All too often, we've all gotten mailings or seen advertisements about families that have fallen into destitution because of the death of the breadwinner of the family. Often these tragic circumstances will leave a widow with multiple children and little means to provide for them. The concept of Areivim was born out of that situation.
The concept behind Areivim is fairly simple. A group of 16,500 people each agree that if one of them dies, the others will pay a small fee for each unmarried child left by the deceased. The collected money (about $100,000) would then be made available to the widow/children to pay for wedding expenses when the children are ready to marry. In the meantime, the money would be invested and the dividends used to defray the costs of raising the children.
Over time, a number of organizations (two or three -- it's hard to tell) have sprung up, all with the same name and the same mission. The exact numbers change (size of the group, amount paid per orphan) change slightly, but all follow the same basic idea.
Rabbi Yakov Horowitz recently contacted a representative of one of these groups and asked him some questions about the organization. The questions related to a number of different aspects of the program, including how the program is administered, grievance procedures, the actual feasibility of the program given the numbers provided and oversight and rabbinic approbation of the program. You can see Rabbi Horowitz's original questions and answer here, and the answers to follow-up questions here.
Having read the responses, I, like many others, am deeply troubled by this project. While I have no objection to helping widows and orphans (does anyone really have an objection to that?), I feel that there are serious problems with the program as it is laid out. My objections lay in three general areas: the feasibility of the project, the lack of transparency, the "flexibility" of the program and, lastly, some of the general attitudes that the program conveys.
Let's start with the feasibility of the program. I will admit up front that I am not an actuary. For all I know, I might be completely wrong in this area. If there are any actuaries out there who are willing to actually crunch the numbers for me, I'd be more than appreciative.
Let's start with the numbers given. The program is based on the following:
- A group consists of 16,500 members.
- If any of those sixteen thousand die, the rest of the group will pay $6 for each unmarried child left behind.
- No member will pay more than $28 a month (i.e. the amount for four orphans).
- No member will pay more than $288 (the amount for 48 orphans).
- If there are more than four new in month, the amount will be rolled over into the next month. So, if a parent with seven children dies, the group members will pay for four orphans the first month and then the remaining three the second month.
The "magic number" that I want you to keep in mind is 48. The program, as it's designed, can pay for up to 48 orphans per year -- no more. If members cannot pay more than $288 a year and orphans are to receive $100,000* each, then the maximum number of payouts per year is 48. (16,500 * $288 divided by $99,000 [the amount given to each orphan] = 48.)
The program, as I understand it, is meant to appeal to those in the 25-60 age range. People over 60 will probably not have kids of marriageable age anymore while those under 25 are probably either don't have kids or are not insurance-minded yet.
I made a spreadsheet where I broken down the possibilities for this program. I made three different scenarios --
1. The population is evenly spread among the age groups
2. The population is skewed toward the young end of the spectrum
3. The population is distributed in a bell curve
The age groups are in column A. The mortality rate for the age group (based on the CDC -- warning PDF) is in column B.
I made (what I believe to be very modest) assumptions regarding how many unmarried kids a typical man in the yeshivish community of that age would have. It starts at one, goes up to five and then begins dropping at age 44 as the kids begin marrying out of the program. That figure is in column C. Personally, I think the numbers should be a bit higher, but let's work with these numbers.
Columns D-G are the first scenario, where the population is evenly distributed among the age groups. The number of members in each age group is about 471. By multiplying the number of members by the mortality rate (and rounding to the nearest whole number), I get the expected number of deaths. That's column F. The number of unmarried kids left behind is simply column F multiplied by column C. The totals are on the bottom.
The end result -- the group can expect 51 deaths and 122 orphans. Not good for a program that can only handle 48.
OK, what about scenario two -- where the population is skewed young (columns H-K). Let's say that the older crowd tends to opt out, so that the average age is in the middle but with twice the weight in the younger segments. Based on those figures, you can expect 32 deaths and 96 orphans. That's still twice as many as the program can handle.
What about if it's a bell curve distribution? That's columns L-O. The result? 42 deaths and 133 orphans.
The bottom line is that, no matter how you slice it, the program will not have the funds to pay out as promised. It won't even come close.
And, this is assuming the program only pays out on the death of the breadwinner. If the mother is included (as is the case in some of the programs) the situation only becomes much worse.
In addition, this ignores the fact that the program probably suffers from adverse selection. In short, those who can get insurance from a reputable company probably will (and, once they read the Terms & Conditions of the program -- see below) will probably opt out. Those that remain will be those who cannot afford or cannot get standard term life insurance -- and those are the ones who are at a greater risk of dying.
Lastly, the financial model is assuming that there is no overhead, no credit card collection fees, no delinquencies in payment, etc. None of those assumptions, of course, are reasonable.
Next, let's look at the transparency of the program (or the lack thereof).
While the program is said to have the backing of the "Va'ad Harabbonim," we are not told who is on the Va'ad. Repeated requests by Rabbi Horowitz to find out who the founder of the program is have gone unanswered. Personally, if an organization is unwilling to say who founded it and who is behind it, then you should be VERY wary of said organization. The fact that the organization is not willing to put forward the name of a single attorney or actuary who worked on this program (on a pro-bono basis) is also very troubling.
