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THE MORTALITY MERCHANTS. By G, Scout Reynolds. McKay. 242 op. $4.95. THE CONSUMERS UNION REPORT ON LIFE EINSUR- ANCE: A Guide to Planning and Buying the Protection You Need. By the Editors of Consumer Reports. Harper & Row. $3.95; paperback, $1.95. ' By Paul H. Douglas Modern life insurance companies have joined together two separate functions: firat. a nooling of the risks of arate functions: first, a pecling of the risks of death whereby small payments from the many, par- ticularly in the active years of life, lessen the losses of those dependent upon the comparatively few who die in any one year and, secondly, a form of compulsory savings with the funds managed by the insuring com- pany for what are sometimes high charges. The first of these functions —— to protect dependents against the death of the family supporter — is highly beneficial since it reduces both the total amount of ' economic utility lost by death and ‘the worry experi- enced by all. This function can, however, he performed | by so-called “term insurance” whereby one buys pro- nt ee eee eee oe ee tection against death alone for a stated period of years. If this is for a given fixed amount payable on death, the charges or premiums increase with age because of Paul H, Douglas, former U.S. Senator from Hlinois, is a visiting professor at the New School for Social Re- "search and a member oj the National Commission on Urban Problems. Page 6 ” ‘ A AR te RRR DA es em Ma es amma nme § } , ” rates become virtually probibitive in the late sixties and seventies of one’s life. Of course, when the insured no longer earns through effort, there is little or nothing except funeral costs to insure against. Another form of term insurance provides diminishing protection through the years with constant annual charges or premiums. When the age ceiling is reached, the payments stop. In the first kind of term insurance the higher risks of advancing years are brought home by increasing costs; in the second they are reflected by decreasing payments. In either case costs can be compared against “benefits” and a rational judgment made by the individual. If this were all, then insurance would indeed be highly beneficial. By accurate mortality tables it could be re- duced to a relatively precise science and easily under- stood by all. . It is the contention of both of these studies that thie function has been confused by splicing-onto it various forms of compulsory savings such as “ordinary life,” “limited payment life,” “endowment,” etc. Here the in- surance company acts as the investing agent for the policyholder and makes an invisible and frequently unstated deduction for its services. Most of these sav- ings plans call for a “cash surrender yalue” and permit the policyholder to borrow upon payment of interest up to the amount of his savings above the sxnount required to meet the mortality rate. If he does so, however, he commonly pays interest on temporarily receiving back his own savings. feits for lapsed policies in the early years are exces or whether the interest credited to the “cash surren policies is adequate, the main thrist of these book that we would do better if we separated insurance f ithe compulsory savings plans. This would mean taki out term insurance against death and then provid compulsory savings by some other method such a separate form of insurance or periedic payments i savings institutions or mutual investment funds. 7 latter would probably yield « higher rate of return they were made. But defenders of the present syst would probably reply that many men would be rek tant to save in a systematic and periodic fashion unk they were also stimulated by the fear that their deper ents will be left badly crippled by their death. In thi view, the companies justify a less than maximy” “te: necessary to pay for the organization and efforts | make men save and insure at all. . Tnsurance companies try to discourage conversion o compulsory savings plans into pure term insurance they term it “twisting.” No auch opprobrium is visite upon changing term insurance into the other forms This is given the morally neutral term of “conversion’ and is welcomed by agents and companies. The argument will continue, but these excellent book: deserve to be widely read and pondered. They clarif: the issues and add to the consumers’ range of informe: choice. . 3