| Show j American Life Insurance Celebrates Its Anniversary by Adopting a New Actuarial Table I i Which Reflects Longer Life of Modern Citizen By ELMO SCOTT WATSON Released by Western Newspaper Union forty-five forty finds N NINETEEN I 1 1 American life insurance observing its anniversary anniversary anniversary sary and by byway way of celebration its it's beginning to operate tinder under under un un- der a new set of actuarial tables ables Until this year insurance insurance insurance ance companies have been booking life and death chances on the same basis as ashey they hey were figured when the first American life policies were vere written away back in 1845 But this year they are discarding the old odds table tale table ta- ta ble le and putting into effect anew a anew anew new one and that's a matter of prime importance to more than han Americans who vho own more than billion dollars worth of life insurance As a matter of ot fact the adoption ot of f the new actuarial tables in American life Insurances Insurance's centennial y year ear car is accidental and coincidental rather ather ra than purposely planned Nine years ears ago state insurance commissioners commissioners commis- commis and mathematical wizards of ot the insurance companies recognized the he fact that the tremendous improvements im- im In medical science had made the old odds table obsolete In n the light of ot modern methods of prolongIng human existence a new newet set zet et Q jt QI life Ufe expectancy standards wasI was needed ceded I But figuring out these standards and fitting them to rates rates rates-or or fit fit- flog rates to them them wasn't wasn't a simple I matter For instance they knew that you you-lt ou if you are 30 years old old have have afar a aar atar tar far ar better chance of ot living beyond that age than you did two decades a aso go o. o It was only a few decades ago that eight out of every thousand people eople died at that age Today thanks hanks to more public enlightenment o on n medical matters and Improvements Improvements Improve Improve- ments meats in diet including more k knowledge of ot vitamin requirements only two or three persons per thousand thousand thou- thou sand and are dead at the age of ot 30 Rates About the Same I But even though the improvement improvement improve improve- I ment in to our life chances seemed to indIcate much reduced rates this was offset over the years by the deterioration de- de t of ot our interest rates and the tie increased cost of ot doing business The problem of ot adjustment was Wis threefold 1 I rates according to Improved life lIe probability 2 company company com corn pany pony Income according to lowered return on investments and 3 company company com corn pany pony expenses as compared to the good old days when breakfast cost costa a nickel and the company president drew rew a salary of 30 per week The insurance commissioners had hada hadn a n major mathematical problem before be- be f fore ore them For the latter two points lowered earnings on invested funds and sharply rising costs of doing business more more than covered covered covered cov cov- ered the slight break they showed on their books because the doctors were keeping us alive longer Nevertheless they went ahead Aired Al Ai tied red N. N Guertin of ot New Jersey was made chairman of a commissioners commission commission- I ers group to recommend the new life lite tables Five other state commissioners commissioners com missioners sat with him John S S. S Thompson mathematician and vice president resident of ot the Mutual Benefit Life Insurance company of ot Newark NJ was a committee member representing represent represent- ing ng the Actuarial Society of ot America Sixteen states enacted the so- so called Guertin law which means mean s that hat the insurance companies doing g Business in t those ose states can in 1945 5 adopt the re recommendation commendation of ot th the e Guertin committee into their tutor future e policIes x The law became become effective January 1 of this year on an optional basis but It becomes mandatory after three years in December 1948 19 How It All AU Began Bee Centuries before Guertin and associates took on their herculean herculean herculean her her- job a Roman named anus devised an odds table for a afew few tew of at his friends was a lawyer with a flair for figures As a matter of ot fact his life expectancy charts were so good that they remained remained re re- unchallenged from A. A D D. for tor almost 15 centuries Even a as s st late as 1814 the Tuscan government t used his tits figures Not content with Lawyer findings however Edmund dmund Halley known as the English astronomer r who discovered the famous Halley's Halley s comet undertook the job of com tom computing computing modern mortality tables in m 1693 His method was the basis fo for r present-day present computations namely that of using accurate vital statis staffs tics Halley selected the city of ot Breslau Bres Bres- lau tau youve you've been reading rending about it inthe in inthe the war news from Silesia for hi his s guinea pig from 92 1687 observing g t r 7 N A ri Er J J Jy y r 4 y yA I A view on Broad street in front of the Stock Exchange and Sub Sub- Treasury then the Customs House In New York City in 1845 when lit life C insurance had its beginnings births and deaths for tor a year five pen pe pe- n od His tables were the precursor for many others such others such as the Engish English Eng Eng- l lish ish tables of ot 1762 But all such Improved Improved Im Ira- Irai proved tables over the last two centuries cen furies failed to keep pace with medical medical medi medi- medical cal science Our first actuarial brainchild was called the American Experience table table ta ta- ta ble which was brought into usage right after the Civil war With minor changes it has continued to be the accepted base for computing life and death chances up the present time Meanwhile the M. M Ds were busily ensa engaged ed In Jn makin making our Experience figures look sick Their Their success In keeping the lower age groups alive longer is directly responsible responsible re re- for tor this major effort to re- re frame the basic structure of ot all life insurance In the United Sta States tes Just by way of ot proving the point in i n 1900 the U. U S. S S average age was 4 A couple of ot years ago it stood at When it all began back in 1845 1815 this was a husky young oung nation But many of its huskiest young citizens fell Sell victims to one disease or another another an- an another other and tuberculosis being being being be be- ing the most active l 1 Many ny Hazards Even as late as 1900 more than than 40 40 out of every