January 1, 1906, were of this character. They numbered 249,496, being more than one policy for every two of its 480,082 inhabitants. With insurance of this class, practically every policy outstanding means insurance on a different life, for comparatively few lives are insured by more than one policy. This huge number of policies is accounted for by the fact that in workingmen's families it is customary to insure, not the breadwinner only, but each member. A large part of the insurance is on the lives of children. The industrial policies constitute an even larger percentage of the policies written in any year than of the number at any time outstanding, because a large percentage of the industrial policies lapse. Thus, of the 960,773 policies written in New York State in the year 1905, 806,408 or 83.93 per cent. were of this class. Twenty companies are engaged in providing such insurance to the people of the United States; but of the whole number of 16,872,583 policies outstanding, 93.55 per cent. are issued by three companies. Of these, the Metropolitan of New York stands easily first, with 48.12 per cent.; then follows the Prudential of New Jersey, with 36.25 per cent.; and long after comes the John Hancock, of Massachusetts, with 9.18 per cent. Industrial insurance is simply level-premium life insurance in small amounts, on which the premiums are collected weekly at the homes of the insured. The policies average about $140. As the Armstrong Committee found, the regular premium charge for such insurance has been about double that charged for ordinary level-premium life insurance. In the initial periods of the industrial policy, the disparity has been ever greater, rising as high as eight times that paid for ordinary insurance, since, by a clause which will be found in most policies issued by the Metropolitan and by the Prudential and some of the other companies, it is provided that if death occurs within the first six months after the date of the policy, only one-fourth of the face of the policy will be paid, and if death occurs within the second six months, payment will be made of only one-half. The New York insurance reports do not supply the data for determining the full extent of the sacrifice of its workingmen's savings which this system has entailed; but enough appears there to indicate the proportions; and existing data taken from Massachusetts official reports or furnished by the individual companies enable us to measure the loss with substantial accuracy. It is known that in eight years ending December 31, 1905, the workingmen of New York paid into these companies in premiums $125,141,711.99, and received back only $47,013,795.69, or 37.56 per cent. It is known that in the fifteen years ending De cember 31, 1905, the workingmen of Massachusetts paid as premiums on industrial policies an aggregate of $61,294,877; that they received back in death benefits, endowments or surrender values, only $21,819,606, and that the increase during that period in the insurance reserve of the companies applicable to Massachusetts policies did not exceed $9,838,000. That is, $29,637,271 of the premiums paid in and all the income from the invested funds has been absorbed in expenses, dividends or surplus. It is known that in the twenty-seven years ending December 31, 1905, in which the John Hancock Company has issued industrial policies, it received in premiums $88,258,917, paid out in death benefits, endowments and surrender values $32,703,315, and accumulated in industrial insurance reserve only $14,891,706. That is, $40,663,896 of the premiums paid in and all income from the invested funds has been absorbed in expenses or surplus. It is known that in the thirty years ending December 31, 1905, since John Dryden introduced industrial insurance into America, the Prudential has received from the workingmen $259,890,468; has paid back to them only $89,306,155, and has accumulated· an insurance reserve for its industrial policies only $45,491,566. That is, $125,092,747 of the premiums paid and all income from invested funds has been absorbed in expenses, dividends and surplus. It thus appears that, under the existing system of industrial insurance, the companies have taken for dividends and expenses about fifty cents out of every dollar paid them by the wage-earners—and also all the income earned from the invested funds. If the $61,294,887 paid as insurance premiums by the workingmen of Massachusetts during the fifteen years had been deposited by them in its savings banks, and the depositors had withdrawn from the banks an amount equal to the aggregate of $21,819,606, which they received from the insurance companies, the balance remaining in the savings banks December 31, 1905, with the accumulated interest, would have amounted to $49,931,548.35. The contrast of the results of industrial insurance and of savings bank investment would be even greater in New York, as a lesser tax burden enables the New York savings banks to pay a somewhat higher interest on deposits than is possible in Massachusetts. It is obvious that America will not long tolerate such a sacrifice of the workingmen's savings as the present system of industrial insurance entails; for the causes of the sacrifice are easily determined and a remedy lies near. The extraordinary wastefulness of the present system of industrial insurance is due in large part to the fact that the business, whether conducted by stock or by mutual companies, is carried on for the benefit of others than the policyholders. The needs and financial inexperience of the wage-earners are exploited for the benefit of stockholders or officials. The Prudential pays annual dividends to its stock- | holders equivalent to more than 219 per cent. upon the capital actually paid in. According to the testimony of its vice-president, Forest F. Dryden, a stockholder, who, on October 13, 1875, paid in $2,200, has