THE WITNESS : By medical inspection, meaning the doctors,
and medical inspectors, more than half of it is inspected.
Q. You mean by that inspected, as contrasted with a medical
examination ? A. I include in that the medical examinations and
the inspections on the industrial business, more than half of it.
Q. What proportion of the industrial business involves an in-
spection as contrasted with a medical examination? A. Do you
know that, Mr. Gore ?
MR. GORE : Well, everything below $250 in amount; and that
would be —
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Testimony of John F. Drydcn
MR. HUGHES : About what volume of your outstanding in-
surance has been taken on that basis?
MR. GORE : Perhaps 60 per cent. /
MR. HUGHES: Of the industrial insurance?
MR. GORE: I should think so.
MR. HUGHES: We may also assume that 60 per cent, of
your industrial insurance is represented by policies calling for
not more than $250?
MR. GORE : That is an estimate, but it is not far wrong one
way or the other.
Q. Who makes these twenty-five cent inspections, regular phy-
sicians in actual practice or those who are retained exclusively for
your work? A. No, sir, I think they are usually young doctors
in general practice, young doctors.
Q. And then your examination is .paid for at the rate of fifty
cents? A. Yes.
Q. And what do you pay in Massachusetts for a medical exami-
nation ? A. I think the rate is the same.
Q. Fifty cents? A. Excepting in Massachusetts we are re-
quired to have everybody examined.
Q. There you have 100 per cent, of your industrial risks medi-
cally examined, while here you have 40 per cent., approximately,
medically examined, and the price for the examination, if there is
one, is the same in both places? A. Yes, sir.
Q. Notwithstanding the high premiums on the industrial de-
partment, based upon the high rate of expected mortality, it would
appear from your gain and loss exhibit of last year that your
percentage of actual to expected mortality was 1 14-99 P^r cent.?
A. Yes, sir.
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Testimony of John F, Dryden
Q. So that your actual mortality is largely in advance of what
you base your premiums upon? A. Yes, our premiums are based
upon the regular table, the American Experience 4J per cent.
MR. GORE : That is the legal requirement, but we base them
upon our own experience.
THE WITNESS : But the table shows we base them on the
American 4^ per cent
Q. I understand you base your premiums on the industrial
business on the high rate of mortality, so I presume you base your
premiums in that department upon your own experience?
MR. FISKE : That department requires us to compare it with
the standard table.
MR. HUGHES : So this gain and loss exhibit does not show
the actual to the expected mortality as the latter is regulated in
your premium rate sheet? '
MR. FISKE: No, that is right.
Q. What is the result actually of the business of your company?
I mean in its industrial department, how does your actual mor-
tality in the industrial department compare with the expected
mortality indicated by your premium rate in that department?
MR. GORE : It is lower.
MR. HUGHES: You have a saving?
MR. GORE: Yes.
4889
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Testimony of John F, Dryden
MR. HUGHES : Can you tell me what the ratio was last year
of the actual to the expected mortality in the industrial depart-
ment?
MR. GORE : We cannot tell that exactly, Mr. Hughes.
MR. HUGHES: Can you approximate it?
MR. GORE: The table that we work on was built some ten
or twelve years ago. That is what we call our Prudential Experi-
ence or Mortality Table, was built ten or twelve years ago.
MR. HUGHES : But you made up this table of rates this year.
When you made that up you must have had some idea of how
your mortality compared with your anticipated mortality.
MR. GORE : Those industrial rates have not been changed for
a number of years.
MR. HUGHES : Then the rates I referred to a moment ago by
error were in the ordinary department, but you have not had any
change in the industrial for a number of years?
MR. GORE: No.
MR. HUGHES : What is your actual experience?
MR. GORE: Possibly about 90 per cent.
Q. When I spoke to you a few minutes ago about the com-
parison of rates between your industrial and your ordinary depart-
4883
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Testimony of John F. Dryden
ment I showed you a statement of partidpating rates. Now you
have a non-participating rate? A. Yes, sir.
Q. I understand a large part of your industrial business is in fact
participating? A. Yes.
Q. We shall come a little later to the extent to which the policy-
holders on the industrial side benefit by that participation, but just
now I would like to have you state on the record what the non-
participating rate of a whole life policy of one thousand dollars is
at age 40 in your ordinary department? A. Ncm-participating
rates for one thousand dollars for a whole life policy is at age 40
$27.03.