people succumbed succumbed succumbed suc suc- to Today its it's only only one per Europe's black plague of ot the early century wasn't much worse a scourge than the horrors of ot pulmonary tuberculosis tuberculosis losis over the last century Statistics Statistics Statistics Statis Statis- tics for 1900 show that this killer took out of every Today less than 40 per die of ot the disease each year For these reasons coupled with all the other hazards of living a century century century cen cen- tury ago the old boys scratched their heads twice before insuring their fellow men promiscuously When Ben Miller bought the first life policy issued by Mutual Benefit Life Insurance in Newark in 1845 there were many tied to the policy Ben bought 1500 worth of insurance on his life llIe at a premium of 51 a year with the provision that 1 He didn't die on the seas 2 he didn't leave the country 3 he didn't go south In the summertime summertime sum sum- 4 he be didn't without consent join the army 5 he didn't cut his own throat to Improve improve Improve im Im- Im- Im prove his wife's finances 6 he didn't expose his insured and valuable value able carcass by duelling 7 he religiously avoided the gallows or guillotine and so on for quite some distance in slightly more technical technical tech tech- verbiage Ben it might be remarked was one of ot the hardier sort for he lived to collect his own insurance at the age of 86 90 eal While the early directors of insurance insurance insurance ance companies had no worries about clients being killed in n an nn autom automobile bile or airplane the 1845 citizens citi zens of Pres James Polk's Folks nation of 27 states were liable to find themselves themselves them them- selves without a scalp if it they took the wagon covered trail west Life insurance companies also could discount the probability of the insured dying from heart failure because of the then modest 15 million million mil mil- lion dollar public debt Perhaps it Is worth noting that over the years the increase in heart disease and i it t has increased considerably is i in n ratio t to the governments government's debt to the people now at the quite quit e Immodest figure of ot almost billion bil lion a very large hunk hunt of ot which I Is s held by the same insurance com tom panics If U as you read this youve you've been hoping to find that now insurance rates will be lower because the doc doe tors are keeping us alive longer longs r you'd better read on At first glance it would seem th thunder that at under the new mortality table lit life lite C i Insurance rates will be cheaper b but ut that is not true John S. S Thompson n vice president and mathematicIan mathematician mathem a titian actuary of ot the Mutual Benefit Bene Ben e- e fit Ht Life Insurance company epee speaking speaking speak speak- k l ing ag for all life lite insurance companies companie tells teUs why He says Policies now in force will not b be e affected nor Is It expected that Po policies polio poli I. I cies ties sold in the future will be Th That Thatis at is i s because the amount of ot interest inters st life insurance companies can earon earn ear earnon earnon n on their invested nv sted funds has dropped d sharply in the last few lew years an and a their operating expenses wages and an d taxes have increased Fewer Investment Chances The cost of ot life insurance d depends de e upon three points 1 th the C j number of ot claims paid on policyholders policyholders policyholders policy policy- holders who die in a given year yea r 2 the yield or earnings from 1 In Investments Investments In- In n vestments of reserve funds and 3 3 the cost of ot operating the company The war has sharply decreased decrease d the field for profitable investments he points out War industries a are re e financed by the government and th the building industry once a big field d for loans is now dormant Thus insurance insurance in in- 1 companies which formerly Y earned from 4 to 6 G per cent on the their i t tre funds now earn only slightly mo more re than 3 per cent From 40 to 50 p per percent percent er cent of insurance company funds fund s are invested in war bonds at a an n average yield of ot about 2 per cent cen t. t And many companies have guaranteed guars guaran n I teed a 3 per cent return to their the it policyholders That Is why insurance ce e rates cannot be reduced It was a dead cinch to earn the good old 6 per cent back in 1845 a aa and anda nd a lot more too even though Mutual Mutu al Benefits Benefit's records show that Robert Robe t L. L Patterson founder and fir first t president and his directors scorned scorn ed the possibility of paying big di dividends divi vi by grubstaking a few of the seeking gold-seeking Sound conservative con cox investments were made mad e to protect widows and orphans But Bu t conservative as the investments investment Is were then they paid handsomely as compared with today Money Earns Less Than 2 Shortly after the turn of the ce century cen n tury returns on invested mono money y tightened up considerably All AU th this this is is readily reflected in overall returns ns to policyholders Between 1914 1928 28 Mutual Benefit policyholders were ve re I getting about 21 per cent on the their dollars paid in The 1943 1929 pi picture picture pic pic- c ture was still trending downward to about 17 per cent per annum It was vastly different in 1845 In those days the company president preside nt drew 1500 per year year just just about ti the e price of ot a fair cook or housekeeper housekeep er erm on today's market The top ins insurance insurance m ance salesman wasn't allowed to earn more than all oth other er earnings going back to the compa company ny till The rent bill was 25 p per er month One of ot the ranking assistants assistants assist assis t- t ants drew the good in those days day salary of per year I Today the taxes alone on a building occupied by one large insurance in in- ii company exceeds 10 milli million o n I dollars per annum And the charwomen char cha or r- r women on an the floor would tau laugh gh at nt an otTer offer of a year Even the ti e elevator boy would sneer at the sa same me salary Robert Patterson was paid pal d in 1845 1895 Now you know why insurance is going to continue to cost just abo about ut it I the same as it has in the past As a group were we're living a lot long longer cr r j and there is less risk in Insuring g us But as a group we cost a Q whale of ot a a. a lot to handle a athe and nd d the days of ot fancy lancy interest returns is 15 are e over I 1 j i t L J t s S x jj 1 li t tt 3 a A Hew o of t the Brooklyn yn docks M from com the x W U street terry cr In 1853 1 s q qA fl J 1 I |
