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Its most rapid expansion, extending from 1864 to 1868, inclusive, rising from $382,569,890 to $1,981,915,920, may be fairly presumed to have resulted from the combined operation of several causes. Being an institution of real and intrinsic value, it was inevitable that, as soon as Companies were established in this country, and in readiness to issue policies on lives, people should hasten to avail themselves of the opportunity so auspiciously presented. The institution possessed something of the charm of novelty, and was eagerly sought for. The want was wholly unsupplied ; but as soon as the means for its satisfaction were known and understood, the supply rushed in to meet the demand as suddenly as air rushes into a vacuum.
The marvellous alacrity with which life insurance was taken up cannot, however, be wholly explained in this way. Savings banks meet a real want, as well as Life Insurance Companies ; and yet their introduction and multiplication have been steady and gradual, not quick and sudden. Life insurance has been successfully introduced into other countries besides America, without at once attaining the gigantic proportions already reached in our own,-a fact from which many suggestive lessons may be drawn.
It is to be observed that this unparalleled growth of the business occurred during a period in which finances were in an unsound condition. The currency of the country was largely depreciated, and its ordinary, business relations were seriously disturbed. The payment of premiums in a depreciated currency secured an obligation likely to mature at a remote period and to be redeemed in specie. Thus the financial position of affairs may, perhaps, in some measure have favored the expansion of life insurance.
We are of opinion, however, that its rapid development in the United States is to be imputed mainly to the operation of the insurance laws of this Commonwealth, and of some other States. These laws have exercised, in a preëminent degree, a controlling and healthful influence in shaping and developing the business in this country. Hence, the great and marked contrast between its history and management here and elsewhere. In the United States, life insurance has been introduced and has grown up under the sanction and authority of a State supervision. It was established in England, Germany and
France under entirely different auspices. The results accruing from this difference have operated largely and constantly to the advantage of the American Companies, and have been made the most of by them. Their emissaries, stimulated by the promise of high commissions, have traversed the country in every direction, proclaiming, in printed publication and by personal appeal, in every city, town and village, the sanction obtained from State authority by the Companies they represented. Certainly, it is not strange that the spread of life insurance should have attained a rate seemingly almost miraculous, when heralded as a humane and beneficent institution, guaranteed and sanctioned by the authority of the States. Meanwhile, but too often, we regret to say, has it been made in reality but au instrument by means of which private individuals have raised themselves to positions of emolument and power.
Companies which are tempted at times to murmur at the inconvenience and hardship (if hardship it be) of being obliged to furnish 'statements, schedules and other returns to so many different States, should remember that many of them have grown rich and powerful in the past through the aid of State laws. We are no advocate of arbitrary or unnecessary requirements. Indeed, the Massachusetts Department has never been, and we trust never will be, open to such a charge. But every Company will find its own best interests promoted by a willing and courteous compliance with all reasonable conditions, especially when involving information necessary to the establishment of public confidence.
Having thus briefly referred to the course which life insurance has taken in this country, the question now arises whether there is about to be a reaction, and whether the tide of public opinion is about to set in a different direetion. In other words, the question is whether the public, after having so long cherished unbounded confidence in the efficacy of government supervision, is about to come to the conviction that it ought to be abandoned altogether; and, if so, whether insurance is likely to suffer in consequence.
The people of this Commonwealth have of course no direct interest in the official management of any Insurance Department, except their own; but in a general view of the condition and the prospects of the business of insurance, the prob
able or possible influence of the recent investigation into the insurance administration of a neighboring State cannot be overlooked. While scrupulously and emphatically ignoring all personal reference, reflection or design, the event may not improperly be cited as the most memorable which the year has developed in this connection, especially as affecting life insurance, which, in the opinion of many, will be seriously checked by the results reached in that investigation. The apprehension in some quarters, therefore, that public confidence in the trustworthiness of government supervision may be thereby shaken, can hardly be deemed a surprise. Consequently, the bearing of these results upon the prevailing public sentiment as to the value and expediency of any interference on the part of the government with insurance interests, becomes at once a pertinent consideration.
If the people of Massachusetts have been accustomed to rely exclusively upon the protection afforded by the Insurance Department for their security, especially in life insurance, they may learn a useful lesson from what has taken place in the connection referred to. An Insurance Department does not supersede the necessity for the exercise of private vigilance. The responsibility for the administration of Insurance Companies properly belongs to their members or shareholders, and it is not the intention of the laws of this State to relieve them from such responsibility. The parties actually and personally interested are clothed with a special authority, which, in coöperation with departmental surveillance, may go very far in securing good management and effectual protection.
