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ſºlagºatbugettº èabingº Bank
ſnºurantt and 33rngton Špgtem
For further information, apply to
State Actuary HARWOOD E. RYAN
I6 I DEVONSHIRE STREET, BOSTON
{\
*
ISSUED BY
MASSACHUSETTS, SAVINGS INSURANCE LEAGUE
TRUSTEES
OF THE
General Insurance Guaranty Fund
APPOINTED BY THE GOVERNOR OF THE COMMONWEALTH
HoN. WARREN A. REED, Vice-President People's
Savings Bank . . . . . . . . . . . . . . . . Brockton
CHARLES K. FOX (Shoe Manufacturer) . . . . Haverhill
CHARLES C. HITCHCOCK (Department Store) . . . Ware
CHARLEs W. HUBBAR3. Treasurer Ludlow
Manufacturing Associates . . 55 Congress Street, Boston
HAMILTON MAYO, President Leominster National
Bank . . . . . . . . . . . . . . . . . . Leominster
PRESTON POND, Vice-President Dennison Mfg. Co.,
- 26 Franklin Street, Boston
GEORGE WIGGLESWORTH . Exchange Building, Boston
STATE ACTUARY.
HARwooD E. RYAN . . . . 161 Devonshire Street, Boston
STATE MEDICAL DIRECTOR.
HORACE D. ARNOLD, M.D. . . 427 Beacon Street, Boston
&
*-º
->
FOREWORD.
The publication in September, 1906, by Collier’s of Mr.
Brandeis's article entitled “Wage-earners' Life Insurance” was
followed by the organization of the Massachusetts Savings Insur-
3,IlC62 League, which secured the enactment in June, 1907, of the
Savings Bank Insurance Law. The purposes of the act are
briefly set forth in the following extract from the report of the
Wage-earners' Insurance Committee of the Boston Merchants
Association, which was unanimously adopted by the Association
at a meeting held December 16, 1908:—
“The Massachusetts system of savings-bank insurance and
annuities was established by Chapter 561 of the Acts of 1907,
which authorized any savings bank to establish under proper
safeguards an insurance department for the issue to residents
of Massachusetts of legal reserve life insurance limited to $500,
and annuities limited to $200 per year, on any one life. The act,
however, permits the same person to take out life insurance and
annuities from more than one bank.
The Whitman Savings Bank and the People's Savings Bank
of Brockton have opened insurance departments. The Bridge-
water Savings Bank, Ludlow Savings Bank, and Ware Savings
Bank have taken agencies from the Whitman Bank. Both the
Whitman Savings Bank and the People's Savings Bank of Brock-
ton have private agencies, including manufacturers, mercantile
establishments, labor unions, and welfare institutions. In this
manner, agencies have already been established in Boston, Cam-
bridge, Springfield, Lowell, Haverhill, Brookline, Whitman, Brock-
ton, Ludlow, and Middleboro.
PURPOSES.
The purposes of the act are:—
1. To give to wage-earners of Massachusetts an opportunity
to secure safe life insurance at the lowest possible cost, as a sub-
stitute for the expensive so-called ‘industrial life insurance.”
Over 1,000,000 ‘industrial life’ policies are outstanding in
Massachusetts. While safe, this form of insurance is very ex-
pensive, the expense of the business being sometimes 40 per cent.
of the premiums.
2. To give wage-earners of Massachusetts an opportunity to
make provision for their old age, in the form of annuities, at the
lowest possible cost. &
This system of old-age annuities is the first, and as yet the only,
opportunity for wage-earners in the United States to provide
adequately for their old age.
LOW COST.
The low cost of life insurance and annuities offered under the
Massachusetts Savings Bank system is attained:—
1. By eliminating entirely the paid solicitor of insurance and
the house-to-house collector of weekly payments.
2. By eliminating entirely the dividends annually paid to the
stockholders of the “industrial life” companies, which in the case
of one very large company amounted to over twice the capital
actually paid in.
3. By eliminating in the main the actuarial and incidental
expenses.
The state actuary furnishes the actuarial service, and the state
medical director supervises the medical work, without charge to
the banks.
4. By utilizing the high net-earning capacity of the savings
banks for investing funds, and their long record of small expenses
of management.
5. By substituting for the paid solicitor and collector numerous
unpaid agencies through which applications for insurance and
annuities may be made, and at which premiums may be paid.”
SAFETY.
The safety of the funds accumulated as a reserve against out-
standing policies is guaranteed:–
1. By the personnel of the savings-banks officials, men of the
highest standing in the community.
2. By a special reserve fund, applicable only to insurance obli-
gations, which must, under the statute, be established by each
bank before it can issue its first policy.
3. By a provision that 4 per cent. of all premiums paid in must
be immediately turned over to the Trustees of the Massachusetts
General Insurance Guaranty Fund for the joint benefit of all
policy-holders.
4. By the fact that all agencies for the acceptance of applica-
tions and the receipts of premiums must be bonded.
_-- These safeguards, all of which are required by the statute,
give the policy-holder a much greater measure of moral and
financial security than that afforded by any insurance company
in existence.
CONCLUSIONS.
Our study of the system of life insurance and annuities estab-
lished by this act convindes us that:-
I. The objects of the act are most commendable, and, so far
as it is availed of, it will prove of great value not only to the in-
sured, but to the whole community.
2. It will immediately benefit the worker, the employer, the
tax-payer, and the citizen.
3. It is thoroughly in line with those policies which have placed
Massachusetts at the head of the list of states in guarding the
welfare of her workers.
