a question of time.
This is not a new opinion. It's truth is attested by more than one wreck
in this country already.
In every level, or uniform premium, there is a provision for the payment
to the company of the rate of insurance at the actual present age, (no
matter at what age the insurance was affected) on the net amount at
risk.
The great danger for co-oporative or assessment companies lies in the
facility with which such institutions may be organized, and by men
without capital, character, experience or financial ability, who may
thus be ushered into corporate existence by the indulgent laws of
different states.
The members of the National Association of assessment companies should
see to it that the laws of the different states should be so amended as
to require at least a small capital, say $25,000, as a guaranty of good
faith and ability on the part of the promoters, and that no company
should be admitted to membership unless its system was founded on sound
principles as demonstrated by science and business experience.
The managers of assessment companies should be careful lest their claims
should prove to be unfounded. For instance, the writer of the article in
your last number boldly asserts that it "is susceptible of mathematical
demonstration that one or two million of dollars of reserve is adequate
to perpetuate any well-conducted assessment company for all time,
however large or small it may be, while the spectacle is presented to us
of level premium companies holding fifty to one hundred millions of
accumulations belonging to their policy holders, from which no possible
benefit, in most cases, will ever accrue to them." On reflection he must
see the absurdity of such statements.
The level premium system is a combination of insurance and investments.
The hundred millions are _investments_, and are necessary for the
integrity of the level premium contracts. Any assessment company in
which the rates do not increase as the members grow older should be
compelled to have the full premium reserve required by state law and
actuarial science to be held on level premium contracts. This is capable
of mathematical demonstration.
It must be borne in mind that the cost of insurance _proper_, that
is, the provision to meet current death claims alone, is quite as high
in the best assessment company as in a regular life insurance company,
for this cost depends on the careful selection of lives. The differen
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