X-Message-Number: 1206
Date: 19 Sep 92 03:10:48 EDT
From: "Steven B. Harris" <>
Subject: Cryonics Dues Structure

   Carlos says (talking about the financial drain of last-minute
sign-ups):

    >> Keeping in mind that we can't (legally) institute any fees
which are based on actuarial considerations, the problem is
rather sticky.  I've heard several interesting suggestions, but
they all had one or another fatal flaw.  Please call or write if
you've got the answer! <<

   Okay-- I made a formal suggestion to the board about this some
weeks ago, but never got an answer.  I will therefore post it
here for comment, and perhaps someone can beat Carlos insofar as
pointing out the Fatal Flaw.

   Here's my suggestion:  Charge yearly membership fees (dues) on
a sliding scale according to how long a person has been signed
up.  Fees would thus initially be high (more on this later), and
drop over time.  We adjust the scale so that newer members are
"subsidizing" longer term members, with the crossover (where you
dip below $200 a year, or whatever) occurring after you've been
signed up for whatever is the average Alcor length of time
between sign-up (for healthy people) and suspension.  In this
plan, if you're a member long enough, your fees would drop sub-
stantially-- maybe even to zero.  This savings would be financed
by the extra money being paid by new members (i.e., that amount
which is in excess of present dues rates) being put into an
investment fund (a fairly aggressive one-- why not?) where it
would generate interest.  If we have to set up a separate for-
profit investment company to do this, it could probably be done.

   Notice: this scheme says NOTHING about actuarial values. 
NOTHING.  Under this scheme a new 21-year-old member (say) pays
the same high initial dues rate as a new 91-year-old member.  It
is absolutely age-blind.  Thus, it should be legal.  

   HOWEVER, this scheme *will* cancel some (though not all) of
the negative actuarial effect of present Alcor policy, since we
can expect in practice a lot more 21-year-old new sign-ups to
survive the decade(s) it would take to get into the low dues
rates, than we would 91-year-old new sign-ups.  Thus, under this
new fee schedule Alcor would not end up eating nearly as much
loss on (non-terminal) older people who sign up and then die
relatively soon, because we would choose the dues structure to
get most of the "average-lifetime-dues" money early (before a
large fraction of the people who sign up can be expected to enter
suspension).  Thus, in this scheme, aged sign-ups will still end
up profiting at the expense of young sign-ups, *but not nearly so
much.*

   Of course, no yearly dues schedule can realistically be
initially high enough to even come close to compensating Alcor
for a *terminal* person who signs up, but a mechanism for dealing
with these cases and getting them out of our normal dues calcula-
tions has already been cleverly suggested by Merkle.  It's rather
the same thing that insurance companies do to protect themselves
from suicides, except that legally Alcor would be forced to do it
indirectly:  what we would do is simply decide how much our
"terminal case sign-up" excess costs happen to be running us, and
then we add this amount to the first year dues of ALL new members
who have NOT recently (within a couple of months) purchased a new
term life policy.  Of course, we can chose to look at it dif-
ferently: we can look at it as though _all_ new members will pay
a very high initial charge, BUT a large portion of this fee can
be "waived" for members with a brand new term policy, as a
"sign-up health discount."   We can require that the new extra
term policy be held for the first two years, as Merkle suggests--
 in other words long enough to make sure that if the insurance
company missed the diagnosis, that Alcor will STILL be paid an
extra sum large enough to compensate it.   How much new term life
insurance will we require?  Again, the exact extra amount that we
figure terminal sign-ups are costing us.  Simple.

   This puts us where we want to be:  With this policy, Alcor is
not in the position of deciding formally who is terminally ill
and who isn't (of course, we can form our own private judgments
about this for medical and suspension purposes, but the point is
that they don't affect the automatic financial mechanisms). 
Rather, we let the insurance companies do all this, and letting
them do it allows Alcor to charge membership dues rates to the
non-terminal that are realistic and compensatory.  People who ARE
very sick will of course have to pay a much higher flat sign-up
fee, but not because they get an extra bill; rather because they
don't qualify for the new-policy "sign-up health discount."  A
subtle distinction, but one the lawyers may like.

