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Show American Life Insurance Celebrates Its 100th Anniversary by Adopting a New Actuarial Table Which Reflects Longer Life of Modern Citizen By ELMO SCOTT WATSON Released by Western Newspaper Union. NINETEEN forty-five finds American life insurance observing its 100th anniversary anniver-sary and by way of celebration it's beginning to operate under un-der a new set of actuarial tables. Until this year insurance insur-ance companies have been "booking" life and death chances on the same basis as they were figured when the first American "life" policies were written away back in 1845. But this year they are discarding the old "odds table" ta-ble" and putting into effect a new one and that's a matter of prime importance to more than 70,000,000 Americans who own more than 125 billion dollars worth of life insurance. As a matter of fact, the adoption of the new actuarial tables in American life insurance's centennial year is accidental and coincidental, rather than purposely planned. Nine years ago state insurance commissioners commis-sioners and mathematical wizards of the insurance companies recognized the fact that the tremendous improvements im-provements in medical science had made the old "odds table" obsolete. In the light of modern methods of prolonging human existence, a new set of life expectancy standards was needed. But figuring out these standards and fitting them to rates or fitting fit-ting rates to them wasn't a simple matter. For instance, they knew that you if you are 30 years old have a far better chance of living beyond that age than you did two decades ago. It was only a few decades ago that eight out of every thousand people died at that age. Today, thanks to more public enlightenment on medical matters and improvements improve-ments in diet (including more knowledge of vitamin requirements) only two or three persons per thousand thou-sand are dead at the age of 30. Rates About the Same. But even though the improvement improve-ment in our life chances seemed to indicate much reduced rates, this was offset over the years by the deterioration de-terioration of our interest rates and the increased cost of doing business. The problem of adjustment was threefold: (1) rates according to improved life probability; (2) company com-pany income according to lowered return on investments; and (3) company com-pany expenses as compared to "the good old days" when breakfast cost a nickel and the company president drew a salary of $30 per week. The insurance commissioners had a major mathematical problem before be-fore them. For the latter two points lowered earnings on invested funds and sharply rising costs of doing business more than covered cov-ered the slight break they showed on their books because the doctors were keeping us alive longer. Nevertheless they went ahead. Alfred Al-fred N. Guertin of New Jersey, was made chairman of a commissioners commission-ers group to recommend the new "life" tables. Five other state commissioners com-missioners sat with him. John S. Thompson, mathematician and vice president of the Mutual Benefit Life Insurance company of Newark, N.J. was a committee member representing represent-ing the Actuarial Society of America. Sixteen states enacted the so-called so-called "Guertin law," which means that the insurance companies doing business in those states can in 1945 adopt the recommendation of the Guertin committee into their future policies. The law became effective January 1 of this year on an optional basis but it becomes mandatory after three years, in December, 1948. How It All Began. Centuries before Messrs. Guertin and associates took on their herculean her-culean job, a Roman named Ulpi-anus Ulpi-anus devised an "odds table" for a few of his friends. Ulpianus was a lawyer with a flair for figures. As a matter of fact, his life expectancy charts were so good that they remained re-mained unchallenged from 220 A. D. for almost 15 centuries. Even as late as 1814, the Tuscan government used his figures. Not content with Lawyer Ulpianus' findings, however, Edmund Halley, known as the English astronomer who discovered the famous Halley's comet, undertook the job of computing com-puting "modern" mortality tables in 1693. His method was the basis for present-day computations; namely that of using accurate vital statistics. statis-tics. Halley selected the city of Bres-' Bres-' lau (you've been reading about it in the war news from Silesia) for his guinea pig from 1687-92 observing k . . : - . W fV w-jl. fli' 'Aiir j A view on Broad street in front of the Stock Exchange and Sub-Treasury Sub-Treasury (then the Customs House) in New York City in 1845 when life insurance had its beginnings. births and deaths for a five-year period. pe-riod. His tables were the precursor for many others such as the English Eng-lish tables of 1762. But all such improved im-proved tables over the last two centuries cen-turies failed to keep pace with medical medi-cal science. Our first actuarial brainchild was called the American Experience table, 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. D.s were busily engaged 'in making our American Experience figures look sick. Their success in keeping the lower-age groups alive longer is directly responsible re-sponsible for this major effort to re-frame re-frame the basic structure of all life insurance in the United States. Just by way of proving the point, in 1900 the U. S. average age was 49.24. A couple of years ago it stood at 64.82. When it all began back in 1845, this was a husky young nation. But many of its huskiest young citizens fell victims o one disease or another, an-other, diptheria and tuberculosis being