4. It encourages thrift and economy, and discourages waste
and extravagance. -
5. It enables producers to foreferd the event of accident or
disease, and to distribute a part of the fruit of their youthful
energy over the years of their decline without paying heavy trib-
ute to private corporation for the privilege of doing so. -
6. Its practicability is already demonstrated.
7. It is entirely in accord with, and a natural development of,
the purposes for which savings banks were established, in that
it encourages habits of thrift and economy, and enables wage-
earners and other people of small means to provide for their fam-
ilies, and for old age, illness, and other unforeseen contingencies,
much more effectively than has heretofore been possible by the
mere accumulation of savings. -
The Massachusetts system of life insurance and annuities rests
upon the undeniable proposition that the cost of providing for
old age is a part of the cost of living in youth; that this cost should
be recognized as a fixed charge upon current wages; and that
any person who, having the opportunity, does not make the old
age provision, is simply shifting upon the community, or upon
his family or his friends, the burden he should have borne him-
self.
Under the act not only may any savings bank, without estab-
lishing an insurance department of its own, become an agent
for any other which has established such a department, but an
unlimited number of private agencies may be established by any
insurance bank in any part of the commonwealth.
It is hoped that substantially every large or fairly large em-
ployer of labor will take such an agency; that the trade unions
and employees’ benefit societies will take agencies; and that agen-
cies will be established with all institutions and organizations
interested in the public welfare.”

WAGE_EARNERS’ LIFE INSURANCE."
HE average expectancy of life in the United States of a
man 21 years old is, according to Meech's Table of
Mortality, 40.25 years. In other words, take any large
number of men who are 21 years old, and the average age which
they will reach is 614 years.”
If a man, beginning with his 21st birthday, pays throughout
life 50 cents a week into Massachusetts savings banks, and allows
these deposits to accumulate for his family, the survivors will,
in case of his death at this average age of 61% years, inherit $2,265.90
if an interest rate of 3} % a year is maintained.t
If this same man should, beginning at age 21, pay throughout
his life the 50 cents a week to the Prudential i Insurance Company
as premiums on a so-called “industrial” life policy for the benefit
of his family, the survivors would be legally entitled to receive,
upon his death at the age of 61% years, only $820.5
If this same man, having made his weekly deposit in a savings
bank for 20 years, should then conclude to discontinue his weekly
payments and withdraw the money for his own benefit, he would
receive $746.20. If, on the other hand, having made for 20 years
such weekly payments to the Prudential Insurance Company, he
should then conclude to discontinue payments and surrender his
policy, he would be legally entitled to receive only $165.
* According to the American Experience Table of Mortality, the expectancy is 41.53
years; according to Dr. Farr's General English Experience Table No. 3, it is 38.80 years.
f The average interest rate paid by the Massachusetts savings banks during the ten
years ending October 31, 1905, was 3.83%. The lowest average rate of all these banks
in any one year (1903) was 3.709%.
it The result in other industrial life insurance companies would be substantially the
S2.In e.
§ The payment to be made."by the insurance company would be increased by small
amounts from time to time paid by way of benefits or dividends if any are declared.
* By Louis D. Brandeis. Reprinted from Collier's Weekly.
6
So widely different is the probable result to the workingman
if he selects the one or the other of the two classes of savings in-
vestment which are open to him; and yet life insurance is but
a method of saving. The savings banks manage the aggregate
funds made up of many small deposits until such time as they
shall be demanded by the depositor; the insurance company,
ordinarily until the depositor's death. The savings bank pays
back to the depositor his deposit with interest less the necessary
expense of management. The insurance company in theory does
the same, the difference being merely that the savings bank under-
takes to repay to each individual depositor the whole of his deposit
with interest; while the insurance company undertakes to pay
to each member of a class the average amount (regarding the
chances of life and death), so that those who do not reach the
average age get more than they have deposited (including interest),
and those who exceed the average age less than they deposited
(including interest). The fundamental object of both savings
and life insurance institutions is the safe and profitable invest-
ment and care, at a minimum of expense, of funds contributed
from time to time in small amounts. To attain this end, the
essential qualities on the part of the management of both classes
of institutions are good judgment, honesty, economy, and ac-
curacy. w smºs
Why, then, does the workingmen’s investment in industrial
insurance prove relatively so disastrous?
WHAT INDUSTRIAL INSURANCE IS.
Industrial insurance is simply life insurance in small amounts
of the kind commonly taken by the wage-earner. In the United
States the policies average now about $140. They serve mainly
to provide funds to meet the wage-earner's heavy expenses of a
last illness and a decent burial. They are considered a prime
necessity among the working people, so that of the 20,936,565
level premium life insurance policies outstanding in the ninety
7
American companies on January 1, 1905, 15,678,310 were indus-
trial policies.
The peculiar features of industrial as distinguished from or-
dinary life insurance are:–
(a) That the premiums are fixed for all ages at 5 cents or mul-
tiples thereof, the variations for different ages being in the amount
of insurance so purchased, whereas in ordinary life insurance
the variation is in the amount of premium.
(b) That the premium is payable weekly: whereas in ordinary
life insurance the premium is payable annually, semi-annually,
or quarterly.
(c) That the premium is collected from house to house, whereas
in ordinary life insurance the payments of premium are com-
monly remitted by mail or are made at the office of the company
or of its agents. *

INDUSTRIAL–INFANTILE TABLE.
Weekly Premium, Ten Cent8.
Age next birthday when policy is issued.
