Metropolitan Life Insurance Company

“ In its consideration the status of a policy-holder in a life insurance company must be taken into consideration. To thoroughly understand what that status is, it is necessary to examine carefully the contract on which it rests. Each policy in a life insurance company provides for a life-long engagement on the part of the assured. He is to continue to pay premiums as long as he lives, if he does not anticipate them by a single payment, or by several payments. On its part the company agrees to pay to the assured, or rather to his nominee at the death of the assured, a certain sum. ”

“ One thing the policy-holder can always depend upon, however: he pays for everything he gets. The price rests upon certain scientific principles; no company can disregard them without disaster. What one company offers another can offer; and any policy that contains unusual opportunities also carries a premium that completely pays for them. All modern novelties are simply old forms of life-insurance under new names—and usually at greatly increased prices.
In recent years, for example, the New York companies have gone daft over "gold bonds," " consols," and "debentures." ”

“ If you wish a policy you voluntarily buy it over the counter. Consequently, the New York companies, which do employ agents, have entered England and practically driven this old institution out of business. There is also a powerful actuarial justification for the agency system. Properly regulated, it brings only healthy lives into the company. A man anticipating early death does not need to be persuaded; he is only too glad to obtain a policy. That is the class which voluntarily seeks insurance. ”

“ Theoretically devised to ameliorate human suffering, its very structure is a constant temptation to the vicious. Ostensibly the life-insurance company merely collects certain sums from its members, invests them at compound interest, and pays them back as contracts mature. ”

“ In the mutual company the assured themselves receive all the surplus premium or profit. The law of the State of New York passed in 1849 requires that all life-insurance companies organized in the State shall have a capital of at least one hundred thousand dollars. Mutual life-insurance companies organized in that State since 1849 pay only seven per cent on their capital, which their stock by investment may produce. ”

“ Term life insurance, so called, is simply banking for the benefit of the company which takes the risk. In regular life insurance the insured has a certain expectancy at the time of taking out the policy. Payment for the amount he is to receive at death is spread out over his expectancy, less four per centum interest compounded, and he pays it in annual, semi-annual, or quarterly installments, as may be agreed upon. If he lives out his expectancy, he will have paid in all he is to receive at death, either directly, or by the interest carried on his premiums. ”

“ Here you may find out just how much the body politic is willing to bet on the chances of life and death of its people. The government has been in the life-insurance business for fifty years, but it has never forbidden the private companies to operate, and competes with them right along. Indeed, it is said that the latter are getting most of the new business because they put more life and energy into selling insurance than the state institution does. The government life insurance company uses the postmasters as its agents, and thus has offices at every crossroads. ”

“ The year after that you take the same policy in the New York Life. The fourth year you come back to the Equitable; and repeat the performance indefinitely.
Occasionally, a rebated policy-holder becomes physically impaired;—what is known as a bad risk. Then sticks in the company into which he was last rebated. A sick man always hungers for life-insurance. A man who ordinarily could afford a $10,000 policy takes one for $100,000 at 90 per cent off. If he falls sick, his relatives and friends gladly pay the few remaining premiums; and his widow, at death, pockets a neat $100,000. ”

“ Life-Insurance Agents Necessary Theoretically, no life-insurance company should employ an agency force. He who has dependents and no income except the product of his own toil is as morally bound to carry life-insurance as he is to furnish his children food and shelter. Obviously, he should not be hounded into performing this simple duty. However, that theory seldom works. Experience has demonstrated that men do not insure of their own free will. They must be clubbed into it. The company that employs no agents does no business. The old Equitable of London pays enormous "bonuses" or "dividends" ”

“ The widow who receives the life company's check, after the death of her protector, takes an entirely different view of the insurance agent's importunities from that taken by the husband who had to be hounded into a policy.
Under modern pressure, however, the New York companies have combed every social and professional class, in the search for solicitors. Each, in this country alone, has from 10,000 to 15,000 men. In New York City there are 5,000 life-insurance agents. Apparently, no citizen exists, in the companies' estimation, who does not possess abilities in this direction. ”

“ They also try to prevent the lapsing of policies and sell new insurance when time allows. The company compensates the agents as agreed to in the 'Agent's Commission Plan' under which the agent retains 20% of his weekly premium collections on industrial insurance and 10% from holders of ordinary life, and 50% of the first year's premiums on new ordinary life insurance sold by him. The company plan also provides for bonuses and other fringe benefits for the debit agents, including a vacation-with-pay plan and participation in a group insurance and profit-sharing plan. ”

“ A policy of life insurance is a peculiar contract. Its obligations are unilateral. It contains no undertaking of the assured to pay premiums: it merely gives him an option to pay or not, and thus to continue the obligation of the insurers, or terminate it at his pleasure. It follows that the consideration for the assumption of the insurers can in no sense be considered an annuity consisting of the annual premiums. ”

“ The plaintiff is a New York corporation, with its home office in New York city, and has transacted and does transact the business of life insurance on a large scale in all of the states of the United States, and with persons residing in every country of the civilized world. It commenced to transact its business with residents of Montana in 1869, and its business has progressively increased until its total insurance in force in that state amounts to $10,023,445, calling for premiums amounting to $343,664.93. ”

“ A policy of life insurance, without restrictive words, is assignable by the assured for a valuable consideration equally with any other chose in action, where the assignment is not made to cover a mere speculative risk, and thus evade the law against wager policies ”

