Recent Tendency to Adopt the Protective Features of Old-Line Insurance

All the aforementioned assessment plans proved exceedingly unsatisfactory, despite the fact that fraternal societies have generally been exemplary in the matter of selecting risks and in keeping expenses down to a very low figure. Accordingly the -societies have attempted in recent years to devise ways and means of strengthening their financial position, and many have secured the services of actuaries for the purpose. Many of the societies have accumulated some sort of reserve or emergency fund, but in the great majority of instances this fund falls far short of being an adequate reserve. It is encouraging to note, however, that those in charge of the leading societies now fully realize that there is only one correct plan of insurance, namely, that based on scientific principles, and that fraternal insurance, if it is to guarantee its benefits and be a permanent factor in the community, must be conducted on the same scientific basis that the old-line companies have wisely made the foundation of their enormous business. In fact, some of the societies have already adopted either level rates computed scientifically on the basis of the National Fraternal Congress table of mortality, or the so-called "step-rate" plan. This latter plan consists of level rates increasing for successive terms of five or ten years. The increasing term rates, however, apply only to the working period of life and, at about age 60, merge into a level rate for the rest of life.

In trying to reorganize their scale of rates the societies are encountering much opposition from their members and are experiencing much difficulty in educating them to an understanding of the situation. The problem involved is a serious one since many of the societies have been in existence for many years and, owing to their inadequate rates during the whole of their existence, are now obliged to increase their rates enormously in order to meet current claims. In other words, their problem is to find some way of meeting the situation which has grown out of the accumulating deficits of past years. And in trying to solve this problem the societies must contend with the conflicting interests of different classes of members. The older members naturally favor the retention of the old methods, since the raising of rates at the older ages to an adequate basis would, in many instances, mean an unbearable burden. The younger members, on the other hand, feel that they should not be asked to contribute for the benefit of the older members, and are therefore not so inclined to oppose a more equitable rate adjustment. In their attempts to reform their rating systems the societies have in most instances tried b compromise between these two classes of members, i.e. when deficiencies made it necessary rates were increased but the increase was greater at the older ages than at the younger ones. Many feel that the only solution available is, as Mr. Walter S. Nichols puts it, "to so regulate the inequality between the groups that additions to the young membership can be kept up until such time as the rates can step by step be finally raised to an adequate basis."