United States. Temporary National Economic Committ.

Investigation of concentration of economic power; monograph no. 1[-43] (Volume no. 2) online

. (page 11 of 19)
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State and Federal relief agencies, other than WPA, and all other forms of charita-
ble or relief assistance. If the family has received home relief or other assistance
which is paid to the family as a whole make the entry on the bottom line which
is marked "Family as whole."

E. Do not make entries in column E.



92 CONCENTRATION OF ECONOMIC POWER

F. Other income during last twelve months. — (1) Investments: Enter here the
amount of cash income received from stock, bonds, mortgages, and other similar
securities.

(2) In kind: Enter here the cash value of food, clothing, and other things which
are regularly received by the family from any source. For instance, if a charitable
or relief agency gives relief in the form of food, enter its value here. If the family
lives "rent free" in exchange for janitorial services, for instance, include the rental
value of the premises occupied by the family as income "in kind." Similarly, if
the family uses food from the shelves of a store run by its members, the value of
such food should be included. If i t is impossible to obtain an estimate of the
value of the material received, make a note of its description, and the estimate
will be made in the office.

(3 and 4) Business — Real estate: Some families may be found which receive
income from real estate owned by them or rented by them from others, (a) En-
tire property rented: If the actual net income, which is the amount left after
all taxes and maintenance expenses have been paid, is known, enter this amount.
If, however, net income so determined is not known, enter 40 percent of the
total (gross) rents received as an approximation of the net income. (6) Part of
the property occupied by the owner: Should the owner occupy a part of the
building rented to others, include 40 percent of the rental value of the owner-
occupied dwelling unit in the net income, (c) Income from a tenant or sub-
tenant: The same formula should be applied in the case of a family which lives
in a portion of a dwelling (which it owns or which it rents), the remaining por-
tion of which it lets or sublets to others. In calculating the family income, 40
percent of the rental value of the portion occupied by the family should be in-
cluded in the family income, (d) Income from lodgers or boarders: If the fam-
ily rents rooms to lodgers, or takes in boarders, ascertain the gross income from
this source and deduct the estimated cost of utilities and other expenses paid for
by the family and incurred because of the lodgers or boarders. This amount
constitutes a part of the family income and should be entered under "Business,
other," column 4 under F. (Note: Where boarders or lodgers are taken in, the
homemaker should be classified as gainfully employed by herself.) (e) Imputed
income from ownership of home: If the family owns the home, and does not
rent any portion of the building, ascertain the family's equity in the dwelling
(deducting from the total market value the value of any mortgages held on the
home). Enter 3 percent of the family's equity in the dwelling as the additional
net income from the ownership of real estate.

In column 4 enter the net income from other business carried on by a member
of the family. This includes net income from a store, taxicab, newsstand, etc.

5. Gifts, etc. : Enter in the column the cash value of all regular gifts, whether
of money or in kind, received by any member or members of the family. Do
not enter the amount of occasional gifts which are not considered a steady source
of income. Do not enter the amount of gifts received by one member of the
family from another member of the family, if both members are living at home.
However, if any member of the insurance family not living with the family con-
tributes regular gifts to the family income, enter the amount of the annual
contribution in column 5 under B designating the member of insurance family
making such regular gifts.

6. Other income: Enter here all kinds of steady income not already men-
tioned. For instance, include amounts being received under a pension or on
account of workmen's compensation insurance.

G. Total annual income.— Yov office use.

Supplementary questions. — These questions should be asked after the other
information called for in the schedule has been recorded:

1. "Have any policies other than those examined ever been in force on any
persons listed as members of the family?" This question refers to policies on
persons listed as members of the family but which policies have not been shown
you and which are not recorded in the schedule. A circle in the column headed
"yes" if there were lapsed, surrendered, or matured policies on any of these people.

2. (To be asked of industrial policyholders in the Metropolitan Life Ins. Co.)
"Has use ever been made of the Metropolitan Life Insurance Co.'s visiting nurse
service? If the answer is 'No,' is it because the family did not know of the
service?" Ask these questions only if there is at least one Metropolitan Industrial
policy listed'in the schedule.

