GOVERNMENT SUPERVISION. The chief activity of Government in the United States in respect to life insurance is supervision and restraint. The history of life insurance in the United States has shown a marked tendency to recklessness in the matter of reserves, and it is only the activity of the Government which has induced the com panies to give to their policy-holders adequate protection. Massachusetts was the first State to establish an insurance department (1855). It was also the first State to adopt a scientific method of insuring the solvency of an insurance company. That method is, in brief, to compel it to carry a reserve sufficient to reinsure all its outstanding risks at net premium rates; that is, a reserve which is called for by a cal culation based on a specified mortality table and rate of discount. The Actuaries' table and 4 per cent. were specified in the Massachusetts law. and have been adopted by most of the other States which have introduced the net valuation test of solvency. Some States.'however, authorize the use of a discount rate of per cent., which
diminishes somewhat the amount of reserve re quired. New York originally used the American Experience table, then changed to the Actuaries' table with 4 per cent. interest, and January 1, 1901, in recognition of the fall of the rate of in terest in safe investments, returned to the Ameri can table of mortality with interest of per cent. This has materially increased the amount of reserve necessary for the companies to carry.
The system of State supervision in force in the United States has proved its efficacy during the half-century of its existenee. The regular life-in suranee business of the United States is on a thoroughly sound basis, while the companies are left free to adopt all such measures as in their judgment will promote the growth of the insur ance business. There is consequently a maximum of initiative in the management of the business together with a maximum of security for the in sured.