Q. And would it be fair to assume that it is one policy, one
person ? A. No, about thirteen policies to ten persons.
Q. Thirteen to ten ; so you make the total persons carrying
industrial insurance in your company about how much? A.
Nearly eighty per cent, of that number, somewhere around 4,-
500,000.
MR. COX: 5,100,000.
Q. Mr. Cox says 5,100,000. Do you want to figure it up?
A. Well, it does not make any diflference to me, I estimated
that number.
Q. Between four and one-half and five millions of individual
industrial policyholders? A. Yes.
Q. And it is pretty certain from the law of averages, that
two-thirds or something over three millions of those people
will never get any money from the Prudential? A. Oh, no;
those are policies in force. It is two-thirds of the issue.
Q. Yes, but those policies in force include how many that
were issued in 1904? You are quite right in that, because you
have taken out those that have lapsed the first year of issue?
A. Yes.
Q. And of those in force there will be a much larger per-
centage which will persist, those that are in force at the end
of the year. That is quite evident. A. Yes.
Q. Taking those that were added during the year 1904, you
have a number of policies issued in that year of about i,547r
000? A. Industrial?
Q. Yes. A. Yes.
Q. Something like 1,300,000 of persons insured in the indus-
trial line in that year. And of course, to get the number of
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persons as to whom we could take the proportion of two-thirds,
we would have to include all those who took policies in the
Industrial Department in 1904? A. Yes.
Q. Can you tell me what proportion of the twenty-six mil-
lion and upward of premiums paid in 1904, was paid in by pol-
icyholders in the Industrial Department who had received in-
surance in that year? A. In that calendar year?
Q. Yes. A. I have not that item here. I have not that
item with me, Mr. Hughes.
SENATOR DRYDEN: Mr. Johnson says they are about
1,250,000.
THE WITNESS : I think he misunderstood the question.
SENATOR DRYDEN : Will you repeat the question, Mr.
Hughes?
Q. (Read by Stenographer.)
MR. FISKE : Do you mean who took out the policies that
year?
MR. HUGHES: Yes.
Q. In other words, I would like to know what amount of
money was paid in on industrial insurance written in 1904,
first, with the object, of course, of ascertaining later what
amount of money was paid in by those who did not carry their
insurance, and whose policies lapsed in the same year in which
it was taken. A. Well, it was probably — I cannot — it is only
a guess; I have not the figures — I should think somewhere
about four million dollars.
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Q. That would be the amount that you think could fairly
be said to have been paid in on the new insurance written in
the Industrial Department, written in 1904? A. Paid in dur-
ing* that year.
Q. And about on the calendar year basis, about thirty-seven
per cent, of the policies issued in that year would lapse before
the end of the year?
MR. LINDABURY: Mr. Johnson says that cannot possibly
be right.
THE WITNESS: I can get that figure for you perhaps later
in the day, but I have not it with me.
Q. What is the average amount paid by the industrial policy-
holder, what do they average? A. The average premium per
week?
Q. Yes. A. About ten cents.
Q. About ten cents is the average? A. Yes, sir
Q. If you take the amount of policies issued in 1904 and have
the average premium paid, multiply the one by the other, would
you not get practically an average of the amount paid on the
new business in that year? A. No. Those who come in and go
out pay about six weeks' premium. Those who come in and
stay until the end of the year pay about twenty-three weeks of
premium.
MR. LINDABURY: The assistant actuary says it is about
$2,300,000.
Q. $2,300,000? A. Well, he is familiar with those figures.
Q. Well, put that down. $2,300,000, that is the amount esti-
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mated to have been received in 1904 on industrial policies issued
in that year? A. Yes.
Q. And about twenty-seven per cent, of those policies lapsed
1111904. A. Yes.
Q. Will you tell me what amount is received within three
policy years from the policyholders in the industrial department
whose policies lapse during that period? A. I have not those
figures.
Q. Those can be stated, I suppose? A. Yes, we could get
that quite closely.