received in the aggregate a return upon his investment of $329,363.60, or about 15,000 per cent. The annual dividends of the Metropolitan are equivalent to only 28 per cent. on the capital actually paid in. But President Hegeman las testified that in fifteen years the company had earned and accumulated for its stockholders, in addition, a surplus of more than twenty-eight times the capital so paid in. The excessive amounts paid in dividends or in salaries to favored officials account directly, however, for only a small part of the terrible shrinkage of the workingmen's savings. The main cause of waste lies in the huge expense of soliciting insurance, taken in connection with the large percentage of lapses, and in the heavy experses incident to a weekly collection of premiums at the homes of the insured. The commission of the insurance solicitor is from ten to twenty times the amount of the first premium. The cost of collecting the premiums varies from one-fifth to one-sixth of the amount collected. And yet commissions for soliciting and collection are only a part of the expenses. The physician's fee, the cost of supervision, of accounting and of advertising must all be added; with the result that substantially no industrial policy "pays its way" until it has been in force about three years. In other words, if the policy lapses before it has been in force three years, not only does the policyholder lose (except the temporary protection) all that he has paid in, but the company (that is, the persisting rolicyholders) bears a part-generally the larger part-of the cost of the lapsed policy. And only a small percentage of industrial policies survive the third year. A majority of the policies lapse within the first year. In 1905 the average payments on a policy in the Metropolitan so lapsing continued little more than six weeks. The aggregate number of such lapses in a single year reaches huge figures. In 1905, 1,253,635 Metropolitan and 951,704 Prudential policies lapsed. The experience of their young and energetic rival, the Columbian National Life Insurance Company, is even more striking. On January 1, 1905, that company had outstanding 40,397 industrial policies. It wrote, during the year, 103,466. At the end of the year it had outstanding only 63,497; and yet, of the 143,863 policyholders, only 699 had died, while 79,677 policies that is, one hundred and fourteen times as many-had lapsed. In the eight years ending December 31, 1905, the termination of the New York industrial policies numbered 4,549,306, and only 427,635 (that is, less than one-tenth) were by death. The results of this system of insurance establish conclusively that, in the conduct of the business, the interests of the insured are ignored. A life insur ance company for workingmen should, as to each policyholder, be conducted, like a savings bank, as a benevolent institution. No one should be induced to take out a policy unless it is advisable for him to do so in the interests of those whom he wishes to protect by it. No one should be lured into becoming a policyholder. No one should take a policy unless he will probably be able and willing to continue it in force. Furthermore, economy in the management of the insurance savings is as essential to satisfactory results as the economy on the part of the workingmen, which alone makes it possible to pay premiums. The supporters of the present system of industrial insurance, declare that a reduction of expenses and of lapses is impossible. They insist that the loss to the insured and the heavy burden borne by the persisting policyholders from lapses, as well as from the huge cost of premium collection, must all be patiently borne as being the inevitable incidents of the beneficient institution of life insurance when applied to the workingman. It is obvious that a remedy cannot come from men holding such views—from men who refuse to recognize that the best method of increasing the demand for life insurance is not eloquent, persistent persuasion, but to furnish a good article at a low price. A remedy can be provided only by some institution which will proceed upon the principle that its function is to supply insurance upon proper terms to those who want it and can carry it, and not to induce working people to take insurance regardless of their real interests. To at tain satisfactory results the change of system must be redical. In Massachusetts, the necessity for such a change has recently received official recognition in the inaugural address of its Governor; and the Recess Insurance Committee of its Legislature has, in a unanimous report just made, recommended a remedy, namely, a bill to permit savings banks to establish departments for the issue of life insurance policies in small amounts. Level-premium life insurance is, of course, but one form of savings investment. 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 manages them 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 have deposited (including interest). Savings banks established on the plan prevailing in New York, as in Massachusetts, are managed upon principles and under conditions upon which alone a satisfactory system of life insurance for workingmen can be established. These savings banks have no stockholders, being operated solely for the benefit of the depositors. They are managed by trustees, usually men of large business experience and high character, who serve without pay, recognizing that the business of collecting and investing the savings of persons of small means is a quasi-public trust, which should be conducted as a beneficient and not as a money-making institution. The trustees, the officers and the employees of the savings banks have been trained in the administration of these savings to the practice of the strictest economy. While the expenses of managing the industrial departments of the Metropolitan, the Prudential and the John