be-ing the most active. Many Hazards. Even as late as 1900, more than 40 out of every 100,000 people succumbed suc-cumbed to diptheria. Today it's only only one per 100,000. Europe's black plague of the early 17th century wasn't much worse a scourge than the horrors of pulmonary tuberculosis tubercu-losis over the last century. Statistics Statis-tics for 1900 show that this killer took 173 out of every 100,000. Today less than 40 per 100,000 die of the disease each year. For these reasons, coupled with all the other hazards of living a century 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 "don'ts" tied to the policy. Ben bought $1,500 worth of insurance on his life 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; sum-mertime; (4.) he didn't (without consent) join the army; (5.) he didn't cut his own throat to improve im-prove his wife's finances; (6.) he didn't expose his insured and valuable valu-able carcass by duelling; (7.) he religiously avoided the gallows or guillotine. . . . and so on for quite some distance in slightly more technical tech-nical verbiage. Ben, it might be remarked, was one of the hardier sort, for he lived to collect his own insurance at the age of 96! While the early directors of insurance insur-ance companies had no worries about clients being killed in an automobile or airplane, the 1845 citizens citi-zens of Pres. James Polk's nation of 27 states were liable to find themselves them-selves without a scalp if they took the "covered-wagon" trail west. Life insurance companies also could discount the probability of the "insured" dying from heart failure because of the then modest 15 million mil-lion dollar public debt. Perhaps it is worth noting that over the years the increase in heart disease (and it has increased considerably) is in ratio to the government's debt to the people now at the quite immodest figure of almost 300 billion, bil-lion, a very large hunk of which is held by the same insurance companies. com-panies. If as you read this, you've been hoping to find that now insurance rates will be lower because the doc tors are keeping us alive longer, you'd better read on. At first glance it would seem that under the new mortality table, life insurance rates will be cheaper, but that is not true. John S. Thompson, vice, president and mathematician mathema-tician (actuary) of the Mutual Benefit Bene-fit Life Insurance company, speaking speak-ing for all life insurance companies, tells why. He says: "Policies now in force will not be affected, nor is it expected that policies poli-cies sold in the future will be. That is because the amount of interest life insurance companies can earn on their invested funds has dropped sharply in the last few years, and their operating expenses, wages and taxes, have increased. Fewer Investment Chances. "The cost of life insurance depends de-pends upon three points: (1) the number of claims paid on policyholders policy-holders who die in a given year; (2) the yield or earnings from investments in-vestments of reserve funds; and (3) the cost of operating the company. The war has sharply decreased the field for profitable investments, he points out. War industries are financed by the government; and the building industry, once a big field for loans, is now dormant. Thus insurance in-surance companies which formerly earned from 4 to 6 per cent on their funds, now earn only slightly more than 3 per cent. From 40 to 50 per cent of insurance company funds are invested in war bonds at an average yield of about 2 per cent. And many companies have guaranteed guaran-teed a 3 per cent return to their policyholders. That is why insurance rates cannot be reduced. It was a dead cinch to earn the good old 6 per cent back in 1845 and a lot more, too, even though Mutual Benefit's records show that Robert L. Patterson, founder and first president, and his directors, scorned the possibility of paying big dividends divi-dends by "grubstaking" a few of the gold-seeking '49ers. Sound, conservative con-servative investments were made to protect widows and orphans. But, conservative as the investments were then, they paid handsomely as compared with today. Money Earns Less Than 2. Shortly after the turn of the century, cen-tury, returns on invested money tightened up considerably. All this is readily reflected in overall returns to policyholders. Between 1914-1928 Mutual Benefit policyholders were getting about 2.1 per cent on their dollars paid in. The 1929-1943 picture pic-ture was still trending downward to about 1.7 per cent per annum. It was vastly different in 1845. In those days the company president drew $1,500 per year just about the price of a fair cook or housekeeper on today's market. The top insurance insur-ance salesman wasn't allowed to earn more than $3,000, all other earnings going buck to the company till. The rent bill was $25 per month. One of the ranking "assistants" "assist-ants" drew the good (in those days) salary of $300 per year. Today the taxes, alone, on a building occupied by one large insurance in-surance company exceeds 10 million dollars per annum. And the charwomen char-women on the 31st floor would laugh at an offer of $300 a year. Even the elevator boy would sneer at the same salary Robert Patterson was paid in 1845. Now you know why insurance is going to continue to cost just about the same as it has in the past. As a group, we're living a lot longer and there is less risk in insuring us. But, as a group we cost a whale of a lot to handle and the days of fancy interest returns are over. i 1 ' 1 " ' A l ; ' ' ' s, ' A U ' v . ; , A view of the Brooklyn docks from the ? w 5 ' ' ' ' a " ; -e- 4 " :i i w '' "4 WjOl street ferry In 1S53. . , . :. ..... j |