Insurance rate

“ By means of an accepted mortality table and an assumed rate of interest, the company calculates the amount that would be required to be paid by the insured each year in advance to cover policy claims if deaths occur as indicated by the table and if that rate of interest is realized on the investments. The amount so ascertained is called the net or mathematical premium. There is added loading to cover expenses and unforeseen contingencies such as excess mortality, diminished taxes. ”

“ If fires destroy a million of dollars’ worth in property insured for its full value, and a million’s worth more in property insured for one-tenth of its value, the insurers will pay $1,000,000 upon the first group and more than $750,000 upon the second. But if all the insurance is taken at the same rate the insurers will have received premiums ten times as great on the former group as upon the latter. ”

“ This high death-rate is due not so much to the fact that life is shorter in the labouring class as to the lack of efficient medical selection, which would be too costly. The premiums, at best, must be made higher than in offices insuring for annual payments, but the demand for insurance extended as rapidly as the system could be explained, and the Prudential is said to have now in force some 12,000,000 policies, with an average premium of twopence a week, secured by an accumulated insurance fund of £17,000,000. ”

“ It is remarkable that the average weekly premium in the United States appears to be about 10 cents, or two and a half times as high as in Great Britain. The average policy is also proportionally larger, and the progressive increase in its amount deserves notice. At the rate at which the practice of insurance is extending among working men, it would require but few years for it to become as universal in these countries as any paternal government has aimed to make it by compulsion. ”

“ In the year 1899 the average premium rate upon all fire risks written in the states in which co-insurance was wholly or partly prohibited was something more than $1.20 per $1000, while in the rest of the country, where the clause was permitted and to a large extent used, the rate was but 96 cents per $1000. The marked difference, which tends to increase, is a perpetual object-lesson which must in the end appeal strongly to the popular intelligence. ”

“ Any scientific plan of insurance, therefore, must provide another method for maintaining the proportion between amounts of premiums paid and the share in its benefits obtained for them. This is the purpose of what are generally called average or co-insurance clauses. The principle is, that when a proper rate for a class of risks is found, then the insured may protect at that rate any percentage of such a risk, and in case of fire shall be indemnified for the same percentage of his loss. ”

“ For such beneficiaries, who are to receive payments for life with 120 payments certain, the regulation provides that the 'amount of the monthly installment for each $1,000 of insurance shall be determined by the age of the beneficiary as of last birthday at the time of the death of the insured, in accordance with a schedule based upon the American Experience Table of Mortality and interest at the rate of 3 percentum per annum. ”

“ Where the Premium or Consideration for such Insurance, actually and bona fide paid, given, or contracted for, shall not exceed the Rate of Twenty Shillings per Centum on the Sum insured;
If the whole Sum insured shall not exceed 100l. ”

“ The agent's compensation, being a percentage of the premium, bears a direct relation to the rate charged the insured. The percentage commonly allowed is so large that it is a vital element in the rate structure and may seriously affect the adequacy of the rate. Excessive commissions may result in an unreasonably high rate level or in impairment of the financial stability of the insurer. It was stated at the bar that the commission on some classes of insurance is as high as thirtyfive per cent. ”

“ More than half of uninsured workers are employed by businesses with less than 25 employees or are self-employed. (3) Health insurance premiums continue to rise at more than twice the rate of inflation for all consumer goods. (4) Individuals in the small group and individual health insurance markets usually pay more for similar coverage than those in the large group market. (5) The rapid growth in health insurance costs over the last few years has forced many employers, particularly small employers, to increase deductibles and co-pays or to drop coverage completely. ”

“ Washington Insurance Co., 4 Cow. (N. Y.) 645, the rule was applied in a case where the agent was authorized to make insurances, 'provided the office shall recognize the rate of premium, and be otherwise satisfied with the risk.' It was held that the company was bound to issue a policy where the insurance was a proper one and the premium was paid or tendered, although before the premium was received at the home office the property was consumed by fire. ”

“ Where there is mutual insurance or municipal insurance in its best sense, the losses by fire and the costs of the protection are often booked in one account, and the better protection up to a certain point should mean a smaller individual annual share. Where there is company insurance the municipal rates are increased to cover the cost of extra protection, while a proportionate decrease is expected in the insurance premiums. Competition and public opinion generally impose this decrease of the insurance rates as soon as there is a greater immunity from fire. ”

“ An employee may elect insurance under the policy by completing any form of pay roll deduction order approved by the employer. Each employee electing the insurance before becoming eligible will be insured automatically on the day he becomes eligible. On the effective date of the policy and on each annual renewal date an average annual premium rate will be established. The employer shall give the insurer notice of terminations of insurance and additions of employees becoming eligible. ”

“ But it’s not just Californians who are being hit by rate hikes. In Kansas, one insurance company raised premiums by 10 to 20% only after asking to raise them by 20 to 30%. Last year, Michigan Blue Cross Blue Shield raised rates by 22% after asking to raise them by up to 56%. ”

“ I believe, the insurance companies in the United States could in a very short time know the exact amount paid by any employer of labor as a premium rate, or cost of insurance which would be necessary to protect the employer against the compensation which he in turn would be obliged to furnish to his employees. ”

“ It is equally for the public benefit that rates of insurance should be fixed on some common scale. Suppose the system of unrestricted competition to be tried, the first effect will be a general and great reduction in rates. But it may be said, “So much the better for the insured; if the offices can afford this reduction of rate, it will only be a fair result of competition; if they cannot afford it, they will be the losers, but the public will gain ”

