stipulations and limitations herein contained, shall continue to
be paid to the said party of the second part, his executors or ad-
ministrators, for the term of fifteen years from the date of each
policy while in force during said time, less one per cent, of the
premium as a collection fee.
The provisions referred to in paragraphs 13, 14, 15, 16 and 19
relate to collection, use of funds collected, defaults, breach of
duties in connection with agreement to devote full time to the
company, to submit all proposals for life assurance, whether re-
ported on favorably by the Medical Examiner or not, to treat
the contract as strictly confidential and to any interference with
the business of the company.
THE WITNESS: Now you have another specimen there, I
think, Mr. Hughes, where the renewal commission is y\ per cent.
Q. Well, it is practically 7^ per cent, under this, is it not? A.
It is 5.
Q. It is 5 with an arrangement for an increase if the premi-
ums amount to $5,000, and if practiced A. Yes, in other re-
spects it is the same.
Q. Do you give bonuses to agents? A. Contingent bonus
sometimes. That was the practice four 'or five years ago, more
than it has been for the last year or two years.
Q. Have you more favorable terms for particular agents, or
is this a schedule that is in force? A. No, sir, that is a schedule
rate.
Q. Do you have any other rates for anyone? A. No, sir.
MR. HUGHES: Will you withdraw for a moment, Mr. Scott.
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Testimony of Henry Moir
HENRY MOIR, resumed.
MR. HUGHES : Mr. Moir, have you the figures on the policy
of Mr. Henry Qay Evans of Chattanooga ? A. I have.
Q. When was the policy issued ? A. The policy was dated the
24th day of November, 1890.
Q. What was the kind of the policy? A. Yearly renewable
term policy with surplus applied to maintain the premium lev-
eled.
Q. Was it one of the forms that had been put in evidence, the
form of 1889. A. Practically. There may be a word or two
rfifferent in the contract.
Q- In substance it is the same? A. In substance it is the
same,
Q' What was the age at time of issue? A. Forty-seven.
Q- What was the amount of the policy? A. $10,000.
Q- What was the initial premium? A. $202.
W- -How long did the policy remain at that amount or that
rate of premium. A. For eight years.
. ^* 'Til en how was this changed? A. An increase in the prem-
ium H*a^
*^^ca.me necessary.
>^- What was the increased rate ? A. $252.50.
^" ^Ixat was the ninth year? A. Yes, sir.
^" -^ow long was that amount paid per annum? A. It was
^* ^« refused the legal period? A. Yes, sir.
V- A^/Tiat year was that? A. 1898.
^* T^d the policy then lapse? A. It lapsed.
^* ^^^at was paid upon its lapse; did it have a surrender
^^^^ • A. It had no surrender value.
y- Why not? A. Because it was a yearly renewable term
poUey and at the date of lapse there was a deficit under the con-
tract.
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Testimony of Henry Moir
Q. No surplus had been accumulated? A. A surplus had
been accumulated, but it had been used in keeping the premium
level, and it had disappeared before 1898.
Q. That is, on account of the use of the surplus the premiums
had not increased before 1898? A. No.
Q. "Otherwise they would have increased? A. Earlier, yes.
Q. As a matter of fact, you say there was a deficit on the pol-
icy? A. Yes.
Q. And that sized off. A. Yes.
Q. What was the rate at attained age at the time the policy
lapsed* under your schedule of rates, what was the maximum
rate of the insured at that time ? A. That rate is g^ven in one of
the schedules.
Q. I want to compare that with the amount which is charged
the insured at the time of increase. Can you state it approxi-
mately ? A. I presume that the rate was the same as the sched-
ule which I have before me, $202.40.
Q. The rate to which it was raised was $252 at age attained,
according to your schedule was $292. A. The maximum rate.
Q. The expectation had been on the part of the insured that
he would not have to pay more than $202, with which he started,
on account of the increase in surplus and various ways of disap-
pointment in his letter? A. Yes. Perhaps I should add that a
ten years' time contract non-participating in two of the largest
companies in existence brought $240, his age at entry, $240.50 in
the one company and $243 in the other.
Q. For what contract is that? A. Ten years' time, from his
age, forty-seven. That is what he said in his letter he had re-
ceived. He paid out $202. Now, the rate for ten years' insur-
ance, term insurance, non-participating, with no rights of renew-
al, in one of the largest companies in the country would have
been $240.50.