BENEFIT PAYABLE IF POLICY EIAS
BEEN IN FORCE FOR
2 3 4 5 6 7 8 9
Less than three months. . . . . . . . . . . . . . $16 || $18 $20 $22 $24 $28 $32 || $40
More than 3, but less than 6 months . . . . . 20 22 26 28 32 38 44 56
More than 6, but less than 9 months . . . . . 24 || 28 || 32 36 44 52 70 100
More than 9 months, but less than 1 year 30 || 34 || 40 48 58 70 || 100 150
One year . . . . . . . . . . . . . . . . . . . . . . . . . . 34 | 40 || 48 5S 78 110 | 160 ſ 240
Two years. . . . . . . . . . . . . . . . . . . . . . . . . . 40 || 48 58 86 120 170 240
Three “ . . . . . . . . . . . . . . . . . . . . . . . . . 48 || 58 94 || 130 | 180 240
Four “ . . . . . . . . . . . . . . . . . . . . . . . . . 58 102 || 140 || 1 90 240
Five “ . . . . . . . . . . . . . . . . . . . . . . . . . 110 150 | 200 240
Six “ . . . . . . . . . . . . . . . . . . . . . . . . . 160 | 200 || 240
Seven “ . . . . . . . . . . . . . . . . . . . . . . . . . 200 || 240
Eight “ . . . . . . . . . . . . . . . . . . . . . . . . . 240
One-half the , above amounts, will be paid for a weekly premium of five cents. No
higher premium than ten cents will be taken.
Table showing the rates charged for baby insurance by
the Prudential Insurance Company. For five cents a
week this company will insure a child one year old,
paying the parents eight dollars in case of death.
THE APPALLING WASTE IN INDUSTRIAL
INSURANCE.
In the United States about 94% of all industrial insurance is
furnished by three companies, the Metropolitan of New York
writing 49%, the Prudential of New Jersey 36%, and the John
Hancock of Massachusetts 9%. Each company issues also or-
dinary life policies.
The Metropolitan (which alone separates in any published
statement the expense of its industrial department from its ordi-
nary life department) discloses that the managing expenses of its
industrial department in the year 1904 (exclusive of real estate
taxes, insurance taxes, and departmental fees) was 42.08% of all
premium receipts. The expense in the John Hancock is stated
to be “about” 40%. That of the Prudential is probably higher
than either of the other companies.
IN THE YEAR 1904 THE AVERAGE EXPENSE OF MANAGEMENT
OF THESE THREE COMPANIES (INCLUDING BOTH THE ORDINARY LIFE
AND THE INDUSTRIAL DEPARTMENTS) was 37.21% OF ALL PRE-
MIUM RECEIPTs. PREMIUM RECEIPTS OF INSURANCE COMPANIES
CORRESPOND TO DEPOSITS OF SAVINGS BANKS.. IN THE SAME YEAR
THE PERCENTAGE OF MANAGEMENT EXPENSES TO DEPOSITS MADE
DURING THE YEAR OF THE 188 MASSACHUSETTS SAVINGS BANKS
was 1.47%. In other words, the percentage of expense of man-
agement to premium receipts of these insurance companies was
twenty-five times as great as that of the savings banks to their
year's deposits. Yet the percentage of expense of the industrial
department of these insurance companies alone is even greater than
37.21% of the premium receipts, the companies’ percentage
of expense being reduced by reason of the fact that the compa-
nies issue also ordinary life policies. Even the extravagantly
managed Mutual Life, New York Life, and Equitable (which
issue only ordinary life policies) took for such managing ex-
penses in 1904, on the average, only 23.33% of the year's
premium receipts; while the Metropolitan, the Prudential,
9
and the John Hancock (which issued both kinds of policies)
took 37.21%. .
It is true that the collections of premium by an insurance com-
pany are partly for the purpose of carrying insurance risk, as well
as for that of investment, while the deposits in a savings bank are
accepted solely for the purpose of investment, but this circum-
stance does not by any means wholly destroy the significance of
the foregoing comparisons.
How heavy the burden is which the present system of industrial
life insurance imposes upon the workingman can, however, be
fully appreciated only if we bear in mind the following facts:—
FIRST-THE DOUBLE PREMIUM.
The premium payable for any given amount of industrial in-
surance is about double that payable on ordinary life non-par-
ticipating policies.
Thus, in the Metropolitan, an industrial policy-holder insuring
at age 21 would pay 60 cents a week, or in the aggregate $31.20
a year for a $984 policy, while he would pay only $16.55 a year
for an ordinary life non-participating $1,000 policy. In the Pru-
dential a man of 40 would pay 50 cents a week, or in the aggregate
$26 a year, for a $500 policy, while he would pay only $27.03
for an ordinary life non-participating $1,000 policy. -
SECOND–THE QUADRUPLE ExPENSE OF MANAGEMENT.
The proportion of the premium taken for management expenses
in the case of industrial insurance is about twice as great as in the
case of ordinary life non-participating policies; and, since the pre-
mium also is about twice as great as for an ordinary non-partici-
pating life policy of like amount, it follows that the industrial
policy-holder pays toward expense of management four times
as much as even the present expense charge borne by the ordi-
nary life policy-holder for the same amount of insurance.
| 0
THIRD-THE HIGH LAPSE RATE.
About two-thirds of all industrial policies lapse and are forfeited
within three years of the date of issue, the premiums paid thereon
proving a total loss to the policy-holder. IN THE YEAR 1904 87%
of THE INDUSTRIAL POLICIES IN THE METROPOLITAN, THE PRU-
DENTIAL, AND THE JOHN HANCOCK WHICH TERMINATED WITHIN
THE YEAR WERE FORFEITED ; AND ONLY 13% RESULTED IN ANY
PAYMENT TO THE INSURED. *
Of the 2,761,449 industrial insurance policies in these three great
companies which terminated by death, surrender, and lapse during
the year 1904, aggregating in amount $422,633,987, payment was
made to insured on only 347,072, or about one-eighth of the poli-
cies. In other words, the holders of 2,414,377 policies, with ag-
gregate insurance of $379,708,958, made a total loss of all pre-
miums paid.
