ADDRESS

PREPARED FOR THE

NATIONAL INSURANCE CONVENTION

ANNUAL MEETING, 1874,

BY

T. S. LAMBERT, M.D., LL.D.

MR. PRESIDENT, AND

SUPERINTENDENTS AND COMMISSIONERS,

GENTLEMEN: When meeting your Secretary in Concord, in the early part of summer, he invited me to be present at this Convention and read a paper, I had the idea that I could not expect that pleasure, and said so to him.

But, as the season wore away, I was glad to find that I could accept the invitation, which had fortunately been an open one, and wrote to him accordingly.

I confess that as I revolved the matter of meeting you together, I felt particularly desirous of presenting to your honorable body several ideas of great import to the public welfare, for the expression of which, it appears to me, that the time is fully ripe.

It might at first appear that, as I am well acquainted with most of you, I could better have visited you in your several offices, and presented my views personally. But it is more difficult for you in private social conversation to bring your minds into the judicial attitude, while it would be quite impossible for me to be as strictly logical and argumentive in a social relation as when addressing a high court of adjudication. Each one here feels a weight of responsibility, whether as speaker or hearer; and it is important that the highest responsibility should be solemnly accepted by all having anything to do with the management of Life Insurance.

The time is not only ripe for a thorough observation of our whereabouts, but it demands in ominous forebodings, that we should know, without any half doubts, whether we are drifting, or scientifically advancing.

The great value of insurance is acknowledged by the people, by the very act of placing it under the supervision of State officers.

That act also distinctly expresses a suspicion that the officers of the companies may conserve the interests of the companies as against those of the insured, and their own as against those of the companies; to wit, that the unenlightened self-interest of the officers jeopardizes the rights and property of both the Company and the assured, and that therefore the business should be supervised by other supervisors than those who theoretically are the guardians of the interests of both Company and insured; supervisors who shall, with pure disinterestedness, conserve the interests of all.

While I shall freely, yet earnestly, allow that there is a measure, even large measure, if you insist upon it, of truth in this view-since it is an axiom that unenlightend self-interest is always short-sighted, -yet I will also suggest that there is another unenlightened self-interest that much more strongly threatens the safety of life insurance contracts than does any real or suspected act of the managers of the companies.

I do not wish to be misunderstood, and certainly not to be misrepresented because I speak with freedom, with entire frankness, before this honorable body. I do not wish to be thought, nor said to speak adversely to the most stringent State Supervision.

Whatever my opinion is upon that subject, I do not argue it pro nor con, but ask to be allowed to assume that it is desirable, and to argue in that view in regard to its true functions.

We have, one and all, I am sure, but one object, to wit: the making of the business secure and beneficent; we shall all shake hands upon the motive which actuates us.

I am thus careful to guard against erroneous deductions, because I know that new ideas often startle the imagination and induce irrelevant deductions, when more familiarity with the same ideas not only robs them of their startling novelty but shows them to be angels of light; they are also apt to seek utterances in strong expressions. I do not mean that I shall speak words the off-spring of momentary excitement, quite the contrary; the ideas have been conned until they are like the pictures in old Noah Webster's spelling-book; apparently something ante-natal.

My first proposition is, that of all the jeopardies to which life insurance is exposed,-great and fully realized as is that to which it is subject through the temptations acting upon officers of companies, -the greatest are the very laws which have been instituted for the express purpose of rendering the institution secure.

I desire to argue this point here, not because this honorable body, or any of its members, were or are responsible for those laws, at least not for their inception,-since none of those constituting this convention were either the fathers or the god-fathers of the ideas which induced the institution of the present insurance laws,-but because, although I believe this doctrine true, some of you may not, and I wish to convert any unbeliever to what seems to me to be the truth.

But I would have you converted to this specific truth, not as I would have all men receive it, but because in regard to it you are by your official position a mighty power in the land. If you cannot have the law changed so as to fulfil truly its intention of being a safeguard, you can have it so modified that it will not be an instrument, as it now is, necessarily productive of jeopardy to this great interest which it was intended to conserve.

Nothing can be good which is not true, nothing can be permanent nor useful which is false and not based upon a scientific foundation. But such "a goodly seeming falsehood hath," in many cases, that we are often led to place reliance upon what will prove an unsubstantial basis.

Are then the bases upon which all the life insurance laws in all the States are founded, true or false?

False, I say, not having the first iota of science in their engendering, and, in their outworkings they are expensive, inequitable and insecure.