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Testimony of Henry Moir
Q. Now you say one of the largest A. That is the Mti-
tual.
Q. Is that the usual rate? A. That is the published Mutual
Life rate.
THE WITNESS: But other companies— the Connecticut
Mutual is $243.
Q. That shows the disadvantages and disappointments from
attempting to insure people too cheaply and raising hopes that
cannot be realized? A. Yes. I think I said before, the premium
rates were paid on eighty per cent, expected mortality.
Q. Eighty per cent? A. Yes.
BY THE CHAIRMAN :
Q. Is there a clause in the policy which would have warranted,
Mr. Evans, of the possibility or the probability, and if so, what
clause ? A. I may say that a policy with the same form was the
subject of suit not long ago, and the judge rendered a decision
saying that the policy was clear and explicit, and there was no
reason to misapprehend its terms.
Q. What clause was there in Mr. Evans' policy which either
permitted that practice or should have warned him of its exis-
tence ? (No reply.)
MR. HUGHES: That policy has been read in evidence, but
have you a form of policy under which Mr. Evans came? A.
Not exactly. There are some verbal changes, but the form I
have before me is practically the form.
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Testimony of Henry Moir
Q. Did the policy that Mr. Evans had contain this clause?
"And the said society further agrees to renew and extend this
insurance upon like conditions upon each successive year of the
life of the insured, from date hereof, upon the payment of an-
nual renewal term for the age attained, in accordance with the
schedule rate on the next page of this policy for each one thou-
sand dollars insurance, excepting as reduced by the application
of the surplus and guarantee fund. Such payment to be made
in semi-annual equivalents, payable on the fifteenth days of Jan-
uary and July, respectively, in each successive year."
A. To the best of my knowledge and belief that is exactly the
same in that respect.
Q. Then the provision for the guarantee fund was in the form
that has already been read on the record? A. Yes.
Q. Containing the words that after deducting the expense
charge, which is limited to four dollars per annum on each one
thousand dollars of insurance, the society agrees to appropriate
the residue of each annual premium paid upon this and upon
other similar policies, as follows :
So much thereof as is necessary for paying the share of death
losses will be deposited in such bank or banks as shall be desig-
nated by the directors as a death fund to be used solely in set-
tlement of death claims. The remainder thereof will be depos-
ited in trust as a guarantee fund in the Farmers' Loan and Trust
Company, or such other depository as shall be designated by the
directors, and will be applied to offset the otherwise unavoidable
increase in rates of premiums on account of advancing age.
That was the provision? A. That is the general provision.
Q. And the sole point was that the insured got the idea that
under that the accumulation would be enough to prevent a
change of rates? A. That is right.
Q. And that is what those who issued the policy believed; at
least that is what was held out as the confident expectation ? A.
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Testimony of Henry Moir
Yes, that these rates would continue during the expectation, and
not longer.
Q. Yes, there is a schedule stated there of rates which would
be charged if the surplus did not exist, and it turned out it did
not? A. Yes.
Q. Now, we have another letter here A. Mr. Hughes,
there is one point in regard to expenditure which perhaps I could
explain a little more clearly if you wish that explanation.
Q. I do not think you can add anything to it, I think we under-
stand it fully, but if you are desirous of explaining it you may.
A. The gain and loss exhibit is rather an elastic schedule, and
in 1903 — ^between 1903 and 1904 — ^there was a change in bookeep-
ing arrangement, whereby the charge on outstanding premiums
was increased fifteen per cent., I think, or seventeen and one-half
per cent., in the two years, which made a difference in loadings
of roundly sixty thousand dollars. That difference could only be
charged against loadings, but there was in effect no real difference.
Q. Who made this difference? A. The difference was made
in the returns to all departments.
Q. Who established the rule necessitating the difference? A.
It was made in the company.
Q. You advanced this explanation in coimection with the show-
ing for 1904? A. Yes.
Q. The loss on loading? A. The loss on loading was book-
keeping as between the two years to the extent of fifty-five thou-
sand or sixty thousand dollars.
Q. Why should it have been? A. Because of the change in
practice, the change in plans in creating outstanding premiums.
Q. If you can g^t to the bad, fifty thousand dollars one year
that way, you can get to the good, fifty thousand dollars the other
way by changing the bookkeeping can you not? A. I do not
think the Insurance Department would allow a change from
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Testimony of Henry Moir
twenty per cent, deduction to a five per cent. They would allow
the change the other way.
