244 INSURANCE 



Most companies have established a maximum which they will not 

 exceed in case of a single life. These maxima range from $10,000 

 up, $25,000 and $50,000 being most common. The heavy policies 

 are bound to operate to the disadvantage of the smaller policies in 

 the same company unless the rate of mortality among large policy- 

 holders is proportionately more favorable than the average; never- 

 theless an insurance man who attempts to convince a client that 

 his company possesses superior merits on the ground that it has a 

 number of heavy policy-holders stands on ground as dangerous as 

 that of the fraternal society which, in a published circular, main- 

 tained that the death of a brother soon after his admission increased 

 the financial strength of the society, because, under the rules of the 

 society, this death led to the transfer of a certain sum to the emer- 

 gency fund; while if the brother had lived and paid his contributions 

 a much smaller sum would have been thus transferred! Theoret- 

 ically, equality can exist only when the policies are all of the same 

 size and the mortality experience is the same for all age classes. 

 This exact equality is obviously impossible, and great numbers tend 

 to rectify the errors as applied to individual cases. Different men 

 want different kinds of policies in varying amounts. Where the 

 variations are not excessive a practical and substantial equality is 

 achieved. Where policy amounts are highly disproportionate, 

 inequality and absolute injustice must follow. Attempts have been 

 made to justify the large policy in a company composed overwhelm- 

 ingly of small policy-holders. The multiplication-table rests upon 

 neither conviction nor opinion. 



It is an axiom of insurance that the assumed rate of mortality 

 must be greater than the rate experienced by the companies; that 

 the interest earned must exceed the rate assumed, and that the load- 

 ing, or allowance for expenses, must be greater than the actual 

 expenses. The last member of this tripod can no longer take rank 

 among axioms, for although the companies have been struggling 

 to keep down the expense rate, the cost of conducting the business 

 has in many instances exceeded the loading for expenses. In case 

 of the life companies doing business in Wisconsin, according to the pub- 

 lished report of the commissioner of insurance, this excess amounted 

 to over seven and one half millions of dollars out of a total expenditure 

 of over one hundred and fifteen million dollars during 1903. This 

 means either that the original allowance for expenses on the part of the 

 thirty-six companies which exceeded their loading was inadequate 

 or that the expense rate has become excessive. If the loading was 

 sufficient in the first place, the additional funds required in conduct- 

 ing the business must have been secured from other sources. Chief 

 among these possible sources are the savings from mortality and 

 gains in interest on investments. Both of these sources create funds 