“ It was the belief of the secretary of the society that most of its policy-holders were insured in other organizations also. The Metropolitan and Prudential Life Insurance Companies have offices in Fall River and together they insure 75,000 persons. Their policy-holders make payments averaging about 10 cents per week. ”

“ Life insurance has come to be a sacred thing. It is the substantial token and expression of responsibility which a reasonable man dying leaves to those dependent upon him. I so wrote Mr. McCall, and told him that if the head of a great institution like the New York Life Insurance Company would be guilty of such perfidy as charged by you, the organization which would retain him in a position of responsibility was undeserving of confidence or patronage. ”

“ For as to the business of life insurance, savings banks, and trust companies, it is somewhat more, or surely somewhat other, than mere business. And so those who practise it and profit by it profess that it is. A life insurance company is a grand combination philanthropico-financial corporation whose motto is, "Cast thy bread upon the waters, and after many days thou shalt receive it again." ”

“ But, fortunately for the cause of life insurance, it varies always in one direction. The company's charges, that is, always exceed the actual cost. It almost invariably has fewer death losses than the mortality tables indicate; and it commonly earns more interest than the estimate assumes. That is to say, it pays out each year less than it has provided for; and earns, in interest, more than it needs to pay all claims. A company properly conducted also uses less every year for expenses than the amount provided in the premium loadings. ”

“ Section 700 states that 'any moneys held or owing' by life insurance companies in the following three classes of policies issued on the lives of residents of New York shall be deemed abandoned property: (1) matured endowment policies which have been unclaimed for seven years; (2) policies payable on death where the insured, if living, would have attained the limiting age under the mortality table on which the reserves are based (an age varying from 96 to 100) , as to which no transaction has occurred for seven years ”

“ There can be no dividend, no profit—no investment—because, even under the most favourable circumstances, the expenses of management are so great. For every dollar collected by a life insurance company, it expends anywhere from eighteen to fifty cents in expenses; manifestly it cannot invest the rest so as to pay you any investment return.
Life Insurance Merely Indemnity—Not Investment Life insurance is one thing, and one thing only. In the social and economic order it performs a single and a simple service. It is the money indemnification for the destruction of a valuable human life. ”

“ Two Scientific Bases of Life Insurance—Mortality Law and Interest Rate The application of this mortality law to the cost of life insurance may now be illustrated in its simplest form. Let us take 1,000 men, all aged 40, who desire to insure their lives. They might take out policies in some existing company, but not necessarily—they can carry their insurance just as well themselves. So they enroll themselves into what may be called a life-insurance association. They agree that $1,000 shall be paid to the widows of all that die. ”

“ The business of life insurance is of such a peculiar character, affects so many people, and is so intimately connected with the common good, that the state creating the insurance corporations and giving them authority to engage in that business may, without transcending the limits of legislative power, regulate their affairs, so far, at least, as to prevent them from committing wrong or injustice in the exercise of their corporate functions. ”

“ Theoretically only one is indispensable; the mortality law. This enables the company to foresee, for a long period of years, its annual expenditures, and consequently to make provision for their payment. With this principle alone, however, life insurance would not be an accomplished reality, because its cost would be excessive. The interest element, by making life insurance cheap, brings it within the purview of the poorest citizen. It transforms life insurance from an unutilized theory into a most salutary fact. ”

“ The Ætna Life Insurance Company.—In mentioning this Company we must reiterate the well-known fact that it stands at the very head of the list of life insurance companies. For thirty years it has stood the storms of financial fluctuation, and now remains the strongest life insurance company in the country. ”

“ The applications were part of the policies, and from them it appeared, and was found by the circuit court, that McMaster applied for insurance 'on the ordinary life table, the premium to be payable annually.' He was solicited to insure by the company's agent, and might, according to the company's form which was used, have asked that the premiums be payable annually, semiannually, or quarterly, but he chose that they should be payable annually, and that the rate of premium should be calculated on that basis by the ordinary life table. ”

“ It must be borne in mind that the cost of insurance proper, that is, the provision to meet current death claims alone, is quite as high in the best assessment company as in a regular life insurance company, for this cost depends on the careful [pg 414] selection of lives. The difference in the two institutions is that the former dispenses with the investment element, while the latter exacts it in connection with all their contracts. Hence the price to be paid is greater. ”

“ Above all, unless all its 1,000 members join spontaneously, it must have a lively force of insinuating gentlemen to persuade them in—that is, life insurance agents. All these things, especially the agency force, cost money. For want of a better system the association clumsily adds to every premium a certain annual sum to provide a special fund to meet these expenses. ”

“ Of course there is a certain amount of loading in the premiums he pays, but for the purposes of our illustration, that need not be considered. In this plan, the policy holder is really insuring himself, and when he dies his beneficiary, or estate, simply receives back the money he has paid in. The fact that there are so many life insurance companies and that they have become so wealthy and powerful, illustrates the power of interest, especially when it is compounded. ”

“ The application for the policy addressed to the company at its home office was likewise delivered at the Missouri Clearing House and forwarded to the home office. The application was considered and accepted in New York. The policy was executed there. It provided that the premiums and the insurance should be payable there. But such acts did not prevent the policy being held to be a Missouri contract. Equitable Life Assurance Society v. Clements, supra; Northwestern Life Insurance Co. ”