Hancock companies have, excluding taxes, exceeded 40 per cent. of the year's premiums, the expense of management in 1905 (exclusive of taxes on surplus) of the 130 New York savings banks, holding $1,292,358,866 of deposits, was only 0.28 of 1 per cent. of the average assets, or 1 per cent. of the year's de posits. The $662,000,000 of deposits held in 1905 in the 189 Massachusetts savings banks were managed at an expense of 0.23 of 1 per cent. of the average assets or 1.36 per cent. of the year's deposits. Savings institutions so managed offer adequate means of providing insurance to the workingman. With a slight enlargement of their powers, these savings banks can, at a minimum of expense, fill the great need of cheaper life insurance in small amounts. The only proper elements of the industrial insurance business not common to the savings bank business are simple, and can be supplied at small expense in connection with such existing savings banks. They are: A. Fixing the terms on which insurance shall be given. B. The initial medical examination. connection with the insurance commissioner, shall serve all the savings insurance banks. The initial medical examination and the verification of proof of death are services that may be readily performed for the savings banks at no greater pro rata expense than for the existing insurance companies. But a State medical director should act as adviser and have supervision of the local physicians. 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, because: First. 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 prac tice of the strictest economy. Second. 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 increased. 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 established 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. Third. The insurance department of savings banks would open with an extensive and potent goodwill, and with the most favorable conditions for teaching, at slight expense, the value of life insurance, a lesson easily learned when insurance is offered for about one-half the premium now exacted by the industrial companies. For instance, in New York the holders of its 2,569,779 savings bank accounts would at once become potential policyholders. The safety of the institution would be unquestioned, and a small amount of advertising would soon suffice to secure a reasonably large business without solicitors. Fourth. With an insurance clientele composed largely of thrifty savings bank depositors, house-tohouse collection of premiums could be dispensed with. The more economical monthly or quarterly payments of premiums could also probably be substituted for weekly payments. Indeed, it is probable that the following simple, convenient and inex The first is the work of an insurance actuary; and the present pro rata cost of actual service can be greatly reduced both by limiting the forms of insur-pensive method of paying premiums would, to a large ance policies to two or three standard forms of policy to be uniform throughout the State, and by providing for the appointment of a State actuary, who, in extent, be adopted, namely:-making deposits in the savings department from time to time, and giving, when the policy is issued, a standing order to draw on the savings fund in favor of the insurance fund to meet the premium payments as they accrue. Fifth. 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 policyholders from unjust burdens which the lapse of policies casts upon them. Furthermore, as cach insured would then have paid all the expense of his becoming such, there would be no reason for forfeiting policies in case of non-payment of premiums; the policyholder would be entitled to receive in such event, either his proper pro rata of paid-up insurance, or an extended term policy, or the surrender value. Sixth. The special expense attendant upon proof of death could also appropriately be met by a charge against the amount payable on the policy. to a common fund which guarantees all outstanding bank notes. 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. Ninth. The plan contemplates that there should be also provided at the establishment of an insurance department for every bank, at least until the central guaranty fund is ample, individual guaranty funds to serve until the banks' accumulated insurance reserve is sufficiently large to meet all contingencies. These separate guaranty funds are at present to be supplied by public-spirited citizens upon the agreement that the funds shall be repaid with interest at the savings bank rate if and when in the judgment of the banks' trustees they are no longer required. Tenth.-Co-operation between the several savingsinsurance banks within a State should, under ap Seventh. The safety of savings banks would, of course, be in no way imperiled 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 in-propriate legislation, be established; for instance, by surance. 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 re providing that each institution could act as an agent for the others to receive and forward premium payments, and in connection with the making of proof of death and payment of losses. Eleventh. The funds of the savings department should not be liable for the obligations of the expenses of the insurance department, the two funds being treated like separate trust funds, managed by the same trustees. Twelfth. As the State Actuary would provide a standard policy and standard premium rates for all savings-insurance banks and the State Medical Director would secure through his supervision substantial uniformity in health tests, a proper basis for comparison between the several banks would be established, with the resulting education and encouragement to the trustees and managers of the several institutions. Superiority in management would result in greater dividends earned and disclosed at the end of the year. These dividends could best be applied in increasing the amount of insurance given each policyholder. Thirteenth.