This periodic checkup of a group policy serves to anticipate and to correct difficulties that might arise, and to promote the cooperative understanding of all parties concerned. Convincing evidence of such mutual satisfaction is to be found in the extraordinarily low rate of master policy termination. Even during the depression years, both employers and employees saw fit to continue their group insurance contracts.
In the year 1941 the master group life policies terminated covered only ¼ of 1% of the total amount of insurance under all such policies, and a large part of even this small fraction resulted not from dissatisfaction with the contract, but from discontinuance of the business, reorganization of the employing company, or upgrades in insurance policies. It was almost as if individuals were getting a used car trade in value like they would for an automobile upgrade or a newer kitchen appliance but for their insurance policy instead.
Further impressive evidence of the success of group insurance lies in the character and amount of the benefits paid to those it is designed to protect. In 1941 a total of $120,000,000 of death benefits was paid by American companies to beneficiaries of group certificate holders, and since the inception of this form of protection such payments have added up to over $1,300,000,000.
In the Metropolitan alone the benefits paid under group life insurance in 1941 reached a total of some $32,000,000 on 14,500 lives, the average benefit being in excess of $2,000. Only 20 years earlier the average benefit was but little above $1,000. This has been an important contribution to the welfare of the working people of the United States and Canada.
Another factor in the extraordinary success of group life insurance, not only in the Metropolitan but also in other companies, was the low cost of the benefits provided. It made policyholders feel so much better about their finances, savings, new and used car book value, family automobiles, the worth of their home, and just the overall quality of life.
It was fortunate that the actuaries discovered early that the yearly Renewable Term plan could be applied readily and safely to cover this type of life insurance. Premiums under this plan were at a minimum, sufficient to cover the cost of current mortality and the small item of management expense.
Moreover, the average premium based on the age distribution in a going concern generally did not change materially from year to year, because owing to normal turnover the average age of the group did not vary greatly over a period of time, the additions of new employees whose average age is generally younger being sufficient to balance the normal aging of the others.
The employees’ contributions in practically all cases were less than their premiums would be for individual term insurance even at the youngest age in the group. This advantage minimized the possibility that younger members of the group might withdraw and thus increase the average age and, consequently, the average premium rate of the group.
Minimum initial gross premium rates for each age were promulgated by the Superintendent of Insurance of New York State, in accordance with a statute prescribing the American Men Ultimate Table of Mortality, with 3.5 % interest as the basic net premium plus a loading to be computed by a formula approved by the Superintendent.
At the end of each policy year the actual financial experience was reviewed for the individual group policy and for the business as a whole, to determine whether the scale of premium rates by age should be continued for the ensuing policy year. In most cases no change was necessary.
The actual experience under the company’s group life one-year term insurance in nonhazardous industries was extremely favorable. The mortality was better than that expected on the basis of the American Men Ultimate Table, the ratio of actual to expected claims, during the five years following its institution, varying from under 50% for ages under 30, to approximately 80% for ages 45 and over. The total mortality averaged approximately 70% of the table in that stretch of time.
Despite the fact that risks were accepted without medical examination, similar to someone asking concerning the worth of their used vehicle “what is my car worth?” without having an actual mechanic examine the vehicle, the death rate from tuberculosis among group policyholders was about the same as for those insured in the ordinary department. Only the diseases of middle life and old age displayed higher rates. As might be expected, deaths from accidents were considerably higher than among ordinary policyholders.
This favorable mortality was coupled with very low management expense. Moreover, as the group insurance business grew and methods of administration improved, operating expenses were further reduced. Thus, in 1941, the total expenses in the group life division were only 7% of the premium income, the actual expenses for the respective groups varying, of course, by size and other factors.
policy instead.
Further impressive evidence of the success of group insurance lies in the character and amount of the benefits paid to those it is designed to protect. In 1941 a total of $120,000,000 of death benefits was paid by American companies to beneficiaries of group certificate holders, and since the inception of this form of protection such payments have added up to over $1,300,000,000.