Q. What was the change you made ? A. It meant taking credit
for less outstanding premiums to the extent of fifteen to seventeen
and one-half per cent., and the only place in which that can pos-
sibly get in the gain and loss exhibit is in loadings.
Q. Here is a letter written by your company with regard to
Chestnut Policy, October 2, 1904, No. 63,856, as follows : That
is written by a general agent of your company.
"October 26, 1905.
"Messrs. Hesse & Shingler,
"Charleston, South Carolina.
"Gentlemen : — Your letter of October 20 to the home office of
the Provident Savings regarding Policy 63,856, on the life of
Cornelius Chestnut, which policy is assigned to you has been
referred to me for reply. I am informed by the home office that
the premium which has been charged for the past eleven years
under this policy is so exceedingly low and the mortality experi-
ence in this class has been higher than was originally anticipated,
that there has been no dividend earnings. In accordance with the
terms of the present policy, the insurance may continue beyond
October 2, 1905 without new medical examination being required
under any form now issued by the Society at the premium rate for
the insured's attained age. We think in view of Mr. Chestnut's
advanced age a continued payment non-participating policy would
be the most desirable. Under this form the annual rate per thou-
sand is $112.63."
Q. Mr. Chestnut's policy was issued at age 59, amount, $3,000?
A. Yes.
Q. October 2, 1894, and the initial premium was $130.11, and
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Testimony of Henry Moir
how long did he pay that premium? A. The policy contract pro-
vides it should run to the age of 70.
Q. That was a A. A fixed rate for eleven years of in-
surance.
Q. And this was issued in 1894? A. Yes. Perhaps I could
illustrate again
Q. Pardon me. He got to the age of 70? A. Yes, sir.
Q. And then he wanted to know what he was going to get?
A. Yes, sir.
Q. And then he referred to this clause in the policy regarding
dividends and extended insurance : "The surplus contributed by
this policy, if it be in force, at its anniversary in 1905 will then
be paid as a dividend in cash, except that if written application
shall have been made therefor not less than one year prior thereto,
the Society will at said anniversary issue upon the life of within
flamed insured, without medical re-examination, a new renewable
temi policy for quinquennial or longer period than his option for
an equal or less amount of insurance, conditioned upon the pay-
ment of the Society's rates of premium for his then attained age,
and in such case said dividends will be applied to reduce the
premiums payable thereon. If after three years the policy be
terminated solely by the non-payment of any premium when due
the owner hereof will be entitled to the surrender value in extended
insurance as provided in the Statutes of the State of New York,
Laws of 1892, etc." A. There was no surplus contributed by this
policy.
Q. Then he was not entitled to an)rthing? A. He was entitled
to continue the insurance
Q. On paying for it? A. Whatever the state of his health
might be.
Q. Well, that is, he was entitled to continue the insurance at
attained age without a medical examination? A. Yes.
Q. The advantage to him under the policy was the freedom
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Testimony of Edward W. Scott
from the necessity of passing a medical examination? A. Yes,
and the protection he obtained during the eleven 3rears.
Q. This was a term policy to age 70? A. Yes, sir.
Q. And the net result was that what he had paid in in annual
premiums of $130.11 for eleven years simply sufficed according
to the experience of your company to carry his insurance and left
him nothing for the money except the fact that his risk had been
carried? A. That is so. As a matter of fact, it did not suffice,
it was not enough.
Q. Was that because of the heavy mortality in the company?
A. Partly so, and partly because the premium may have been
much too low.
Q. The premium was too low? A. I think so.
Q. And the mortality too high? A. Yes.
Q. That is a bad combination? A. I think so.
Q. What about agents* balances in your company, do you
know about those? A. No, nothing whatever.
EDWARD W. SCOTT resumed.
BY MR. HUGHES :
Q. Mr. Scott, regarding your agreement with agents, you have
under date of November 15, 1905, issued a supplemental letter as
to non-participating plans? A. Yes.
Q. And in brief the purport of that is what, to raise the com-
missions on non-participating business? A. Somewhat, yes, sir.
Q. To make them more nearly approach the commissions on
participating business? A. Yes, sir.
Q. Prior to that time it was to the advantage of the agent not
to write non-participating business? A. Exactly.