The fact that more than 40% of each premium goes to ex-
pense of management, when taken alone, fails, therefore, to show
how great this industrial insurance waste is. We must remember
that the expense is more than 40% of a premium which is double
the ordinary premium. But even these facts considered together
do not fully disclose the waste. They indicate only the loss to
persisting policy-holders. We must remember also that those
whose policies lapse—a great majority of all who insure—lose
also (except for the temporary protection) the whole 100% of their
premiums.
THE CAUSES OF THIS WASTE.
What are the causes of this appalling waste of the workingmen's
savings P
(A) NOT FINANCIAL DEPRAVITY.
Financial depravity is not an important cause. The recent
insurance investigations have, it is true, disclosed in the Metro-
politan and in the Prudential, as in the Equitable, the New York
I 1
Life, and the Mutual Life of New York, grave breaches of trust.
These industrial companies also have paid exorbitant salaries.
In them also official position and policy-holders’ money have been
used for private profit. By them, also, illegal contributions have
been made to secure legislative favors. And, in addition, the
stockholders of the Metropolitan and of the Prudential have, to
a degree unknown in ordinary life companies, received unjusti-
fiable dividends. THE CAPITAL OF THE PRUDENTIAL HAS BEEN
swell, ED FROM $91,000 TO $2,000,000 OUT OF THE PREMIUMS
EXACTED FROM WORKINGMEN, SO THAT NOW THE COMPANY.,
while PAYING NOMINALLY A 10 % DIVIDEND, IN FACT PAYS TO ITS
STOCKHOLDERS IN DIVIDENDS EACH YEAR AN EQUIVALENT OF
219.78% ON THE CASH ACTUALLY PAID IN ON THE CAPITAL STOCK.
The capital of the Metropolitan likewise has been swelled out of
wage-earners’ premiums from $500,000 to $2,000,000, so that now
the company, while paying nominally a 7% dividend, in fact pays
to stockholders each year an equivalent of 28% on the cash act-
ually paid in on the capital stock. The profitableness of the busi-
ness to stockholders and officers is further shown by the fact that
the Metropolitan, in order to increase its own business and to
eliminate competition, bought out, in 1902, a small Kentucky
company on terms which netted its stockholders nearly $400 per
share for stock on which only $100 had been paid in.
But the amount diverted from policy-holders by financial irregu-
larities, though large in the aggregate, is small as compared with
the total of prémiums paid. Financial depravity does not explain
why IN FIFTEEN YEARS THE WORKINGMEN OF MASSACHUSETTS
HAVE PAID $55,285,744 IN INDUSTRIAL PREMIUMS TO THESE
THREE COMPANIES, AND RECEIVED BACK IN ALL ONLY $19,881,–
353; that is, 35.96% of the aggregate premiums paid, without
interest.* The John Hancock appears to have been managed
throughout with scrupulous honesty as a mutual company, and yet
in the fifteen years ending December 31, 1904, it took from Massa-
chusetts industrial policy-holders in premiums $18,319,730, and
* The figures for the United States are not available, the payments to industrial policy-
holders not being separated from those to ordinary policy-holders.
12
paid to them only $5,942,083, or 32.43%, without interest, of the
premiums paid.* - -
(B) NOT MERE ExTRAVAGANCE.
Nor is this fearful waste of workingmen's savings due to mere
extravagance in management. The working organization of these
companies is said to be admirable; and, aside from a few exor-
bitant official salaries in the Metropolitan and the Prudential, the
employees of the three companies are certainly not overpaid on the
average. The Armstrong Report states that, of the 12,000 or 13,000
agents in the Metropolitan, “an enterprising man who devotes
his whole time to the business” received an average of $11.64 per
week; the 2,112 clerks, an average of $15; the about 2,700 assist-
ant superintendents, $25 a week; and the about 350 superintendents.
$50; and that the fees paid for each medical examination and in-
spection were 50 cents and 25 cents respectively; that the Pruden-
tial paid to 8,582 agents on the average $14.61 per week; to 1,751
assistant superintendents, $24.24; and to 223 superintendents.
$95.55. Obviously, therefore, mere extravagance is not the cause
of this waste of workingmen’s savings.
(C) THE SYSTEM WICIOUs.
The real cause of these meagre results to the insured from in-
dustrial insurance is not financial depravity or extravagance, but
the extraordinary wastefulness necessarily attendant upon the
present system of supplying life insurance for workingmen.
The principal elements of expense in industrial insurance are:
(1) The initial expense on issue of policies, taken in connection
with the large percentage of policies lapsed.
(2) The expense of house-to-house collection of weekly pre-
miums.
* The insurance reserve and some surplus were, of course, accumulated also,
13
(A) THE INITIAL EXPENSE.
The average initial expense as figured by the Metropolitan was,
in 1904, $2.07 per policy on which the average premium was
12 cents weekly. It is probably about the same in other companies.
In the John Hancock the initial expense includes the agent's com-
mission at the rate of 48 cents for placing a policy bearing 5 cents
weekly premium, and the physician’s fee of 50 cents. But the issue
of each policy involves besides these specific charges a large pro.
rata for general expense, the exact amount of which is not supplied
by the published accounts. The initial charge, while large in
itself as compared with the year's premiums, becomes particularly
burdensome to persisting policy-holders by reason of the heavy
lapse rate.
“From the most careful accounting made time and again,”
says the John Hancock, “the weekly premium policies do not
square themselves and make good the initial and current expenses
and loss and provide for the State requirement of reserve, until at
least three full years’ premiums have been paid. . . . Not a policy
that lapses before at least three full years’ premiums have been
paid but leaves a greater or less deficiency for the survivors to
bear.” . . .
