The Proceedings of the National Fraternal Congress for 1899 contain the following statistics compiled by one of the representatives. The numbers indicate the rates paid for the same kind of insurance, at the same age, in different societies:

At age 30: 25c., 35c., 371⁄2c., 44c., 45c., 46c., 5oc., 55c., 56c., 60c., 62c., 64c., 65c., 69c., 7oc., 8oc., 82c., 84c., 85c., 90c., 92c., $1.00, $1.04, $1.10, $1.11, $1.14, $1.16, $1.19, $1.21, $1.22, $1.40.

At age 50: 65c., 75c., 8oc., 85c., 90c., $1.00, $1.10, $1.16, $1.20, $1.25, $1.33, $1.38, $1.40, $1.42, $1.45, $1.50, $1.53, $1.55, $1.58, $1.60, $1.65, $1.72, $1.78, $1.80, $1.85, $1.86, $1.90, $1.96, $2.00, $2.07, $2.08, $2.15, $2.35, $2.45, $2.52, $2.56, $2.86, $2.90, $3.00, $3.30, $3.80.

Still more elaborate comparisons are made in the subjoined table, exhibiting, except in columns I, II and 12, level annual rates for $1,000 of whole life insurance. Column I gives ages. Column 2 gives the net annual level premiums based upon the American Experience Table, with 4 per cent interest. Since net premiums provide for the so-called reserve and mortality elements only, but not for the loading or expense element, the premium actually collected, gross or office premium, must be considerably in excess of what is indicated in this column. The assumed rate of interest is perhaps too high for a time when a number of leading companies are going over to a 3 per cent basis. This would necessitate another addition to the net premium, for the lower the assumed rate of interest, the higher must the premium be. Column 3 contains the net annual level rate per $1,000 of

whole life insurance, adopted and recommended by the National Fraternal Congress. Columns 4, 5, 6, 7, 8 and 9 show the rates collected by as many different fraternal societies for $1,000 of whole life insurance.

Comparative Exhibit of Fraternal and American Experience Tables.

For columns 5, 8 and 9 the annual rate was secured by multiplying the monthly rate by twelve. The product is

consequently too large, for monthly payments must necessarily be greater than one-twelfth of the annual premium to compensate for loss of interest and the lesser losses due to intervening mortality. Annual premiums are always supposed to be paid at the beginning of the year, thus giving the society the benefit of the interest earnings during the year. In case of monthly payments these earnings are appreciably smaller because of the reduced periods of time during which loans can be made. Column 10 exhibits the gross or office level annual premiums charged by a society which aims to provide pure insurance at the lowest possible cost under a mutual system. This table has the sanction of able actuaries. Columns II and 12 show the probability of dying according to the American Experience and National Fraternal Congress Tables respectively. In these columns one finds the reason for the differences existing between columns 2 and 3, the probability of dying being correspondingly lower in column 12.

It will be noticed that the premiums in column 3 are approximately one-sixth lower than those in column 2, up to age thirty-five; and that for ages above thirty-five they are only about one-tenth lower. Although the rates of column 4 are generally one-third below those of the Fraternal Congress, they show system and careful calculation, as a comparison with columns 2 and 11 and 12 will readily reveal. Columns 5, 6, 7, 8 and 9 are fair examples of that type of fraternal societies which attempt to make the world believe that accepted mortality tables are thoroughly bad and that they can furnish insurance or "protection" at rates from one-half or one-third to one-fourth of "old line " rates. They promise benefits out of all proportion to the contributions made, and sooner or later go into inevitable ruin. Column 10 shows the table of rates prepared by competent actuaries for a society which aims to furnish insurance at the lowest possible cost consistent with safety and efficiency. This society, furthermore, aims to eliminate

the investment features from its insurance, and to restrict its business to the furnishing of mere life protection. If the relief work of many fraternal societies may be characterized as remedial, the insurance of this society may be described as preventive, just as tontine and semi-tontine policies may be termed speculative. Modern life insurance as a whole is primarily preventive; whereas in its beginnings, insurance was chiefly remedial. The transition from the remedial to the preventive form was made possible only by the scientific formulation of accumulated experience, and the transaction of insurance business on the basis of this experience. Accumulated experience eliminated gradually the chance or speculative element which was so prominent in some earlier forms of insurance, such as the maritime or sea loan in connection with which some life underwriting was also done. Although an element of speculation still survives and the investment' features of many policies are predominant, modern life insurance is the greatest engine of prevention which the world has known. Failure to recognize the scientific truth that the efficiency of this preventive work depends absolutely upon rigid adherence to health experience has not only brought disaster to thousands of fraternal societies, but has tended to throw the entire fraternal system into disrepute as well as to discredit insurance in every other form.

The fact is, therefore, worthy of emphasis that the National Fraternal Congress has for some time recommended a table of rates (column 3) which is the result of years of work of a standing committee of this body. Like all other scientific tables of rates, this is based upon a mortality table. Only a part of the Fraternal Congress Mortality Table is given in column 12. The committee took into consideration the published experience of old line companies in the United States and several foreign countries, and the

1 No attempt is here made to discuss the use of this word in insurance terminology.

experience of several of the largest and oldest fraternal societies in this country. The committee was unanimously of the opinion that the Actuaries' and American Experience Tables are too high both from the experience of the old line companies and from that of fraternal societies. Having reached this conclusion, the committee combined the various actual mortality experiences into a new mortality table. The latter was made the basis of the premium rates in column 3; and, in addition, of step-rate and modified steprate plans. A fraternal society might accept the mortality table without adopting the schedule of rates. For instance, column 3 assumes 4 per cent interest. This is probably too high for the present; hence, a society desiring to assume an interest basis of 3 or 31⁄2 per cent could construct its own tables on the basis of the mortality table, giving it, of course, a higher rate of net annual level premiums than those of column 3. The chief significance of the work of this committee on rates lies in the official recognition which has repeatedly been given by fraternalists to this kind of work, and the inference that any fraternal society whose experience is more unfavorable than that assumed in the Fraternal Congress tables is faulty either in plan or management, or both. It is doubtful, however, whether fraternalists as a body sufficiently realize the advantage of assuming a more unfavorable mortality rate than their own experience realizes. No one will be inclined to question the desirability if not also the necessity of erring on this side of the line.

Here we are confronted by the question of reserve and surplus. An ideal system of pure life insurance would be one in which the actual experience is identical with that assumed in the mortality table upon which the organization in question bases its tables of premium rates; in which the interest earnings are exactly equal to the assumed rate; in which the expenses of management absorb only the sums set apart as loading; and in which there exist no lapses,