Business Assessment Associations

A discussion of assessment life insurance is not complete without reference to the numerous local societies which at one time granted insurance in the United States on the assessment plans already referred to, but which were neither fraternal in character nor organized on the lodge system. These societies were generally known as "business-assessment associations" to distinguish them from fraternal societies. Almost universally, however, these associations failed to follow sound, business methods in writing insurance. In nearly all instances their managers ignored actuarial principles and, like the fraternal societies, took the position that the accumulation of reserves was an unnecessary practice which served only, to increase the cost of insurance. They, therefore, employed various assessment plans and as a consequence encountered the same difficulties experienced by fraternal societies. The local and non-fraternal character of the societies, however, caused the consequences of defective rating systems to show themselves much more quickly and effectively, and, as a result, although fraternal insurance still ranks as a leading form of life insurance, practically all the important assessment societies have either passed out of existence or have been reorganized into old-line companies. As compared with fraternal orders, business assessment societies were greatly handicapped in overcoming the defects of their system in that they lacked the benefits of a lodge relationship and the strong fraternal tie that binds the members together and causes them to stand by each other in time of adversity. In other words, they lack the fraternal feeling among their members and were really nothing more than ordinary companies organized solely for the purpose of giving insurance at rates much lower than those charged by old-line companies. As compared with the fraternal orders, business assessment associations were also operated at a much greater expense, and in many instances their medical selection of risks was decidedly inferior.