Q. And the rates for $500 on the industrial side with such par-
ticipation as it may receive is $26? A. Yes, sir.
O. So that the non-participating rate on the ordinary side is but
a little more than one-half of the regular industrial rate at the same
age?
MR. GORE: Which is participating?
MR. HUGHES: Which is participating to the extent which
will be developed in a few minutes. A. Yes.
Q. Now, I have asked you to state to the Committee the extent
to which your business persists or your ratio of lapses, ^nd I have
received here a table of lapses which we may assume to be correct?
A. Yes.
MR. HUGHES : I offer it in evidence.
(Paper marked Exhibit 682.)
MR. HUGHES : I will read it upon the record.
4884
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Testimony of John F. Dryden
Q. Before we leave that table, Senator, I would like to have you
look at the rate of lapse in the industrial department, under the
head of the year 1900. I understand from that table that of the
issue of policies in the Industrial Department made in the calendar
year 1900, there lapsed in the year 1900, 37.51 ? A. Yes, sir.
Q. And in the next year, that is, the second calendar year, or in
1901, 22.87? A. Yes, sir.
Q. In the third calendar year, that is, in 1902, 5.71 ; in the fourth
year, that is in 1903, 3.39, and in the fifth year, that is in 1904,
2.61 ? A. Yes.
THE CHAIRMAN : For the five years that is seventy per cent.
Q. So that of the industrial business written in the year 1900,
about seventy-two per cent, had lapsed at the end of five calendar
years, lapsed in the five calendar years, 1900 to 1904, inclusive? A.
It would appear so, and yet this explanation should be made, that
many of those policyholders come in and go out, a man will take
a policy in January, perhaps he has paid three or four months and
lapsed for one reason or another, and perhaps the next month he is
persuaded by the agent to renew his insurance. Now, he pays
that premium, although that has been treated as a lapse, and when
he ccOTies in ag^in it is a revival, treated as new insurance.
Q. If he lapses again? A. If he lapses again and the same
policy may lapse and be revived half a dozen times during the year,
so that apparent lapse is not the real lapse.
Q. But taking the apparent lapse in the absence of figures show-
ing the real lapse, we have lapsed in two years, that is, of the busi-
ness of 1900, in the Industrial Department, there was lapsed before
the end of, or by the end of 1901, something over sixty per cent.?
A. Yes, sir.
Q. And in three years about sixty-six per cent. ? A. Between
sixty-five and sixty-six per cent.
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Testimony of John F. Dryden
Q. Now, the figures given cm the Ordinary Department side
show that of the business written in the year 1900, there lapsed in
that year 9.48 per cent., and in the next calendar year, that is 1901,
2746 per cent. ? A. Yes, sir.
Q. And in the next calendar year, 1902, 7.55 per cent.? A,
Yes, sir.
Q. In the next calendar year, 1903, 3.76 per cent. ? A. Yes. sir.
Q. And in the next calendar year, 1904, 2.55 per cent.? A.
Yes, sir.
Q. About fifty-one per cent, in the five years? A. I have not
added it up ; I have no doubt that is correct.
MR. HUGHES : Now, with that understanding of that table, I
will complete the reading of the Exhibit :
Q. Now, have you a statement which will show what you
referred to a moment ago as the actual lapsed rate as compared
with this apparent lapsed rate? A. No, sir, I don't think it
would, be practicable.
THE CHAIRMAN: That lapsed rate included deaths?
MR. HUGHES : Which were stated to be about one per cent,
of the number.
THE WITNESS : If I understood the point of your inquiry it
was whether we can furnish you with the information as to the
actual lapsed rates, taking into consideration those insured who
come in and go out.
Q. The ins and outs ? A. Yes, sir ; we have no such informa-
tion as that. I would say that we can trace the individual policy
4886
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Testimony of John F. Dryden
through its whole course, but we have nothing to show aggre-
gate facts.
MR. GORE : We are now reviving fully i6 per cent, of all poli-
cies that have lapsed, and would be subject to revival. Of course
some that go off our books— -deaths, I do not include those — of
all those that lapsed we are now reviving about ten per cent,
this year.
Q. That is a statement which we can accept that the revivals
amount to about i6 per cent, of the lapses? A. Yes, sir, that
would throw light upon that 'question.
Q. So that if we reduce the number of lapses by 15 per cent
we would have a very close approximation to the actual lapses ?
A. That is true.
BY MR. COX:
Q. What advantages do the policyholders get out of a revival
of these contracts ?
