| Show american life insurance celebrates its anniversary by adopting a new actuarial table which reflects longer life of modern citizen by ELMO SCOTT WATSON re released eased by western newspaper union forty five finds NA i american merican life insurance observing its anniversary and by way of celebration its beginning to operate u under a set of actuarial tables until this year insurance companies have been booking life and death chances on the same basis 1 as ab they were figured when the first american life policies were written away back in 1845 but 4 this year they are discarding the old odds table and putting into effect a new one and a matter of prime importance to more than americans who own more than billion dollars worth of life insurance asa As a matter of fact the adoption of the new actuarial tables in american life insurances centennial year is accidental and coincidental rather than purposely planned nine years ago state insurance commissioners and mathematical wizards of the insurance companies recognized the fact that the tremendous improvements prove ments 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 standards was needed deeded but figuring out these s standards tan dards and fitting them to rates or fitting rates to them 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 an on medical matters and improvements in diet including more knowledge of vitamin requirements I 1 only caily two or three persons per thousand are dead at the age of 30 rates about the same but even though the improvement in our iff life e chances seemed to indicate much reduced rates this was offset over the years by the deterioration teri oration 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 income according to lowered return on investments and 3 company expenses as compared compare d 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 them for the latter two points lowered earnings on invested funds and sharply rising costs of doing business more than covered the slight break they showed on their books because the doctors were keeping us alive longer nevertheless they went ahead alfred N guertin of new jersey was made chairman of a commissioners group to recommend the new life tables five other state commissioners ners sat with him john S thompson mathematician and vice president of the mutual benefit life 5 insurance company of newark NJ N J was a committee member represent ing the actuarial society of w america sixteen states enacted the called guertin law which ch means if that the insurance rance companies doing business in those states can in 1945 y adopt the recommendation of the guertin committee into their future policies the law became effective january 1 of this year on a an n optional basis but it becomes mandatory after three years in december 1948 how it all AH began centuries before guertin and associates took on their herculean job a roman named ulal anus devised an odds table for a few of his friends Ul was a lawyer with a flair for figures As a I 1 matter of tact fact his life expectancy ri charts were so good that they remained unchallenged from A D lor for almost 15 centuries even as f late as 1814 the tuscan government used his figures not content with lawyer Ul findings however edmund halley known as the english astronomer who discovered the famous balleys Hal leys Vs cornet comet undertook the job of compit Z g ing modern mortality tables in rys 1693 his method was the basis for g present day computations namely that of using accurate vital statistics wea halley selected the city of breslau youve been reading about it in athe e the war news from silesia for his 1116 chinea pig from 1687 92 observing P PV 3 4 1 4 A ha woi I 1 A pa 4 T A view on broad street in front of the stock exchange and then the customs house in new york city in 1845 when life insurance had its beginnings births and deaths for a five year period his tables were the precursor for many others such as the english tables of 1762 but all such improved tables over the last two centuries failed to keep pace with medical science our first actuarial brainchild was called the american experience table 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 Ds were busily engaged in making our american experience figures look sick their success in keeping the lower age groups alive longer is directly te responsible for this major effort to the basic structure of all life insurance in the united states just by way of proving the point in in 1900 the U S average age was A couple of years ago it stood at when it all began back in 1845 this was vas a husky young nation but many of its huskiest hu young citizens fell victims to one disease or another diphtheria dip theria and tuberculosis being the most active many hazards even as late as 1900 more than 40 out of every people succumbed to diphtheria dip theria today its only one per Eu ropes black plague of the early century much worse a scourge than the horrors of pulmonary tuberculosis over the last century statistics for 1900 show that this killer took out of every today less than 40 per die of the disease each year for these reasons coupled with all the other hazards of living a century 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 bonts don ts tied to the policy ben bought 1500 worth of insurance on his life at a premium of 51 a year with the provision that 0 1 he die on the seas 2 he leave the country 3 he go south in the summertime mer time 4 he without consent join the army 5 he cut his own throat to improve his cifes finances 6 he expose his insured and valuable carcass by duelling buelling du elling 7 he rel religiously avoided the gallows or guil guillotine lotina and so on for quite some distance in slightly more technical verbiage ben it might be remarked was ons one of the hardier sort for he lived to collect his own insurance at the age of 96 while the early directors of insurance companies had no worries about clients being killed in an automobile or airplane the 1845 citizens of pres james folks nation of 27 states were liable to find themselves 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 dollar public debt perhaps it is worth noting that over the years the increase in heart disease and it has increased considerably is is in in ratio to the governments debt to the people now at the quite immodest figure of almost billion a very large hunk of which is held by the same insurance companies if as you read this youve been hoping to find that now insurance rates will be lower because the doc tors are keeping us alive longer better read on at first 9 glance lance 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 actuary of the mutual benefit life insurance company speaking for all life insurance companies tells why he says policies now in force will not be affected nor is it expected that policies 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 ia last st few ye years bars and their operating expenses wages and taxes have increased I 1 fewer investment chances the cost of life insurance depends upon three points 1 the number of claims paid on policy holders who die in a given year 2 the yield or earnings from investments of reserve funds and 3 the cost of operating the company the wai 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 companies which formerly earned from 4 to 6 per cent on their funds now 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 az 2 per cent and many companies have guaranteed a 3 per cent return to their policyholders policy holders that is why insurance rates cannot be reduced it was a dead cinch to earn the tha good old 6 per cent back in 1845 and a lot more too even though mutual benefits records show that robert L patterson founder and first president and his directors scorned scorned the possibility of paying big ig dividends by grubstaking grub staking a few of the gold seeking sound conservative serva tive 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 returns on invested money tightened up considerably all this is readily reflected in overall returns to policyholders policy holders between 1914 1928 mutual benefit policyholders policy holders were getting about 21 per cent on their dollars paid in the 1929 1943 picture was still trending downward to about 17 per cent per annum it was vastly different in 1845 in those days the company president drew 1500 per year just about tile he price of a fair cook or housekeeper on market the top insurance salesman allowed to earn more than all other earnings going back to the company till the rent bill was 25 per month one of the ranking assistants drew the good in those days salary of per year today the taxes alone on a building occupied by one large insurance company exceeds 10 million dollars per annum and the charwomen on the floor would laugh at an offer of a year even the elevator boy would sneer at the sime same salary I 1 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 were 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 an and d the days r rf fancy interest returns are over |
