advance once only j the
dues are used in taking care of the old business, and are payable
annually in advance. The admission fee and annual dues, are the
same at all ages, but the amount required for the payment of
death claims and the Reserve Fund are graded, according to age
and amount of insurance carried.
The executive officers are required by the constitution at the
expiration of every sixty days, to wit : on the first week days of
February, April, June, August, October and December, to call
upon the members for a sum equal to the amount actually required
for the payment of the approved death claims and Reserve Fund.
Seventy-five per cent, of each call is applied to the payment of
the death claims, and twenty-five per cent, is set aside in the
Reserve Fund. The principal of this fund is invested in First
Mortgage Bonds on real estate worth twice the amount loaned,
bearing interest at, at least, 4 1-3 per cent., which is paid into the
death fund and takes the place of the increase of cost by reason of
increase of age,, thus enabling the Association to keep its rates of
mortuary premiums the same as at date of entry. The rates are
based on the Experience Tables of mortality and provide for a
death loss of $17.94 per $1,000 exclusive of expenses, at all ages,
which is nearly $6 per $1,000 in excess of the actual cost of
insurance, as proved by the experience of companies with a record
of forty-five years. And, if in any one year the death losses
exceed the maximum amount indicated, the constitution provide^
that the excess may be paid out of the Reserve Fund. The
mortuary premiums may be paid every two months, or once a
year, as desired. If paid every two months the sum total of the
six calls will not exceed the yearly maximum amount per $1,000
indicated lu the tables of the Association ; it paid annually, the
amount not required will be allowed on the next year's premium.
As the Reserve Fund is the most important and scientific
feature of the association a summary of how it is accumulated, pro-
tected, and utilized will be of interest. Every member must pay
the admission and Medical Examiner's fee, and the annual dues
l/t
^i
before he receives his policy and this defrays the expenses incurred
in getting his business. He must contribute his full share of the
amount required for the payment of the death losses, and 25 per
tjjg cent, to the Reserve Fund, so long as he remains a member, and
when he ceases to be a member of the Association, at any time,
4 within the first fifteen years, it matters not how, whether by death
or by lapse, he leaves one quarter of all he paid in assessments for
the benefit of those who keep up their insurance. This which at
first seems an injury is just and equitable. The interest earnings
from the Reserve Fund are used in the payment of death claims,
and thus every member receives an immediate benefit.
Suppose, E. G.. that on 1st February there are $ioo,cxx) of
death claims due, and that, there are $30,000 of interest coming
from the Reserve Fund ; the amount that the members will have
to pay will only be $70,000 instead of $100,000. This is why
the Association is able to keep its rate of mortuary premiums the
F'.me as at date of entry. The interest receipts have taken the place
of the increase of cost by reason of increase of age. If a member
keeps up his policy for fifteen years, he gets back his portion of the
principal of the Reserve Fund, which shall be applied to the pay-
ment of future premiums or taken as a cash surrender value for
the policy, as the policy holder may then direct. If death takes
place while his policy is in force, his heirs get from $10 to $20
or $30 for every $1.00 he paid for his insurance. And if he
allows his policy to lapse he has had the protection of life insur-
ance for about one-half the amount which it would have cost him
in an ordinary life company, and as he himself has benefitted from
the contributions to the Reserve Fund of those who preceded him,
he must in his tarn, forfeit his portion of this fund for the benefit
of those who succeed him.
The Reserve Fund now exceeds one million, five hundred
thousand dollars, ($1,500,000.00), and is increasing at the rate of
♦ over one thousand two hundred dollars ($1,200) daily. This
fund is utilized for the benefit of the members as follows : 1st, —
In granting extended insurance ; policies in force five years shall
be carried six months, policies in force for ten years shall be
carried one year for the full amount after the failure to pay assess-
ments or dues. This secures to the Policy holder an all but ab-
solute guarantee against the possibility of his policy lapsing on
16
account of an oveisig])t on his part. 2nd. — After the expiration
of fifteen years from the date of membershii), a member, by
giving the company one year's previous notice, has the privilege
of surrendering his policy and withdrawing his contributions and
tontine profits from the Reserve Fund in cash. This gives a cash
surrender value to the policy.
Should a mem er, at the expiration of the fifteen years not
desire to surrender his policy or terminate his membership, the
entire amount of his Reserve Fund accumulations will be placed
to his credit and used in the payment of future dues and assess-
ments. 3rd. — Should the amount required for the payment of
death losses exceed the amoui.t indicated by the Experience
Tables of Mortality, the excess will be paid out of, the Reserve
Fund. This guarantees that the cost of insurance shall not exceed a
definite and fixed sum each year. 4th. — Should members fail to
respond to their calls, at any time to such an extent as to render
it impossible to pay the death claims, then the Reserve Fund > in
be used for that purpose. This provides a definite guarai.tea that
all death claims shall be paid in full at all times.
Every precaution has been taken to protect the Reserz'e Fund
against the possibility of its being misappropriated . Experience
proves that, it imperils the safety of any financial institution, and
demoralizes the officials to place the sole custody of large sums of
money in their hands to be controlled by them at will.
The Mutual Reserve has by the appointment of a separate
corporation as Trustee for its policy holders, [the Central Trust
Company, of New York, with over $20,000,000.00 of assets,]
removed this temptation and placed the surplus funds of its mem-
bers beyond the control of the officials and who can never handle
a single dollar of it without first giving satisfactory proof that it
is required for one or other of the purposes above indicated. The
following extract from the '•Report of the Investment Commit-
tee " shows how carefully the Reserve Fund is invested and
protected.
Extract from Report of Investment Committee. — *'This committee ia
composed of five of your directors, and all applications for loans are referred
to it. Such as appear dcsitable are investigated by us, not less than three
members having personally to examine the property and make a favor-
able written report before the matter is brought before your Board of Direc-
tors. Applications which are reported favorably are carefully considered by
your Board of Directors, and if approved, are referred to Mr. Coleman
Chairman of the Board of Tax Commissioners of the city of New York, by
whom the property is examined and appraised, if his report is favorable, and
the amount a«ked for is not more than 60 per cent, of his valuation, the
application is submitted to the President of the Central Trust Co. of New
York ; if he advises to make the loan, and it seems in every way desirable,
the title to the property is thoroughly examined by the counsel of the asso*
elation, and if approved by them, the loan is made. Every dollar of the
Beserve Fund must go through the above process before it can be loaned .
When a loan is made, the Central Trust Co. takes the bonds and insurance
policy before paying out the money, leaving us the mortgages long enough
to get them recorded, and then taking tliem also.
*' All loans are deposited with the Central Trust Co. and we cannot col-
lect so much as the interest upon them, said Company holding power of
attorney for that purpose, and having control of the whole matter under the
deed of trust giving it by your association. These precautions were not
adopted under the advice of authority, or the coercion of law, but are safe-
guards which the officers of this association have voluntarily thrown around
its Reserve Fund, and are so far as we know, without precedent or parallel.
Respectfully submitted,
SAMUKLA. EOHINSOX, M.I).,
Chairman of Finance Committee on Investments.
HENRY J. REINMUND, Comptroller,
(Late Superintendent of Insurance State of Ohio.")
This fund serves as a guarantee to policy holders that the cost
of their insurance shall not exceed the amount indicated by the
Experience Tables, and that every just claim shall be paid in full,
no matter how many refuse to pay their mortuary calls. In other
words, the Reserve Fund of the Association serves every purpose
in the way of security and exemption from liability, that the
capital ot a stock company does with greater advantages to policy
holders.
1st. It is an actual cash asset, and not an asset on paper
merely as is nine-tenths of the capital of stock companies, which
may, or may not be paid, according to the financial standing of
the stock holders when the stock is called. 2nd. The Reserve
Fund now amounts to over $1,500,000.00, which is $1,375,000,00
more than the paid-up capital of the oldest stock company on the
continent of America^ and nearly $1,000,000,00 more than the
paid-up capital of all the ordinary life Canadian stock companies
combined. 3rd. The interest earnings of the Reserve Fund, now
amounting to over $60,000.00 annually, are paid to the members
and not absorbed in the payment of dividends to stock holders ;
-'■17
and an equitable proportion of the principle is returned to members
after fifteen years membership, instead of being used to pay up
the stock for the benefit of stock-holders as is usually done by
stock companies. See History of Dividends, dr^c, appropriated
by stock holders.
In the report of the Superintendent of Insurance for 1886,
under the heading of "expenditure in the returns of an old line
stock company there appears the following item.
♦•Written off loans on real estate, (mortgage having proved
a forgery) $2,000,00."
As will be seen from the extract from the '* Report of the
Investment Committee," a fraud such as the above mentioned
could not be perpetrated on the Mutual Reserve.
How such a fraud could be possible, in view of the fact, that
this same company paid $8,149.32 for ** Solicitor's Charges*'' and
" Valuation Fees" seems a mystery, and is surely sufficient to show
the importance of the precaution taken by the Mutual Reserve,
CHAPTER IV.
Having briefly outlined the plan adopted by the Mutual
Reserve I shall now make a few comparisons as to cost security,
and cost of management.
1st. As TO THE COST OF INSURANCE. CoST OF $ 10,000.00,
LIFE INSURANCE in the Mutual Reserve, and in an ordinary life
or old line company respectively. It is assumed that the insured
will live out his expectation and pay full rates in an old line com-
pany, and the maximum amount each year in the Mutual Reserve,
the admission fee and medical examiner's fee being included.
Age.
40
60
55
Saving.
$4,196.50
$5,122.00
$4,795.20
TABLE No. II.
Mutual Reserve. Oil Line Co.
$4,567.50 p 8,764.00
$4,314.00 $ 9,436.00
$5,389.50 $10,184.70
It will, no doubt, be argued that old line companies give
profits to which I answer so does the Mutual Reserve. The divi-
dend in i886 was 33^^ per cent, of y^ of all assessments paid.
The interest alone, on the amount saved by insuring in the
Mutual Reserve would yield a profit of nearly a thousand dol-
18
lars, during the expectation of life. I shall explain how this is
possible, and where the money comes from later on.
2nd Security. (A). The rates of the Mutual, Reserve,
though 50 per cent, below old line companies, provide fcjr $17.92
per $1000 for death losses, at all ages, exclusive of expenses*
while, as I have already proved, $12.00 per $1000 is more than
sufficient.
(B). The Mutual Reserve has now over 50,000 members
upon each of whom it can call for their proportion of the amount
required for the death losses and expenses, up to the American
experience Table of mortality and 33"^ per cent, in addition for
the Reserve Fund. If any member refuses to pay, his policy
lapses and the association is relieved of all liability to him. This
is exactly the same as in an old line company except that the cost
is 50 per cent, more than in the Mutual Reserve. Every policy
holder must pay his premium when it is due, in any company on
any plan, or he is cut off and is no longer insured. The great
aim of nine-tenths of all who insure is that those who are depend-
ent upon them for support, may be provided for in the event of
their being taken away in early life. This is the only influence
that can be brought to bear on any one to induce him to pay the
premium ; there being no law by which any one can be compelled
to continue his insurance one day longer than he so desires. And
the company or system that furnishes life insurance and good
security on the easiest terms, will be the one that will grow in
favor and overshadow and supplant companies doing business on a
more expensive and less secure basis. This is why the Mutual
Reserve has now more business in force at the commencement of
its eighth, than the New York Life had in its fortieth year. Its
system has only to be known to be appreciated.
(C). The Mutual Reserve has $100,000.00 more Government
Deposits than the law requires and is prepared to place all the
Reserve Fund in the Insurance Department for the security of the
members if the Government so desire.
(D). The Mutual Reserve Fund Life Association has always
on hand in cash securities three thousand dollars for each one thou-
sand dollars of unpaid death claims. In other words, it can pay
in full every death claim three times over, without receiving a
single additional dollar from any of its members.
k
I I
(E). It is the only Life Insurance Company where its assets are
placed in the hands of third parties, the great Central Trust Com-
pany, of New York (with assets of over $20,000,000.00), and
with Government authorities, who hold the same as trustee for the
exclusive benefit and protection of the members, and so invested
and held that neither the Trust Company or the Officers or Direc-
tors of the Association can divest the members of their ritijhts in
the accumulated Reserve Fund or misappropriate the same.
See Report of Investment Committee on Paf^e 16.
3rd. Management. — The best possible way to test the effi-
ciency and executive ability of the management of any Life In-
surance Company is to examine its record, and as will be seen
from the following, collated from the sworn reports of the
various life insurance companies, to the New York Insurance
Department, for the year ending December 31st, 1886, the
Mutual Reserve Fund Association leads all other companies.
1st. It has the most economical management. — Its expenses to
each $1,000 of insurance in force being $2.35, but one-third the
averageof all other companies, the lowest being $5.95, and the
highest $14.76.
