240 B. F. MEYER 



signifies either that interest, cost of insurance, and loadrng, 

 as assumed, are exactly reahzed in practice, in which case the 

 ideal would have been attained; or, which would be disastrous, 

 that experience is more unfavorable than the assumptions on 

 which the business is based. Prudence would dictate that at 

 least a small margin should be allowed for adverse conditions. 

 So much for the question of a surplus. 



Somewhat different in nature but of even greater impor- 

 tance is the question of a reserve. The National Fraternal 

 congress has almost from the very first included this among 

 the subjects for discussion, and the organization of an Amer- 

 ican fraternal congress at Omaha, in October, 1898, making 

 the chief quahfication for membership the adoption of a re- 

 serve system, is significant in that it shows a well niarked 

 division of opinion among fraternalists on the question of 

 reserves. The National Fraternal congress has not yet taken 

 steps making it obligatory on the part of its members to adopt 

 a reserve fund; yet, speakers before this body have repeatedly 

 urged the necessity of adopting reserve systems. A number 

 of societies — consistent with the traditional fraternal dislike 

 for old line terms— have established safety or emergency 

 funds, which are technically reserve funds. Several prominent 

 fraternalists expressed their approval of both a reserve and a 

 natural plan before the National Fraternal congress of 1900, 

 and similar utterances were made before the same congress 

 during earlier years, notably in 1893, 1894 and 1898. ^ An ex- 

 amination of all the proceedings of this congress gives the 

 reader the impression that there is an unmistakable tendency 

 among fraternal insurance societies toward the reserve or 

 natural premium plans, especially the former. 



Disregarding several minor considerations, under a reserve 

 plan the premiums are level, i. e., do not vary in amount during 

 the premium paying period of the pohcy. Since the cost of 

 insurance — i. e., moneys required to meet current mortality 

 losses — increases with increasing age, it follows that under a 

 level premium system the earlier premiums are greater and the 

 later premium payments less than the cost of insurance for the 

 age represented by the pohcy holder in question. That part of 

 the level premiums which is in excess of the current cost of 



