This need hardly be looked upon as an admission that it costs twice as much to care for the funds of a life insurance company as for those of a savings bank.  A liberal expense allowance must be made at the outset, seeing that an error in this particular cannot easily be rectified after the policy is issued.  The dividend, or, to speak more correctly, the annual return of surplus, will correct any overpayment on this account.

There is another expense which seems inevitable.  This is the government tax on insurance companies, amounting in the aggregate to nearly 1/3 of one per cent. on the reserve.

When we consider that these institutions are intended to encourage thrift and to relieve the community from the care of numberless widows and orphans, it seems a clear violation of the principles of political economy to levy a tax on this business; still, whatever our opinion may be as to the justice or injustice of the imposition, the tax is maintained and must be provided for.  Consequently a further allowance of 1/2 of one per cent. must be added to the net premium to cover the same, making a total of 1 per cent. of the reserve for banking expenses and taxes.  Considering this point as settled for the time being, let us proceed to investigate the insurance expenses.

Here, again, we are fortunate in being able to refer to the official reports of a class of corporations doing nearly, if not quite pure insurance.

The assessment societies, outside of the fraternal and benevolent, reporting in 1889 to the insurance commissioner of Massachusetts, show outstanding risks amounting to $733,515,366.  Losses to the amount of $7,270,238 were paid during the year at a cost for transacting the business of $2,403,053, which includes among other items “agency expenses and commissions,” which amount to about $1,203,000, or 17 per cent. of the cost value of the insurance actually done.  It would seem as if an allowance of 20 per cent. would be a liberal one in the case of the regular companies, which surely have as good facilities for doing business as the assessment societies.

As far as insurance is concerned, there is less difference between regular and co-operative companies than is generally supposed.  Regular companies assess each policy in advance for a year’s insurance at a time, while co-operative societies furnish insurance only from one assessment to another.  The difficulty in the way of collecting the assessment in the latter case would seem to be greater than in the former, owing to the more permanent nature of the regular insurance contract.

In compensating agents the assessment companies naturally pay in proportion to the insurance obtained, inasmuch as there is no other basis to go upon, but regular companies usually pay the agent a percentage of the premium which includes a considerable trust fund over and above the assessment for actual insurance.  It is easily seen that by the last method the agent’s compensation increases in proportion to the amount of savings bank business forced upon the company.