Its expenses or each $1,000 ot new business were only $6.20
while the lowest of all other com] anies were $28.13; the
expenses of one company running as high as $121.94 for each
$1,000 of new business.
2nd. // has the most carefm management^ and as a result of
this its death losses are loxver than that of any other company ; its
members being carefully selected, and its funds devoted only to
the payment of just claims, Its death claims to each $1,000 in
force were only $7.65 ; the lowest of all other companies $7.78.
3rd. It has the most energetic management. (A). Its percentage
of new business to amount in force being $46.^5, the highest of
all other companies $36.66 ; the lowest $5.48. . (B). The in-
crease in its surplus was greater than in any other company, being
$76. 14 ; the highest of all other companies $18.02, the lowest,
four cents. f
4th. // is the sajest company. Its assets to each $100 liability
being $230 ; the highest of all other companies $142, the lowest
$113.
^ 20
its are
Com-
), and
for the
vested
Direc-
hts in
le effi-
ife In-
e seen
of the
nuance
>6, the
ises to
iid the
ncl the
$6.20
3; the
r each
suit of
ly ; its
)nly to
000 in
^78.
lentage
est of
^'he in-
being
owest,
lability
lowest
It is self evident, that if the same care is exercised in the
selection of risks, the death losses will be the same or nt-ai ly the
same under any system, consequently the company, or system
which carries on its business on the most economical basis will be
the best for the policy holder. 'Ilie following extract from Mr.
Tabor's "Three Systems " page 67, will be of interest to the
reader.
" In looking over the companies lor a series of years it will
be seen that their expenses have averaged from $5.00 to $15.00
per annum for each $i,oco of insurance in force." In the Mutual
Reserve the expenses are limited to $3.00 after the first year.
CHAPTER V.
Two questions : — " How can the Mutual Reserve furnish in-
surance for so much less than any other company ? " and ♦' How
can any company pay $10,000.00 to the representatives of a
deceased policy holder from whom they only received $4,314 ? "
are often asked; I shall try to answer both, as briefly and cleaily
as possible.
\st Question. — Extra expense is necessarily incurred in getting
new business in any company. In the Mutual Reserve this ex-
pense is limited to the admission, and medical examinei's fee,
which are paid by the applicant. In ordinary life companies this
expense is usually provided for by allowing agents a commission,
which varies from 40 to 60 per cent, of the first, and from 7^^ to
10 per cent, of each subsequent year's premium.
If this statement is contradicted over the signature, in his offi-
cial capacity, of the President, Manager or Secretary, of any
ordinary life insurance company I shall Y>^h\\%\\verh(itim et literatim
extracts from contracts which will settle the question.
The following extracts will suffice for the present.
" Some of the most profitable general agencies of our leaili'cj cnmpanios
yield a revenue of from $10,000 to $30,000 per annum, and marly all of tliia
is from renewal commissions."
N. WiiiLKY LiFB Agents' Instruction Book, Page 87.
"REBATE INIQUITY."
•• Notwithstanding all that has been written on this subject,
the evil still continues, and the most glaring cases are of almost
21
^
If
I ■ i
daily occurrence. One remarkably outrageous case has come
under my notice within the past month.
Several agents were in pursuit of a risk for $10,000, until it
became a case of who could put the greatest monstrosity in the
shape of estimates on paper. All were adepts at this, and all the
big companies were on the trail. Until finally an agent named
such a rebate that he was promised the risk."
"This practice, I hold, is dishonest on the part of the com-
pany which allows it, and a simple illustration will suffice as
proof. Jones insures for $50,000, premium, say $2, 500 per annum,
and receives a rebate of fifty per cent, as in the case just mentioned ;
while Smith, insuring with the same company for same amount,
pays full premium. Jones has the advantage of Smith in the way
of prolits ecjual to $1,250 with its accumulations, and the longer
the contract runs the greater the advantage. The general agent
who docs this sort of business is acting most dishonorably, and
his name should be given to the public."
Insurance and Finance Chronicle,
Montreal, January, 1888.
The Itisnrance Chronicle is an old line journal and will not be
suspected of stating the matter too strongly.
It is an open secret that a few years ago the Equitable, of
New York, paid their Montreal agent $115,000.00, and their
agent in Paris, France, $70,000.00, on the condition that they
relinquish their contracts, from which it appears that they must
have had extra good terms.
TABLE No. III.
Assuming that, old line companies pay agents a commission of
60 per cent, on new business, and that tne whole of the admission
fee is spent in getting new business in the Mutual Reserve, the
following shows the saving the first year on $20,000 insurance.
Cost of securing $20,000 insurance.
Old Line
Mutual Re-
Saving
Age.
Premium.
Agent's
serve Admis-
First
Commission.
sion Fee.
Year.
40
$626 00
$375 60
$80 00
$295 60
45
759 40
455 64
80 00
375 64
60
948 60
666 16
80 00
486 16
65
1,198 92
718 80
22
80 00
638 80
TABLE No. IV.
The following table shows the saving the second, and each
subsequent year on a $20,000 policy.
Old Line ,,. Mutual Re
Age. Premium.
Acenl s Com- . serve (. ost of
_: ■ _ Assess- .. ,, ^.
Collection,
40
45
50
55
$
r)2(; 00
759 40
94:i <;o
I.IDS 1)2
mission,
10 p.c.
$ (12 «)()
75 94
91 ;{()
119 H9
NLix.
>sess-
ments.
$2').? 40
299 20
Ml 40
599 00
4 P-c.
$10 52
11 9i;
14 OS
2.'{ 5()
Saving.
$52 OH
(\:\ 98
79 M
90 :i2
To the above commission there must be added at least 50 per
cent, for salaries, travelling expenses, etc. to Superintendents, In-
spectors, etc. ' the employ of old line companies. This as will
be seen will more than exhaust the balance of the first year's pre-
mium. In order to defy contradiction as to cost of collection
under the system of the Mutual Reserve and the Ohl Line plan
respectively I tiUbjoin the following extracts taken from the annual
statements subscribed and sworn to by the chief agents of the
Mutual Reserve, and Canada Life, and published in the report of
the Superintendent of Insurance for 1886.
MUTUAL RESERVE.
"Cost of leveying and collecting $1,547,258.42 of assets
ments for the year l886, danl' ami collector's charges and discount
allowed $54,707. 14 " less than 4 per cent.
CANADA LIFE.
"Total outstanding and deferred premiums $44^,441.95
deduct cost of collection at lo per cent. $44,334 19." The cost of
collection is set down at 10 per cent, in the annual statement of
every company reporting to the Superintendent of Insurance. And
if any one doubts it he has only to turn up any of the Reports in
order to see for himself.
In addition to the expenses already stated there is wliat are
usually called '* office expenses," which include salaries of officials.
President, Manager, Secretary, Clerks, printing, advertising, etc.,
etc., and in stock companies, dividends to stock holders.
In old line companies these expenses are regulated to suit the
circumstances and wants of the officials ; there being no limit to
what may be expended in this way. Old line companies usually
23
T
;i:
I
add 40 per cent, for expenses to the amount required for the pay-
ment of death losses, as indicated by the mortality tables, the
direct effect of which is to compel old and middle-aged members
to bear a disproportionate share of the burden. An examina-
tion of table No. VI, page 26, showing the elements of which a
level i^re.nium for $1,000 is composed, will enable the reader to
understand the matter fully. According to this table a member
nged 60 has to pay nearly four times as much, as one aged 25.
I conmiend this table as worthy o{ special attention. The columns
under the heading of *• Reserve Element " and ' ' Expense Element "
are particularly interesting when studied and compared with the
same columns under the same heading in table No. V, The *^ mor-
tality element is the same in both tables, being based on the same
mortality tables. No. 5, however, is based on the mortality
tables only ; No. VI is based on the same tables and 4^ interest.
This accounts for the apparent difference. The injustice of com-
pelling old and middle aged members to pay so much to expenses
is still more forcibly illustrated \n table No. Ill, page 22, where,
as will be seen, a person insuring at age 55 for $20,000.00 has to
pay $343,20 more to the a ^ent who writes his application than his
neighbour who happens to be 15 years younger. This glaring
injustice is corrected in the Mutual Reserve by an equal loading of
$3.00 for each $1,000 insured, and an admission fee to cover
initial expenses, which is the same at all ages. It co<5ts no more
money, time or trouble to keep the accounts of a metnber aged 55
than une aged 25.
24
TABLE No. V.
Table shOAving the elements of which the Premiunfi
for $1,000 Insurance is eoimposed after Ist year, based
on the American Tables of Mortality, worked by the
Mutual Reserve Fund Life Association of New Vork.
«
Maximum
Reserve
Maximum
Mortality
Maximum
Expense
Maxiiinim
amount wliich
can be collected
annually.
Element.
Element.
Element
25
$ 2 69
$ 8 07
$3 00
$13 76
26
2 71
8 13
3 00
13 84
27
2 73
8 20
3 00
13 93
28
2 76
8 27
3 00
14 03
29
2 78
8 35
3 00
14 13
30
2 81
8 43
3 GO
14 24
31
2 84
8 51
3 00
14 35
32
2 87
8 61
3 00
14 48
33
2 91
8 72
3 00
14 63
34
2 94
8 83
3 00
14 77
85
2 98
8 95
3 00
14 93
36
3 03
9 09
3 00
15 12
37
3 08
9 24
3 00
15 32
38
3 H
9 41
3 00
15 55
39
3 20
9 59
3 00
15 79
40
3 17
9 80
3 00
16 07
41
3 i«
10 00 •
3 00
16 33
42
3 42
10 25
3 00
16 67
43
3 51
10 52
3 00
17 03
44
3 61
10 83
3 00
17 44
45
3 72
11 17
3 00
17 84
46
S 86
11 57
3 00
18 43
47
4 00
12 00
8 00
19 00
48
4 17
12 51
8 00
19 68
49
4 37
13 11
3 00
20 48
50
4 59
13 78
3 00
21 37
51
5 11
16 34
3 00
23 45
52
5 67
17 03
3 00
25 70
53
6 23
18 72
3 00
27 95
64
6 80
20 40
3 00
30 20
65
7 36
22 09
3 00
32 45
56
7 92
23 78
3 00
34 70
57
8 48
25 47
3 00
30 95
58
9 05
26 15
3 00
39 20
59
9 61
28 84
3 00
41 45
60
10 15
30 53
3 00
43 70
per $1,000 ^ «> * *•'
$13 45
$3 00
$20 94
Members desiring tc make payments annually in advance can do so at
the above rates (to thp Home Office,) and the amount not required during
the year will be applied to reduce the next annual payment.
26
J
r
TABLE No. VI.
-:o:-
Table showing the elements of which a ievel premium for $1,000
insurance is composed, based on the American Tabies of IMortality, and 4^ per
cent, interesti and worl<ed by American Companies. Manufacturers' Life
InruranceCo., "Agents Bool< of Estimates," page 43.
<
Reserve
Mortality
Expense
Gross Level
Element,
Element.
Element.
rnmiiim.
25
$ 6 50
$ 7 71
$ 5 68
$19 89
26
6 81
7 70
- 5 83
20 40
27
7 13
7 82
5 98
30 93
28
7 47
7 88
6 13
21 48
29
7 81
7 96
6 30
22 07
30
8 18
8 03
6 49
22 70
31
8 57
8 11
6 67
23 35
32
8 98
8 20
6 87
24 05
33
9 40
8 30
7 08
24 78
34
9 86
8 40
7 30
2-) 56
35
10 33
8 51
7 54
26 38
30
10 82
8 64
7 79
27 25
37
11 30
8 77
8 05
28 17
38
11 89
8 93
8 33
29 15
39
12 47
9 10
8 62
30 19
40
13 06
9 20
8 9")
*31 30
41
13 70
9 49
08
32 47
42
14 37
9 71
9 04
33 72
43
1") 00
9 95
10 02
35 05
44
15 80
10 24
10 42
36 46
45
16 57
10 55
10 85
37 97
4G
17 35
10 92
n 31
39 58
47
18 18
11 S2
11 80
41 30
48
19 02
It 70
12 32
43 13
49
I't 8<»
12 43
12 88
45 09
50
20 73
12 97
13 48
47 18
51
21 62
13 67
14 11
49 40
52
21 53
14 45
14 80
51 78
53
23 46
15 33
15 r.2
54 31
54
24 43
It; 30
16 29
57 02
55
25 41
17 38
17 22
59 91
nr,
26 4t.
18 60
18 00
63 00
57
27 42
19 93
18 94
66 29
58
28 ;;?