3. "Has advantage ever been taken of the 10 percent discount given industrial
policyholders for paying premiums at the local office of the insurance company?
If the answer is 'No,' is it because the family did not know about this?" Ask
these questions only if there is at least one industrial policy listed which was



CONCENTRATION OP ECONOMIC POWER 93

issued by the Prudential, the Metropolitan, or the John Hancock. (Remember
not to criticize any company or its practices in obtaining answers to this question.)

4. "Could the family conveniently pay industrial insurance premiums on a
monthly basis? Does policyholder prefer to pay by the week?" These questions
refer to industrial insurance only. If premiums are usually paid monthly or
oftener, do not specifically ask the first part of this question, but enter a circle in
the column headed ."Yes." If they are usually paid weekly or every 2 weeks,
ask the question. Ask the second question in every case.

5. Determine which, ifi'any of the following types of saving institutions are
now used by members of the family:



Savings Bank

Savings Department of Bank.
Co-operative Bank



Postal Savings.-.

Credit Union

Other (Describe).



If any member of the family has savings on deposit or invested in one or more
of the named institutions, enter a circle in the proper space or spaces. Do not
ask how much the savings amount to.

6. Write in additional question as follows: "Have you ever consulted an
insurance counselor?" An insurance counselor is an individual not connected
with an insurance company whose principal business is that of giving advice in
the planning of insurance.

Note. — On page 3 of schedule, above the words "Supplementary Questions",
write: "Lives in rented home (or apartment) ," if such is the case. If the premises
are occupied by the owner, state whether such occupancy applies to all or only
a part of the premises.



APPENDIX 5
Adjustments Made on Schedules

The realities in an insurance contract are not always what appear on the surface.
This is particularly true of industrial insurance where the actual amount of benefit
that will be paid upon the death of the insured is usually either greater or less than
the so-called "face amount." It is seldom that the policyholder himself knows the
exact facts, and it requires no little skill in the use of rate books and dividend sheets
for an experienced agent to figure it out.

The survey was directed toward finding out the amounts, classes, and plans of
insurance and the cost of maintaining this insurance in force. It was, therefore,
necessary to study carefully the data reported for each policy in each schedule,
and check it against dividend and company releases so as to be able to adjust the
"face value" of the policy to the amount of insurance actually in force and the
amount of premium being paid. The amount of benefit that would have been
paid if the death of the insured had occurred on the date of enumeration was
used as the "face value," and the annual premium, as affected by current divi-
dends, was used as the present cost of that amount of insurance.

Insurance in force — Infantile and cumulative endowment policies. — In the case of
certain policies such as infantile and cumulative endowment policies the amount
of insurance in force at a particular time is dependent upon the age at issue and
the number of years the policy has been in force. It is therefore necessary to
consult a table, usually printed on the policy itself, from which it is possible to
determine the amount in force for every 5 cents of weekly premium. Multiplying
this by the number of nickels contained in the weekly premium gives the total
amount of insurance in force.

Insurance in force reduced by policy loans. — In cases where a loan had been made
to a policyholder against the reserve value of a policy, the mount of the loan was
deducted from the amount of insurance that would otherwise have been paid on
the death of the insured. Few loans are made on industrial policies as they
ordinarily do not have any loan values. However, when a policyholder reinstates
a lapsed policy and does not pay the premium arrears in cash a "lien" is placed
against the policy for the amount of unpaid back premiums. Liens, usually for
relatively small amounts, were ignored. In a few rare cases where liens on indus-
trial policies were large they were deducted from the amount of insurance other-
wise represented by the policies. No account of interest was taken in these
adjustments.