   It can obviously be argued that all this tends to discourage
the terminally ill from signing up, because it shifts their true
"cost-to-the-organization" back upon them.  I have no answer to
this charge (which is true), except to say that if we wish to
engage in charity for the purpose of saving lives, we ought to be
more open about it, and have a special fund into which charit-
ably-minded people may donate (I'll be the first to contribute). 
But if we have charity let it be on an individual basis, and let
us not make it a hidden aspect of Alcor business policy.  If our
object is survival I think we will hardly gain by hiding from
ourselves what our true burdens are, and why we bear them.  
Alcor is not in a position to save the world, and if we let it,
the world may weigh us down until we sink.




   Now, a word about the flaws of this plan.  The worst one is
obviously that, (even though it insulates Alcor somewhat from the
morbidly ill by means of the Merkle "signup health discount")
still the fees for new members will be high, and this may have
the effect of discouraging sign-ups.  My suggestion for dealing
with this is to make the very first year of fees for _healthy
people_ (i.e, those with new term life policies) artificially
low, then increase fees starting the _second_ year in "balloon
fashion."  This is done quite commonly in the insurance industry
for whole-life policies, and seems to work well.  In cryonics,
the idea is to encourage the person to sign up, then once he/she
has gotten used to the (quite wonderful) feeling of protection
provided by cryonics, only then increase the fees to a realistic
level ("turn the screws," if you must).  It's almost unheard-of
for people who are signed up to later drift away.  That tells me
that we're safe in charging more, and if more is needed for the
organization to survive, then we'd better do it.

   I know.  It sounds Machiavellian.  But note that I am not
suggesting any kind of cynical or hidden policy.  There is no
reason to be secretive or other than absolutely up-front and
honest about the whole balloon fee-schedule business, and no
reason not to tell our prospective sign-ups exactly (psychologi-
cally) why we have the funny fee schedule that we do.  Everyone
knows that the worst impediment to signing up is a psychological
one: to wit, to do the sign-up paperwork you actually have to
think for some hours in a concentrated fashion very hard about
your own "death" and the rather drastic things that people are
going to be doing to your body on that day (and thereafter) while
you lie helpless.  Darn it, that's VERY, very hard to think
about.  And then there is the issue of what will the neighbors
think, as Mike Darwin likes to say.  During all this time, we
want the financial stress to be low, because other concerns are
bad enough.  Later, after you've been babied over your other
mental humps, it will be time to worry about fiscal reality. 
Alcor structures its policies to help.  As I say, we can be
completely up front about this "push-pull" policy as an organiza-
tion, because (as any psychologist can tell you) the odd thing
about fighting demons in the subconscious is that many of the
techniques (here, initial positive reinforcement using a savings
in money) work just as well even when the conscious mind is
completely aware that manipulation is being attempted.




   Finally, one last thing that can be said about my proposal is
that it might lead naturally into what will eventually be the
future of cryonics, i.e., self-insurance.  Many will have noted
that a dues schedule which starts out high, is invested, and then
declines for long-term members, very much resembles a universal
life policy-- and so it does (except for the lack of an actuarial
component).  It may be possible that in the future (when Alcor
has more resources), it will be able to institute an even higher
fee schedule, based on membership years (seniority), which allows
members to pay higher membership fees and carry less insurance
(i.e., so long as you go through the initial exclusion period,
you would be able to choose to carry less insurance and pay
higher dues, with such a trade-off as to resultant in savings to
you).  Thus, Alcor would in effect be partially entering the
Universal Life insurance business, but in a legal way (young
members will still get the shaft relative to older ones, of
course, but perhaps not badly enough not to save on the total). 
This back-door approach might allow partial realization of the
long-held dream that some of the profits now being made by
insurance companies off cryonicists, be retained by cryonics
organizations.  Most importantly it may be possible that this
approach can be utilized long before organizations reach the
level of resources required by law to enter the insurance
industry.  As such, if applied intelligently it might be a source
of profit that would otherwise not be available during that
interim.

   I'll be glad for everyone's thoughts on this.

                               ---   Steve Harris

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