“ Recently it was necessary, in order to protect the interests of the Board which guarantees safe delivery, to charge in addition to the above rate by weight an insurance fee of $1.50 per each $100 value. ”

“ As before suggested, the annual premiums are not the consideration of assurance for the year in which they are severally paid, for they are equal in amount; whereas, the risk in the early years of life is much less than in the later. It is common knowledge, that the annual premiums are increased with the age of the person applying for insurance. According to approved tables, a person becoming insured at twenty-five is charged about twenty dollars annual premium on a policy of one thousand dollars, whilst a person at forty-five is charged about thirty-eight dollars. ”

“ The rates charged for insurance are calculated at so much per cent.—or so much for every hundred pounds—of the sum insured. They vary in amount according to the nature of the risk. If there is little danger under ordinary circumstances—as in a dwelling-house—of the property being destroyed by fire, the sum to be paid is low ”

“ If entered at forty, by the actuary's table, at four per cent., its net single premium would be $511.15 for $1,000. At the age of forty, the natural net premium to insure $1,000 for one year is $9.96. This, at four per cent., will amount at the end of the year to $10.36, so that the company, exclusive of the party himself, by insuring $1,000, runs the risk of losing $989.64 if he dies, and of gaining $10.36, if he does not. There is in this case no reserve at the end of the year, and no occasion to use the term "self-insurance." ”

“ This single large premium, like the small annual premiums considered above, resolves into two parts, the "insurance value" and the "reserve." The "reserve" is the same in nature as with the annual premium, though of course much larger; but a new element enters into the composition of the "insurance value." The "insurance value" of an annual premium compensates the company for its risk in one year, while the "insurance value" of a "single premium" compensates the company for its risk during all the years that the policy has to run. ”

“ And the average life policy becomes a claim thirty years after the first payment is made. Again, the company receives much larger amounts than the actual insurance cost. This peculiarity results from the fact, described in the first article, that men will not pay for their insurance as they go. They will not pay its actual cost this year, its actual cost next, and so on—on the natural premium plan, that is—but insist on paying the same amount each year—or a level premium. ”

“ The cost of pure insurance is about one third of the premium, or perhaps a little less. Now, does any unprejudiced person believe that it is necessary to charge three dollars for the purpose of disbursing to the families of the insured one dollar? Is not any system of insurance properly open to criticism that continues to assume and charge a cost that experience has shown to be so excessively beyond the necessities of the case? ”

“ The official reports of Level-Premium Life Companies to the Insurance Departments of the several states show that these companies actually use, for expense of conducting the business, from $6 to $25 for each $1,000 of insurance outstanding. A man carrying $10,000 insurance for his family in these companies must pay on the average, for the expense of the business, about $80 per annum, and if it should be twice or three times that amount he has no redress. Should not these companies stipulate, in every policy, a sum for expenses which could not be exceeded? ”

“ I'll repeat that: 6 out of 10 of all Americans, and even more as the reforms begin to take effect and cost increases go down, will pay the same or less for the same or better benefits.
About 25 percent of our people, people who are now underinsured or people without insurance at all who can afford to pay, will pay a little more for coverage. But many of them will actually pay less in medical bills. Right now, there are lots of people with cheap premiums, because their deductibles, their up-front costs are so high, $2,500, $3,000, even $5,000. ”

“ The fine print in your insurance policy can cost you your coverage. Eighty-one million Americans have those preexisting conditions, just like the little boy in Nashua, that insurance companies can use to raise rates or deny coverage and that as a practical matter prevent many, many people from changing jobs because they know they'll lose their coverage. ”

“ With the gross amount I am not particularly concerned, but it is the sum they yearly voluntarily tax themselves to pay to keep these three hundred policies in force that I want to discover. It is difficult to get at the sum the people pay annually, for there are so many kinds of life insurance that{215} they vary, some policies being on the plan of annual payments for life, while others are only for a stated term of years, so that it is difficult to get at the average amount. Five thousand dollars per month one insurance company has been known to receive from here. ”

“ Inasmuch as the net premium for an abstainer at age 35, under an average distribution of endowment and whole-life policies, would be $3.03 per thousand of insurance in force less than for a non-abstainer, we have here a figure representing the actual saving on such lives, the net premium being comparable to the cost of manufacture in trade. ”

“ This rough illustration shows that in an equitable adjustment of rates the amount insured as compared with the value exposed is a prime element, and that premiums might justly form a scale, highest on the smallest fractions of 663 value, and diminishing rapidly as the percentage of insurance increases. ”

“ They thus force the insured, during the first half of the premium paying period, to advance a considerable amount on the insurance cost of the latter half. These advance payments, with accumulated interest, are the company's reserves. The Mutual Life, for example, collects each year about $60,000,000. from its policy-holders; but pays in death losses only about $20,000,000. Its $40,000,000. balance, after deducting expenses and other larger disbursements, is really the advance payment of the insurance cost of succeeding years ”

“ In determining the liabilities upon its contracts of insurance of any insurance company other than life insurance, and the amount such company should hold as a reserve for reinsurance, he shall, for casualty insurance companies, charge one half of the premium on all annual policies written within one year, and on policies written for more than one year he shall charge one half of the current year's premiums, plus the whole of the premiums for subsequent years. ”