You are reading a page from The Fraternal American Table,
American Insurance Union (1926)
Part
of the American Term Life Insurance History Project
Term Life Insurance
Discussion of Mr. Fackler's Paper Before Fraternal
Actuarial Association
Tuesday, February 23, 1926
Chicago, Illinois
Hotel Sherman
By
Sidney H. Pipe
I think the actuary who follows Mr. Eldridge in discussing
any subject has a hard task on his hands, because Mr. Eldridge
usually, and has done so in this case, says all there is to be said
on the subject.
He seemed to divide his discussion into two parts—the
actuarial ills that the fraternals are suffering from, and the
technical discussion of the Fraternal American Table itself.
In regard to the first part of his paper, I think the frater-
nals are really suffering from the strangling effect of the legisla-
mmated themselves years ago. I think in those days
that that legislation was perfectly proper. I think when so-
'"adequate rates, that the members had
the right to know that a full, inadequate premium, if we can say
that sort of thing, went into the insurance fund, and that they
nad that protection, and that none of that premium would be
used for expenditures.
. With the development of the actuarial side of fraternal so-
cieties, the situation is entirely changed.
Those ideas are, to my mind, archaic. In 1916 in Canada
we were in a fortunate position. We had as the Superintendent
of man who was an - We had the experience
socletles ^ore us, under their legislation. We
was necessary was that the actuary should be
treated as a professional man and not as a machine.
^^The law P-!^"^ °^r here what instrument an actuary
shall use regardless of a situation.
It is like telling a doctor who goes to see a patient, to give
tne patient a certain kind of medicine, whether that is the medi-
cine that is proper or not.
We don't believe in that kind of legislation. We were for-
tunate enough to have a very sympathetic superintendent, since
he was one of our profession, and he left the actuaries with en-
tire freedom as to the medicine which thev should prescribe for
the patient.
The result was that in a few years there was not an insol-
vent fraternal society doing business under Dominion license.
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The result also was that the societies were permitted to take ad-
vantage of every item in their make-up that was in their favor.
Canadian societies are allowed freedom in the matter of our
expenditures, to this extent: The duty of the actuary and for
which he is held personally responsible, is to see that his society
is kept in a solvent condition, that is his duty, and that is why
he is there. Whatever surplus is earned out of the rates worked
out by him shall be used in the way the governing body or execu-
tive officers of the society see fit, for developing the society.
According to our point of view, that is a very desirable and
quite a rational situation. The actuary, if he is as he should be,
will see that he does not allow the society to impair its ability to
meet its obligations by excessive expenditures. It does away
with this putting of a few cents in one pocket and a few cents
in another pocket and earmarking those pockets with different
purposes.
It treats the rate as a rate for the purposes of, putting them
in the order of their importance,—paying claims, putting up
reserves, and meeting expenses.
I think on this side that that should be our aim. I think
that the National Fraternal Congress can do nothing better than
move towards that freedom of action on the part of the actuary.
We would then do away to a certain extent with all this discus-
sion about tables.
If we want legislation over here of a restrictive character,
then I think that what should be prescribed is the basis of re-
serves to be maintained. I am not even in favor of going that
far in a restrictive sense. If they do pass legislation to that
effect, then we would have to consider what table would form a
suitable basis for our reserves.
About a year ago I presented some figures to the Associa-
tion, showing a comparison of the actual to expected claims of
the Independent Order of Foresters, upon the basis amongst
other mortality tables of the Fraternal American Table, both
amongst its readjusted business and also amongst the business
that had not been readjusted, and which had been in force from
1899 on. I pointed out at that time that the Fraternal Ameri-
can Table was a highly desirable table to use for the reason that
the mortality of the society followed the shape of the curve of
the Fraternal American Table.
Now as an illustration of the importance of that point, I
had a letter sent me a while ago from an executive officer, who
shows great interest in statistical matters and takes quite an
intelligent interest in actuarial matters, and he asked me, "Why
is it that the ratios of actual to expected deaths, according to
the National Fraternal Congress Table, are continually getting
higher and higher?"
I explained to him it was because there was a greater body
of lives continually being massed towards the higher ages, and
in the higher ages the National Fraternal Congress Table was
weak. Therefore, that percentage was obliged to go up. If the
bulk of business, owing to a scarcity of new business, eventually
got into the higher ages, we would have an increased ratio
the ratio for a number of years was in the neighborhood of 95
per cent, according to the National Fraternal Congress Table
but that is not telling the story, because the National Fraternal
Congress Table does not follow the actual mortality of the so-
cieties.
Mr. Eldridge pointed out that when you examine the ratios
according to the Fraternal American Tables by age groups thev
all run around 89 per cent consistently.
That is why I say the Fraternal American Table is a good
table for a fraternal society. If we want to change our basis—
1 say if we want to change—1 think the table should receive our
serious consideration.
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