MR. HUGHES: We are coming to that; will you hold that
for a moment ?
MR. FISKE: I claim that they come back without revival,
and that they come in and out all the time. We know that they
do. They take in new policies, the same man.
THE WITNESS: Of course, yes.
MR. FISKE : That is not a lapse at all. These revivals are
strict revivals.
THE WITNESS : I was speaking only of the actual policies
4887
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Testimony of John F, Dryden
issued. This matter which Mr. Fiske brings up is another phase
of it, which is correct, that a man may lapse a policy this year,
and next year take a new policy entirely, and the same party,
the same life, is insured again.
MR. FISKE: Two in the same year?
MR. HUGHES : That is done in ordinary insurance. We all
discontinue policies, and take new policies.
THE WITNESS: Unfortunately.
Q. And we let some lapse and we take others ? A. Yes.
Q. And it depends a g^eat deal on the ingenuity and persist-
ence of the agent we happen to meet ; so that we are entirely in
the realm of conjecture with regard to that, but if you take the
business issued of the two classes, and compare with the busi-
ness issued the amount of lapses as determined by your book,
you have a reasonably fair criterion of persistence of the particu-
lar kind of business ; that is what we want to get at.
THE CHAIRMAN : Was the i6 per cent, the actuary spoke
of actual revivals, with payment of the arrears?
MR. FISKE: That is it.
MR. GORE : Those are actual revivals, those policies.
THE CHAIRMAN : Accompanied by payment of arrears?
MR. GORE: Yes.
MR. HUGHES : I am about to add the statement which ap-
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Testimony of John F, Dryden
pears on a page succeeding the one I have read, which I will
oflfer in evidence.
(Statement marked Exhibit 683.)
THE WITNESS : This is a statement which shows how the
persistency in insurance, and the percentage of revivals is in-
creasing from year to year. For instance, in 1895 the per cent,
of revivals of policies lapsed was only 5.21 per cent., while for
the year 1904 the percentage of revivals was 16.03 P^^ cent.,
showing that there had been an increase in the percentage of
revivals of lapsed policies of more than 300 per cent.
MR. HUGHES : That table I will put in in a moment. We
had just introduced as Exhibit 683 an addition to what your
company had stated regarding its lapses, which should be read
in connection with that, as follows :
MR. tlUGHES: In this statement that has just been read,
Exhibit 683, with reference to revivals, do you refer to calendar
years or policy years?
MR. GORE : Those are policy years.
MR. HUGHES: The conclusion, then, that I would draw is
as follows: That taking your record of 90,000 and following
them for one year, you would find, including deaths, which
amount to less than i per cent, of the number issued, a total
lapse in the policy year of 51.3 per cent., and that of the revivals
in 1904 it is found that about 5 per cent, of the lapsed policies
revived were those that had been in force for less than one year ?
•MR. GORE: Yes.
4889
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Testimony of John F, Dryden
MR. HUGHES: Now, Senator, I will offer in evidence this
table you gave of the ratio of policies revived to policies lapsed.
Paper marked Exhibit 684 and read in evidence by Mr.
Hughes.
Q. Now» Senator, suppose an industrial policy lapses in the
first policy year, does the insured become entitled to receive
anything? A. No.
Q. He does not? A. No.
Q. Suppose a lapse in the second policy year, does he become
•entitled to anything? A. He does not.
Q. In the third policy year? A. He becomes entitled to a
paid-up policy.
Q. For lapses in the third year? A. After three years.
Q. So that if there is a lapse within three years from the date
of issuance of the policy the insured gets nothing. A. No.
Q. So that unless the policy-holder takes out — reVives his
policy, if he lapses within three years he gets nothing at all for
the moneys he has paid in? A. Except that he has been pro-
tected by insurance in the meantime.
Q. Undoubtedly, but we are now taking a case, or consider-
ing the fact that there is a contmuous stream of the insured,
and that without picking them out individually you find that a
certain percentage of them will not persist ? A. Yes.
Q. For more than three years. In fact it would appear from
this that 51 per cent, will drop out in one year. A. And that is
an enormous loss to the company.
Q, Undoubtedly; we will come to that in a moment. And it is
pretty certain that over 70 per cent, will drop out within three
years? A. Probably.
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Testimony of John F. Dryden
Q. So that in the run of your industrial business there are on
the average about 70 per cent, of those who take insurance who
drop out and get nothing? A. Except the protection.