-In view of the fact that the actuarial service would be supplied by the State, that the books, policies and other blanks would be uniform, that the initial and death expenses would be covered by special charges, it is believed that safe insurance could be supplied by the savings banks for premiums not greater than one-half those heretofore charged. Fourteenth. It is believed that the establishment of such insurance departments will tend to materially increase the number of depositors in the sav ings department. Many who insure and have had no deposit will, through becoming savings bank insurance stockholders, be led to become depositors also. Fifteenth.--The law authorizing the establishment of an insurance department in connection with savings banks should, obviously, he permissive merely. No savings bank should be required to extend its functions to industrial insurance until at least a majority of its trustees are convinced of the wisdom of so doing. The savings banks seem not only the natural, but the only available means of extending immediately the blessing of cheap. and safe insurance to our workingmen. Any new companies organized for the purpose of providing this insurance, even though undertaken with wholly philanthropic purposes, would be subjected to a large part of the expenses to which the existing industrial insurance companies are now subject, and such new companies would also lack the existing good will of the working classes, which is essential to early relief to the workingmen from the present unnecessary life insurance burdens. : 0: ous liberties, among them the right to contract, the right to compete, and even the right to do business at all. The man of the hour is not for less governmental control, but for more. The people are almost ready to demand more taxation, and to applaud any one who can devise a new scheme for raising revenue. Tables, however, are turned. It is not the rich who are endeavoring to tax the poor, as in olden times. The newer taxation is to fall mainly, if not exclusively, upon the rich, but it is not taxation without representation, and if resisted it must be upon some other ground. Of equality, too, we have a superfluity, and are not calling for more. Our laboring men do not need to be aroused to that feeilng of self-respect and confidence in themselves that makes them know that each American citizen is a king. They are fully aware of all their royal prerogatives. The leader of the negro race in this country is constantly proclaiming that his people are not asking for social equality, and are not even insistently or generally demanding political equality. They ask, he tells us, merely that they shall be treated The Bench and the Bar in Their Relation to fairly and justly in the industrial relations of life. the People and the Corporations. level. It might be better for us-society being constituted as it is-if there was more reverence from the BY J. ASPINWALL HODGE, OF THE NEW YORK BAR. humble to the great, from youth to old age, from The relation of the Bench and the Bar to the great man to woman, from servitor to master, from pupil questions which are agitating the public mind is to teacher, from child to parent-a little less equaltimely. The people are taking an interest in publicity. Those who in olden times looked up, now look affairs and discussing public questions more generally, intelligently and intensely than at any time since the Civil War. It is a time of stress and strain. Old issues are either fading, or the division upon old issues is not following the party alignment heretofore existing. We can agree upon all this without asserting or believing that we are on the eve of a revolution, or even a crisis-industrial or political. Prominent as have been the parts which the Bench, and especially the Bar, have played in every such period in the history of this country, I believe that in the coming struggle (for we can at least call it that), they are to be called upon to play, whether they respond to the call or not, a more important part than ever before. This arises from the nature of the issue which is being forced to the forefront. The plain people of the land which is but another name for the great mass of the citizens, still believe in liberty, equality and fraternity, but these are not watchwords to-day. Of liberty we have too much. The united voice of the nation seems to be that we should have less. In dealing with corporations, and especially with those which control public necessities and utilities. we speak of curbing, restraining and limiting vari Fraternity is no watchword for to-day, brotherly love is something to come not by force nor by agitation. The tribunes of the people in the French Revolution declaimed about it, but did not practice it. All classes now resent charity. What the people demand is none of these. With one voice, East and West, North and South, from high and low, rich and poor, employer and employee, captain of industry and minority stockholder, idle and active, the spotless and the sinful, the people of this land demand-Justice. The representative men of every one of the above classes have spoken, from the President of the United States, who speaks of the "square deal” (a somewhat unfortunate synonym of justice), to the criminal or to the man indicted, who pleads that in all justice extenuating circumstances should be considered and that public clamor should not cause justice to be over-harsh or over-technical. Did time permit, I think I could interest you in merely reading newspaper clippings published during the past three months, in which in different phraseology, representative men have voiced the cry of the varied interests which compose our industrial and political world. If I did so, the list would include |