“On the average fully one-half the entrants lapse their policies.
before the end of the first year and a majority of these within the
first quarter, though no policy lapses until four weekly premiums
are overdue.”
The experience of the John Hancock is, of course, not exceptional.
The Metropolitan lapse rate appears to be larger, and that of the
Prudential still larger. The Armstrong Committee found that in
the Metropolitan,—
“More than one-third of the policies issued do not survive three
months, and about one-half are cancelled within a year. In 1903.
the company took one week’s industrial issue from each month.
in the year, and followed the issue through a period of twelve
months, with the following result:—
14
- Per Cent.
Rate of lapses in first 3 month from date of issue . . . . 35.40
{ { & & {{ 6 { { { { & & { { - - - - 43.57
& 4 & & & & 9 { { ( & & & {{ . . . . 48.28
& 4 {{ { { 12 & & {{ « (£ & © tº º 51.46
In 1904 the average time for which premiums were paid on policies 4.
which lapsed within one year from issue was 6.05 weeks.
The net result to the Metropolitan Company from each policy
so lapsed is as follows:–
Initial cost of policy . . . . . . . . . . . . . . . . . $2.07
Cost of carrying policy . . . . . . . . . . . . . . . . .52
$2.59
Average weekly premiums at 12.004 cents for 6.05 weeks . . .726
e-mºsºsºm-
Net loss to the company (i.e., to the persisting policy-holders) $1.864
Net loss to the insured (12.004 cents per week for 6.05 weeks) .726
During the second year (in which about 10% of the policies lapse)
and the third year (in which about 5% lapse) the net loss to the
company (that is, to the persisting policy-holders) grows gradually
less, but that to the insured whose policies lapse grows very much
greater. For, while the average net loss to the insured whose policies
lapse during the first year is only 73 cents, the average, figured
on the same basis, for those whose policies lapse in the second year
is approximately $8.88, and the average net loss to those whose
policies lapse in the third year is approximately $15.12. In 1904
the Metropolitan wrote 1,829,559 new policies. Applying the above
percentages to the business of the Metropolitan for the full years
of 1904 and 1905, we find that 941,491 of the 1,829,559 policies
written in 1904 must have lapsed within the year 1905, and that
the net loss on these lapsed policies aggregated $2,438,461.68, of
which the insured bore $683,522.46, and the persisting policy-
holders, $1,754,939.22.
15 N
(B) THE COLLECTION CHARGE.
But besides the deficit due to lapses the persisting policy-holder
bears another fearful burden. Even in the honestly managed
John Hancock the fee of the collector is 20% of each week’s
premium, and this 20% charge is only a part of the cost of collec-
tion. There is in addition necessarily the large expense of an
elaborate system of superintendence and accounting. Bear in
mind that 20% of an industrial premium is equal to 40% of the
sum payable as premium for a like amount of ordinary insurance.
Obviously, therefore, a substantial reduction of the present cost
of industrial insurance is not possible unless some radical change of
system be introduced whereby the initial expenses, the cost of pre-
mium collection, and the percentage of lapses is greatly lessened.
THE SACRIFICE OF THE THRIFTY.
The supporters of the present system of industrial insurance
declare that such a reduction of expenses and of lapses is impos-
sible. They insist that the total loss to the insured and the heavy
burden to the policy-holders from lapses, as well as from the huge
cost of premium collection, must all be patiently borne as being
the unavoidable incidents of the beneficent institution of life in-
surance when applied to the workingman. They declare that the
appalling waste incident to the forfeiture within three years of
two-thirds of all policies written is a sacrifice essential to the ulti-
mate salvation of the small persisting minority, and that the huge
expense involved in the house-to-house collection of weekly
premiums is necessary to prevent still more lapses on account of
the workingman’s alleged lack of thrift.
IT MAY BE QUESTIONED WHETHER, IN VIEW OF THE HEAVY
EXPENSE NOW ATTENDING INDUSTRIAL INSURANCE, TII E DIS-
CONTINUANCE OF PREMIUM PAYMENTS WII ICIH YIELD SUCH
( I6
SLIGHT PROBABILITY OF NET RETURNS IS NOT EVIDENCE,
RATHER OF THRIFT THAN OF THRIFTLESSNESs. It is surely dif-
ficult to justify a system of insurance as to which it may be fore-
told that, of the millions who are entered each year at a per capita
initial expense of $2.07, a majority will not only let their policies
lapse within the year, but will on the average pay in premiums
only 72 cents. Does not such a record of mortality in policies
prove conclusively that most of the entrants had been over-
persuaded or misled into taking the insurance? BUT IF, As
THE COMPANIES CONTEND, THE DISCONTINUANCE OF PREMIUM
PAYMENTS IS EVIDENCE OF THRIFTLESSNESS, SURELY THE
THRIFTY WHO PERSEVERE SHOULD NOT BE COMPELLED TO
SUBMIT TO A SYSTEM WHICH REQUIRES SUCH GREAT AND
LARGELY USELESS SACRIFICES IN THE SUPPOSED INTEREST
OF A SMALL MINORITY.
The thrifty workingman, like people of larger means, should
have the opportunity of obtaining life insurance at more nearly
its necessary cost.
THE REMEDY.
