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THE MORTALITY MERCHANTS. Sy G, Scout Reynolds. McKay. 242 pp. $4.95. TRE CONSUMERS UNION REPORT ON LIFE INSUR- ANCE: A Guide to Planning and Buying the Protection You Need. By the Editors of Consumer Reports. Harper & Row. $3.95; paperback, $1.95. ' and te sabi By Paul H. Douglas Modern life insurance companies have joined together two separal 4 3 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, be performed by so-called “term insurance” whereby one buys pro- 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 Illinois, is a visiting professor at the New School for Social Re- search and a member of the National Commission on Urban Problems. Page6 rates become virtually prohibitive in the late sixties and seventies of one’s life. Of course, when the insured no longer earns through effort, there is little of 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; eflected by de reflected by di easing 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 this 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 value” and permit the policyholder to borrow upon payment of interest up to the amount of his savings above the smount 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 surrent 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 agsinst death and then provid compulsory savings by some other method such a separate form of insurance or periodic payments i savings institutions or mutual investinent funds. | latter would probably yield a higher rate of return they were made. But defenders of the present syst would probably reply that many men would be relt tant to save iss 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 # leas than maximv return on their customers’ savings by a 4 at necessary to pay for the organization and efforts { make men save and insure at all. Insurance companies try to discourage conversion o compulsory savings plans into pure term insurance they term it “twisting.” No such opprobrium is visite: upon changing term insurance into the other forms erm of “conversion’ “ew at gi 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. Y ’ BOOK WORLD May 13, 195