BUSINESS METHODS OF LIFE INSURANCE 1. Loading.—The expenses of the business of life insurance are provided for by an addition to the net premium, called a loading. The premium itself, as computed by the mortality tables and the assumed interest earnings, may be called a net or pure pre mium, and does not contain any provision whatever for expenses.
In other forms of insurance, as in fire, the cost is not covered by such an addition, but has always been considered as forming a part of the rate computation itself. The loading may vary for different and in different companies, but, as competition be tween the different companies is keen, the cost of in surance among the old-line companies is kept down. They must maintain a sufficient reserve at all times to meet their obligations, and competition is a fairly effective hold-back to any undue ambition to put the premium at too high a point by means of loading.
2. Settlement of claims.—In the older method of settling claims adopted by the Equitable of London which has already been described, some claimants were made to wait very nearly if not quite a year before they received the insurance fund. Under the present method, expedition in the settlement of claims is a marked feature of the modern life insurance compa nies. Probably 95 per cent, if not a somewhat higher proportion, of claims are paid within forty-eight hours from the time the proofs of death are received at the home office.
The life insurance company furnishes certain forms which are used in the preparation of claims. One form, filled out by the claimant, sets forth the basis of the claim and gives evidence that the deceased person is the one that was insured under the policy. A statement of a physician, assuming there was one, who attended the insured in his last illness, is usually required. Another statement is made by the under taker or it may be the clergyman, testifying to the fact that the person buried was the one described in the claim papers. There is often a statement of a friend as to the identity of the deceased and the circum stances of his death. Not all four of these statements or sets of papers, may be required in all companies, but these cover the usual run of the cases.
3. Life insurance in its commercial aspect.—Pro tection to the family, which was the primary idea in the beginning of life insurance, has lost none of its original force, and perhaps is more prominent today than ever. At the same time there is a tendency to look upon life insurance as a commercial undertaking and to disassociate it from the "You must die to win" sentiment. Life insurance is simply an investment for the purpose of prolonging the earning power of the individual when the individual himself may have lost the power to continue earning. This is the com mon-sense view of the matter that will probably have the greatest influence in the upbuilding of the great business of life insurance.
There are, however, cases which perhaps come more closely within the realm of commercial life insurance. Some of these may be suggested: In New England a noted hotel keeper desired to erect another hotel and still continue the one in which he had earned his fame. In fact, at the time of this incident, he was managing successfully two important hotels in the city, but desired a third, which was to be run on somewhat different lines. His venture in the new hotel would represent an investment of something over a million dollars. Capitalists were willing to make the invest ment if there was a reasonable assurance that the hotel would be managed by this person. As part of the investment, they insured the life of the manager and so protected their venture. The hotel was built and successfully managed for many years. This is an incident of commercial insurance.
Many corporations find that their success will de pend on the life of a certain individual if not thru a long period, at least thru the time, perhaps three, five or ten years, necessary to build up the business. The common-sense thing to do, which is being done every day, is to insure the life of that individual, and free both the individual and themselves from any strain incident to the fear that the whole thing would come down in ruin thru the loss of this valuable and important life.