Q. Senator Dryden remarked yesterday in connection with
the plan for transferring the control of the Prudential that the
question of further stock dividends might be raised. Is it the
fact that the profits of your company were so great that the mat-
ter of additional dividends was imminent. A. I know nothing
about that. You know the
Q. But knowing the amount of money received by your com-
pany, were you aware that it was possible for the company to in-
crease the benefits to the policyholders? A. It might be possi-
ble to increase them. I doubt whether I would say it would be
safe to increase them.
Q. And why would you doubt the wisdom of such a step? A.
As I said before, the business is really young yet, and up to the
present time we have not felt we could increase our benefits to
any higher point than they are at the present time.
Q. Take, for example, the John Hancock, is that an older
company than yours? A. Yes.
Q- How much older? A. I do not know exactly.
MR. LINDABURY: It is not in the industrial department?
THE WITNESS: It is not in the industrial business, but it is
an older company, however.
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Q. It was incorporated in 1862, it appears, and it took up the
industrial business at about the same time A. 1879, 1 think.
Q. Or a little later than the Prudential. It appears from the
Blue Book that your company in surrender and lapsed values
allowed in 1904 33.64 of the reserves and dividends released to
surrender and lapse, while the John Hancock allowed a percent-
age of 83.83 per cent. What explanation will you make of that?
A. Mr. Hughes, I cannot make any positive explanation. I
have an opinion about it.
Q. Well, state that? A. In my opinion it is blameable entire-
ly on the gain and loss exhibit.
Q. In what respect does the gain and loss exhibit make an in-
accurate showing? A. The gain and loss exhibit includes cer-
tain items that are positive and known. All of those items could
be found, I think, from a company's annual statement, most of
them. It also includes a number of items that necessarily must
be estimated. One of the items represents gain in mortality
Q. We are talking entirely about this matter of reserves and
surrenders ? A. It seems to me that that item must have been
forced on the John Hancock statement, because every company
has to force at least one of its items in order to make that gain
and loss exhibit come out right.
Q. What item do you force? A. We force our loading.
Q. Why do you have to force an item to make it come out
right ? A. Well, we know of no possible way to calculate the loading
on a premium actually received by our company. When you
think that we have over six millions of policies in force, coming
into the company at all times of the year, and going out at all
times of the year, and in the industrial the amounts are made
to the even dollar, so that the loading very slightly
Q. You were interrupted. Go on. A. From that fact, that
we have so many millions of policies with the loadings varying
on each amount, and especially on the industrial at each age,
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because we give amounts for even dollars — ^it is evident that
without increasing our office force two or three hundred fold we
cannot do anything more than to approximate the loading each
year on our policies.
Q. Do you know your gain on mortality? A. We know it
probably within a fraction of a per cent.; we know that quite
closely.
Q. Do you know your gain in surrender and lapse values?
A. We know the gain that is required according to that gain and
loss exhibit. We do not feel that we gain that much money.
Q. Do you know actually the gain that is required to be stat-
ed by a comparison of released reserves with amounts paid? A.
We worked that out quite closely.
Q. You get that quite closely? A. Yes.
Q. Do you know your investment gains? A. Quite closely.
Q. And you know the total amount of your gain at the end
of the year according to the balance sheet? A. Yes.
Q. And if there is only one item missing, and that is the load-
ing, a deduction of the total of the other items from the total of
your gain must give that with absolute precision? A. Well, may
I speak a little further on that point?
Q. Certainly. A. One of the questions to which we were
asked to give an answer was the amount of forfeited reserves
in 1904 within the first three years of insurance. In the Pru-
dential that amount was $2,000,000 — ^$2,011,684. Of that amount
$641,523 was in the industrial department, and $1,370,161 in the
ordinary. In the ordinary, of that $1,370,000 about $1,060,000
came from policies in their second calendar year of insurance.
Of those policies 60 per cent., a little more than 60 per cent,
lapsed during the first three months, January, February and
March of the calendar years. Now, those policyholders had
paid, the great majority of them had paid but one quarterly
premium, and yet the company must put up the full mean re-
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serve for the year. Now, the gain and loss exhibit, as we inter-
pret it, requires us to put down the amount of reserve released,
and so that is accurate, we have that reserve put up. Of course,
in our statement we have a credit for the first premiums, which
would account for part of that, but there is no such arrangement
in the gain and loss exhibit; it is the amount of reserves released,
and according to our idea we estimate about half of that amount
is fictitious.