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Testimony of Edward W, Scott
Q. And the participating business paid you a larger premium ?
A. The participating business, yes, sir.
Q. Although the surplus results had not been as anticipated?
A. I must say that during the last year there has been a tendency
to writing a larger line of non-participating business generally in
the companies.
Q. And what has been the reason for that — has that been a
general disappointment with results on dividends in participating
business? A. To some extent, I must say.
Q. And in this circular you have given the agents an additional
advantage in non-participating business? A. Yes, sir.
Q. Well, you refer to this year, to the result of the agitation
this year? A. To some extent, yes.
Q. Growing out of the Equitable trouble? A. Very largely.
Q. With regard to agent's bonds, do you treat those as assets ?
A. No, sir, we do not.
Q. What do you do at the end of the year when you have a
large amount of agents' balances and you wish to make a good
showing by your report, do you get in a temporary payment and
then loan out money again to the agents ? A. We have our agents
pay up their balances as fully as they can.
Q. At what time in the year? A. In December.
Q. Then do you in January make increased advances to them ?
A. Usually less amounts.
Q. Well, take A. Not in January, but the
Q. Early in the year? A. Early in the year.
Q. In other words, if you were to take the agents* balances as
they exist, say on the ist of December in a given year, and as
they exist on the ist of March the following year, there would
not be much difference? A. Well, that would depend upon the
condition of the agents.
Q. But if you took them on December 31st and compared them
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Testimony of Edward W, Scott
with the 1st of December there would be quite a difference? A.
Yes.
Q. Frankly, is it not the point that they are encouraged to give
you payments in December, and in that way free a certain amount
for your cash balance ? A. It is the usual practice, yes, sir.
Q. Which otherwise would be treated as a non-admitted asset
by the Department? A. Yes.
Q. To what extent does that go, do you get checks from them
which you treat as cash at any time? A. Yes.
Q. Do you get checks from them on the 31st day of December
sometimes which you carry over? A. Or before.
Q. Do you take checks which you treat as cash which do not
go through the banks? A. Well, very seldom. I do not think
that our cash in the office — that would be cash in office ever
exceeds $20,000.
Q. It appears from your report for 1903 that the amount of
agents' debit balances were $235,333.23, and the amount of agents'
balances for 1904 were $77,005.77. What was the explanation of
the difference? A. We charged off the difference.
Q. You mean charged to profit and loss? A. Yes, sir.
Q. They were not reduced by giving any cash at that time?
A. No, sir. Is not that correct, Mr. Hubbard?
MR. HUBBARD: Yes.
Q. Can you give me a statement by months of the amounts of
your monthly debit balances to agents for a period of five years?
A. Yes, sir.
Q. If you will have that for me on Monday morning, and also
a statement that I asked with regard to that real estate.
MR. GILBERT : Let me know exactly what you want, and I
will have it.
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Testimony, of Edward W. Scott
MR. HUGHES : If five years imposes too much of a burden on
you in that respect
THE WITNESS : It would be quite a task.
MR. HUGHES : Make it two years, and that will answer our
purposes. Make it from January, 1903, to November, 1905, the
monthly balances of the agents, and that will answer the purpose.
Before we go, will you state, Mr. Moir, whether the Blue Book
figures are correct of the premiums received, payments to policy-
holders and expenses and total disbursements.
MR. MOIR: The expense item certainly was incorrect. That
was given correctly in a statement filed with Mr. Hughes.
MR. HUGHES : Have you the data which will enable you to
state the total your company has received from its organization
in premiums, and the total it has paid to its policyholders ?
MR. MOIR: No.
MR. HUGHES : Have you no records which will enable you
to state that?
MR. MOIR : Not to my knowledge, in the company. We must
have some sort of record which will state it, but I do not know it.
MR. GILBERT : Mr. Hubbard says he will give you a state-
ment of that on Monday morning, Mr. Hughes.
THE CHAIRMAN : The Committee will now take an adjourn-
ment until Monday morninjg, December 18, 1905, at 10:30 A. M.
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^ ' ^ ALDERMANIC CHAMBER, f
/- • . City Haix» New York City.
/ December i8th, 1905.
The Comirattee met pursuant to adjournment, Senator Arm-
strong in die chair.
HENRY MOIR, resumed, f
BY MR HUGHES:
Q- Have you prepared a statement of the total receipts from
premiums and payments to policyholders from the organization of
your Society? A. Yes, sir.