Q. Except the protection which they have during the mean-
time, which taking those on the average means to those who
drop out, no return ? A. Yes.
THE CHAIRMAN: Is that 70 per cent, for three years or
72 per cent, for five years ?
THE WITNESS: What is that percentage for two years, Mr.
Gore?
MR. GORE: Sixty-six per cent.
MR. HUGHES: That is justified because the 72 per Cent,
you are thinking of was for five years, but from the fact that
there was 72 per cent, for calendar years, and 52 per cent, in
the first policy year on the table, with regard to two policy years,
I inferred that it was probable that for three policy years there
would likely be a lapse of about 70 per cent.
THE CHAIRMAN: Is that the fact? That is a very im-
port ant fact and he ought to be able to give us some light on it.
MR. HUGHES: Let us see if that is proper, Senator Dryden.
There is 72 per cent., according to your table in the Industrial
Department, that lapses in five calendar years, but according to
your generalization, based on ninety thousand policies, there is
51 per cent, that lapses in one policy year, and about 60 per cent,
in three calendar years. Now, if we took three policy years,
what in your judgment would it amount to? It would be some-
thing more than 66 per cent ? A. Undoubtedly.
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Testimony of John F. Dryden
Q. Would be in the neighborhood of 70 per cent.? A. Un-
doubtedly.
MR. GORE: About 67^ per cent., somewhere around there.
Q. Now, let us take the policies that lapsed after three years.
What does the policyholder get, assuming that he does not re-
vive — ^that is, what does he get in the way of paid-up insurance
or cash surrender value? A. After three years he gets a paid-up
policy. If you look at the space marked B you will see a table
of surrender values and paid-up policies, which the company
gives under its contract — ^the paper marked B.
Q. That is the table of surrender values and paid-up policies
taken at age twenty-one at issue at the end of various years? A.
Yes.
MR. HUGHES: I will mark that for identification. That is
not a complete table, but that is what the Committee called
for with reference to page 21 ?
THE WITNESS: Yes.
(Paper marked Exhibit No. 685 for identification.)
Q. Now, is this policy that I show you one of your regular
forms of industrial policies containing upon the second page
the table of privileges showing the paid-up insurance and the
cash values which you allow? A. Yes, sir.
MR. HUGHES: I will offer that in evidence.
(Policy marked Exhibit No. 685.)
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* ^ Testimony of John F. Dryden
Q. Now, these benefits stated on the second page of this pol-
icy, that is the additional benefit after five years, the cash divi-
dends after fifteen years, the cash surrender values after twenty
years, and the paid-up policy after three years are your regular
privileges? A. Yes, sir.
Q. This is a complete statement of that ? A. Yes, sir. That
is a contract we make with our policyholders.
Q. Before reading this it may be well to bring out the fact
that you do not have a great variety of industrial policies, do
you? A. No, sir. We have the regular industrial and the in-
termediate industrial and the child's endowment, pure endow-
ment; we have, though, stopped issuing child's endowment.
Q. You don't have the increasing endowment plan that the
Metropolitan has? A. No.
Q. Your industrial policies are whole life policies in the main?
A. Yes, sir.
Q. These — ^that is, benefit payable only at death? A. Yes, sir.
MR. HUGHES : Now, we have Exhibit 686, which provides
for the insurance of the life of the person designated as the in-
sured and an agreement to pay the stipulated benefit as shown
by the schedules, subject to the privileges, conditions and pro-
visions contained on the second and third pages. Then follows
a schedule showing a table of benefits if the insured is less than
ten years of age next birthday for a weekly premium of five
cents.
Q. In other forms of policies you have a table for benefits
corresponding to the age at which the insurance is written, and
the premiums paid? A. Yes, sir, we have.
Q. Now, taking the privileges there, drawing your attention
first to the provision after three years, in case of lapse, after
three years the insured is entitled to a paid-up policy? A. Yes.
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Testimony of John F. Dryden
Q. The provision is that if this policy shall become forfeited
for the non-payment of any premium after having beeYi in force
for three full years and the insured shall be over thirteen years
of age at date of such forfeiture the company will grant a non-
participating paid-up life policy in accordance with Chapter 356
of the Laws of 1895 of the State of New Jersey. Now, suppos-
ing one had been insured at an age under ten, and three years
had elapsed. Would there be any right to get a paid-up policy?
