4 141 Assessment And Fraternal Insurance
Modern Business © 1919
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CHAPTER IX
ASSESSMENT AND FRATERNAL INSURANCE
1. Nature and origin of the assessment system.
The essential difference between the assessment sys-
tem and old line insurance lies in the fact that the ben-
efits offered in the certificate of insurance of the for-
mer are not guaranteed upon the payment of a fixed
premium. The assessment company reserves the right
either to increase the premium or to reduce the amount
of the benefit. This system arose in the United States
in the years following the Civil War in response to
the demand for cheap current-cost insurance such as
could not be purchased from the regular companies.
The cheapest policy sold by the latter at this time was
the ordinary life, and its premium, as has been seen,
contains an overcharge above the yearly cost. The
public was misled as to the real nature of this premium
because of the refusal of the companies to return ac-
cumulations in case of forfeiture. It was assumed
that the premium covered only the yearly cost of in-
surance and in view of the large reserve accumulations
of the companies the conclusion was drawn that they
were making vast profits. In many cases further-
more the choice of the public lay between cheaper in-
surance and none at all, for many persons could not
afford the premiums necessary to carry ordinary life
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