THE ANNUAL

Cyclopedia of Insurance

IN THE

UNITED STATES.

1897-8.

EDITED BY H. R. HAYDEN.

H. R. HAYDEN, HARTFORD, CONN.

1898.

Annual Cyclopedia of Insurance.

A

AACHEN AND MUNICH FIRE INSURANCE COMPANY of Aix-la-Chapelle, Prussia.

ABANDONMENT. In marine insurance the relinquishment of an insured ship or cargo to the underwriters when the same is damaged and the claim is for a total loss. There is no abandonment in fire underwriting.

ACCIDENT INSURANCE. The ordinary accident insurance policy grants a fixed compensation to the insured for a limited time in case of disabling accident, and also a definite amount to be paid to a designated person if death results from accident. Such policies are in general strictly limited by their terms to accidents which totally disable or kill the insured. Some companies issue modified forms providing for injury and death, with an additional clause as to partial disabilities of a permanent nature, such as loss of a limb, an eye, a hand, or foot. In order to recover, the injury must arise from "external, violent, and accidental means," and must be incurred while the insured is not unnecessarily exposing himself to "obvious danger," and while he is not engaged in an occupation more hazardous than that in which he has elected to be classified and insured; or if more hazardously occupied at the time of the injury, then recovery can be had only to the extent to which the premium paid would have purchased insurance in the more hazardous class. Within these limits there has been found a great deal of ground for differences of opinion, and many of the points which have been settled have only been disposed of after harassing litigation. [See Legal Decisions Affecting Insurance. Accident Insurance.]

ACCIDENT UNDERWRITERS, INTERNATIONAL ASSOCIATION OF. [See International Association.]

ACTUARIAL SOCIETY OF AMERICA was organized April 25, 1889. [For an account of the origin, charter, and early proceedings of this organization see the Cyclopedia of Insurance for 1890-1.] The first president was Sheppard Homans, the second David Parks Fackler, elected in 1891; the third Howell W. St. John, elected in 1893; the fourth Emory McClintock, elected in 1895, and the fifth Bloomfield J. Miller, elected in 1897. [See the Cyclopedia of Insurance for 1890-1, 1891-2, 1892-3, 1893-4, 1894-5, 1895-6, 1896-7.]

186673

The ninth annual meeting was held in the directors' room of the Metropolitan Life Insurance Company, in the city of New York, on Thursday, April 29, 1897. In consequence of the absence of the president, Emory McClintock, on account of an accidental injury, the vice-president, Bloomfield J. Miller, presided.

Mr. McClintock's address was not delivered, but appeared in the printed minutes subsequently published by the society. The topic selected by Mr. McClintock was the actuarial profession as a means of livelihood, and was replete with information and advice for young men proposing to become actuaries, from one whose long experience qualified him to speak with wisdom and authority. On roll call, and during the session forty-nine officers and members appeared.

On recommendation of the council of the society, Thomas Emley Young, A.B., F.I.A., actuary of the Commercial Union Assurance Company, London, and president of the Institute of Actuaries, was elected to membership.

Officers and members of the council were elected as follows:Bloomfield J. Miller, president; George W. Phillips, first vicepresident; Oscar B. Ireland, second vice-president; Israel C. Pierson, secretary; John Tatlock, Jr., treasurer. Members of Council

for three years, John B. Lunger and Elbert P. Marshall.

At the afternoon session papers were read as follows:-" What Constitutes an Insurable Interest in Lives?" by Clayton C. Hall; "Meech's Life Table," by Howell W. St. John; "Cost of Insurance,' by James M. Craig; "Level Premium Life Insurance" Historical Note, by Joseph A. De Boer; "Note Upon the Legal Ratio of 151⁄2" (in Coinage of Silver), by M. Leon Walras, University of Lausanne, Switzerland; translation by H. W. St. John, and "Government Legislation of Holland in Reference to the Working of Life Insurance Companies," by Leonard Wolterbeek.