21 40
19 95
69 82
59
29 52
23 10
21 03
73 60
60
30 60
24 85
22 18
77 66
G'daver
piT if;i.(
;,^o'S-«ici4
$12 10
$11 20
$39 44
Any one who wishes can see this same table on pages 202-203
*• Tabor's Three Systems of Life Insurance." In Tabor's work
the Actuaries' Table is used and the interest is calculated at 4 per
cent, instead of 4K» and the agft are given up to 99 . At this age
the expense element of a level premium is $320.51 per $1,000 in-
surance annually.
n
I feel sure, that anyone who will examine the facts which I
have stated, will easily understand how it is possible for the
Mutual Reserve to furnish life insurance at less than one -half the
rates of ordinary life companies. The practical application of
those principles which experience has shown to be essential, and
the rejection of features which has endangered the safety, and re-
tarded the progress of life insurance, combined with strict econo-
my in every department, care in the protection and honesty in the
administration of the trust funds of the Association contain the
answer in a nutshell.
CHAPTER VI.
2nd Question. — '♦ "Where does the money come from ?" In
the " Independent" (?), 3rd March, 1887, there appeared the fol-
lowing :
•* As an evidence of the wise management and admirable in-
vestment of its funds, the following list of payment of death
claims in 1886 has been published, showing what the cost of
insurance is in this company. Tt will be seen that for every dollar
paid, by the insured to the Mutual Life, the Company returns
$2.68 to the policy bolder."
During the same year the Mutual Reserve returned at least
$23.00 for every dollar paid by the insured. If the reasoning
adopted by the "Independent" (?) is correct and honest, it fol-
lows that the wisdom displayed in the management and invest-
ment of the funds of the Mutual Reserve must be at least nine
teen times greater than that of the Mutual Life. It is fair to
presume, that if the Mutual Life returned $2.68 in the 44th year,
•'for every dollar paid by the insured," it iiust have returned at
least an equal amount each previous year ; e. g. suppose a young
man insured at age of 25 for $10,000 when the company started*
and that he died within a year thereafter, his heirs would get more
than $50.00 for every dollar he paid the company. The average
duration of the policies of all who died within the first seven
years could not be more than three and a half years, therefore the
company must have returned at least $10.72 for every dollar paid
by the insured ; the heirs of all who died within the first fourteen
years must hftve received at least an average of $5.36 for every
27
dollar paid by the insured, and so on up to 1886. All insurance
companies publish similar statements each year. The New York
Life professes to have returned $2.80 in 1886 for every dollar
paid by the insured. Well may the * ' Independent " (?) remark
that these companies have ^* attracted the attention of the public"
for it must not be forgotten that they are Mutual Companies that
they have not nozu, and never had, a dollar of capital stock ; that
ihty covamenced on the co-operative plan, i. e. they were entirely
dependent on the voluntary contribtitions of their members, for
the payment of death losses, and every other item of expenditure ;
and that, as they expended four times more in management, they
were dependent on their members for a sum four times greater than
that required by the Mutual Reserve ; that neither of these com-
panies have realized five and a half per cent, compound interest
on their gross assets ; that they have sunk millions of dollars in
buildings ; that they have expended in management nearly $3,000,
000.00 each year, or a total of over $75,000,000.00 within the
last twenty five years ; that they have returned from $2.80 to $50
for every dollar paid ** by the insured ; " that notwithstanding all
these seeming impossibilities their surplus funds have increased
at the 1 ate of $11,500.00 per day or over $4,000,000.00 each
year since they commenced business.
Where does the money come from ? If such statements are
true how can they be accounted for? They are literally true and
can easily be explained so that any one can understand the secret.
I shall lift the veil and dispel the mystery. Life Insurance Com-
panies on any plan, are corporations composed of members not
individually, but collectively considered ; an unlimited number of
members mutually bound together by the strongest of all cords,
the protection of their families ; the many who are spared con-
tributing to make up a stipulated amount to the representatives
of the few, who are taken away each year. The great majority
insure their lives and keep up the policy so long only as they require
it for the protection of their families ; this is doubtless one of the
reasons why lapses are more numerous among policy holders who
are up in years, than they are among those in middle life-
The death losses of an insurance company cannot be estimated
in the same way as can the deaths which will take jiJace each year
28
T
in a given number of individuals. That all must die is a moral
certainty, but that only a very small percentage of those who in-
sure will remain insured until death, is all but equally true.
There is scarcely a policy holder to day who has not lapsed one
or more policies. This is known and admitted by the best au-
thorities, and used as an argument to induce men to take out cer-
tain kinds of policies. In support of these statements I submit
the following tables : —
No. VII is taken from "Agents' Book of Estimates," page
44, now in use by the Manufacturers' Life Insurance Company.
This table was revised by Professors Tabor, of Chicago, and
Standen, of New York, actuaries. No. VIII will be found on
page 142, "Life Agents Instruction IJook," by N. Willey, ac-
tuary, and is given to illustrate the tontine dividend system.
TABLE No. VIL
"Showing the natural process ot disposinic ot 1000 per-
sons, each 40 years old at entry, representing $1,000,000
insurance by applying the mortality and lapse experience.^'
i
00
C
M
No. of
mbers be-
ing of year.
to
<u
to
0.
S3
•
00
*->
a
Si
1—1
0)
* -
d
d
5^
1
1000 00
174 00
8 CA
2
817 45
78 49
7 50
3
731 47
57 05
7 02
4
667 38
45 38
6 67
5
615 33
35 07
6 43
6
573 82
26 39
6 27
7
541 15
26 51
6 17
8
508 46
18 30
6 10
9
484 05
12 10
6 12
10
465 83
13 50
6 17
11
449 14
11 15
6 24
12
428 74
6 76
6 38
13
41', 60
6 65
6 51
14
402 44
8 04
6 65
13
387 74
3 48
6 86
16
377 38
3 77
7 10
17
366 50
3 66
7 36
18
355 47
1 06
7 65
19
346 75
6 11
7 95
20
335 69
3 35
8 25
21
324 08
2 91
8 55
22
312 60
1 56
8 98
23
302 14
1 81
9 24
24
291 08
2 91
9 58
25
278 59
2 78
9 89
26
265 90
2 65
10 21
27
253 03
a 53
10 52
28
239 98
2 40
10 81
29
226 76
2 26
11 05
O
5 o
fd
8
7
7
6
6
6
6
6
6
6
6
6
6
6
6
7
7
7
7
8
8
8
9
9
9
10
10
10
11
540
•")()0
020
670
4:?0
270
170
100
120
170
240
380
510
C5(>
860
100
360
650
950
250
650
890 ;
240!
580
890
210
520
810,
050 '
30
31
32
33
34
3-)
36
37
38
39
40
41
42
43
44
45
46
47
48
49
50
51
52
53
54
56
O U
o ^
u
e
6C
6C
52
18
213 44
200 05
186 50
172 95
159
146
132 93
119 97
107 31
95 13
83 48
24 43
63 76
53 86
43 80
35 96
28 80
22 66
17 45
13 11
9 59
6 71
4
2
1
43
n
67
94
o
Total
13
00
86
73
59
46
32
19
07
95
83
74
03
53
43
35
28
22
17
13
09
06
04
03
02
01
5 77
o
S O
O cS
11
11
11
11
11
11
11
11
11
10
10
9
9
8
7
6
5
4
4
3
2
,2
1
1
423 00
$
$423 000
29
It
m
i i
TABLE No. VIII.
be
<
No. of
Policies
in force.
i
P.
A
Death
Losses.
®
tie
No. of
Policies
in force.
S
09
eS
Death
Losses.
25
26
27
28
29
30
31
32
33
34
35
36
1000
917
840
774
718
6(i!)
C25
589
555
522
491
463
75
69
59
50
43
38
31
29
28
26
24
23
8
8
7
6
6
6
5
5
5
5
4
4
37
38
39
40
41
42
43
44
45
46
436
410
386
363
341
321
302
284
267
251
22
20
19
18
17
16
15
14
13
4
4
4
4
3
3
3
3
3
649
100
Neither of these tables take into account the surrender poli-
cies which make up nearly one third of all policies terminated.
These tables were never intended for the public. An inspection
of them will explain the cause of the wealth and prosperity of
insurance companies, on other grounds than those given by the
"Independent" (?) In Table No. VII, for example, it is admit-
ted that the rates are high enough to enable the "Manufacturers"
and all other line companies, to pay $1,000,000.00 of insurance,
but that they never exf)ect to be called upon to pay more than
$423,000. And if the surrendered policies were deducted from
the $423,000, the amount to be paid would be reduced by at least
$150,000. Table No. VII reveals the fact, that 649 policy
holders will lapse and only loo will die out of 1,000, in twenty.
one years, and that the lapses are even greater than indicated by
these tables is evident from the following extracts from the
writings of several well known old line actuaries. Nathan
\Mlley, says on page 9, ** Life Agents' Instruction Book" that
r'}C loss of insurance during the past few years, equal to 70 and
'I .■> -r cent, of the new business in lapses surrenders and not
I t,\ '-^ ,'oiicies suggest the importance of reform." That is for
^ .i .' =; > mndred new policies issued each year, eighty policy holders
I refuse to continue their insurance any longer, preferring to lose
I what they have paid rather than to continue to pay such exorbi-
I tant rates. Some years the lapses and surrenders were over loo
30
•I "
i ®
« s
i °
4
4
4
4
3
3
3
3
3
per cent, of the business as may be seen from the following,
'.aken from the reports of the Insurance Commissioner of the
State of New York.
The Mutual Life had 13 tnillioHS less insnrance in force in 1871
than it had in 1870; it had 14 millions less insurance in force in
1878 than it had in 1875.
The New York Life had nearly thtee tnillions less insurance in
force in 1878 than it had in 1877, and less insurance in force in
1879 than it had in 1876.
The Equitable had Hventy seven millions less insurance in
force in 1878 than it had in 1873, ^"'^ more than eighteen millions
less in 1877 than it had in 1875.
The North Western of Milwaukee, had nearly five millions
less insurance in force in 1878 than it had in 1871, and nearly six
viillions less in 1879 than it had in 1876.
As these are four of the largest and most wealthy insurance
companies, it is fair to presume that if the lapses were great in
them they would not be less in smaller companies. If the busi-
ness of the Mutual Reserve fell off like what it did in the above
companies, it would be heralded in all the old line journals as a
sure indication that the end was not far distant. But a decrease
of twenty-seven millions of business in lapsed and surrended poli-
cies in an Old Line Co. in less than five years, seems to be looked
upon as an event which was of common occurrence, and therefore
unworthy of notice on the part of Old Line Insurance Journals,
such as " The Monetary Times ^^^ q{ Toronto, and ^'■Insurance
Chronicle y''^ of Montreal.
On page 69 '* Principles and Practice of Life Insurance" by
Nathan Willey, he says that, — "The combined statistics reti'med
by fifteen life offices in England shows that the average life time
of a policy in those companies up to the year 1843 ^^^ ^^^^ \)ci2lVl
five and one half yearst
In the Gotha Life of Germany, it was a little over eight years :
and in the Equitable Life, of London, twelve and a half years.
" In the seventeen life offices, the average duration of life,
after insuring, of the policy holders who died was 6413 years.
In the Massachusetts report for 1861 we find that on 2, [80 poli-
cies which had been forfeited in companies doing business in that
state, 7,646 premiums had been paid, making the average duration
of each lapsed policy 3.51 years,"
31
I
Ili'
On page 69 ** Three Systems of Life Insurance " by M.
Tabor, he states that, "the lapse alone of fifteen companies, from
1872 to 1 88 1 inclusive, were from 15 to 87 per cent, of their
entire new business written during that time, the average being
over 43 per cent. "The new business in round numl)ers was
1,730 millions of dollars. The amount of lapsed insurance,
►.herefoie, was 744 millions of dollars. We have compared the
lapses with the new business, but it must not be inferred from
this, that the lapses were from the new business. A very small
percentage of them weie from the new business. If the policies
averaged $2,000 each, 372,000 policies lapsed during the decade
named in only fifteen companies." The careful examination of
official s^tatements shows that the amount of insurance issued by
all the Old Line Companies : —
In New York from 1863 to 1883, was.. .$6,696,494,686
Amount of losses paid 408,610.120
Whole amount of Insurance lapsed and
surrendered 41834, 198,320
Atnount of insurances terminated 5,242,808,440
Amount of insurances in force 1,453,686,246
In other words that nearly seven thousand millions of insur-
ance were issued ; that eighty-five per cent, terminated ; that only
six per cent, was paid ; that seventy-nine per cent, lapsed, and
fifteen per cent, only remained in force.
From 1870 to 1S80 the active old line New York Companies
had 3061 death losses, and 29,431 lapsed policies, i. e. liX P^r
cent, by defection and ij/i per cent, by death.
During the same period the Tontine Companies had 5,516
lapses and only 506 deaths, i. e. ii 78-100 per cent, by lapse and
I 5-100 by death. And during the last five years the lapses have
averaged 47 per cent, of the entire new business done.