A. Not, I believe, unless the insured is thirteen years.
Q. You do not g^ve any paid-up policies in case of lapse under
thirteen years of age? A. No, sir, we do not.
Q. Do you g^ve one in case of a lapse under thirteen years of
age, when the insured arrives at the age of thirteen? A. Yes,
sir, we do.
Q. You do in that case, but he does not become entitled to
it until he becomes thirteen, and the reason for that is that there
are no reserves? A. Yes, sir.
Q. Until they are thirteen years of age? A. Yes, sir.
Q. And the New Jersey law, it is stated, provides for a paid-
up policy in case of lapse when the insured is at least fifteen
years old? A. Yes, sir.
Q. Your pdint is that you give a little more than the law re-
quires? A. Yes. sir.
Q. By giving a policy when the insured is thirteen years old ?
A. Yes.
Q. The next question is, what is the amount of that policy,
suppose the insured pays ten cents a week ? A. It is an amount
of paid-up policy which may be bought by two-thirds of the re-
serve. Am I right about that, Mr. Gore?
MR. GORE: Two-thirds reserve American, four and a half
table.
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Testimony of John F. Dryden
Q. Take the case of a person who is insured at twenty-one
years of age on the industrial plan, and pays ten cents a week
for three years, or $15.50 in all in the three years, and then
lapses, for what amount will he receive a paid-up policy? A. I
have not the table here. Won't that instruction book to agents
show that, Mr. Gore?
Q. You now show me a sheet showing your paid-up values
per one hundred dollars, whole life industrial ? A. Yes.
MR. HUGHES: Which I will mark for identification.
(Sheet marked Exhibit 687 for identification.)
Q. This says paid-up values per one hundred dollars — what
does one hundred dollars mean?
MR. GORE: Of insurance.
MR. HUGHES: One hundred dollars of insurance?
THE WITNESS: Of insurance, yes.
Q. If one were twenty-one years of age, and pacing ten cents
a week, he would have over $168 of insurance? A. Yes.
Q. To take a round figure, let us take one at forty, who pays
fifty cents a week, or twenty-six dollars, in a year, and has five
hundred dollars in insurance. Assume that he pays that twenty-
six dollars for three years, pays a total of seventy-eight dollars
and then lapses, what will he get a paid-up policy for ? A. What
does that table say?
MR. GORE: Forty dollars, I think; eight dollars a hundred.
THE WITNESS: He gets eight dollars a hundred, forty dol-
lars of the five hundred dollar policy.
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Testimony of John F, Dryden
Q. He will get at the rate of eight dollars a hundred, or forty
dollars? A. Yes.
Q. And that paid-up insurance will be paid at death. A. Yes.
Q. Now, if this man at age forty had paid ten cents a week,
he would have had an insurance of a hundred dollars and at the
end of three years on lapsing he would have been entitled to a
paid-up policy for eight dollars? A. Yes, sir.
Q. What are the provisions of Chapter 356 of the Laws of 1895
of the State of New Jersey referred to here? A. Paid-up policy.
Q. Yes? A. It provides that we must give either a paid-up
policy or a term policy, at the option of the insured, for an
amount which two-thirds of the reserve will purchase at his then
age.
Q. Now, we find that after five years the policy provides for
what is called an additional benefit ? A. Yes.
Q. That if the insured should die after five years from the date
hereof the company will pay, in addition to the benefit herein
provided, an amount to be determined from the tables of addi-
tional benefits issued by the company from the year in which
death occurs. Have you the table of additional benefit issued
last year? A. The actuary, I think, has.
MR. HUGHES: I will mark this for identification. ^
(Paper marked Exhibit 688 for identification.)
MR. HUGHES: This is headed additional benefits and cash
dividends on regular industrial policies payable during 1905, and
in that statement appears the following: "Continuation of vol-
untary concessions first made in 1897, ^^d continued each year
since then.
The Prudential Insurance Company announces to its old pol-
icyholders that the voluntary dividend concession first made in
4896
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Testimony of John F. Dryden
1897 on its reg^ar industrial policies will be continued through
policy or a term policy, at the option of the insured, for an
in the year 1905. The concession : Additional benefits will be paid
on all regular industrial policies which have been five or more
years in force, and will become claims by death during 1905.
The amounts of such additional benefits may be found from the
table on page two of this circular. Now, on page two of the
circular appears the following:
•'If a person insured under a regular industrial policy in one
of the years given below dies during 1905 the company will pay