Not one of the assumptions of the laws is scientifically assumable, and, therefore, they must work with friction, expense and hazard.

I will first illustrate by what will, must, deeply interest you. The law assumes that there is an increment of the risk of dying in case of each person, with each year of age. All its computations assume this error as if it could not be debated, and, as one actuary said, when he heard the correct idea broached, "That may be true, but, if it is, What will become of all our calculations ?"!

That there is an increment of risk to each person, with each increasing year of age, is a dogma without even a shadow of truth for its foundation.

Its apparent truth is produced by an abnormal, illogical process of reasoning. It is produced by including within those observed, persons of severally different capabilities of living, and by distributing equally among all, the risks which belong only to a few.

I will illustrate my meaning. Suppose, White, Brown, Green

and Black, each 30 years of age, are averaged in regard to the risk of dying that year?

White has, I will presume, no chance of living through the year, and his real risk of dying is therefore 1,000 in 1,000. Brown, say, is sure to drop off within two years, and say that his chances are equal between the two years-that is his risk that year, is 500 in 1,000; while Green and Black are in every respect best grade risks, not exceeding 2 each in 1,000. All together have 1,504 chances in 4,000 of dying in that year, or 376 in 1,000, and their net premiums, correspondingly averaged, would be expressed accordingly as $376.

The absurdity of such a procedure is so .plainly seen that this illustration can hardly be believed to be a fair one.

To remove any such impression we will suppose White's risk to be but 30 to 1,000, Brown's but. 20, and the other two as before. This supposition gives in all 54 in 4,000 or 13.50 chances in 1,000 to each. This looks so near like the ordinary figures in the table that it is not at all startling and is readily accepted, especially as the decimal .50 gives an appearance of great exactness.

Yet, in fact, this illustration is as absurd as the other, and the error is precisely the same in each supposition.

I am quite aware that these are crude illustrations in one view, but they are perfect in another, that in which I wish to use them. I am also quite aware that it may be said that the small number of persons in these illustrations prevents their application to a case where the very point is to have the average among a large number of persons.

Because sometimes we are apt to think a person ignorant or thoughtless, I will notice this objection, for, although it has not any validity, it will aid in illuminating the very error that I am combating.

The apparent necessity for having an average made among a large number arises from the assumption that these persons will be very different in their characteristics-and a large number is taken in the hope that thus a sufficient number of superior risks will be entangled in the scoop-net to bring up the average of the inferior risks. In results this is always an uncertain, unreliable assumption. It is a fundamental law of mathematics that ratios can be instituted only between quantities having the same unit.

The persons compared and adjusted must be very similar to each other in order that there may be any equity or security in the work, since, if latitude is allowed, there is always a tendency to accept the inferior too largely; but if the proposition is to select together

those who naturally are alike capable of living-like Black for example--the task is easy, as it also is if they are to be like White.

The tendency or the necessity to die during any year is dependent upon two causes-one inherent the other incidental. The former we are bound to look up, since the indications may be found either in the ancestral record or in the person's own constitution.

To announce the correct formula will, perhaps, best bring out the point that we wish to exhibit.

Every life, every living thing, has a plateau of life, that which may be called its constitutional longevity, at the end of which, at best, it must die-its earlier death is incidental.

This fact is seen in every plant, in every animal; it exists none the less in man. It varies in species, in varieties, in individuals.

As we always insure individuals, the individual indications of probable longevity are always what we wish to know.

Perhaps there is no living thing in which there is so much variation as in case of men. Their several natural plateaus of life, with only incidental risks of dying, range from a moment up to an hundred years. This great variation has, probably, been the reason why the idea has gained ground that the uncertainties gathering about man's life are more numerous than they really are, and has induced too many deaths to be attributed to incidental causes, when the prime cause was in their natural constitutions.

As the persons with varying natural or constitutional longevities have been observed together, and as a larger number are born to die naturally at forty, in proportion to those born to survive forty, than there are of those born to die naturally at thirty, in proportion to those born to survive thirty, of course the increment shown in the mortality tables must exist when they are based upon the deaths of all these people aggregated. To fully account for the increment, or its irregularity, we must go back to the source thereof, in the ancestral tendencies.

It appears then, that, because persons have the common names of men and women, it is not to be assumed that the same facts are to be predicated of each and of all in regard to the probabilities of living or of dying, but that the general idea which we all have in regard to different kinds of living things, and in regard to different races and families of men, must be applied to individual men and women.

We must not think that the same liability pertains to all persons, but we should perceive the fact that a very different liability may pertain to different individuals-who may have not only different