The ratio of lapses to new business in a number of the Cana-
dian Companies has been even greater than that of the New York
Companies. During the last five years there was 9,791 lapses and
surrenders and only 572 deaths or 18 lapses and surrenders to
each death in six companies.
The rates of ordinary Life Companies are based on the
assumption that every one who insures will continue his policy
until it becomes a claim, when in reality not more than one in ten
do so.
32
The Hon. Elizeer Wright, one of the most celebrated actu-
aries of the ninaeetith century, says, that, " In the be>t of old
line companies the lapsed and surrendered policies outnumber
those remainin<^' in force, and are about ten times the number of
those matured by death or endowment." A review of the history
of lapses, as given in these pages, covering a period of more than
fifty years, collected from official statements, and the writings of
old line actuaries, demonstrates the fact that the certainty of
death is nut more real than the certainty of termination for other
causes.
This, and not "wise management and admirable investment,"
accounts for the vast sums of money, life insurance companies
spend and accumulate as if by magic. In formulating the system
of the Mutual Reserve this factor was taken into consideration,
and utilized so as to be a benefit rather than an injury to those
members, whose circumstances compel them to continue their
insurance. See Reserve Fund, how accumulated, page
The guarantee that a member has, that his claim will be paid
by the Mutual Reserve is unequalled liy any other compnny, on
any plan in the world. 1st, He has the pledge of every member
of the Association, any violation of which will immediately cancel
his insurance and interest in the Reserve Fund. 2nd, Should
every member refuse to pay, then there is over $1,500,000.00 in
the Reserve Fund that can be used for that purpose. 30!, Should
every member lapse except say ten, those ten would hold a deed
and would really own the whole of the Reserve Fund and all that
they would then have to pay for their insurance would be one call
not in excess of the Mortality Tables as each one of the ten died ;
and when all died except the last, he would have his insurance for
nothing, because there would be no death losses to pay, and his
claim would be paid out of the Reserve Fund.
The substance of what I have stated may be briefly summed
up as follows :
1st. That the experience of life insurance companies, cover-
ing a period of at least 45 years, proves that the cost of insurance,
exclusive of expenses, does not exceed $12.00 per $1,000 at all
ages.
2nd. That the extravagant expenditure of money in the pay-
ment of salaries, commissions, bonus, waves, dividends to stock-
holders, and in the erection and equipment of costly buildings, is
88
"
prima facie evidence that the premiums of ordinary life insurance
companies are too high.
3rd. Tliat tlie rates of the Mutual Reserve though
50 per cent, below those of ordinary life companies, provides for,
at least $5,00 per $1,000 exclusive of expenses, more than either
the Mutual Life or New York Life required during the 45 years of
their existence. The Association is, therefore, on a safe basis.
4th. That the Reserve Fund of the Mutual Reserve ena.l)les
the Association to guarantee that the cost per annum shall not
exceed the Mortality Tables, and that every just claim shall be
paid.
5th. That, the ReserTe Fund, being invested and the securi-
ties held by a separate corporation as Trustees for the benefit of
policy holders are safeguards which are not found in any other
company, and is a guarantee that the trust funds of the Associa-
tion shall not be misappropriated by the officials.
6th. That, the fact that the Mutual Reserve has now more
business in force in its 8ih year than the New York Life had m
its 40th year, is an evidence of the superiority of its system over
all others.
7th. That, the expenses of the Mutual Reserve are less than
one-sixth of the average expenses of ordinary life conmanies.
8th. That, the death losses of the Mutual Reserve are lower
than that of any other company.
9th. That, there are from ten to twenty policies terminated,
in ordinary life companies for other causes, for everyone that is
terminated by death.
loth. That, there are fewer policies terminated for other
causes than that of death in the Mutual Reserve than there are in
any other company on any plan with the same amount of business
m force.
The representatives of old line companies make considerable
capital out of the cash surrender or paid-up insurance feature of
their system.
The insurant is informed that if at any time he is unable to
make his payments or wishes to discontinue his insurance he will
not lose anything, as in that case the company will give him a
pa'd up policy or cash surrender for all he has paid. Let us
examine this statement.
84
No insurance company, on any plan, can return that portion
of the premium which lias been used in the payment of death
losses and expenses ; the reserve or bankitij; part of the premium
is all that is available for this purpose. And if the reader will
turn b-ack to page 26 and examine the elements of which a level
premium is composed he will see that the reserve is less than one-
third of the amount paid. Hut, as will be seen from the following
extracts, no ( onipany returns the full amount of the reserve even.
In " Life Af^eiits Instruction Uook," page 121, by N. Willey,
Actuary, he states that "The surrender charge of 25 per cent, on
the res('>-^>e is as low as the most liberal companies adopt, many com-
panies charging y?/?i' per cent.
In " Three Systems," pace 70, by M. Tabor, Actuary, there
appears the following intf^resting chapter on surrender values and
paid up policies : "A policy holder in a certain company asked
for the cash surrender value of his policy. His reserve and sur-
plus amounted to $I 15.99. The company offered him $26.38 !
"Another gentleman who was insured in another comjiany,
asked for the cash surrender value ot his policy, and was offered
$ 1,876.52. His resen>e and surplus amounted to $5,400.00.
The amount paid by 29 companies doing business in the State
of New York, for the year ending Dec. 31, 1884, foi" lapses and
surrendered policies, was $9,503,530. Assuming that they paid
an average o{ one-quarter of the reserves, the whole reserves amount-
ed to $38,014, 120 I If these policies surrendered were all ordi-
nary life policif^s, issued at an average age of 35, and had been in
force an average of four years, their cash surrender value, accord-
ing to the Massachusetts Standard, zvas $23,948,896, — sixty-
three per cent, of the reserves. The differenco between what
they ]")aid and ivhat they might have paid — according to Massachu-
setts law — ruithout impairing their vitality, was $14,445,366. The
last amount, therefore, was the net profits in cash surrenders
values, for one year, of only 29 of the 50 regular life companies
doing business in America I
"The amount of cash paid for surrender policies from 1875 ^o
1884, inclusive — 10 years — by the companies reporting to the
Massachusetts Insurance Department, was $92,099,599. As-
suming that an average of one third of the reserves was $276, 298,
36
policies, anf] issued .it an average age of 35, and liad been in force
an average of four years, their cash surrender value l>y the M.issa-
chusetts Standard rvas $174,068,242! 'I'hese comi)aniis could
have paid this last amount without impairing tlieir vitality. Sub-
tract what was paid [$92,099,599], from what might have safely
heen paid [$174,068,242], and we hai'e $81,968,613 as the nrt
profit in one decade^ in cash surrender valuer, by considerably less
than the whole number of life companies doing business in this
country at that time. •' Had these policies been on the ten year
life plan, instead of on the ordina.iy life, as assumed, the nei profit
tvould have been viore than 162 millions of dollars! "''
In the Mutual Reseve the whole of the Reserve Fund and its
accumulations to the credit of members whose policies have been in
force for fifteen years, shall be used in granting extended in-
surance or paid as a cash surrender value.
CHAPTER VII,
Having proved that the Mutual Reserve is furnishing life
insurance for less than one-half the cost, that the security is in
many respects superior, and that the system is more scientific and
equitable than that of old line companies, I shall now expose a
few of the deceptions and misrepresentations that arc constantly
made use of in order to mislead and impose upon the public.
Deceptions. — One of the mos^t common forms of deception
practised is to publish through the columns of ** Insurance^*
Journals, '■^Finance'^ Chronicles " etc., cooked statements intended
to prove that the cost of insurance increases indefinitely as the
company advances in years. A sample of the false reasoning
resorted to will be found in the "Monetary Times" for 25th June
and 2nd July, 1886. In order to prove that^ the premiams collect-
ed by old line companies are not too higV. the following remark-
able statements are made : ** In England a great many carefully
conducted companies are now paying out each and every year
very much larger sums than they are receiving from premiums. In
a number of cases the reserves are being annually drawn upon to
meet the yearly deficit, and yet these companies are pushing on
successfully in insuring new lives. We need not, however, go so
far away as the old country to find proof that the ordinary pre-
miums are none too high to provide . or current death claims when
36
new members cease to come in rapidly and olil ones have grown
older. Several life insurance companies, formerly doing a con-
siderable business in Canada, have ceased at one time or another
since 1878 to solicit new risks, and the consequence is that though
their membership and insurance carried are decreasing, their death
losses are growing heavier and heavier as the years go by. Take
the first year of the last dtiide, 1876, and we find that eleven
companies received in that year premiums amounting to $388 456,
and their death losses were then only $209,910, showing a gain
to the funds of $178,546- But coming down to the last year of
the decade, namely 1885, we find the figures nearly reversed. The
premium receipts were over a third less, and the losses nearly a
half greater, as follows : —
Premium received by II companies $201,588
Losses incurred in 1885 296,531
Showing a loss in the year of 94,943
'* Dividing the decade into first five years we find the follow-
ing to be the receipts and claims of the following companies
during each period, as found in the Blue Eo.jks issued Irom
Ottawa :—
FIRST FIVE YEARS.
Name of Company, Premiums, Losses.
Briton Medical $ 188,030 $ 121,357
Edinburgh Life 108,905 48,015
Life Association, Scotland 558 830 313, 382
Mutual, of Hamilton 194,460 49,661
North British 139,208 110,687
Queen, of Liverpool 54,570 31,662
Reliance Mutual 128,965 42,683
Scot. Amicable 100,162 73,965
Scot. Provident , 25,665 6,813
Scot. Provincial 152,402 129,183
37
$1,643,197
$ 927,310
m
SECOND FIVE YEARS.
Name of Companv.
Briton Medical $ l.Ti.dl.'}
E(linburfi[h Life
Life Association, Scotland
Mutual, of Hamilton
North British
Queen, of Liverpool
Reliance Mutual
Scot. Amicable
Scot. Provident
Scot. Provincial
Premiums.
Losses.
$ i.u(;i3
$ 207,727
8:5,491
7:5,275
;5S8,588
880, 58S
180,015
98,0:57
120,489
115,54!>
49,754
52,;54(;
77,944
00.90:5
60,8()2
1:50,44 ^
19,4:56
1:5, 2:59
127,192
187.904
$1,241,954 $l,:V28.i:50
"Glancing up and down these fii^ures it will be seen tliat in
eve'/ instance the death calls of the second five years were very
much heavier than during the first five years. In several cases
they are nearly double, notwithsiaiiding that in all cases the
income, and, therefore, the amount of insurance in force, has
decreased. Looking at the footings we find the following result:
Periods. Preriinnis. Losses.
First five years ....$1.01:5,197 $ 927,:510
Second five years 1,241,951 l,:528,i:50
"With $401,243 less premiums, death increased $400,836."
In the issue for 2nd July, 1886, the discussion of the sul)ject
is continued and the experience of the companies above mentioned,
from 1875 ^° '885, inclusive, is again quoted to prove that old
line rates are not too high : " If we add 15 per cent, to death
claims, for expenses, we find that an annual premium, or an
assessment call of $11.70 per $1,000 would answer at the be-
ginning of the period, while for 1885 $48 per $1,000 would be
called for. In a society of 1,000 members always kept full, each
paying twelve assessments of $ i each year, with no expenses to
meet and having no deaths until the full $2,000,000 is made up,
each individual must live more than 166 years after joining before
$2,000 could be paid each member, if no money is put out at
interest. Assuming 24 assessments annually each man aged 30
at joining would be 113 years old before all could be provided
for. A man aged 40 has 27 years of life ahead, on the average.
38
Hence it would take $74 per annum to provide $2,ocx) at his
death if there were no more income from intere«;t than would
meet expenses. But if only $20 were paid each year for half the
time — about the amount some people think sufficient — then
$128.15 would have to be paid during the last half of the
27 years or the money would not be made up. And yet though
anyone can see that the above statements are true as that two and
two make four, thousands of otherwise intelligent people are now
paying exorbitant admission fees to get into assessment enterprises
whose agents assure them that the cost hitherto has been only
one-quarter or one -third what regular companies have been chargin^^.
Let us analyze these ''statements," and in doing so we may
find that they are not quite as true "as that two and two make
four."
What are the reserves, about which we hear so much from old
line agents? It is a scheme devised by insurance companies,
which requires the insured to insure himself by depositing with the
company each year, a sum, in addition to his full share of the
death losses and expenses, which, together with the interest at four
or four and a half per cent, shall equal ^he face value of his policy
when he reaches the age of 96. And when he dies his claim is
paid out of the mortality element of the premiums of other policy
holders, and the company pockets the reserve, or at least the
greater portion of it. The mortality and expense elements of a
level premium in an old line company are sufficiently high to
meet the necessary expenditure independent of the reserve element.