Q. Do you keep in your own records, or do you make up for
your own purposes a gain and loss exhibit which does show how
you are coming out annually. A. We analyze our business.
Q. You analyze your business? A. Yes.
Q. Now, what different items do you take in making up an
^iccurate gain and loss exhibit for analysis of your company's
transactions, for a year? A. Well, our ordinary method is to
place on one side our premiums received, which we divide ac-
cording to our estimates and calculations into years of issue;
also the interest on the reserve is in the credit. In the other col-
umn we have our claims surrender values, dividends to policy-
holders, increase of reserve and expenses as our charges. Those
are divided into the years of issue, as our figures show. Some of
those are partly estimated, but after years of long practice we
feel we get them very closely.
Q. As I understand you, this statement shows the results of
policies of each year of issue ? A. Yes, we try to work out the
separate years. Of course, it is not absolutely accurate, but it
is very close.
Q. Does any department require that information of you?
A. No.
Q. That is the information you need to know where you
stand? A. Yes.
Q. As a matter of fact, does not the John Hancock pay larger
surrender values than the Prudential? A. I am not aware of
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Testimony of John K. Gore
the fact that it pays larger. It may pay slightly larger, not
enough larger to make that tremendous difference, I will say
that.
Q. Is it not under the law of Massachusetts compelled to give
larger surrender values on industrial policies than you give ? A.
It gives larger surrender values under that law, as I remember
it, on endowment, but I did not know that they were considerably
larger on the others. I cannot tell you that absolutely. »
Q. What is the average benefit of an industrial insurance
policyholder in your company, that is, what is the average
amount of insurance per policy? A. About $120.
Q. What proportion of your industrial business is on the adult
table? A. About two-thirds of our policies.
Q. And is about one-third of your policies on the infantile
table? A. Yes.
Q. Under the infantile table of rates the premium is limited
to ten cents ? A. Yes.
Q. What is the rate of lapse in child insurance as compared
with the adult table ? A. There is very little difference.
Q. The adult table begins with age ten? A. Yes.
Q. Taking adult ages, whether the insurance is on the adult
table or the infantile table, how does the rate of lapse compare
with those for minors? A. Why, it is about the same.
Q. There is not any striking difference then in the amount of
lapse in the case of insurance on those under twenty-one. A.
No.
Q. Have you recently increased the amount payable by your
company in surrender values ? A. Somewhat.
Q. Could you not properly pay to policy holders who lapse
within — or say after — ^five years, some surrender value in cash ?
A. It would not seem to us that it would be properly paid, Mr.
Hughes.
Q. Why not? A. Because we believe that to work out the
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object oi insurance business we should give paid-up insurance,
because there are temporary reasons which arise which would
often make the industrial policyholder surrender for a very
small amount of cash— even if it would be a very large per-
centage of theii- reserve it is a small amount of cash. The whole
insurance — it has always seemed to be better for the welfare
of the policyholders that we should not give surrender values
until they had the need for insurance which had perhaps passed
away.
Q. But that amount of insurance which persists for five years
is fairly persistent after that time. Would not the motive to sur-
render for surrender value be lost practically after the policy had
lasted for five years? A. It does not seem to us that it would if
it was an actual cash value. That is a matter of judgment.
Q. Giving a cash surrender value after a policy has been in
force for twenty years means a very small amount, considering
the amount of your insurance? A. Yes.
Q. Last year, for example, $75,000, the entire amount paid in
cash surrender values. A. Of course we have very few policies
on our books that were twenty years or more old. We issued
twenty years ago very few policies as compared with now.
Q. You think they will increase as you go on ? A. Well, you
can see how it has increased the last year.
Q. What have you done in the Prudential within the last five
years, during which time your surplus — ^well, we will say in the
last four years— during which time your surplus has practically
<ioubled, to liberalize rates to industrial policyholders or the
benefits received, rather, for in that case your rates are fixed so
much a week ; but what have you done to increase the benefits to
policyholders since the beginning of 1901? A. We have not
made any change in our industrial policies in that time except,
perhaps, in the way of surrender values. We have made a prac-
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Testimony of John K. Gore
tice of giving higher surrender values in the form of paid-up in-
surance than we did before that time.