THE SACRIFICE INCIDENT TO THE PRESENT INDUSTRIAL IN-
SURANCE SYSTEM CAN BE AVOIDED ONLY BY PROVIDING AN
INSTITUTION FOR INSURANCE WHICH WILL RECOGNIZE THAT ITS
FUNCTION IS NOT TO INDUCE WORKING PEOPLE TO TAKE
INSURANCE REGARDLESS OF WHETHER THEY - REALLY WANT IT
OR CAN AFFORD TO CARRY IT, BUT RATHER TO SUPPLY IN-
SURANCE UPON PROPER TERMS TO THOSE WHO DO WANT IT
AND CAN CARRY IT,L-AN INSTITUTION WHICH WILL RECOGNIZE
THAT THE BEST METHOD OF INCREASING THE DEMAND FOR
LIFE INSURANCE IS NOT ELOQUENT, PERSISTENT PERSUASION,
BUT, AS IN THE CASE OF OTHER NECESSARIES OF LIFE, IS
TO FURNISH A GOOD ARTICLE AT A LOW PRICE.
17
THE SAVINGS BANK THE BEST MEDIUM.
Massachusetts in its 189 savings banks, and the other States
with savings banks similarly conducted, have institutions which,
with a slight enlargement of their powers, can at a minimum of
expense fill the great need of life insurance for workingmen.
The only proper elements of the industrial insurance business
not common to the savings bank business are simple, and can be
supplied at a minimum of expense in connection with our existing
savings banks. They are:—
(a) Fixing the terms on which insurance shall be given.
(b) The initial medical examination.
(c) Verifying the proof of death.
The last involves an inquiry similar in character to that now
performed by the clerks of savings banks in the identification of
depositors.
The second is the work of a physician, who is available at no
greater expense to the savings bank than to the insurance com-
pany.
The first is the work of an insurance actuary, who would be
equally available to the savings banks as he is to insurance com-
panies, if the former undertook the insurance business. And the
present cost of actuarial service can be greatly reduced: first, by
limiting the forms of insurance to two or three standard forms of
simple policies, uniform throughout the State; and, secondly,
by providing for the appointment of a State actuary, who, in com-
nection with the insurance commissioner, shall serve all the savings-
insurance banks. The work of such an actuary is, indeed, now
necessarily performed in large part in each State by the insurance
department, as an incident of supervising life insurance com-
panies.
The savings banks could thus enter upon the insurance business
under circumstances singularly conducive to extending to the
workingman the blessing of safe life insurance at a low cost, be-
Call Se –
| 8
First. The insurance department of savings banks would be
mangaged by experienced trustees and officers who had been
trained to recognize that the business of investing the savings of
persons of small means is a quasi-public trust which should be
conducted as a beneficent and not as a selfish money-making in-
stitution.
Second. The insurance department of savings banks would be
managed by trustees and officers who in their administration of
the savings of persons of small means had already been trained
to the practice of the strictest economy.
Third. The insurance business of the savings banks, although
kept entirely distinct as a matter of investment and accounting,
would be conducted with the same plant and the same officials,
without any large increase of clerical force or incidental expense,
except such as would be required if the bank’s deposits were in-
creased. Until the insurance business attained considerable
dimensions, probably the addition of even a single clerk might not
be necessary. The business of life insurance could thus be estab-
lished as an adjunct of a savings bank without incurring that
heavy expense which has ordinarily proved such a burden in the
establishment of a new insurance company.
If the individual risks were limited at first to, say, $150 on a
single life, the business could be begun safely on a purely mutual
basis as soon as a few hundred lives were insured, or earlier if a
guaranty fund were provided. As the business increased, the limit
of single risks could be correspondingly increased, but should
probably not exceed $500.
Fourth. The insurance department of savings banks would
open with an extensive and potent good will, and with the most
favorable conditions for teaching, at slight expense, the value of
life insurance. The safety of the institution would be unques-
tioned. For instance, in Massachusetts the holders of the 1,829,-
487 savings bank accounts, a number equal to three-fifths of the
whole population of the State, would at once become potential
policy-holders; and a small amount of advertising would soon
suffice to secure a reasonably large business without solicitors.
19
Fifth. With an insurance clientèle composed largely of thrifty
savings bank depositors, house-to-house collection of premiums
could be dispensed with. The more economical monthly pay-
ments of premiums could also probably be substituted for weekly
payments.
Sixth. A small initiation fee could be charged, as in assessment
and fraternal associations, to cover necessary initial expenses of
medical examination and issue of policy. This would serve both
as a deterrent to the insured against allowing policies to lapse and a
protection to persisting policy-holders from unjust burdens which
the lapse of policies casts upon them.
Seventh. The safety of savings banks would, of course, be in no
way imperilled by extending their functions to life insurance. Life
insurance rests upon substantial certainty, differing in this respect
radically from fire, accident, and other kinds of insurance. As
Insurance Commissioner Host, of Wisconsin, said in a recent
address:–
“If we take a number of thousand persons of different ages, nothing is more
certain in nature than that their natural deaths will occur in a series not
differing very widely from that of other thousands of persons under similar
circumstances. &
The practical experience of this theory has given to the world the mortality
tables upon which life insurance premiums are ascertained and the reserves
for the future needs calculated.
No life insurance company has ever failed which complied strictly with the
law governing the calculation, maintenance, and investment of the legal
reserve. . . .”
The causes of failure in life insurance companies since Elizur
Wright established the science have been excessive expense, un-
sound investment, or rapacious or dishonest management. To
the risk of these abuses all financial institutions are necessarily
subject, but they are evils from which our savings banks have been
remarkably free. This practical freedom of our savings banks
from these evils affords a strong reason for utilizing them to supply
the kindred service of life insurance.
The theoretical risk of a mortality loss in a single institution
20
greater than that provided for in the insurance reserve could be
absolutely guarded against, however, by providing a general
guaranty fund, to which all savings-insurance banks within a State
would make small pro rata contributions,—a provision similar to
that prevailing in other countries, where all banks of issue contrib-
ute to a common fund which guarantees all outstanding bank notes.