See Table No. VI, page 26. Every dollar of the reserve, as the
reader may easily see. is extorted from the insured as a deposit,
which has no connection with insurance, and which is of no use
to the policy holder, or to the company until the policy becomes
a claim. 1 he impression that old line representatives try to make
is that the reserve can be used, and is created for the purpose of
guaranteeing the payment of claims — that it is wealth. It is not
wealth, but an ever increasing debt which the company owes to
its policy holders. It is not a source of strength, but of weakness.
It is not an element of safety but of danger. It places 7>ast sums
of money in the hands of the officials and thus subjects them to a
most insiduous and powerful form of temptation to wrong doing in
the misappropriation of trust funds, which has proved too strong
89
for thousands of men who have been considered /r^J^ against any
and every form of temptation. And to this may be traced the
failure of nine-tenths of all the old line companies, through which
thousands of policy holders have lost both their insurance and
reserve or bank deposits. Millions that have been deposited with
insurance companies have been literally stolen from the widow
and the orphan and appropriated by old line insurance companies
and their officials.
In an insurance company operated on the plan of the Mutual
Reserve this danger does not exist, as the system avoids the
accumulation of vast sums, the money being left with the memljers
until it is required, and when paid in it is immediately paid out
again. Only a small percentage of the premium is set aside
as a reserve, or emergency fund, the most stringent regulations
being made for its investment and protection. See Report of
Investment Committee, page 96. Several old line companies
have such vast sums of money now on hand that the officials
are unable to invest it. This accounts for the millions that
have been and are now being sunk in expensive buildings, such
as the New York Life is now erecting in Montreal and in
many other cities. The interest on the money paid for the
sites alone on which the New York Life and Canada Life are
erected, would be more than enough to pay the rent of offices
sufficiently large and numerous in which to transact all the insur-
ance that is, or will be, done in Canada for the next century.
In order that the reader may see that I have correctly stated
the purpose which the reserves of ordinary life companies serve,
I shall submit the following evidence from well-known old line
actuaries. *• This larger premium is required to provide for a
fund or reserve, which with the annual interest therefrom will
meet the ultimate payment of the risk when the insured reaches
the age of 96, or if he dies before, it will be added to the contri-
bution of other policy holders to pay his own claim." — N.WiUey,
"Life Agents Instruction Book," p^^e 23,
'* A level premium company not having in hand the reserve
is not solvent . The reserve can be used for no purpose whatever,
while the original policy is in force, except for accumulation." —
M. Tabor, «* Three Systems," page 61.
40
•• The fact is the reserve is simply and purely a bank deposit,
belonging for life or death to the depositor, and having no more
real connection with the insurance risk than a corresponding
deposit in a bank across the street would have." Emory McClin-
tock. Actuary, Northwestern Mutual." (An old Line Company,
J. T. P.)
" No part of the Reserve can be used to pay a death claim
on any policy save the one to which it belongs, any more than a
bank of deposit can use the funds of one depositor, to make good
its losses to any ot'^er." E. D. Williams, Consulting Actuary.
If the statements of the "Monetary Times" that "Many
carefully conducted companies are now paying out each and
every year very much larger sums than they are receiving " and
that •* the reserves are being annually drawn upon to make up
the deficit, and yet those companies are pushing on successfully
in insuring, new lives, are as true as that two and two make four,"
the officials are misappropriating the deposits entrusted to them by
their policy holders and are guilty of fraud ; the companies doing
so are insolvent, and if they are, "pushing on successfully in
insuring new lives " they are swindling the public. If the ou lay
exceeds the income year by year, the ultimate result is inevitable.
The company must fail, and then where will the funds come from to
pay the last man ? " This is a sample of the kind of arguments
that are used to frighten people from insuring in the Mutual
Reserve. There is not even the semblance of an argument against
the Assessment Life Insurance system that does not apply equally
to the old line, or high rate insurance plan. If a man aged forty
has only twenty-seven years of life ahead on the average, and it
takes $74.00 per annum, exclusive of expenses, "to provide
$2,000 how will an Old Line Co. make it up out of a premium of
$62.60, $17.90 of which are expended in expenses. It is need-
less to try to account for it by counting on the interest. For there
can be no interest from that part of tke premium which is expend-
ed in the payment of the death losses and expenses ; the reserve is
the only portion of the premium from which any interest will be
received, and this at age of 40 is only $26.52, which, invested at
4 per cent, compound interest for 27 years would amount to
$1,405 53 ; deficit, $594.47. But as will be seen from the fol-
lowing extracts from Nathan Willey and from " The Monetary
41
^
f~~ '. ^
I Times itself, the average duration of a life policy is less than nine
years.
"In the Beventeen life offices the average duration of life after insuring
of tlie policy holders who died was 6.413 years," Principles and practice of
liife Insurance" page 69.
"The average duration of the policies in the leading offices in England,
upon wliose experience the tables (hm) named in our Insurance Act was
founded, was 9-12 years.
"Monetary Times, Dec. 18th 1885."
In view of such ** Statements," that •* are as true as that two
and two make four," how could the companies pay each policy
holder's claim ? Instead of paying $74.00 for 27 years, they only
paid $62.60 for 9 years. That is, they each paid $563.40 and
the companies paid their representatives $2,000.00. There is no
mystery about this. Nothing but what any schoolboy might
easily understand. It is the contributions of the many who are
spared, that meet the claims, of the few who are taken away each
year. See history of lapses and surrender values.
Here in the language of the •' Insurance Chi-onicle*'' are a few
of the " Monstrosities " which Old Line agents "are adepts at
placing on paper : — ** Manufacturers Life "age 35, "Ton-
tine period 20 years, $10,000.00 policy, annual premium $312.00'
Total premiums paid during tontine period $6,240.00. Paid up
policy for $21,850.00," i. e. $3.50 for every one dollar paid. I
have estimates from the North American, Neiv York Life, and
Equitable Life, that are equally astonishing in view of the fact that
the statement is made, by the first three named companies that if
the policy holder dies within the period, his heirs get the $10,000
and all the premiums he paid returned. For example, suppose a
policy becomes a claim ten years after it is issued, the company
would pay $13, 120.00, or $6,880 more than it received from the
insured. Surely the " Chronicle" is right in calling such estimates
** Afonstrosities," i{ it takes ** $74.00 per annum" for 27 years,
•* to provide $2,000," rtj stated by the ^^ Monetary Times,''* Six
out of the ten companies cited ceased to do new business, in
Canada, ten years ago two of them are insolvent and have been so
for years and the others are not really life insurance companies in
the true sense of the term. They are fire insurance companies
that issue a life policy if any one desires them to do so. Several
of these companies have been in business for 50 years, and yet
42
according to tlie '* Monetary Times^^ in 1875, when they were
doing even an average new business, '*$i 1.70 pf.R $1,000 was
SUFFICIENT TO PAY BOTH DEATH LOSSES AND EXPEN"ES,
\\\uc\i flit nishes an additional proof that the cost of life insurance
IS LESS THAN $i2.oo PER $1,000 AT ALL AGES. If the cost of in-
surance is to be determined by the experience of companies that
have ceased to do new business, and in which there are hundreds
of thousands of paid up insurance, it could be made to appear that it
costs $1,000 per annum per $1,000 insured ; for, suppose all the
policy holders in these companies are dead but one, and that he has
a paid up policy for "$20,000.00, the company will have to pay
out $20,000.00, more than it receives the year that his policy
becomes a claim.
There is not an official statement on record, from which it can
be proved, that the death losses of any well managed life insurance
company, have exceeded the average indicated by the Mortality
Tables, while it was " pushing on successfully in insuring new
lives." In proof of this I quote from the ^'' Monetary Times ^^
December i8th. 1885. The actual losses of the leading offices on
this continent have been from one-fifth to one-sixth less than those
provided for by the mortality table named. ^^ Also from the report
of the Hon. John K. Tarbox, Insurance Commissioner of the
State of Massachusetts for 1S84 • —
*' These Mortality Tables are the results of carefully verified
statistics of the actual death experience of Life Companies in Europe
and in this country. Confidence in their safety as a basis of antici-
pation is strengthened by the seemingly tvell-established fact that the
longrc'ity of the human race grows with the advance in knowledge
of the lazvs of health, the better obsemance of sanitary conditions and
the generally improved circumstances of the people, incident to high-
ly civilized life. 'That the average duration of life in the future of
well ordered American communities will, at least, equal the past
average, as found by the tables, is a reasonable expectation . Tur-
ther confirmatory evidence is afforded by later experience. Of the
companies doing business in Massachusetts^ ivith records of from
twenty to forty-two years' experience^ not one has experienced a death
rate of within ten per cent, of the expectation. Of the older and
larger companies, which furnisrh perhaps the more satisfactory test,
THE ACTUAL MORTALITY, BY THE LATEST COM-
PUTA TION^ has bfu in the Mutual, 80 ; in the Mutual Benefit,
85; in the New York Life, 88; in the ALtna, 89 ; in the Pennsyl-
vania Mutual y 81 ; in the Connecticut Mutual, and the Equitable^
78; in the Northwestern, 77; and in the New England, ^i^ per
cent. AS COMPARED WITH THE TABLE. Whenever a
Compa ny has suffered a death loss in excess of the expectation, the
cause is irferred to imprudent selection. The evidence of the safety
of the mortality assumption is proof beyond reasonable doubt." To
show the public that the form of deception adopted by the
•'Monetary Times,'' as to the cost of insurance, is constan ly
practised by old line journals and agents, I quote the following
from the *' Insurance and Finance Chronicle," Montreal.
To THE Editob OF The Chrrt ,a.
Port Hopk, January 20th, 1888.
Dkab Sir,—
When dealing •wit. 1 Ihc paaest'^-Tt humbugs, I state that the average
age at which a man insures !» ol and that the average all life policy runs for
32 years. "By dividing $1,000 by 32 we get $31.25, years, hence for the
average all life man $31.25 must be raised each year besides expenses, and
if there is no interest that sum must be got hold of somehow by the Associa-
tion or the things is nil. *<Are my figures correct?
Yours respectfully,
J. L. M.»»
•'Our correspondents figures are just about correct. "Every dollar which
is paid out in death claims by a co-operative must be collected in assess
ments from members. "Taking 81 as about the usual ago at entrance and
32 as the expectancy of life, the average amount to be paid in yearly is $31.25
plus the expenses of management.**
"Editor."
Insurance Chronicle'* Feb. 1888.
A few lines will suffice to expose the hollowness of the above
statement. *'The rates of old line high rate companies only pro-
vide for $23.25, and $6.67 of this is spent in management leaving
$16.68. The average duration of a policy is less than 9 years ;
$16.68 X 9=$I50., 12, deficit, $849.88. The statement that
** the average all life policy runs for ^i"^ years," is positively untrue.
And if the editor did not know it was when he made the state-
ment this will account for many similar statemencs which have
appeared in the ** Chronicle" within the past three years, which
without this explanation would remain, like his little circular
against the Mutual RcMTTe **Ths Unsolved Problem." As
44
the ** Monetary Times" and the " Insurance and Finance Chroni-
cle,"' are the two leading old line journals in Canada, the reader
may judge for himselt as to the kind of apology that can be made
for charging $2.00 for every $1.00 necessary for the protection of
life insurance.
CHAPTER VIII.
II. Misrepresentations. — " The Mutual Reserve does not
pay its just death claims." In answer to this statement, I need
hardly say that an insurance company is bound, in justice to it
members, and in the interests of morality to resist the payment of
all fraudulent claims. This duty has been faithfully discharged by
the officials of the Mutual Reserve and by so doing they have in*
creased the confidence of the members in the honesty and executive
ability of the management. The association has been officially
examined by the Insurance Commis-.ioners of at least six different
States, including the State of New York, and in every instance
has received the highest commendaiion that could be given to the
management of any company.
In order to refute the slanderous statements as to the way the
Mutual Reserve settles its claims, I sul)init the ft)llowing extracts
from the reports of the Insurance Commissioners, of Wisconsin
Minnesota, and Rhode Island.
•♦ State of Wisconsin. — Department of Insurance.
Madison, January 9th, 1888.
*' The Medical Department system, in the appointment of
Medical Examiners and everything for the safe conduct of that
branch of the business, is excellent and seemingly could not be
improved upon. That portion of the business to which I gave
particular attention, the losses is well administered; and from the
examination made of the proofs on file, and the methods adopted
to detect fraud were beyond criticism . *• I found that most of
the claims contested and afterwards settled, the same of which so
much has been said and written, arise from false statements made
in the applications, and largely grow out of the giving of condi-
tional receipts of health by the assured, for the purpose of being
restored to membership alter being lapsed for non-payment of
dues or assessments. Lapses and misstatements as to previous
injuries, severe sickness and other questions in the applications
45
I
which are material to the acceptance of tae risk and particularly
untrue statements as to age of applicant ; in one case the age in
application was given as 55 years, after death the proofs show
that the applicant was 70 years of age ; in this class of cases the
Association pays the pro| er proportion on the true age. Many
cases are suicides, the certificate provides that the Association is
not liable in case of death by suicide, some of the claims in ques-
tion have been paid in full, and in many cases were settled by
Attorneys for claimants.
