Arguments Urged in Favor of Each of the Plans for Charging Premiums

The argument most frequently urged in favor of stock company rates is that they are low, definite in amount and time of payment, and eliminate all element of uncertainty, thus enabling the policyholder to know the exact future cost of his insurance and to make provision therefore in much the same way as he does for his rent, mortgage interest, or any other fixed obligation. In the words of one supporter of stock companies, insurance policies issued on the non-participating plan are " plain business contracts which tell their whole story upon their face; which leave nothing to the imagination; borrow nothing from hope; require definite conditions, and make definite promises in dollars and cents/31 Another statement is to the effect that " the policyholder of a stock company knows just what his insurance will cost, now and in the future, everything being guaranteed a thing impossible in a mutual company for the reason that one cannot know in advance what future dividends will be, or even that there will be any dividends at all." 2 It is further argued that under the stock plan the self-interest of the stockholders will secure, as well as any other system, a faithful management of the funds accumulated by the company for the benefit of its policyholders, and that the competition of other stock and mutual companies will keep down the cost of insurance to a fair basis. Stockholders, it is asserted, will be actuated by self-interest to select the ablest management, and in attempting to do this will not be interfered with by the policyholders.

In favor of the mutual plan it is argued that there are no dividends to be paid to stockholders, that insurance is given at actual cost by returning in dividends all unnecessary overcharges, and that the affairs of the company may be controlled by the policyholders in such manner as they deem best for their interests. It is also pointed out that by charging higher premiums the mutual company possesses an important source of strength against periods of financial stress or other unforeseen contingencies. Stock companies., on the contrary, are not in a position in case of reverses to call upon their policyholders for additional contributions to meet losses, since the stockholders, being alone entitled to profits, must also bear all losses. Strength and safety are regarded as first considerations in life insurance, and in this respect it is impossible to foretell the contingencies, such as wars, epidemics, greatly declining interest rates, oppressive legislation and taxation, inefficient management, etc., which may arise in the distant future; hence the danger of companies assuming fixed obligations which run for many years and must be fulfilled absolutely without the company possessing the right of withdrawal or modification. In practice, however, both types of companies usually retain a considerable fund for emergencies so that the argument is applicable only in the event of very unusual contingencies. Furthermore, the argument that certain stock companies possess a much greater accumulated surplus than certain mutuals is considered by the supporters of the mutual plan to constitute nothing more than "the discussion of the merits of companies and not of systems; just as would be the case if it were pointed out that the capital of most stock companies is so inconsiderable as to be negligible in the nature of security."