AS TO PRESENT BUSINESS.

The principles to be embodied in a law under which Assessment Associations may with safety be permitted to continue business

are:

I. Minimum Premiums, determined from the State Standard;

II. Reservation of actual surplus payments, determined by the State Standard;

III. Determination of the sufficiency of the reserve by the standard of premium construction;

IV. Enforced application of the reserved right to increase premiums in event of impairment of reserve.

Under such requirements, there could be no shilly-shallying; no dodging of unpleasant responsibilities to the end of avoiding the exaction of sufficient premiums; no carrying of policy-holders who are paying inadequate rates under one scale by defrauding those who are paying in accordance with a higher scale.

It would have rendered impossible the conditions which wrecked in 1896 the two largest Massachusetts associations.

The same principles, thus developed with relation to new business, are the governing ones under which existing business in these associations should be treated.

Such existing business is easily divisible into certain groups to which are applicable either all or a part of the four principles enumerated above, the first and fourth being applicable to all the groups. The following specified groups will cover all such business:

I. Policies or certificates under which the cost is payable through assessments or calls to meet accrued claims (post-mortem assessment policies); including all contracts under which there is no accumulation other than the single call, now required as an "Emergency Fund" under the legislation of most of the States.

To this mass of business the first and fourth principle would apply. The reserve would be simply the amount necessary to meet standard cost to the date of next premium payment. The equivalent of this would

be the standard premium necessary to cover the cost of the insurance to the end of the policy year, less the net assessments collectable within the same period.

II. All policies under which a stated premium is payable, which premium is in excess of the standard premium for age of issue, which premium is still in excess of that called for at attained age. If not still in excess, these policies would fall under group "I."

If these policies are paid for by premiums designed to remain level throughout a term of years or for life, based upon a standard demonstrably sufficient, all four of the principles above named would apply.

If not based upon such a standard, then these policies would be treated as renewable term policies under the State standard, the term determinable by the actual net premium with relation to age of issue, the amount of reserve depending upon the number of years that has elapsed since issue. With the expiration of the term, these policies would renew under a corresponding premium for attained age, or fall into group "I." The first, group"I."

second and fourth principles would apply to these policies.

III. Policies under which the term of premium payment is less than the possible term of insurance-so-called "Limited Payment Policies."

To these policies all four of the principles enumerated are applicable. In the application of the third principle, the standard of premiumconstruction must be such as to accumulate at the end of the term of premium-payment the full net single premium at attained age, by the State standard, necessary to carry the insurance to the end of life; for the entire after lifetime now being the period paid for in advance, under the first principle set down, the minimum premium applicable becomes the State standard premium for life.

In general practice, unless the limited term of premium payment is very long, the net premium requisite under any acceptable standard would, necessarily, so nearly conform to the premiums required by the State standard as to make the variation at best but slight and unimportant.

A necessary prerequisite of authority to continue business under the amended law should be the advancement of deficient premiums to the minimum fixed by the State standard under the new law.

XVII.

FIRST YEAR'S INSURANCE.

To the end of avoiding all questions, the amended law should provide that when, by the terms of the contract, the first year's insurance is single year term insurance, it shall be treated as such for valuation purposes, regardless of the status of the contract after the close of such first

year.

Unquestionably in case of a contest the terms of the contract would govern, but such a provision will remove all possibility of con

test.

This treatment of the contract during its initial year accords with facts and has the support of the best actuaries of the world. It is especially applicable to this form of insurance, under which the reserve on account of pay