The Association has an employee who looks up this class of
cases exclusively, they also use two of the best Mercantile
Agencies for information, and in all the cases examined which
consist of those published by *• Insurance" as well as all since,
there are only thirteen contested cases now pending) from the
evidence on file in relation to the claims in controversy, I came
to the conclusion that if the strictest interpretation of the Contract,
under the application made for the same, that the Association had
been more liberal in the settlement of said claims than justice re-
quired, compromised as all companies do when the expense would
be less than litigating the cases in Courts ; and that this Associa-
tion has no more of this class of claims than is inherent to any
company doing the large volume of business done by this Asso-
ciation. I am fully of the opinion from the examination made
that the Assaciation is honestly conducted and is abundantly able
to fulfil its contracts. (Signed), Philip Cheek, Jr.,
Commissioner."
*' State of Minnesota — Insurance Department.
January 9th 1888.
"Having assisted the Hon. Philip Cheek, jr., for two days in
his examination of the Mutual Reserve Fund Life Association, I
cheerfully concur in the foregomg report, and so far as relates to
the Reserve Fund, the membership in force, the system and motle
of bookkeeping, the care exercised in the Medical D partment,
and the checks and safeguards placed upon the financial alTairs of
the Associations, I can certify of my own personal knowledge.
(Signed), Charles Shandrew,
Insurance Commissioner,
Minnesota. "
46
11
" State of Rhode Islnnd — Insurance Department.
Providence, 19th December, 1887.
"At the solicitation of Messrs. Taylor and Parker, who have
charge of the death claim department, I was induced to go care-
fully over the payment of death claims, and the manner and
method of their adjustment and to particularly investigate your
list of resi«5led death claims. In this list I found but thirteen con-
tested or resisted claims, out of the payment this year of over three
hundred and seventy (370) claims aggregating $1,200,000. I was
careful to note the cause for resisting each of these claims, and
can therefore assure you, in my opinion, you were justified in so
doing, and it would be an injustice to your members and a reflec-
tion on the management of the Association if such fraudulent
claims were allowed. I can now from personal knowledge and
careful inspection of your Association, cheerfully recommend it
to my constituents in Rhode Island as worthy of confidence in
every particular. Respectfully yours,
(Signed), Elisha W. Bucklin,
Insurance Commissioner."
Extract from Report of Death Claim Department.
** We further report that all claims now in contest for fraud-
ulent representations to the Company, covering in this all suits
heretofore reported, and in all and every Court, and during all the
years in the history of the Company there are but five pending,
and most of these have been left by the claimants slumbering in
the Courts without active effort to push them to a determination.
And it may be interesting to state that the entire sum of all such
contested claims in dispute, where a wife or child is interested, or
would be benefited by payment, is only $5,000.
We unhesitatingly say that no just claim has ever been dis-
puted ; every such claim has been paid in full to the beneficiary,
and we challenge the world to show where a single dollar has
been wrongfully appropriated or witheld by any officer, agent or
employee of the Association, or .any other person having any
relation to or connection with it. Respectfully submitted,
Frederick S. Parker,
Chairman Death Claims Department.
47
We hereby certify, as counsel for the Association, that the
above statements presented in the foregoing report of the chair-
man of the death claims department are correct and true.
Taylor <5r» Parker.
Counsel."
CHAPTER IX.
If the reader understands the system of the Mutual Reserve
he will see that the Diri-Ctors have nothing to gain by resisting
claims. The death losses are all paid from assessments levied on
the members. It is to the interest of the officials to make the
Association popular and successful. They get $3.00 in dues an-
nually for expense of management for every $1,000 of business
that the company secures and has in force. The officials are
elected by the members and are responsible to them for the faith-
ful discharge of duty. If they betray the trust confided in them
they will forfeit both the honor and the remuneration connected
with their office. If an old line stock company can beat a widow
out of her claim it is clear gain to the stockholders, and increases
their dividends by that much, for the compan y collects the same
premium no matter how many or how few death claims are paid.
I couid cite half a dozen cases that have come under my own
notice, and prove them by living witnesses, where deliberate at-
temps have been made by old line insurance companies to defraud
a widow and her children out of their just claims. I know of one
case in particular, where the company attempted to induce a
widow to Settle for less than one half her claim Three different
attempts were made to induce her to compromise, the last being
made on the morning of the day that the case was to have been
heard, and when the jury was sworn in the company withdrew and
paid the claim in full and all expenses. This widow is still living,
and her son is the respected pastor of a large and influtntial Pres-
byterian congregation in western Ontario. It is a fact which I can
prove, from documents in my possession and which I am prepared
to exhibit that policies have been restored after death had taken
place and the money to the amount of $12,000.00, handed over to
the representatives of the son of one of the presidents of an old
line company. All of the policies were surrendered and the cash
surrender value paid for them two years previous to their restora
48
)
tion. I further state and am prepared to prove from the state-
ments of the then Actuary of the comi)any made under oath, that,
when a trustee of one of the old line coin[)anies was on hi s death-
bed, his policy, for which the cash surrender value had been paid,
was restored and $9,418.29 paid to his executors a few niontlis
afterward. If transactions such as I have related are not fraudu
lent, I fail to find a term in the English language that will
describe them. And, no doubt, this accounts for the vile
insinuations, that are constantly made by old line representatives,
to the effect that all assessment insurance men are blacklegs, and
engaged in the business for the sole purpose of swindling the
public.
It is impossible to notice more than a few of the many forms
oi misrepresentation now resorted to in order to prevent the public
from securing their insurance in the Mutual Reserve where they
get it for less than half the amount charged by old line companies.
1 shall deal with but one more — '* Dead Co-operatives,
Nearly a year ago an institution called the ♦* Equity Life
Reserve Fund " was heralded as the coming insurance company
that was to drive the Mutual Reserve out of Canada. Unfortu-
nately, the promoters of this scheme intrusted its management to
two old line agents whose incompetence was only surpassed by
their ability to put ** Alontrosities in the shape of estimates on
paper.**
Here are a few samples, the prospectus was headed '* Asses<s
ment System ** and concluded with the following : —
** // will put an end to the assessment delusion** It was also
stated that it was ** under the direct supervision of the superintend-
ent of Insurance.** A letter with the prospectus enclosed was
sent to the Superintendent and in answer he stated, under dai^ of
November 8th, 1887, that the " Statement was quite incorrec. : t I
unjustifiable." After some six months o{ frtiitless efforts to ^^ put
an end to the assessment delusion " the Equity passed away, and its
extinguished managers are now back in an old line company put-
ting ** Monstrosities in the shape of estimates on paper. *^ The
Insurance Chronicle now reports the •' Equity " as *' dead and gone
for e^'cr*^ February 1888.
Nine tenths of all the assessment companies that are now
reported as ** Dead Co-operatives," if they ^er had an existence
49
I
ll
were like the *• Kcjuity Life Reserve Fund," the STILL-horn ciuL.
DRKN OF OLD LINK MANAOKRS. It requires Something more
than adaptability to put ** Monstrosities in the shupe of estimates
on Paper '^ to manaj^e an assessment insurance couipany success-
fully. In ordei- that tlie reader may have an idea of the unscra"
pulous and dishonest cliaracter of all who publish and circulate
this list of '* Dead Co operatives," 1 submit the following from
the •' Guardian," of Boston, Mass.
1. Of the twenty-three Massachusetts institutions named,
twenty were never chartered, one never began business, one was
not a life insurance company, and the remaining one is still in
existence and doing business, having simply changed its name.
2. In the list of New York institutions, there are not a half
dozen that can, by any fair interpretation of the word, be said to
have "failed."
3. The Pennsylvania list, with the exception of one or two
old line institutions therein included, is made up of a set of grave-
yard concerns that are in no way co-operative life companies, that
were destroyed by the laws of the States as gambling concerns,
which law was the result of the work done by legitimate co-
operatives or assessment institutions. There are institutions
included in the list that never had an existence.
4. The Ohio list contains the names of at least seven insti-
tutions that never had an existence; five that are still in exist-
ence ; three that have rc-insured their risks ; one that was simply
a building institution ; one that is still in existence under a
changed name ; two that never did any business.
5. The list of Illinois, Kansas, etc., institutions contains
the names of at least three institutions that never completed their
organization ; two that were not co-operatives, and six that never
had an existence.
6. The Southern list contains the names of at least nine
institutions that never had an existence.
The above is only a synopsis of a part of the evidence in our
possession that goes to show the falsity and utter untrust worthi-
ness of this purported list of failed co-operatives. We do not deny
that assessment institutions have retired ; we are satisfied that
there are others that must ultimately retire, to the great advantage
of the business and benefit of the public ; but we do, claim, —
60
First, — That the expi'dence of assessment organizations in
the matter of failuie is far more favorable in all respects than that
of level-premium companios.
Second, —That this purported list of four hundred and eight
dead co-operatives is an infamous lie, stamping with disgrace
every man that makes use of it and every journal that repub-
lishes it.
It may not be uninteresting to the reader to have a few items
on •' Dead old line companies." Any one who cares to investi-
gate for himself has only to consult the New York Insurance
Report, 1883, part II, pa^es 39 to 41 inclusive, and he will find
a list of 143 old line companies that have died out leaving 239,911
sorrowing policy holders. I have a list of 820 old line companies
that have l)een chartered to do business in the various States, that
are now ^'"daui and ^one forei'er, "
And from N.\than Willey's Life Agents 'nstiuction Book,
page 18, it appears that there is a still greater number of failures
in England.
Speaking of the advantage of strict supervision on the part of
Insurance Departments, he says, — "Contrast this trait of our
companies with the condition of life companies in England, where
so many failures have occurred in life insurance, and where they
are still occurring."
In an adoress before the Banking and Commerce Committee
in the House of Commons, on the 6ih March, 1885, the Hon, L.
R Church <;aid, •'! remember in 1862, when I looked into the
qiestion of life insurance in Great Britain, that out of 200 com-
panies organized no If^ss than 184 had died out and only 16 were
left at thn time." See Ottawa Citizen, 7th March, 18S5.
As an evidence that the above statements are true I quote the
following as published in the "Record" (official organ of the
N.nv \ ork Life). Apologizing for charging such high rates it
said, More companies than are now in existence found the same
rates "too low and were unable to make them cover the expense of
the business," On page 56, "Three Systems of Life Insurant- '
by M. Tabor, Actuary, it is stated that ^^ Between one and two per
cent, of the money handled by life insurance companies has been
lost by bad managef?ient." In the "Monetary Times, Dec. 2nd,
1887, it is stated that ** heavy death losses and heavy expenses"
61
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caused the failure of the ** Briton Medical" and of the "Life
Association of Canada." T/iis statement is positively untrue.
On page 34 of the Report of the Superintendent of Insurance for
1885, ^ statement of the affairs of the Briton Medical is given
includinsr the following : —
*' 1 his deficiency is owing in part to defalcations ivhich the in-
vestigations already made shozv amount to not less than one hundred
thousand pounds.''^ No insurance compnny in this or c-iy other
country has ever failed by reason of the death rate experienced.
See extracts from Commissioner Tarbox, and •* Monetary Times,"
Page 43. The failure in every case has been caused either by
the misappropriation of the funds, or by mismanagement on the
part of the official.
CHAPTER X.
When any one takes a life policy in an old line company he
signs a contract, in which lie agrees, to pay his full share of the
current death losses and expenses as long as he lives, and to depo-
sit with the company in addition to this each and every year a sum
which together with the interest shall be sufficient to meet his own
claim when his policy matures if he lives until he is 96 years of
age. If he wishes to withdraw at any time he is at the mercy of
the company and must lose at least from 25 to 50 per cent, of his
deposits. See "surrender values, etc." Page 35.
An examination of this contract will prove that it is an unfair
and one-sided one. It compels the policy holder to pay his own
death claim, or a portion of it if he dies before he is is 96, and
his full portion of the expenditure incurred in the payment of the
death claims and expenses of all who have died before him. This
is a most profitable contract for the company ; the whole of the
reserve part of the premium being clear gain in every case where
death takes place, while the policy is in force, and from 25 to 50
per cent, of it being kept when the policy is surrendered. At
age of 40 the expectancy is 27 years and if a policy holder lives
out his expectancy his reserve, or deposit with the company, will
then amount to $489.40, counting 4 per cent, interest. When he
dies his claim is paid out of the premiums of the then policy hoi
ders and the company pockets the $489.40. That this is positive-
ly true is evident. 1st. Because the ordinary life rates of old
52
death losses of an insurance company for the first 45 years of its
existence. See cost of insurance, pages 7-8. 3rd. Because, from
the above it follows that, after providing for the death losses at
the rate experienced by the Mutual, and New York Life, etc.,
there is a balance of $27.00 per $1,000 at all ages.