Eighth. In other respects, also, co-operation between the
several savings-insurance banks within a State would doubtless,
under appropriate legislation, be adopted; for instance, by pro-
viding that each institution could act as an agent for the others to
receive and forward premium payments.
Ninth. The law authorizing the establishment of an insur-
ance department in connection with savings banks should, obviously,
be permissive merely. No savings bank should be required to
extend its functions to industrial insurance until a majority of its
trustees are convinced of the wisdom of so doing.
The savings banks are not, however, the only existing class of
financial institutions which could be utilized for the purpose of sup-
plying, at a low expense rate, insurance in small amounts under
a system requiring frequent premium payments. Co-operative
banks, as operated in Massachusetts and in some other States,
would, under appropriate regulation, be admirably adapted to
supply a part of the required service. The excellent record of
these institutions in Massachusetts presents a most encouraging
exhibit of the achievements of financial democracy when applied
to small units and when operating under a wise system of super-
vision.
Public attention having at last been directed to this subject,
our workingmen will not long submit to the needless sacrifice of
their hard-earned savings, described in the following judgment
of the “Armstrong Committee” on the methods of the Metropoli-
tan Company:—
“IN FINE THE INDUSTRIAL DEPARTMENT FURNISHES IN-
SURANCE AT TWICE THE NORMAL COST TO THOSE LEAST ABLE
TO PAY FOR IT; a large proportion, if not the greater number of
the insured, permitting their policies to lapse, receive no money
21
return for their payments. Success is made possible by thorough
organization on a large scale and by the employment of an army
of underpaid solicitors and clerks; and from margins small in
individual cases, but large in the aggregate, enormous profits
have been realized upon insignificant investment.” -
If an opportunity for cheaper life insurance is afforded by means
of an extension of the functions of our savings banks, the present
industrial insurance companies may be permitted to pursue their
efforts at inculcating thrift in accordance with the system which
seems to them wise, and their claim that the present huge waste
is inevitable will be duly tested.
BUT IF WE FAIL TO OFFER TO workTNGMEN SOME OPPOR-
TUNITY FOR CHEAPER INSURANCE THROUGH PRIVATE OR
QUASI-PRIVATE INSTITUTIONS, THE EVER-READY REMEDY OF
STATE INSURANCE IS CERTAIN TO BE RESORTED TO SOON ; AND
THERE IS NO OTHER SPHERE OF BUSINESS NOW DEEMED
PRIVATE UPON WHICH THE STATE COULD SO EASILY AND SO
JUSTIFIABLY ENTER AS THAT OF LIFE INSURANCE.
However great the waste in present life insurance methods, our
workingmen will not be induced to abandon life insurance. To
them, as to others, life insurance has become a prime need. It
must be continued. It should be encouraged. In spite of the
disastrous results of this form of savings investment, the industrial
insurance business has assumed enormous proportions. On
December 31, 1904, the number of industrial life policies outstand-
ing in the three great companies (Metropolitan, Prudential, and
John Hancock) was 14,731,463, as against a total of only about
5,258,255 ordinary life policies outstanding in the ninety legal
reserve companies. The New York Life, with its record of
957,201 policies outstanding, had only one-eighth as many policy-
holders as the Metropolitan, one-sixth as many as the Prudential,
and three-fifths as many as the John Hancock. In the year 1904
alone the Metropolitan, Prudential, and John Hancockwrote 3,742,-
209 industrial policies; that is, more than three times as many as the
90 leading level premium companies wrote of ordinary life policies
during that year. In Massachusetts the predominance of in-
22
At
dustrial policies is even greater than the average. With a popula-
tion of 3,000,680 there were outstanding December 31, 1904,
1,080,003 industrial policies; that is, one for every three inhabi-
tants, counting men, women, and children, and of ordinary life
policies only 257,792 were outstanding. g
The demand of workingmen for life insurance will continue and
will grow; but THE YEARLY TRIBUTE OF THE workINGMEN
TO PRUDENTIAL STOCKHOLDERS OF DIVIDENDS EQUIVALENT
To 219.78% on THE CAPITAL ACTUALLY PAID INTO THE COM-
PANY, THE YEARLY WASTE OF MILLIONS IN LAPSED POLICIES,
IN FRUITLESS SOLICITATION, AND IN NEEDLESS COLLECTIONS,
wiLL CEASE. The question is merely whether the remedy shall
be applied through properly regulated private institutions or
whether the State must itself enter upon the business of life insur-
a,IlC6.