Q. (Handing paper) : Is that correct? A. Yes, to the best of
my knowledge.
Q. Where did you get the data for that statement? A. Prin-
cipally from the reports to Departments.
MR. HUGHES: I offer it in evidence.
(Paper marked Exhibit 724.)
Mr. Hughes read Exhibit No. 724.
Q. How much of this is the legal reserve, that is, how much of
the $7,926,128 is the legal reserve? A. About seven millions and
a few thousand dollars over.
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Q. Have you got the exact figures — ^$7,174,431 ? A. Yes, that
is so.
Q. And the difference between $7,926,198 which you say are
the admitted assets now held for protection of policyholders and
$7,174,431 is the surplus as of the 31st of December, 1904? A.
That is right.
Q. Have you a statement of the mortality of your company
exclusive of the mortality of the first policy year? A. I have.
Q. Do you include the mortality of the first policy year in
making a computation of your surplus earnings? A. No.
Q. Why not? A. Because the policy contracts provide that the
first year shall be excluded in every case.
Q. From the computation of surplus? A. Yes.
Q. Here is a sample policy of your company. Please point out
the provisions of that effect? A. In the current policy form it
takes the form of being one-year term insurance and thereafter
renewable.
Q. You mean preliminary term? A. Preliminary term.
Q. And in your former policies it took what form? A. I "will
read the exact form.
Q. Yes, give me the provision under which you claim the right
to exclude that? A. (Indicating.) That has already been read in
evidence.
Q. You refer to policy form of January, 1887, of what class —
well, you have given me the Owen policy which has been read in
evidence? A. Yes.
Q. 75 per cent, of the insurance portion of each annual premium
paid hereon, excluding the first year.
Q. You mean the reference of 75 per cent, of the insurance por-
tion of each renewal premium indicates that you are not to take
into consideration the mortality rate of the first year in computing
surplus? A. Yes.
Q. Is there any other language upon which you base that con-
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Testimony of Henry Moir
struction? A. The language is somewhat similar in all the old
policy forms.
Q. Is the language from which you deduce this method or the
right to employ this method of computation the reference to the
75 per cent, of renewal premiums and the subject of deposit as a
death fund? A. It explicitly excludes the first premium for all
computations.
Q. Where ? A. By providing for the renewal premium.
Q. When you say it explicitly excludes the first year's premiums,
you mean it does so by the use of the word renewal premiums in
connection with the provision for a deposit of 75 per cent, to con-
stitute a death fund? A. Yes, that is right.
Q. Have you the mortality rate exclusive of the first year
(handing paper.) Is that a correct statement? A. That is cor-
rect.
i '
MR. HUGHES: I will read it.
I890-I
1. 100
I89I-2
1.086
1892-3
1.049
1893-4
1. 182
1894-5
1.202
I89S-6
I.2II
1896-7
1.225
1897-8
IIS3
1898-9
I 350
18990
1.065
I900-I
1.034
1901-2
I.OIO
1902-3
1.066
■1903-4
1. 091
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Testimony of Henry Moir
Q. What do those figures mean? A. They give the ratio be-
tween the actual losses and the expected losses for the years stated.
Q. Then the actual losses were in 1890 to 1891 10 per cent, more
than the expected? A. That is right, yes, excluding the light
mortality of the first year.
Q. You have presented a statement with regard to the expenses
of 1904. Is that accurate from your books? A. Yes, accurate
from the gain and loss exhibit.
MR. HUGHES : I offer it in evidence.
(Paper marked Exhibit 725.) ^ . ,:. s
Mr. Hughes read Exhibit No. 725.
Q. What was the class ofe policy upon which the loadings were
high which had been considerably reduced in amount? A. The
five-year combination term policy.
Q. You remember a case of a policy on the life of Isaac Shapira,
No. 29,771, issued April 25th, 1889? A. No, I have no recollec-
tion.
Q. You have had considerable correspondence in regard to that
policy, have you not? A. I am not aware of it. I do not remem-
ber the name at all.
Q. It appears on April 25th, 1899, there was issued by your com-
pany cm the Shapira life a policy at the annual premium of $192.50.
It appears that this amount was paid annually for nine years, when
there was an increase to $240.63 ; that this rate was raised annually
until 1903, when the rate was $488.60, the policy being in amount