In view of these facts it is little wonder that old line life
insurance companies have squandered so much money and 'ct have
mdlions ot/t millions of assets. The Mutual Reserve furnishes life
insurance pure and simple, at the lowest possible cost consistent
with security, and allows the policy holder to do his hanking
wherever he pleases. And if the reader will but consider the facts
which I have placed before him, he will be convinced that Life
Insurance Companies are expensive and unsafe as banking institu-
tions.
In order to settle the question I submit the following
extracts : ** Still it may be, and probably is, true that $25,0 o,-
000 have been /ost hy those Life Insurance Companies that failed.
** Lei the record be told as it is, " Say it boldly. Betiveen one and
two per cent, of the money handled by Life Insurance Companies has
been lost by bad management." *' Tabor's Three Systems, page 55-
56. In order that the reader may more easily form an estimate of
the enormous sum which has been lost by Insurance Companies
during the last twenty years I have reduced the calculation as
follows : —
It is equal to $1,500,000 every year; $125,000 everv
month; $29,400 every week; $4,200 every day. It must
not be forgotten that vast as the above sum is, every dollar of it
was paid into the companies over and above the cost of insurance
as a reserve or bank deposit-
Here is another extract :— •
"Of 250 such companies that have started businr-sa in America, biit 48
are alive to-day. Those that failed during the ten years, 1873-83, alone, liad
collectid SEVENTY-SEVEN MILLIONS niore than they •eturned to their too-
confidiiifJT policy-holders. The irresistible logic oi" ?acts has demonstrated
tl at the large reserve fund of Level-Premium Insurance is a source of
weakness, which threatens the stability of the richest companies of to-day.
<' There is a fond delusion prevalent amongst policy-holders that the
reserve is a reinsurance fund, upon which the risk would be transferred to
a Bolveni company in case of disaster.
" The following grim joke, perpetrated by the Receiver of a company
whose memory in still green in the thousands of American homes it had
68
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plundered, forcibly illiistratoa the vanity of sm'h hopes.
"We quot« from the "Savannah Nt-ws," December 6, 1883:
"The ways ol bankrupt lift! iiisuranc*! comp inii'^ are divioua and dark,
and difficult to define. What becomes of the assets of the broken concerns,
the most diligent enquiries of tlie diHyusted policy-liolihsrs fail to discover.
A well-known citizen of this city had a i)olicy for $ ,000 in the Knicker-
bocker Life Insurance Company, wiiieh ^^ave uj) the ifhost some time ago- He
wrote to the Receiver to know what liis policy was worth. The following is
an extract from the reply he received :
"Your claim is valued by the Receiver at $ 1 70
But he deducts from his valuation—
For your indebtedness on i)reiniuMi notes $ 00
For your iudebtedness on premium charyes 4!tl 42
Total deductions. , 491 42
Leaving the net amount of your claim only $0 00
"It is on this vast sum the dividend will be rated. It is not likely to ex-
ceed 20 per cent., or, say $0.00 " I I
" A writer in the "International Review" estimates that, in the " trans-
fers" of eight compani s (1871-77) to tlie Uuiversal, nearly twenty-six mil-
lions' worth of policies disappeared, and that in the Universal, seventy-four
millions more finally disappeared within that period of seven years."
••Wright's Natural System of Life Insurance," page 24.
The following, taken from the Annual Report for 1884, of
Insurance Commissioner Tarbox, of Massachusetts, is well worth
the careful attention of anyone who is contemplating investment in
a Life Insurance Company. ** A provident person will do better
to buy his insurance of an insurance company and mzkv: his deposits t
if he wiihes to make investments of that character, tviih so/ne regular
savings institution ivhose sole business is the administration of trust
funds.^* Speaking of endowments, and the companies transacting
insurance on this plan, he says, **I am moved to express a regret
shared in I believe, by the conservative and mo«t sagacious men
in the business, that our insurance establishments have adopted
schemes of insurance whereby they have beconie so largely insti-
tutions of investment. ♦ • • ♦ '«] hat ordinary short term
ndowment, wliich is a little insurance and a great deal invest-
ment, is not desirable as either, is capable of mathematical demon
straticn^ and is alike impolitic for the companies and utipi of table for
the policy-holder. Tlie eloquence of the solicitor, inspired by
the hope of a liberal commission may deceive the uninstructed
but cannot impeach the fact. ^^ ^ » * ^^ »
•* As for the company vrhich deals in endowments, it thereby
fieedlessly assumes the obligations and responsibilities of a banker in
54
491 42
r^. — ' ~. >
addition to the obligations and responsibilities of an insurer, and
prejudices its safety as an insurance institution by exposure to the
dangers incident to its banking operations ^ If Life Insurance com-
panies had devoted their attention to life insurance, pure and
simple, failures would have been all but unknown. As in every
Instance, where failure has taken place, it has been caused by the
mismanagement or misappropriation of moneys over and above
the Cost of insurance, intrusted to the company as an investment
or bank deposit.
^or the benefit of those who prefer to insure on the endow-
ment plan, I submit the following taken from a circular published
by the Mutual Reserve.
" How AN Endowment Policy can be Secured it the Lowest
Possible Cost and the Largest Results Obtained.
The Assured Retaining Control of the
Accumulation.
"The Mutual Reserve Fund Life Association introduces the
following plan by which an Endowment Fund may be provided, a
piopoitionate amount of which (in case of necessity) may be drawn
at any time, beside providing an immediate benefit to the family
or estate in case of death.
'•The cost of providing both benefits is but the "Annual
Premium " charged by an Old Line Company for an Endowment
Policy.
«*the old way.
" $721.40 is the Annual Premium, age 45, to secure an
endowment policy of $10,000 payable in fifteen years, or at death,
if prior, charged by Old Line Companies.
66
'•the new way. y
"Deposit annually in Savings Bank an amount
equal to the Annual Premium charged by
an Old Line Company $72140
•'Deduct the amount to pay this Association for
$10,000 insurance at maximum rates, which
has never yet been reached and which in-
cludes the 25 per cent, set apart for Reseive
or Emergency Fund which iS the property
of the members, and is returned to the per-
sistent members. The Annual Dues of
$3.00 on every $1,000 of insurance is also
included $179,60
" Difference in Gash in Bank for En-
dowment Fund $541.8 O
*• And interest at 4 per cent, on amount in bank, $21.67
** Total Amount Endowment Fund
in Bank end of first year $563 47
••The following table fully illustrates the practical workings
of both methods, the OLD and the NEW.
Table showing amount accumulating each year) the amount realized any year
in case of deaths and the amount that would be paid
by Old Line Companies-
•
1
2
3
Total am'nt
that would
be realized
4
Am'nt that
w u 1 d be
due from
YEAR.
Amount f
any year
old line
YEAR.
Endow-
in case of
com p any
Amount i n
nientFimd
d'-ath, i f
any year in
this Asso-
ill bank at
insured in
case of
c i a t i n
end of each
Mutual Re-
death, r
payabL- in
y<'ar, 1 n -
serve Fund
at end of
case of
eluding in-
Life Asso-
15 years if
death.
terest.
ciation.
living.
Ist year.
$10,000 00
$ 503 47
$10,663 47
$10,000 00
l8t year.
2ml '*
10,000 00
1,14'J 48
H,149 48
10,000 00
2nd "
3rd "
10,{.00 00
1,758 93
11,758 93
10,000 00
3rd '«
4th «
10,000 00
2,302 7o
12,392 76
10,000 00
4th "
6th "
10.000 00
3,051 93
] 3,051 93
10,000 00
6th »
6th "
10,000 00
3,737 47
13,737 47
10,000 00
6th '•
7th "
10,000 00
4,450 44
14,450 44
10,000 00
7th "
8th «
10,000 00
5,001 92
15,191 92
10,000 00
8th «
9th «•
10,000 00
5,963 06
16,963 06
10,900 00
9th "
10th "
10,00(1 00
6,765 05
16,765 06 .
10,000 00
10th "
11th •<
10,000 00
7,599 12
17,599 12
10,000 GO
11th ♦'
12th '*
10,0(K) 00
8,466 55
18,4«6 55
10,000 00
12th ««
13th ••
10, ' 00
9,368 68
19,358 68
10,000 00
13ih •«
14th '*
lOjt.Jv; 00
10,306 89
20,306 89
10,000 00
14th "
15tb *•
10,000 00
11,282 63
21,282 63
10,000 00
loth •»
56
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**It will be observed that if death occurs the first year, under
the new plan, the representatives of the insured receive, 1st, $io,-
Goo from the Insurance Company, 2nd, 513.47 from the Hank,
making a total of $10,563.47, as against $10,000, which would be
paid by the Old Line Company. Should death occur the fifth year,
the representatives of the in ured would receive, under the nnu
plan $13,051.93, the tenth year $16,765.05, and the fifteenth year
$21,282.63, while the old line Company would have been obliga-
ted to pay but $ 10,000 in either case.
"The foregoing table shows by the old way, that if a person
at the age of 45, takes out an endowment policy in an Old Line
Company for $10,000, to become due in 15 years if living, or to
be paid at death if prior, he will be required to pay an annual
premium in advance of $721.40.
•'Should the insured live until the end of the period, or should
death occur prior, in either event, in an Old Line Company, he
could but realize $10,060 from his investment.
"Should a person who holds an endowment policy die before
the expiration of 15 years, he would receive no greater amount
from the Old Line Company than he would by paying "Life-ra-
tes," which are 3$4i.70 less per year than endowment rates.
"This table shows that by the new way, if a person a1i|he age
of 45 takes out a life certificate in this Association for $10,000 pay-
able at death, and places in a Savings Bank as an Endowment Fund
the difference between what he would pay .1.1 Old Line Company
for an endowment policy and what his life certificate would cost
in this Association, he would be able to realize from the first from
five to over one hundred per cent, greater results.
"Column two of the table shows upon this plan the amount
of Endowment Fund in the Savings Hank at the end of each year,
which cou d be drawn at any time should the person desire to dis-
continue This amount, at the end of the 13th year, will be
greater than he would receive from the Old Line Company at the
end of 15 years. Should death occur at any time within 15 years,
the family or estate would receive from this Association the
$10,000 insurance, besides they would have the Endowment Fund
in Bank in addition, which might be nearly or quite equal to the
insurance. By the old way they would only receive the $10,000
67
5* *i
insurance from the Old Line Company, with such blight dividends
as they may choose to pay.
•♦other advantages gained hy this new plan.
''Should a member desire to continue his insurance after the
15 years has expired he can do so, without re-examination, while
in the Old Line Company he would be compelled to pay a pre-
mium at his increased age, and perhaps could not obtain a policy
on account of disability or advanced age.
♦'Should a member become disabled or meet with reverses and
be unable to make his payments, upon this system he could draw
from the amount in Bank, subject to his control, a sulficient amount
to continue his insurance, while in an Old Line Company his insu-
rance would cease.
♦♦Should a member de='-e to stop at any time, he would have
a pro-rata amount of the Endowment Fund in the Bank in cash,
subject to his du'ection ; while in an Old Line Company nothing
would be due except at the end ot 15 years or in case of death if
prior."
The wisdom of adopting the At'7f instead of the O/i/ Plan is
still more forcibly illustrated by the following important conside-
rations.
1st. At least 900 out of every thousand who insure on the
Endowment Plan either lapse, surrender, or exchange the policy
for a life policy before the expiration of the fifteen years. See
history of lapses and surrenders, page 27.
2nd. At least 22 out of the remaining 100 will die before the
endowment period expires, consequently only 78 out of looo
realize any benefit from the investment feature of endowment in-
surance.
3rd. The vast sums of money lost through the mismanagement
and misappropriation o^ the trust funds of Life Insurance Com-
panies render an Endowment Policy a most risky and undesirable
m vestment.
CHAPTER XL
A work such as this would be incomplete did it not deal with
a few of the principal objections urged against the Mutual Reserve.
1st. *^ It is an assessment company.** In a very important
sense of the term, this can be said of any life insurance company
■ u .
CI
on any plan. Old Line Companies make one grand ** Kncnv 7vkat
you pay ^' assessment for $37.97, (called a premium) each year, at
^ge 45, whether this amount is required or not. And if the reader
will turn to page 26 and examine Table No. VI, he will see by
looking at the foot of the column giving *' mortality element**
that $12.10 IS all they expect to pay in death losses out of the
$37.97 *' Know what y OH pay " annual assessment.