In the Metropolitan alone the benefits paid under group life insurance in 1941 reached a total of some $32,000,000 on 14,500 lives, the average benefit being in excess of $2,000. Only 20 years earlier the average benefit was but little above $1,000. This has been an important contribution to the welfare of the working people of the United States and Canada.
Another factor in the extraordinary success of group life insurance, not only in the Metropolitan but also in other companies, was the low cost of the benefits provided. It made policyholders feel so much better about their finances, savings, new and used car book value, family automobiles, the worth of their home, and just the overall quality of life.
It was fortunate that the actuaries discovered early that the yearly Renewable Term plan could be applied readily and safely to cover this type of life insurance. Premiums under this plan were at a minimum, sufficient to cover the cost of current mortality and the small item of management expense.
Moreover, the average premium based on the age distribution in a going concern generally did not change materially from year to year, because owing to normal turnover the average age of the group did not vary greatly over a period of time, the additions of new employees whose average age is generally younger being sufficient to balance the normal aging of the others.
The employees’ contributions in practically all cases were less than their premiums would be for individual term insurance even at the youngest age in the group. This advantage minimized the possibility that younger members of the group might withdraw and thus increase the average age and, consequently, the average premium rate of the group.
Minimum initial gross premium rates for each age were promulgated by the Superintendent of Insurance of New York State, in accordance with a statute prescribing the American Men Ultimate Table of Mortality, with 3.5 % interest as the basic net premium plus a loading to be computed by a formula approved by the Superintendent.
At the end of each policy year the actual financial experience was reviewed for the individual group policy and for the business as a whole, to determine whether the scale of premium rates by age should be continued for the ensuing policy year. In most cases no change was necessary.
The actual experience under the company’s group life one-year term insurance in nonhazardous industries was extremely favorable. The mortality was better than that expected on the basis of the American Men Ultimate Table, the ratio of actual to expected claims, during the five years following its institution, varying from under 50% for ages under 30, to approximately 80% for ages 45 and over. The total mortality averaged approximately 70% of the table in that stretch of time.
Despite the fact that risks were accepted without medical examination, similar to someone asking concerning the worth of their used vehicle “what is my car worth?” without having an actual mechanic examine the vehicle, the death rate from tuberculosis among group policyholders was about the same as for those insured in the ordinary department. Only the diseases of middle life and old age displayed higher rates. As might be expected, deaths from accidents were considerably higher than among ordinary policyholders.
This favorable mortality was coupled with very low management expense. Moreover, as the group insurance business grew and methods of administration improved, operating expenses were further reduced. Thus, in 1941, the total expenses in the group life division were only 7% of the premium income, the actual expenses for the respective groups varying, of course, by size and other factors.
year the actual financial experience was reviewed for the individual group policy and for the business as a whole, to determine whether the scale of premium rates by age should be continued for the ensuing policy year. In most cases no change was necessary.
The actual experience under the company’s group life one-year term insurance in nonhazardous industries was extremely favorable. The mortality was better than that expected on the basis of the American Men Ultimate Table, the ratio of actual to expected claims, during the five years following its institution, varying from under 50% for ages under 30, to approximately 80% for ages 45 and over. The total mortality averaged approximately 70% of the table in that stretch of time.
Despite the fact that risks were accepted without medical examination, similar to someone asking concerning the worth of their used vehicle “what is my car worth?” without having an actual mechanic examine the vehicle, the death rate from tuberculosis among group policyholders was about the same as for those insured in the ordinary department. Only the diseases of middle life and old age displayed higher rates. As might be expected, deaths from accidents were considerably higher than among ordinary policyholders.
This favorable mortality was coupled with very low management expense. Moreover, as the group insurance business grew and methods of administration improved, operating expenses were further reduced. Thus, in 1941, the total expenses in the group life division were only 7% of the premium income, the actual expenses for the respective groups varying, of course, by size and other factors.
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