1871-1, NAIC Proceedings

  • 1871-1, NAIC Proceedings, (fka National Insurance Convention)  ---  [BonkNote]  ---  233p
    • (p49) - Solvency, Lapse-supported
    • (p50-51) - Life Insurance Chart
  • The experience of most companies shows that about  one half of the policies lapse within ten years from the date of their issue; and probably not more than one-quarter of the policies issued in any year will be in force at the end of twenty years.

--  E. W. Peet, Secretary of the National Life Insurance Company of the United States

1871-1, NAIC Proceedings, (fka National Insurance Convention)  ---  [BonkNote]  ---  233p

  • (pXV) - There is no analogy, whatever, between the insurance of life and that of property; for, while the risks of fire and marine companies are taken for a short, fixed time, upon the expiration of which the contract terminates, and it is optional with both parties to renew it or not, those of liſe companies end only with the life of the assured, and the whole sum promised him must then be immediately paid .
  • (pXVI) - There is no mystery in life insurance, there are no hazardous contingencies, which can excuse the slightest departure from universal rules of business, and life insurance will never attain its proper position in public estimation, until its conductors are required, by public opinion, to respect those rules.
    • Harvey G. Tuckett, in a little work published just twenty yens ago, enlarges upon this idea as follows: The premiums are calculated in accordance with certain tables of mortality, and a certain rate of compound interest, to which is added a certain sum for expenses.
  • Gustavus Smith, Kentucky, Insurance Commissioner:  My attention was incidentally called to the subject of life insurance some year and a half ago, and when I found upon what a peculiar and very simple theory it is based, I was utterly amazed to think how little the thing was generally understood, and that the insuring public were utterly ignorant of what it was all about.
    • The committee of which I am chairman has before it for consideration this peculiar element of life insurance which I refer to, and I think if the members of the committee will closely attend to and study over that matter, they will have different views when they come back of the theory of life insurance from those which they had when they came here.
    • My opinion is that every intelligent man ought to understand this peculiar theory, and I hope that the beginning which we have made here, and the communications sent in and referred to the various committees, will spread before you an amount of information which will enable you to get out what I think has been kept a secret a little too closely and a little too long.
    • We will find that the mysteries of the actuaries' art is no mystery at all, and that when they are fully comprehended there will be safety.
  • Mr. Bryant, Actuary of the New York Insurance Department:  The mystery of life insurance!
    • Why, there is not the least mystery in it.
    • The only mystery is, how it has managed to live so long on the reputation of having a mystery, which it has not.  [Laughter]
  • (p13) - Albert W. Paine, Maine, Insurance Commissioner - We are here as a grand jury of inquest on the insurance body — not for indictment, but to find the best system for practice, and I feel that we want the utmost information that we can get.
    • Let it come from whence it will.
    • I will thank any man in the United States, let him be who he will, to come forward and give any light when these subjects are under discussion; and I hope we will find a correct verdict upon the case.
  • -- N.D. Morgan, president of the North America Life insurance company
    • (p30) - Mr. Morgan, referring to the report of the committee' on assets and investments, spoke as follows:
      • Life insurance is a theme that should be approached and handled reverently and discreetly, and, I would add, with a fear of God, for it is little less than holy ground; hence, carelessness and  ignorance, empiricism and charlatanry, should be excluded from its high places. 
    • (p84) - Mr. Morgan: I conceived, Mr. Superintendent, that in your report you have unintentionally, of course, impeached or underrated the capabilities of the officers and managers of our life insurance companies in relation to a most vital point, and that it is due to them that the public shall not be misled by any statements or empirical suggestions from any quarter whatever.
  • (p87) - Gustavus Smith, Kentucky, Insurance Commissioner:  We have got a vast deal to learn.
    • While on this subject, I may allude to what I consider the great trouble in life insurance.
    • It is, in my opinion, an undoubted fact that educated, intelligent, influential business men of this country, as a class, are utterly ignorant of what this thing is.
    • If we can digest all that has been brought before us, and adapt it to practical business requirements, I think in that one thing we can accomplish a great deal of good.
    • We shall then be able to place before the business men of the country such a view as they can themseives comprehend and readily learn.
      • And I assure you it can be done.
    • Men can learn.
      • There is no such mystery in this that ordinary business men cannot learn it.
    • If we can accomplish that with the people of this country—I do not mean all of them, only its leading, influential men to whom the people generally refer for advice, in reference to finance, law and other questions—I believe the institution is safe.
      • You can then conduct your state supervision with some sort of safety.
    • On the other hand, until these men do know all there is peculiar under this thing, all the state institutions that can be devised will not be able to hold this giant.
    • The men interested in the life insurance business must know something what they are about; then they will be able to attend to their own  business.
  • (p107) - Thomas S. Lambert, president of the American Popular Life Insurance Company - ...and examiners at the central office should not have their duties merely incidental to a general practice, but should be devoted to them exclusively, and fitted for them by adding to a thorough knowledge of life a good knowledge of actuarial mathematics.
  • (p132) - Closing Address of the President - George W. Miller - Sup't of Insurance Department - New York
    • This system of insurance is like a vast machine.
    • Let the parts be constructed by independent artisans without any reference to the labors of each other, and you have no warrant that they will fit together and work in harmony, or produce any kind of useful result.
    • But let the artificers come together and unite their skill; let the different parts be made for each other, and by connecting links be made to work together, and you will have a perfect machine.
  • (p154) - Sheppard Homans: I, in common with other actuaries, have taken a great interest in the proceedings of this convention—more, however, as spectators than with the view or wish to participate in its discussions or deliberations, still less to make formal statements or remarks—I came here this evening, at your invitation, without preparation, but simply with a desire as far as it may be in my power, by replies to your queries, and by impromptu remarks, to aid in the accomplishment of the object desired, which I conceive to be a thorough discussion and ventilation of the subject of state supervision in life insurance matters, and the adoption of uniform systems and blanks by the different states, by which that supervision may be rendered more effectual, and at the same time less onerous to the companies. 
  • (p157) - Sheppard Homans: If policyholders wish to obtain insurance at the lowest present outlay of premiums, they surely ought to be allowed to do so, provided the rates are based upon assumptions which, in all probability, may be realized.
    • What those assumptions for interest in the future should be, is a question upon which men of financial and business experience are better capable of affording a solution than actuaries, and to them we leave the question. 

