The managers of assessment companies should be careful lest their claims should prove to be unfounded. For instance, the writer of the article in your last number boldly asserts that it “is susceptible of mathematical demonstration that one or two million of dollars of reserve is adequate to perpetuate any well-conducted assessment company for all time, however large or small it may be, while the spectacle is presented to us of level premium companies holding fifty to one hundred millions of accumulations belonging to their policy holders, from which no possible benefit, in most cases, will ever accrue to them.” On reflection he must see the absurdity of such statements.
The level premium system is a combination of insurance and investments. The hundred millions are investments, and are necessary for the integrity of the level premium contracts. Any assessment company in which the rates do not increase as the members grow older should be compelled to have the full premium reserve required by state law and actuarial science to be held on level premium contracts. This is capable of mathematical demonstration.
It must be borne in mind that the cost of insurance proper, that is, the provision to meet current death claims alone, is quite as high in the best assessment company as in a regular life insurance company, for this cost depends on the careful selection of lives. The difference in the two institutions is that the former dispenses with the investment element, while the latter exacts it in connection with all their contracts. Hence the price to be paid is greater. But is not the guarantee also greater?
The beneficiary under a death claim in an assessment company has for her security the hope, or promise if you please, that one thousand men will pay ten dollars each for her account. The beneficiary under a death claim in a regular life insurance company has for her security not only the actual payments of ten dollars each by one thousand men, but the definite promise to pay in full by an institution which has ample capital, assets, and surplus to back its contracts.
Assessment insurance is yet on trial, and its only hope of permanent business lies in a rigid compliance with the laws of mortality and of sound business experience.
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BY SIDNEY MAXWELL.
The Old State House! Within these
The early fathers of the hamlet met
And gravely argued of the town’s affairs.
Another generation came; and in
This hall the Tory Council sat in state
While from the burning lips of Otis, or
The stem, defiant tongue of Adams sprang
That eloquence whose echoes thundered back
From Concord, Lexington, and Bunker’s Hill!
Between those years and ours a century lies;
Those patriot’s graves are deep