An examination of Table No. I reveals the fact that the aver-
age amount actually paid in death losses is usually less than
$12.00 per $1,000. In the Mutual Life for example the amount
paid in death losses was less than $12.00 for eighteen out of the
twenty-seven years of which we have Official Returns,
The Mutual Reserve only calls for the actual amount re-
quired for death losses with a small loading for the Reserve o<
Emergency Fund. D.iring the last seven years the average
amount required has Iieen $9.66 at age 45, add admission fees,
which average about $4.00 per $1,000, the annual dues and
medical examiner's fee and the total cost at age 45 has been less
than $14. CO against the grand *■'■ Know what you pay** 2i'Cinwx\
SiSisessment {called a premi/im) o( $^'j.g'j collected by Old Line
Companies. The principal ditiference between the •' Assessment
System" of an old line company and that of the Mutual Reserve
consists in the amount collected and the mode of collecting. In the
Mutual Reserve it may be paid every two months or once a year,
as the policy holder may desire : The cost is the same, whether
paid in one or six calls. In an Old Line Company, it must be
paid annually, in advance, if not, ^ per cent, interest is added ioihe
grand *^ Knoiu what you pay assessment of $37.97 per annum.
2nd. '•// is a Mutual Company ** so are nearly all the most
successful Life Insurance Companies. Stock Companies are a
mere experiment compared with Mutual Companies. There is not a
stoch company on the continent of America that has an existence
of 42 years. Wliereas there are at least six Mutual companies
that have been in existence for nearly 45 years. Prominent
among these are the Mutual Life, and the New York Life.
Neither of these companies have now, or ever had a dollar of
capital.
A few quotations from Old Line authors may be of interest to
those who are *'• down on Mutuals," " Some of the oldest and
argest companies in this country were started without a dollar of
capital, » » » their assets are now numbered by the tens of
millions." •• Life Agent's Instruction Book," by N. Willey, page
69. '* A Mutual Company is one that is nominally controlled
by the policy-holders, themselves. Every policy-holder has the
right to vote, in person or by * proxy * in the election of a Board
of Directors. The largest and most successful Life Insurance
Companies on the globe are mutual companies, and their policy-
holders have always had the right to vote at their annual elections.
^ ^ ^^ The system is a popular one. It seems to possess
certain elements of success not found in either the stock or mixed com-
^panics." Tabor's •♦ Three Systems," page 24. At least two out
of every three Life Insurance Companies that have failed have
been stock companies. Fully half a dozen doing business in
Canada ten years ago, are now insolvent; and there are several
others that will soon follow. If stock-holders are not kept in good
humor by handsome '■^ dividends ^^^ ** bonus waves,* etc., they soon
lose their interest in the protection of the widow and the orphan.
III. Members personally lial)le if the Association fails.
A. The Mutual Reserve is regularly incorporated as a Life
Insurance Company. It has a charter, from the same state, and
fills every requirement if the law that either the New York Life
or the Mutual Life does. If the members of the Mutual Reserve
are personally liable, so are the members of the New York Life,
of the Mutual Life, or of any other Old Line Company.
B. .The precaution taken \.o protect the trust funds of the As-
sociation in the appointment of a separate corporation as trustee
for the policy holder and the simplicity and success of its system
render {z\\^xxQ practically impossible.
C. It {% positively impossible for the Association to fail so long
as thete is a single dollar in the Reserve Fund, which fund now
amounting to over %\ ,^00,000, is increasing at the rate of over $^00,-
000, per annum.
D. There is a clause in the policy issued by the Mutual Re-
serve which .'states positively and distinctly that **JVo personal liabili-
ty of the members is incurred by becoming a member of this Associa-
tion." The fact that thousands of the most prominent yudges.
Lawyers and Statesmen are memoers of the Association is a sufficient
^n^'wex io \.\iQ liability *^scare." -^
In the discussion of this question I have tried to attack the
principle and not the individual, I have stated a {q-w plain fads
substantiated in every case by proof drawn either from Official Re-
turns or from Old Line authors, constantly qupted by the advoca
tes of the Old Line * * Know what you pay " plan o( assessment insur-
ance.
Had it not been for my friends, the enemy. I might have
remained as innocent of the history and grand underlying principle
of Lfe Insurances as are the majority of Old Line Life Insurance
agents. The anonymous circulars scattered broadcast by other
Companies, and, the malicious attacks of the "Insurance and
Finance Chronicle" of Montreal, and the Monetary Times" of
Toron'o, caused me to examine the system adopted by the Mutual
Reserve, and I shall never regret it.
Many of my most attached friends are gentlemen with whom
I have had the pleasure of transacting business and who at my
solicitation have insured in the Mutual Reserve. And now, in
conclusion, I wish to say that the name of E. B. Harper, Presi-
dent ot the Mutual Reserve, and that of those who are associated
with him in the defence of the widow and orphan shall be held in
nffictionate remembrance long after those who are now slandering
their good name have gone to reap the reward of their calumny.
U/aQted Eu^ryiulj^rei
-€)
/T)e9 U/l?o l/alu^ Hoijor aijd Pripeiple
0.
ipboi/e Ricl?<?5,
to unite with the Officers of the Mutual Reserve in the defence of
the Widow and Orphan. For terms to Agents, etc., address
J. D. WELLS 66 KING ST., EAST. TORONTO, O.,
J. T. PATCRSON 217 ST. JAMES St., MONTREAL, Q.
61
I
POST SCRIPTUM.
The following which appeared too late for insertion in the
body of the [)amphlet seems important : —
*'W}IKRE DID THE MoNEY Go ?— The Charter Oak Life
building, in the city of Harlford, built some years since at a cost
of $800,000, was recently sold at auction, or rather the ef|uity of
redemption from the mortgages was sold, for the sum of $50, the
mortgage covering the present value so far as to leave but a small
margin of value beyond. A mystery seems to hang around the
purchasini^ even at that price as to wliom it was bought for. 'I'he
ALina. Life, the owner of the mort^jage, is now the owner of the
building." — *• Insurance and Finance Chronicle," May, 1888.
The "Charter Oak" failed some three years ago, and on
investigation it was found that nearly 1,500,000 of the trust funds
belonging to its policy holders had been lost through the mis
management and dishonesty of the ofTicials. To sink vioney in
grand buildings, as did the ofTficials of the '• Charter Oak," and as
a few large companies are now doing, is to increase rather than to
diminish the opportunities for fraud. If the officials can mortgage
the building at will, as did the officials of the *• Charter Oak," it
is an easy matter to get hold of the funds.
The only true and safe way is to place the sti 'plus funds, as the
Mutual Resen'e does, in the hands of a separate corporation. The
following certificate from the President of the Central Trust Com-
pany, of New York, the Trustee for the members of the Mutual
Reserve, speaks for itself : —
This is to certify that the Central Trust Co., of New York,
held on tlie thirty first day of March, 1888, under the agreement
by and between the Mutual Reserve Fund Life Association and
this company, as trustees, dated October i8ih, 1882, one million,
one hundred and eleven thousand, one hundred and seventy-two
dollars, and scventy-eight cents, ($1,111,172.78) of the above
stated reserve fund, as follows : —
In bonds secured by first mortLT t^ns upon well improved real
estate in the <'ity of New York, and not exceeding 60 per
cent, of a conservativf, appriiisod cash value of said real
CHtate $1,024,500. 00
In cash deposited with ns; (ini'luding spocial certificate No. 105
for $lt), 000, issued by this company, subject to the terms
thereof) 86,672.78
Total amount held by the Central Trust Company, of New York,
Trustee $1,111,172.78
Central Trust Co . , of New York,
Dated, New York, March Slst, 1888, by
Y. P. OLCOTT, President.
The balance of the Reserve Fund is deposited with Insurance
departments. J. T. P.
62
1
^ZOWH'
ADVOCATES,
BDrrist^rs, <$ommi88ioi)er$, Oq.
147 ST. cr^nycES ste^eet,
[T\OT)trea\.
"^-o--D>-s<^^^T^;|^
'Ej>-c5>-<f>-o
HON. J. A. CHAPLEAU, Q.C., M.P.
JOHN S. HALL, JR., Q,C., M.P.P.
ARMINE D. NICOLLS. ALBERT J. BROWN.
H
AVE YOU a lot of Slow or Bad Accou nts?
If so, send them in to the office of
She (Canadian
Reportioj aod Collection AssociatioD
(ESTABLISHED 1869,)
217/ ST. '^ J/IMES « STREET,
MONTREAL.
P.O. 80X2004. -.^A^^,.-.^ TELEPHONE No. 1698 A.
N.B.— No Collection, no Charge and no Membership Pee.
-■j*"«««»'j<«aiatei^-.
PROMINENTjCAiyjlMAN MEMBERS.
Certificates of Alemhemhip have been issued to the followiug
7vell-kiiown ^eiitieinen :
Hon
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Z. A.
B. B.
J. J. Curraii, Q C, LL.D,, M.P., Advocate, etc.,
T. E. Kilvort, M.P., Hamilton, Ont.
J. S. Hall, g.C, M.P.P., Montreal.
D. Girouard, Q.C., MP., Montreal.
Duncan McMillan, M.P., London, Ont.
N. W. Trenholme, of Trenholme, Taylor & Dickson, Advocates, Montreal.
Hector Cameron, Q C, Toronto, Ont.
A. R. Boswell, Ex-Mayor, Toronto.
M. Heaton, Inspector Molsons Bank, Montreal.
M. Hutchinson, Advocate, of McMaster, Hutchinson A Co., Montreal.
A. Desjardins, M.P., Prea. Jacques Cartier Bank, Montreal.
Mr. Jennings, Manager liank of Commerce, Paris, Ont.
T, C. Irving, Sui)erintendent Bradstreet Mercantile Agency, Toronta
J. L Harris, Banker, Moncton, N.B.
A. L. DeMartigney, Cashier Jacques Oartier Bank, Montreal.
R. C. Struthers, Bankar, London, Ont.
Ernest Varin, Cashier City and District Savings B nk, Montreal.
W. White, Superintendent CP.R., Toronto.
W. Wilson, Toronto Vinegar Works, Toronto.
Robert Hannaford, Civil Engineer, Montreal.
Geo. Bishop, Managing Director Bishop Engraving A Printing Co., Montreal.
C. Drinkwater, Secretary C.P.R., Montreal.
Richard White, Managing Director '-Gazette," Montreal.
H. W. Walker, Chief Accountant G.T.R,, Montreal.
James Stephenson, Superintendent G.T.R., Montreal*
C. H. Levin, Wholesale Furrier, Montreal.
Bernard Levin, Wholesale Merchant, MontreaL
W.J. Fenwick, Broker, etc., Montreal.
Chas. McFall, Agent D. & H. R. R., Montreal.
64 ■ -..•-■^-■-
A. R. Angers, Lieut. -Governor Proviuci" of Quebec.
8. H. Blake, of Jilake, K<'rr, Lash A Cuasels, Toronto.
Judge Rose, Toronto, Ontario.
Judge Laird, Port Arthur.
Jud^e Robi-rtsoii, Hamilton.
iTudge Gill, Montreal.
Judge Davidson, Montreal.
Judge Wurteli", <•
Judge Caron, Quebec.
R. M. Wells, Toronto, Ex-Speaker Ontario Legislature.
Honore Mercier, Montreal, Preniiir Province Quebec.
A, G. Blair, Kx-Premitr Prov. New Hrunswick.
J. R. Tliibaudean, Senator, Montreal.
0. A. G(!()ffrion, Attorniy-at-Liw, Montreal.
W. W. I.yneh, Ex-Miiiister of (Jrown Lands, Montral.
Ij. L. Haniiingtdii. Ex-Attorney General Prov. New Brunswick.
A. D. Richard, Dorchester, New BrunHwick.
H. R. A. Turcotte, Tlirec Rivers .
Wni. ("oehrane, M.A , D.l)., Zion Presbyterian Church, Brantford.
V. R. B.-attie, Ph.T) , D.D , Ut PrcHbyt.Tian (niurch, *'
J. K. Smith, &.D., Knox Presbyterian (Jiiurcb. Giilt, Ont.
J. A. R. Dickson, B.D., (Central J'rrsbyterian Cliunh. G It, Ont.
J. C. Channer, M. A., Rector St. James KnuliHh Church. Meaford.
J. A. Dixon, Rector St. Jude's Enj?li-*h C'hiircli, Montieal.
H. M. Parsons, Knox Presbyteri.ni Cluirch, Toronto.
Richard Harrison, St. Matthias, English Church, Toronto.
J. S. Lonergan, Parish Priest, Montreal.
J Bte. Thibault, Hotel Dieu, Montreal.
Lash, Q.O , Blake, Kerr, Lanh & Cassels, Toronto.
Osier, QC^ of McCarthy, Osier, Hoskins & Co., Toronto.
Montreal.