 

86 / 365

In bargaining for life insurance the purchaser consults his interests by considering the transaction from two standpoints — 1. In regard to the question of price. 2. In regard to the question of security. He will require his insurance to be as low-priced as possible, and he will require it to be as certain as possible. I deny the authority or the right of the state to interfere with the question of price, except so far as to prevent the making of contracts which are notoriously contrary to public policy. And, so far as the question of security is concerned, I insist that the state has but one duty to perform — the duty of enforcing the performance of contracts according to their terms. The maturity of these contracts is deferred, and hence it follows that, if any state supervision be necessary, it is a matter of prime importance to regulate for the fulfilment of the contracts in advance of their maturity. Therefore the requirement of a reserve.

87 / 366

It may be assumed that the people cannot afford to take out life insurance policies, unless the rates of interest in life insurance are very nearly what those persons could themselves realize on their funds in other directions.

 

88 / 367

the assumptions — each being no more, nor any less than was provided. In that case, there will remain at the end of the year the net premiums less the mortality charge, or cost of insurance, increased by the interest upon the premiums from the time they were invested.

93 / 372

the assumptions — each being no more, nor any less than was provided. In that case, there will remain at the end of the year the net premiums less the mortality charge, or cost of insurance, increased by the interest upon the premiums from the time they were invested. of security in the consideration of this great subject.  

73 / 646

Prof. Elizur Wright says, (page 53,) " I have with some care studied what has been written on the other side of the water by the British institute of actuaries, a very learned and capable body of men. I won't say they are owned ' body and soul ' by the life insurance companies of Great Britain, but I do say they are not owned by the public outside of the life insurance companies."

43 /322

 Then, again, they say they are willing, as I understand, to put up a reserve sufficient to meet the claim at 4J-£ or 4 percent, whichever it may be, but they want our reports to show that their capital is unimpaired. Well, it is a very fair proposition upon its face. But what is the proposition ? As I understand it, it i6 simply this: "That you, Messrs. Commissioners, will please help us advertise our company.

44 / 323

And here I will just allude to another point, for I shall get no support. I suppose, because I find no actuary will support me, though I have corresponded extensively. There is one consideration, however, which I have brought to the attention of several of the most eminent actuaries, and they have answered me; I am not satisfied with it. That is the subject of lapses.

44 / 323

I do hope that one of the results of our meeting here will be to put an end to a very great portion of this waste, if I may so call it, of life insur ance, to wit, the unnatural termination of policies. No one would believe half the truth that could be told to him, and that all our reports show is the truth, with reference to that subject.

 

Let us do what we can to get rid of the evil; and then we shall have nothing to legislate for.

161 / 440

In regard to this matter of dividends, every member of this conven tion is aware of the immense profits made by companies from lapses; and from that source many of the companies have been able to make dividends.

 

Mr. Miller : Then there must be something vicious behind the lapses.

 

Mr. Atchison — As the action of this convention is to be purely advisory I move that all the executive officers and actuaries of the insur ance companies be invited to participate in the deliberations of this convention. Mr. Kelsey — I think that might, with propriety, be left to the committee which has just been appointed.