Q. Have you made any enlargement of benefits in the ordi-
nary department ? A. Within the last four years ?
Q. Yes. A. No, I think not. Mr. Hughes, may I add to my
last answer ?
Q. Yes. A. I refer now to the industrial. We have made one
change in our paid-up policies during the last four years. Any
policyholder who has been with us ten years or more and reaches
age 80, by an annual vote of the Board of Directors receives a
paid-up policy. Of course the policy was a whole life policy, but
that is one addition I wish to add there, that we now make them
paid-up policies at age 80.
Q. How long has that been in operation? A. I think two or
three years.
Q. The point is that your paid-up policy in the industrial in-
surance is now in effect a term policy ? A. No, it is a whole life
policy.
Q. What happens if he reaches age 80? A. At the present
time his premium stops, although the contract would call for
premiums until death.
Q. I am talking of the paid-up policy. There are no premiums
on the paid-up policy? A. We give the insured a paid-up policy
at age 80.
Q. Then any policyholder who for ten years has been paying
premiums and who arrives at age 80 can have a paid-up policy ?
A. For the whole face amount of his policy.
Q. For the face amount of his policy ? A. Yes.
Q. Now just translate that into figures. Suppose a person is
insured at age 70 ; he pays ten cents a week ? A. Yes.
Q. Or $5.20 a year ? A. Yes.
Q. And he keeps that insurance for ten years? A. Yes.
Q. Thus paying $52.00? A. Yes.
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Testimony of John K, Gore
Q. Then you will give him a paid-up policy for how much?
A. $26.
Q. Well, suppose he insured at age 60, at ten cents a week ; he
has got to carry that for twenty years before he gets that paid-up
policy? A. Yes.
Q. And carrying it for twenty years and paying $104 in the
twenty years, he will then have a paid-up policy of how much?
A. $44. But of course, you understand, Mr. Hughes, that in
both those cases the great majority would have died and would
have received the face of the policy before that time.
Q. Yes, but we are talking about the additional benefit or
change. A. Yes. Formerly it was a whole life policy, and now
il becomes a paid-up policy.
Q. Formerly he would have a whole life policy and would not
get any paid-up policy unless he lapsed, and then for a certain
proportion? A. Yes.
Q. Now the distinction is that when he gets to age 80 he can
get a paid-up policy for the face of his policy ? A. Yes.
MR. LINDABURY : If he lives to 85. Formerly he had to
pay five years more than he does now, if he lives to 85.
Q. As I understand it, under the form of policy, if it is lapsed
after three years there will be a paid-up policy given upon the
basis to which testimony was given yesterday. A. Yes.
Q. Now, has that been changed in any way, that is, your pres-
ent scheme? A. Yes.
Q. What is it precisely that has been changed in the last few
years with regard to paid-up policies? You give a policy at age
80 to a man who has been ten years a policyholder which pre-
viously you did not give ? A. Yes, we give a paid-up policy for
the face amount of his insurance.
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Q. Well, what did you give before ? A. Something less than
that.
Q. Something less than the face amount of the insurance ? A.
Yes.
MR. HUGHES : That is the point, is it not? I do not under-
stand that he has in either case to pay until he is 85 unless he
wants to, although he could only get a paid-up policy before.
MR. LINDABURY : At 80 years he is entitled to a paid-up
policy for the full amount, and saves the payments for the rest
of his life, whatever they may be. If he lives to be 100 he saves
twenty annual premiums.
MR. HUGHES : In other words, if he quits at 80 he gets a
paid-up policy for the face of his policy ?
MR. LINDABURY: Yes.
Q. I started a moment ago to ask you about sub-standard
risks. In what department are they? A. In the ordinary de-
partment.
Q. Just state briefly what classes you do not take in your
industrial department. It is there, is it not (handing book)? A
This is the ordinary.