Then there's the "flexibility" of the program. What do I mean by "flexibility?" Specifically, the program is very flexible in terms of who will be paid in the event of a death. There are enough loopholes in the terms and agreements that you can drive a Mack truck through them. Take a look at the Terms and Conditions of the program (is there a reason the T&C are written in a hard-to-read coloring?). Let's start at the top:
The first paragraph makes it clear that the program is only for "Torah observant" homes. What does "Torah Observant" mean? What is the definition? If someone drinks Cholov Stam, are they still "Torah Observant?" What if they use the Flatbush eruv? Or the wife's snood doesn't cover all of her hair? What if the man doesn't have a regular learning schedule? What if he davens without a hat and jacket? What if they (God forbid, of course) are Zionists?
None of this is spelled out, of course. The determination of what, exactly, is a "Torah observant" home is very broad and ambiguous. Some would say that Zionists are idolaters (yes, some make that claim). Some would say that people who use the Flatbush eruv are Shabbos-desecrators. Are such people "Torah observant" according to the committee who will make the final payout determination? I don't know. Do you? I know that I'd hate to find out *after* the fact.
The T&C later reiterates and says:
The program is designated only for orphans who are Torah-observant!
My reading of this is that the payout is based not only on the parents being Torah observant, but the kids as well. Well, we all know that all kids rebel to one degree or another. They may go through a phase where they are lax in a particular mitzvah or set of mitzvos. Perhaps davening or learning will slide for a boy. Perhaps a girl might decide to rebel and wear a pair of jeans outside once or twice. This happens with teens and "normal" families and can especially happen in a stressful situation where a parent is lost. Who determines what is "Torah observant" for the kids. If they go through a rebellious phase, do they lose out on the monies put aside for them? Who determines just how much "rebelliousness' is permitted in terms of the program? Or is it one misstep and they're out?
Then there's this clause (bolding mine):
The program is a tzedaka fund that operates according to Halachah only, and is not an insurance plan. Therefore, the registration and acceptance to the program has a stipulation that in the event of a high number of unnatural deaths, Heaven forbid (such as war and/or earthquake etc.), and/or a situation arises which according to Vaad Harabanim’s determination does not permit charges to be made to the members (for instance an unusually high number of orphans and/or economic inflation and/or some other economic condition etc), the rabbis of Vaad Harabanim will decide whether to establish a fund and what its sum will be. All the obligations will be determined by Vaad Harabanim, and their decision will be final, without any option of placing a claim - in any place or legal framework - for indemnity and/or compensation and/or grievance of any kind.
In short, if there is an economic problem that causes the program to be unable to pay, the Va'ad gets to decide who gets what -- and there is no recourse or redress. Now go back and look at the numbers I projected earlier. Do you see this clause kicking in fairly often?
Lastly, I have some general problems with the program as it is set up.
I have a problem with the fact that the program FAQ states that people with life insurance are welcome to participate, but does not state that such people are not eligible to collect.**
I have a problem with the way the program is marketed. The program makes the point that it is not an insurance program. The reason for this is probably legal -- insurance programs in the United States are heavily regulated. The program states that it's a charity organization. But, in my opinion, it fails the duck test. The old rule of "if it walks like a duck, and smells like a duck and quacks like a duck, then it's probably a duck" still applies. The fact that members (potentially) pay money in in order to receive benefits makes it too much like an insurance program to me. A true charity organization would, IMHO, try to take care of orphans and/or widows whether they were members of a paying program or not. Think of organizations like Tomchei Shabbos, for example. Are you asked to pay in so that if you fall on hard times they will pay out for you? No -- they help anyone who needs a handout whether you've donated to them in the past or not.
I'm also troubled that the program will cause people to forgo proper insurance. Ideally, people should have life insurance. Rabbi Horowitz's contact even admitted as such in his correspondence. However, I believe that most people will, once they sign up, decide they don't need insurance, since they have Areivim. Of course, they probably aren't aware of the numbers in the program and how unstable it is. They are far better off going with a reputable insurance company.
Lastly, I believe the program is being self-contradictory when it states that it's goal is to preserve the dignity of widows and orphans, but then turns around and states that the deceased's rabbi will have the final say on where the money is spent. What if the parent wants to send their kids to a co-ed school (like Yeshiva of Flatbush, for example). Does the family rabbi have the right to withhold funds because he doesn't like the school or disapproves of it's policies and hashkafos? What if he doesn't approve of the potential marriage partner of the orphan and he's convinced that the potential marriage partner will lead the orphan down the path to Modern Orthodoxy? Can he refuse to pay for the wedding from the funds on that basis? In short, by putting the funds in the rabbi's hands, you are potentially giving the family rabbi veto decisions over matters for which they have no business having a veto power. That doesn't preserve dignity of the widows and orphans -- on the contrary -- it robs them of it.
There is a very real need to help support widows and orphans -- but I don't believe this program is the answer. I believe that, while it may be well-meaning, it has far too many flaws in the economics of the program as well as the mechanisms to ever be truly viable.
The Wolf
* $6 per orphan for each of the 16500 members is actually $99,000, not $100,000. And, of course, the decedant isn't going to pay either. But I'll overlook those facts for now.
** To be fair, it does state that in the T&C, but that's in very small type and in a hard to read color.