b º
Wage-earners Insurance Committee
OF THE
BOSTON CHAMBER OF COMMERCE
*
ELMER J. BLISS (Chairman),
Treasurer Regal Shoe Co., 109 Summer Street, Boston
A. FARWELL BEMIS,
President Bemis Bro. Bag Co., 89 State Street, Boston
THEODORE, G. BREMER (Parker, Wilder & Co.),
4 Winthrop Square, Boston
JoBIN GOLDEN, -
General President of the United Textile Workers of America,
Weaver Building, Fall River
EDWIN FARNHAM GREENE, Treasurer Pacific Mills,
70 Kilby Street, Boston
CHARLEs W. HUBBARD,
Treasurer Ludlow Manufacturing Associates,
55 Congress Street, Boston
RUSSELL ROBB (Stone & Webster),
147 Milk Street, Boston
GEORGE WIGGLEsworth,
President Chicopee Manufacturing Co.,
Exchange Building, Boston
WALLACE D. WILLIAMS, Director Jordan Marsh Co.,
450 Washington Street, Boston
*m-------------------
MASSACHUSETTS SAVINGS INSURANCE LEAGUE,
A. H. GRADY, Financial Secretary, -
161 Devonshire Street, Boston
ACTIVE AGENCIES
(JANUARY 1, 1910)
BRIDGEwATER SAVINGS BANK . . . . . . . . . . . . . . . . . Bridgewater
B. F. BUTLER Co-operaTIVE BANK . . . . . . . . . . . . . . . . Lowell
CAPE ANN SAVINGS BANK . . . . . . . . . . . . . . . . . . . Gloucester
HolyokE SAVINGS BANK . . . . . . . . . . . . . . . . . . . . . Holyoke
LUDLow SAVINGS BANK . . . . . . . . . . . . . . . . . . . . . Ludlow
WARE SAVINGS BANK . . . . . . . . . . . . . . . . . . . . . . . Ware
AMERICAN HIDE AND LEATHER COMPANY . . . . . . . . . . . . . Lowell
AMERICAN STEAM GAGE AND WALVE MANUFACTURING COMPANY . . . Boston
ARNOLD, M. N. COMPANY . . . . . . . . . . . . . . . . . North Abington
BIRD, F. W. & SON . . . . . . . . . . . . . . . . . East Walpole
BosTON BOOK-BINDING COMPANY . . . . . . . . . . . . . . . . Cambridge
BosTON CONSOLIDATED GAs COMPANY . . . . . . . . . . . . . . . . Boston
BosTON GEAR WORKS . . . . . . . . . . . . . . . . . . . . . . Quincy
BosTON TYPOTHETE . . . . . . . . . . . . . . . . . . . . . . . . Boston
CoMMONWEALTH SHOE AND LEATHER Co. . . . . . . . . . . . . Whitman
CROSS, JOHN H. Co. . . . . . . . . . . . . . . . . . . . . . . . . Lynn
DENNISON MANUFACTURING COMPANY . . . . . . . . . . South Framingham
EATON, C. A. CoMPANY . . . . . . . . . . . . . . . . . . Brockton
EDISON ELECTRIC Co. . . . . . . . . . . . . . . . . . . . . . Brockton
EMERSON SHOE Co. . . . . . . . . . . . . . . . . . . . . . . Rockland
FALES, LEWIS F. . . . . . . . . . . . . . . . . . . . . . . . . . Walpole
FIELD-LUMBERT Co. . . . . . . . . . . . . . . . . . . . . . . . Brockton
FILENE’s, WM. SONS COMPANY . . . . . . . . . . . . . . . . . . . Boston
FoRBEs LITHOGRAPH MFG. Co. . . . . . . . . . . . . . . . . . . Chelsea
FoEE RIVER SHIPBUILDING COMPANY. . . . . . . . . . . . . . . . Quincy
Fox, C. K. . . . . . . . . . . . . . . . . . . . . . . . . . . Haverhill
FRENCH, SHRINER & URNER . . . . . . . . . . . . . . . . . . . Boston
FROST, GEORGE COMPANY . . . . . . . . . . . . . . . . . . . . Boston
GILLETTE SAFETY RAzor Co. v. . . . . . . . . . . . . . . South Boston
HoDTZER-CABOT ELECTRIC COMPANY . . . . . . . . . . . . . . Brookline
INTERNATIONAL UNION OF STEAM ENGINEERs, LOCAL No. 16 . . . . Boston
KEITH, GEORGE E. CoMPANY . . . . . . . . . . . . . . . . . . Brockton
REITH, GEORGE E. CoMPANY . . . . . . . . . . . . . . . . . Middleboro
LABORATORY KITCHEN . . . . . . . . . . . . . . . . . . . . . . Boston
McELWAIN, W. H. CoMPANY . . . . . . . . . . . . . . . . . . . Boston
McEL waſ N, W. H. CoMPANY . . . . . . . . . . . . . . . . . Bridgewater
PACKARD, M. A. COMPANY . . . . . . . . . . . . . . . . . . . Brockton
PEOPLE's INSTITUTE . . . . . . . . . . . . . . . . . . . . . . Roxbury
PHELPs PUBLISHING COMPANY . . . . . . . . . . . . . . . . . Springfield
REGAL SHOE COMPANY . . . . . . . . . . . . . . . . . . . . . Milford
REGAL SHOE COMPANY . . . . . . . . . . . . . . . . . . . . Whitman
SIEGEL, HENRY COMPANY . . . . . . . . . . . . . . . . . . . . Boston
STURTEVANT, B. F. CoMPANY . . . . . . . . . . . . . . . . . . Hyde Park
TALBOT MILLs . . . . . . . . . . . . . . . . . . . . . . North Billerica
TUBULAR RIVET AND STUD COMPANY . . . . . . . . . . . . . . . Quincy
UNITED SHOE MACHINERY COMPANY . . . . . . . . . . . . . . . Beverly
WELLS MEMORIAL INSTITUTE . . . . . . . . . . . . . . . . . . . Boston
WHITMAN & KEITH COMPANY . . . . . . . . . . . . . . . . . . Brockton
WINCHESTER LAUNDRY . . . . . . . . . . . . . . . . . . . . Winchester
WINSHIP, BoIT & CoMPANY . . . . . . . . . . . . . . . . . . Wakefield
WINSLOW BROs. & SMITH COMPANY . . . . . . . . . . . . . . . Norwood
WoMEN’s EDUCATIONAL AND INDUSTRIAL UNION . . . . . . . . . . Boston
WRIGHT, E. T. & Co. . . . . . . . . . . . . . . . . . . . . . Rockland
Photo mount
Pamphlet
Rinder
Gaylord Eros.
Makers
Syracuse, N. Y.
Påſ. JAN 21, 1908

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