Business Still Booms Within Proposed Limits

By Kyle Y Widner

The scene for Metropolitan Life Insurance Company began to shift around 1905-a year of great import in American life insurance history. For some time it had been clear to leaders of public opinion that all was not well with the practice of life insurance as it had been conducted by some of the larger companies. In that year the New York Legislature appointed a joint committee, with Senator William W. Armstrong as Chairman, to make a sweeping inquiry into every phase of the industry.

The inquiry concentrated upon the alleged mismanagement of the companies, their vast accumulations of wealth, their treatment of policyholders, their cost of operation and administration, the methods and character of their investments, their legislative activities, and practice of contributions to political parties.

The investigation was conducted by distinguished counsel headed by Charles Evans Hughes, later Governor of the State of New York and Chief Justice of the United States Supreme Court. Much that was unsavory was disclosed in the activities of some, though not all, of the larger companies. The report of the investigation was followed by drastic legislation which cleansed the business of questionable practices which had sprung up during the years.

Two decades later the business had earned from Mr. Hughes, in an address before the Association of Life Insurance Presidents, the commendation: "1 believe that there is no safer or better managed business in our country than yours." In so far as the Metropolitan itself was concerned, the Armstrong investigation and the legislation which ensued were, with exceptions mentioned below, a happy vindication of the practices which the company had previously established. Tontine, or deferred dividend insurance, which Mr. Fiske had proscribed when the Ordinary Department was reestablished in 1892, was outlawed. Expenses in the acquisition of new business were definitely limited.

When other companies argued that the restriction of expenses imposed a hardship upon them, the Legislative Committee cited the Metropolitan as an example that business could be done within the proposed limits. As regards industrial life insurance, the committee referred to what were called "serious evils which have been disclosed by this inquiry," but stated that it was not prepared to make recommendations with reference to that business. This was regarded by Mr. Fiske as a personal triumph.

He had impressed the committee with his views as to the importance of industrial life insurance as an institution and with the value of the service which it rendered, and he had urged that the companies be permitted to seek remedies of the features criticized, without legislative interference.

The only applicable changes in the law were to put the reserve liabilities on the basis of Metropolitan Industrial mortality, and to provide paid-up values to lapsed policies after three instead of after five years. The result of the investigation as a whole was to add to the prestige of the company, a fact evidenced by the sharp increase in its business in the years that followed.

This author is a freelance marketing writer based out of San Diego, CA. She specializes in the history of life insurance, business, and finance.