The members engaged in discussion of the following papers read at the meeting of October 8, 1896:-" Insurance Values as Bases for Surrender Values," by Sheppard Homans; "Mortality Prevailing Among Annuitants," by Thomas B. Macaulay; "Coinage of Silver Dollars of the Present Weight," President's Address, by Emory McClintock.

In the evening the members dined together at the Imperial Hotel, New York, Vice-President Miller presiding.

The regular semi-annual meeting was held at Springfield, Mass., on Thursday and Friday, October 7 and 8, 1897. President Miller occupied the chair. In addressing the society he made some remarks on legislation, urging members to promote wise legislation and a judicious exercise of the powers of the insurance commissioners of the different states. In no country have life insurance companies been so much bothered, hampered, and restricted by law as in the United States, and yet assessment and flexible premium companies have been practically exempt from government control. No company should be allowed to do business on plans which can only result in failure and disappointment. The law should do with

assessment companies what it does with regular companies, viz.:— compel them to do business on scientific principles. They should either maintain an adequate reserve or provide for increasing assessments based on the attained age of the assured.

The president added that it is quite usual to consider that the possession of the full net reserve is a test of solvency. A fuller and truer view of the reserve is that it represents moneys which have been collected to meet obligations not yet matured, and that it must be sacredly held in trust for that purpose only.

Touching upon the demands of state insurance departments, President Miller said:

Their power to annoy and harass the companies is almost unlimited, but it is greatly to their credit that they have rarely subjected any company to serious inconvenience without a reasonable and justifiable end in view. The Departments are entitled to much praise for their efforts to provide uniform blanks for financial statements, but they sometimes call for schedules and exhibits which are practically valueless, although their preparation is attended with an enormous amount of labor and expense. I have in mind particularly the schedule of loans on individual policies assigned to the company as collateral, and the "Gain and Loss Exhibit." The former is of no interest to the Department so long as it is assured of the total amount of such loans and that they are in every case within the policy reserve. The latter is absolutely misleading and mischievous.

No company can, within the short time allowed for the preparation of the "Gain and Loss Exhibit," do any more than guess at some of the most important items; such, for instance, as the tabular cost of the insurance for the year just ended, and every company must force the balance. An exact balance could not be made, no matter how much time was given to its preparation. The "Gain and Loss Exhibit" should be abandoned as leading to false and misleading comparisons between the companies. The only item in it of real value and interest is the amount of reserves on lapsed and surrendered policies. A comparison of this item with the amount allowed for such policies, as shown by the financial statement, would show the company's apparent gains from discontinued policies much more fairly and accurately than the present form of "Gain and Loss Exhibit," in which some companies mix up payments on account of tontine surplus with payments for surrender values, pure and simple.

The president deprecated deposit laws, because if enforced in all States would be attended by great inconvenience to the companies. The deposit made in one State for the protection of all members can be reached in case of necessity by the policy-holder in any other State with about the same facility as a deposit in his own State. Non-forfeiture legislation is not required in view of the fact that all the companies now incorporate clear and fair forfeiture clauses in their own policies. Speaking of surrender values, the president said:

A general law prohibiting the company doing business in the State, without incorporating clear and specific provisions for one or more kinds of surrender value (cash paid-up insurance or extended insurance), one of which should apply automatically, might be applied to companies of foreign states without inconvenience or friction, but the law should not undertake to prescribe the form or amount of the surrender value. This can be safely and properly left to the companies themselves, so long as the non-forfeiture provisions are so clear and definite that the insured knows exactly what his rights are. When a State undertakes to fix the rule upon which surrender values are to be allowed, it is liable to abridge rather than to extend the privileges which the companies are able and ready to grant to the policy-holder. Thus the Massachusetts nonforfeiture law makes it impossible for Massachusetts companies to grant automatic surrender values in the form of extended insurance, and yet a very large proportion of the insured might prefer an automatic surrender value in the form of extended insurance than in the form of cash or paid-up insurance.