Adjustments for dividends. — It was necessary to make extensive computations
to determine the annual premiums required to maintain the amount of insurance
in force, since the payment of dividends by mutual companies frequently alters
the facts as shown on the policies. This required the use of premium-rate books as
well as the statements of dividends declared by the different mutual companies.
Three industrial companies paid their annual dividends in the form of credits
against premium charges and one by additions to the face of the policy. All
premiums after adjustments for dividend credits were put on an annual basis.
The premiums on all participating ordinary policies were reduced by the amount?
of dividends declared in 1939 on those respective policies, on the assumption that
the great majority of policyholders elect that mode of dividend payment.

Annual premiums reduced when paid at company's office. — If a policyholder was
taking advantage of the 10-percent discount on premiums for payment at the
local office of the insurance company, proper adjustments were made on the
schedule.

Policies surrendered for cash. — Policies which were cash-surrendered during the
year previous to the date of enumeration were not considered as having been in
force during the year, nor were any premiums on these policies included in the
family's annual premium payments.

Policies in force as paid-up insurance for a reduced amount. — Policies on which
premium payments had ceased, and on which the policyholder had selected the
option of paid-up insurance at a reduced face value, were considered as being in

94



CONCENTRATION OF ECONOMIC POWER 95

force at the reduced face value. No premiums on these policies were included in
the family's annual premium payments, but proper adjustment for dividend
additions to the face amount were made.

Policies in force as extended term insurance. — Policies on which the premium pay-
ments were in arrears beyond the grace period were considered as in force for the
full face value on extended term insurance, if the number of premium payments
already made warranted such treatment, and unless the liens against the policy were
of such amount as to exhaust the policyholder's equity. The contractual obligations
of the companies were carefully analyzed in making these entries. No premiums
on these extended limited term policies were included in the family's annual
premium payments.

Policies issued during the year preceding enumeration. — On policies issued during
the 12 months preceding the date of enumeration premiums were computed for the
entire year and included in the family's annual premium payments.

Assumptions with respect to ordinary policies. — In making adjustments in the
premiums on ordinary policies on account of dividends declared in 1939 it was
decided to proceed on the assumption that the ordinary policies found in the survey
contained neither the disability nor the double-indemnity benefit. This results in a
slight tendency to overstate dividends, as companies have paid slightly higher
dividends on policies without these benefits than they have on policies with them.
On the other hand, additional premiums are charged for the disability and double-
indemnity benefits. Hence this factor tends to compensate for the other tendency.
Relatively few of the policies were complicated with double indemnity or disability
features and it is felt that no bias results from this assumption.

Plans of insurance. — A wide variety of terms is employed to describe different
plans of life insurance and many provisions are found which vary somewhat in
different policies. To the layman these present a confused picture. Close study,
however, reveals that basically life insurance policies may be classed into four
groups: (1) Whole life, (2) limited payment life, (3) endowment, and (4) term.
These are the classes employed generally in the industry. The criteria employed
in classifying policies follow those used by the companies and the State insurance
commissioners and relate mainly to length of the period over which it is contem-
plated that premiums will be paid. Thus when the premium paying period was
30 years or longer, a policy whether of the limited payment type or of the endow-
ment type was classified as on the "whole life" plan. Policies in which the pre-
mium-paying period was less than 30 years were divided into "endowments" or
"limited payment life" plans, respectively. Endowment policies were those
policies that terminate 1 with the payment of the face amount upon the expiration
of periods less than 30 years in length. "Limited payment life" policies provide
insurance throughout the life of the insured, but were those in which the premium-
paying period stipulated was less than 30 years. "Term" insurance policies are
in force for a limited term of years. In this respect they are like "endowments"
but, unlike endowment policies, there is no payment to the policyholder upon
the expiration of the period indicated as the "term."

A detailed classification of policies is shown in table 7. From this the relative
importance of each of twenty-odd policy plans may be judged. Among the in-
dustrial policies classified as "whole life" it is clear that policies written on the
plan "paid up at 75" dominate the group. Policies of this type account for 84
percent of all such whole-life policies. These together with the policies "paid
up at 70" account for all but 5.4 percent of the total in this group.

