Look Before You Leap

The dedicated askanim who devote themselves day and night to solving some of our most pressing communal problems are one of the crowning glories of the Israeli chareidi community. Recently two groups of askanim – one in Jerusalem and one in Bnei Brak -- addressed themselves to the plague of tragedies involving the loss of parents of young children, often after long and agonizing illnesses.

Many of the stricken families are left without even the money for basic necessities, not to mention resources to cover all the extra help required in the wake of such tragedies. About money to help the orphans marry, we need not even speak.

In virtually every case, the deceased parent had no life or health insurance. So the family is left without any recourse other than to turn to the already overburdened community, and to ask strangers to open their hearts and purses.

The askanim in question refused to accept the current system of ad hoc appeals as the best possible solution. And they came up with the idea of creating large groups of ten thousand or more families, whose members would in effect self-insure one another. The initial plan promised approximately $50,000 to every unmarried child, upon the death of a parent in one of the participating families. Those costs would be covered by contributions from the other families in the plan, in an amount not to exceed $18 per month. For their efforts, these oskim b'tzarchei tzibur deservedly received the gratitude of gedolei Yisrael and blessings that their efforts be crowned with success.

On its face, this plan is far better than any comparable insurance scheme. I have a friend who bought at age 45 a term life insurance policy of $500,000 until the age of 65. His annual premium is around $1,900. If his wife too were covered, his annual premium would be about $2,600.

By contrast, the proposed plan in effect insures the life of both parents, and at a maximum annual payment of $216. If there are ten children in the family, the plan provides $500,000 of life insurance for each parent for about 8% of what comparable term insurance policies would cost.

Sound too good to be true? It is.

Troubled by my comparison of the plan to term insurance rates, I decided to consult a number of actuaries to get their take. Every insurance company employs numerous actuaries to make sure that their policies make sense. Actuaries employ highly sophisticated mathematical models to make these determinations, and it is one of the hardest professions to enter.

As it happens, my neighborhood includes some of Israel’s leading actuaries. They too had been very concerned by the proposed plan when it was first publicized in the chareidi press, and had even contacted some of the askanim responsible for overseeing the plan to express their grave reservations.

They pointed out, inter alia, that plans similar to those being proposed had once been popular in the United States, under the rubric of mutual benefit associations, but have not been licensed to do business since the 1930s, in the wake of the widespread failure of such plans.

The actuaries also expressed their view that the numbers did not make sense. Indeed the developers of the plan did not even have the information available upon which to make informed actuarial decisions – such as the age of those covered by the program and the number of children who would be eligible for payments. Finally, they noted a number of ways in which the plan might be in violation of Israeli insurance law.

The askanim involved - who are highly respected figures working purely leshem Shomayim - listened. In response to the actuaries' comments, at least the Jerusalem plan was altered to specify that if contributions of participating families are insufficient to cover the commitments, they will be apportioned by a committee of rabbonim, and that participation in the plan confers no guarantee to receive a certain amount of money or any right to sue the fund. In short, this is a sophisticated tzedakah plan, not insurance.

That still leaves questions about what the criteria for apportioning funds will be. And it is far from clear that the public is aware of the changes in the plan (or that the Bnei Brak plan followed the lead of Jerusalem in hiring experienced insurance lawyers redraft the by-laws of the association.)

NEVERTHELESS, I BELIEVE these plans represent a substantial improvement over the present situation. I would recommend participation as an excellent tzedakah, even for those whose private insurance or resources are such that their children would never receive any benefit from the fund in the case, chas ve’shalom, of their premature death.

If 15,000 families (the Jerusalem group has more than that number) sign up, and each pays the maximum payment of $18 per month, that comes to well over $3,000,000 that will be available annually to unmarried boys and girls who have lost their parents. Even if the family of the deceased parent receives less than $50,000 per child, they are likely to receive more than they can raise today through their own efforts, and in a far more efficient fashion and with a great deal less humiliation.

In addition, apportionment of the monies by a responsible group of highly responsible rabbis is preferable to a situation where everything depends on who puts out the more heart-wrenching brochure. The funds available to help cover marriage costs of orphans will not only help the orphans, but make it much more likely for widows to remarry by lessening the financial burden on a new husband.

The sociology of our community is such that most families would not individually purchase relatively low-cost term life-insurance if they did not participate in this program. A group program sponsored by highly respected tzedakah organizations has a much better chance of providing some degree of protection to a large number of families.

Still the way in which the plan was originally presented to the public reflects some disturbing tendencies within our community. The first is the suspicion of experts. When the idea of a self-insuring group was first raised, the need to consult trained actuaries and lawyers with a background in insurance law should have been obvious. The actuaries should not have had to seek out the heads of the plan on their own initiative.

The second is the tendency to believe that we have found a way to outsmart the odds – the financial equivalent of Ponce de Leon's fountain of youth. Every year or so, we hear of avreichim who have lost all their chasanah money in some new Ponzi scheme that promised 30% returns, with no risk.

As one of Eretz Yisrael's major young poskim puts it, one must always know whether a shayla is one for a rav or a doctor (which itself is a shayla for a rav). But knowing Gemara does not by itself make us a doctor or an actuary or a financial wizard. Nor in this unperfected world should we assume that all the laws of probability have been suspended for our benefit.