Q. Can you tell me, without going into too many details, what
classes you do not insure in your industrial department ? A. We
practically insure all classes in the industrial department. I
believe saloonkeepers are rated up to a higher age, but we prac-
tically insure all classes in that department, providing they pass
the medical examination or inspection.
Q. So that with the exception of saloonkeepers the Industrial
Department is open to all? Does that include glassblowers, and
people in hazardous business ? A. Yes, I think so.
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Q. Is it a fact that the rate is so high in the Industrial Depart-
ment that it is not at all necessary for you to discriminate as to
classes? A. We try to include— our rates are supposed to be high
enough for the industrial classes generally.
Q. Generally without discrimination; gasmakers and stokers —
are they allowed to come in ? A. Yes.
Q. Without an increase — that is, without putting them at a
higher age? A. Yes, I believe so.
Q. Annealers, iron and steelworkers ? A. Yes.
Q. But in the Ordinary Department you make a distinction, do
you not? A. Yes.
Q. Now, what classes are not allowed to be insured in the
Ordinary Department on ordinary terms? A. That would re-
quire a list
Q. Read those that you absolutely decline, the class that you
absolutely decline in ordinary insurance? A. These are arranged
alphabetically ; actresses, aeronauts, asbestos makers, blasters,
bleachery workers, circus employees, colormakers and mixers, dry
process. Flint mill workers, under the head of the glass indus-
try, handlers of material, mixers. Under the head of hatmaking
industry, fur cutters, makers and sizers, hide-salters ; horse-
trainers — ^horse-trainers a separate heading, jockeys, leadworkers,
liquor merchants and' their employees; including saloons, distil-
* leries, breweries, bottling works, match factory employees, and in
the pottery industry, dippers, flint mill workers, ground layers,
mixers, scourers and sweepers ; raftsmen. Under the head of rail-
road employees, ashpitmen, tin-dippers and finishers, trench and
v/ell-diggers and excavators, construction workers, Turkish bath
employees, white lead makers, zinc and lead workers.
Q. All these can be insured in the Industrial classes without
extra charge? A. I think so.
Q. Now, what class of people do you put in an intermediate
department? Those that you have just mentioned, I understand,
you do not insure at all in the Ordinary Department? A. No.
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Q. You won't take them on any terms? A. No.
Q. Do you put them in in the Intermediate Department? A.
No. ^
Q. You do not take them at all except as industrials ? A. No.
Q. And than what you do for other classes that are extra
hazardous or sub-standard, you take in an Intermediate Depart-
ment? A. Yes. ^
Q. With special rates? A. Special rates.
Q. Now, what are those, please? A. Well, as a general rule,
our Intermediate policyholders are all those who wish a five-hun-
dred-dollar policy. We found that the expense of handling a
five-hundred-dollar policy is as great as that of handling a ten-
thousand-dollar policy in all the office requirements, and to get it
out; we found we were losing money on our five-hundred-dollar
policies at the old rate ; so we issued an intermediate policy ; and
we do take in the first place all those, and issue a five-hundred-
dollar policy on each class as an average.
Our experience shows a somewhat higher death rate than on
our ordinary regular policy. We also take certain industries, like
members of the pottery industry, and glass industry, and hatting
industry — I could not name just the details; that is the general
classification.
Q. Do you take sub-standard risks that are sub-standard not
with reference to occupation but to physical conditions, or his-
tories? A. No, I think not. Physical history — I beg pardon,
Mr. Hughes, we do in certain cases, where there is a family his-
tory of certain diseases we add a lien to the policy.
Q. How do you determine that lien? A. We have set rules
for it.
Q. Can you state them briefly? A. Well, as a rule, the lien is
for three hundred dollars per one thousand dollars, passing off
either in ten years or fifteen years, according to the nature of the
case. If it passes off in ten years it goes off at the rate of thirty
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dollars a year ; if in fifteen years, at the rate of twenty dollars a
year.
Q. Who determines the amount of the lien and when it shall
pass off? A. We have rules according to certain cases of family
history, I could not state those now.
Q. This is not based upon the medical examination of the in-
dividual ? A. Not at all.
Q. Not at all on that? A. The individual must pass a first-
class medical examination.
Q. So that it is not an effort upon the part of the physician and