Among the ordinary policies grouped as "whole life," 2 types stand out:
""Endowment at 85" and "until death." Together these 2 plans account for 485
out of a total of 622 policies.

In both industrial and ordinary insurance the policies classified as "limited-
payment life" were predominantly of the "20 payment" variety. This plan
accounted for all but 18 of the 1,384 industrial policies, and all but 16 of the 444
ordinary policies in this classification.

Endowments in both industrial and ordinary policies are primarily of the short-
term variety. Thus among the industrial policies 2,677 of 3,122 were for 20
years and 338 for 15 years. Among the ordinary endowments, 20-year policies
afe dominant and account for 146 out of 189 policies.

Of the 192 industrial term policies all arose from the operation of the nonfor-
feiture provision — hence they were what is known as extended term policies. Only
10 term policies were found in the ordinary insurance. Half of these were extended
term policies, the other half had been sold originally as term policies.

• Such policies could, of course, terminate by death, lapse, or surrender before the expiration of 30 years.



96 CONCENTRATION OF ECONOMIC POWER

It may be noted that this table shows 395 certificates of group insurance. All
of these represent term insurance. In 109 cases these certificates carried such
benefits as accident and health insurance in addition to life insurance.

There were 276 fraternal-insurance policies. All of these were written on the
whole-life plan in which premiums are payable until death.

Family' income. — One of the objectives of the survey was to relate the cost of
life insurance to the premium-paying ability of various classes of families. This
necessitated an inquiry to determine the total annual income of each family
enumerated. For this purpose it was decided to include both the money and
nonmoney income received by the family during the 12 months preceding the
day of enumeration.

Money income was defined as the total net cash received by each member of
the economic family. This included salaries, wages, Work Projects Administra-
tion wages, local relief, whether worked for or not; mother's aid, old-age assistance,
soldiers' relief or other forms of relief; net earnings from boarders or lodgers; net
profits from business enterprises owned or operated by members of the family;
net rents from property owned by members of the family; interest on investments;
gifts received regularly and used for living purposes; pensions; workmen's com-
pensation; and alimony.

Nonmoney income included the estimated cash value of commodities taken
by owners from their shops for family use; commodities received by families from
the Surplus Commodities Division of the Massachusetts Department of Public
Welfare or other sources; free rent for janitorial or other services; value of the
use of owned home.

In estimating the net rents from the operation of real property it was decided
after some study to use an arbitrary 40 percent of the gross rents as the most
equitable average net income. When the owner occupied part of the premises,
40 percent of the rental value of that portion was added to his income. Similarly,
a formula was established for estimating the imputed income of families owning
and living in their homes. The family's equity in the property was established
by ascertaining as nearly as possible the market value of the property and de-
ducting the amount of the mortgage, if any. On the assumption that the resulting
equity should yield an average return of 3 percent if converted into some other
form of investment, 3 percent of the equity was added to the family income.

Family members. — For analytical purposes family members were classified with
reference to their relation to the familv income as follows: A breadwinner was one
whose contribution to the total income of his family was at least 50 percent as
large as the average annual income per member in his family. In other words,
it was one who was carrying at least 50 percent of his share of the family burden.
The chief breadwinner was that individual in each family in whose continued
earning capacity the family had the greatest insurable interest. Except as
noted below, a member who contributed nothing or whose contribution amounted
to less" than 50 percent of the average annual income in his family was classed
as a dependent. Individuals who received old-age assistance, mother's aid or
some form of government relief for which they did no work were considered neither
as dependents nor breadwinners.

Average annual income per family member was derived by dividing the total
family income by the number of persons living at home. The income of members
of the family not living at home was not included in the total family income, but
any contributions made to the family by these members were included as part
of the total family income.



APPENDIX 6
Illustrations of Premium Receipt Books




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Online LibraryUnited States. Temporary National Economic CommittInvestigation of concentration of economic power; monograph no. 1[-43] (Volume no. 2) → online text (page 11 of 19)