The principal function of this Department is to make more readily accessible a knowledge of the facts on which the judgment of private individuals is to be exercised. It is beyond all doubt a mater of absolute right, on the part of policy-holders, to require that the Companies in which they are insured should always be possessed of assets equal in amount with the value of their liabilities. Their right to a knowledge of the fact that these assets are actually held by the Companies, is no less absolute. The Legislature of Massachusetts, in assigning to the Insurance Department its duties, has determined that there is, in its own judgment, some difference at least between the business of insurance and that transacted in other connections.
It has determined that this difference is at least sufficient to warrant, to a certain extent, the interposition of its authority. But the exercise of such authority, as undertaken by the State of Massachusetts, is confined within narrow limits. This Commonwealth only interferes so far as may be necessary to secure for her citizens that which is indisputably their right, namely, a sufficiency of assets in possession of the Companies, and the means for obtaining a knowledge of its existence. The reason for the attempt, on the part of the State, to secure these rights for her citizens, is found in the peculiar nature of insurance interests and obligations. Nor have recent events, viewed in any aspect, shown that such a government supervision is necessarily either mischievous or useless.
But, though, as already intimated, the people of Massachusetts have no direct interests in the official administration of any other Insurance Department, they have an interest in the proper management of all Insurance Companies, wherever organized, that do business within their borders. It is their interest and their right to know what the principles are, upon which the funds of the Companies are appropriated and their business conducted. It is certainly a matter of importance to them to know whether any portion of these funds are used for the purpose of influencing legislation anywhere, or for any other object not legitimately within the proper and beneficent scope of the business of insurance. But it is a matter of very special and grave importance to them that no portion of such funds should be perverted to the improper purpose of influencing legislation in this State.
For the sake of drawing the attention of the people of this Commonwealth to this subject, and to the general interests involved in its discussion, we may with propriety quote a few sentences from the majority report of the New York committee making the investigation herein referred to. Suggesting, as they do, the dangers inevitably resulting from the mismanagement of company finances, as also the necessity and duty of maintaining a legitimate and equitable administration, the words of the committee, which are cited only for the purpose of such illustration, possess pertinence and force. Commenting on the large amounts voluntarily paid by some of the Companies to the Superintendent and for other purposes, they say :
“The officers and managers of some of these companies seem, in the minds of your committees, to have wilfully misconceived the purposes of insurance The law by which they were organized, and the confidence reposed in them by the insured, suppose that the affairs of the companies will be administered by their officers and directors, not for selfish purposes, but in the interest of the policy-holders and the public. Widows and orphans are dependent upon these institutions for the means of support. And property owners, otherwise bankrupted by unavoidable calamity, rely upon them for the means wherewith to rebuild their broken fortunes; and the insurance interests of the country are now so vast, that the welfare of society itself is dependent, to a serious extent, upon the honest and economical management of these companies.
Liberality is best exemplified when we expend or bestow that which we ourselves possess, and not that which we hold in trust from others for safe keeping and profitable investment. The prodigality of many of the companies, in proffering large fees for examinations, in expending large sums for council,' and upon outside parties in the performance of doubtful and unwarrantable services, and in contributing to large funds by which to secure unwise and injurious legislation and to corrupt legislators, should receive the most emphatic condemnation. Your committee believes that at no time since the insurance department was organized has it been necessary to use money to secure the passage of just and proper laws to further the best interests of insurance; whose humane purposes, when rightly carried out, commend it to the good will of all. The fact that such large sums have been thus used in an illegal manner, discloses not only corrupt and selfish motives, but an abuse of the various trusts reposed, which must sooner or later destroy all confidence, and effect the overthrow of the entire insurance interest, as at present administered.”
These views will at once commend themselves to every honest legislator, as well as to every judiciously conducted Insurance Company. All such will coincide with us, and with this Committee, that any application of the funds of an Insurance Company for the purpose of influencing legislation, or for any of the purposes indicated in the report here cited, either in the State of New York or elsewhere, should be carefully avoided. It is an unwelcome inference, that the officers of some of the Companies may have committed grievous error in this respect. And if, in consequence, insurance officers are unable hereafter to use official certificates in the extension of their business with as much effect as heretofore, it will be in part because public confidence has been undermined through the action of some of their own number; and so, also, any impairment of the insurance interest may be in some degree traceable to the same source.
Still, the largely reduced rate at which life insurance is now