Page:Encyclopædia Britannica, Ninth Edition, v. 13.djvu/194

182 INSURANCE [LIFE. Govern- Besides the business transacted by British assurance ment companies there is a scheme of Government life insurance life in ~ authorized by the Act 27 & 28 Viet. cap. 43, and worked surance. . -.-i ,1 -r> t. s^a- T> i- in connexion with the Post-Ofrice. By a recent parliamen tary return it appears that from the commencement of the scheme in 18G4 to 31st December 1878 there had been issued 5844 policies insuring in all 460,000, and there had been paid on the death of nominees about =25,000. In the United States of America, life assurance has attained a greater relative importance among financial institutions than in any other country. Its history there extends back to an early period, but the system has received its main development in comparatively recent times. During the years which immediately followed the close of the civil war it grew with unparalleled rapidity. The social disorders of the period excited anxiety for the future, and directed earnest attention to institutions which promised exceptional security. The general Government, by its financial administration, and especially by its issues of paper money, furnished a powerful stimulus to the specu lative tendency in this as in every branch of business. New companies were established in great numbers new plans and features of assurance contracts were devised ; thousands of energetic agents canvassed the community with their solicitations ; and the published reports of the assurance companies reflected, in a high degree, the fictitious prosperity of the period of inflation. The financial crisis of 1873 applied to the companies a test of great severity. The mushroom institutions of recent growth fell rapidly ; and, while tha standard societies, which were administered with wise conservatism, and which had always held the greater part of the business, were unshaken, their growth was seriously checked. The following figures (for which we are indebted to the Insurance Year Book, Chicago, 1880) give in outline the history of this period. They represent the aggregate business of the companies reporting to the New York insurance department. The figures for 1879 include " industrial assurance," a branch of business but recently developed in America. Number Year Policies issued during Year. Policies in force at end of Year. panics. Dec. 31. Number. Amount of Amount of Assurance. Assurance. 1 8 27 1864 59,198 155,803,897 146,729 395,703,058 43 1867 158,605 471,611,744 401,140 1,161,729,776 71 1870 237,180 587,863,236 747,807 2,023,884,955 56 1873 199,050 465,614,001 817,081 2,086,027,178 38 1876 99,036 232,665,489 706,179 1,735,995,190 34 1879 112,025 168,633,035 653,905 1,457,255,513 From 1873 to 1879 the number of companies and the aggregate amount at risk steadily decreased. Since then, although no new companies have been organized, there have been no failures, and a healthy and natural increase has been observed in the business of the existing offices. The following table shows the aggregates of the principal items in the business of the forty -two most important com panies in the United States for the years 1879 and 1880, as compiled by the New York Spectator : Total assets, December 31 ,, liabilities ., (including reserve) Premiums received during the year Total income ,, ,, Death claims paid ,, Endowment claims ,, Paid for purchased and surrendered assurance ,, dividends to policyholders Total disbursements during the year Assurances written ,, , Total assurances in force, December 31 1880. A subject of special interest in connexion with life Lf assurance in America is the legislation by which it is ti( regulated. While the national Government, under the constitution of the United States, has supreme control over all commerce between the States, the courts hold that insurance in its various forms is not commerce, and that corporations created by a State have no corporate powers beyond the limits of that State, and can transact no business beyond those limits., except on sufferance of the local Government. Hence the life assurance companies are the creatures of State law, and are controlled by the legislatures of the States in which they operate. The first systematic attempt to regulate the business by Government supervision was made by the State of Massachusetts under a statute passed in 1858 establishing an "insurance department." New York adopted a similar law in 1859, and the example has since been followed in nearly all the States, even in those which have no important assurance companies of their own. Each State has its own peculiar laws, and these undergo frequent changes in detail as successive legislatures attempt to improve or to reform the business, but the general character of the supervision exercised is the same in the different States, and is as follows. A company may be organized at any time for the business of assuring lives and granting annuities, by obtaining from the proper officers of the State the approval of its name and fundamental law or charter, and by depositing with the insurance department a stated sum, usually $100,000, in prescribed securities, as a guaranty of good faith. Since no charters are now granted except under this general law, it is no longer possible to establish a company except by the deposit of a considerable sum in advance, so that purely mutual companies cannot now be founded ; but it is customary to limit the amount of profit upon the capital to a reasonable rate of interest, and all surplus beyond goes to the policy-holders. In some instances, the capital stock of these " mixed companies " has been redeemed, after their successful establishment, leaving them purely mutual. In New York and some other States the insurance R department may receive further deposits, representing the tc reserve or present value of policies, and hold them accu- P mulating in trust, for the security of those particular policies, which are "registered" in the State treasury. This scheme was pressed with vigour a few years ago, as offering peculiar protection, but several companies which adopted it have failed, and the settlement of the claims of creditors upon the funds held by the State has been the cause of much delay and costly litigation. In each State there is a superintendent or commissioner of S- insurance whose powers and duties towards the companies t( are varied and important. The companies must return to him under oath every year full statistics of their business in * all departments, showing the precise investments of their funds, the amount and sources of their income, the expendi ture for every purpose, and a schedule of policies with the ele ments for valuing them. It is the superintendent s duty to see that the investments are made in accordance with the laws, which limit the companies to securities popularly re garded as the safest ; to make every inquiry which he deems it " desirable for the public interest " to have answered ; to make a valuation of the policies of each company by the legal standard ; l and to report to the legislature every year in full the results of his inquiries and calculations. It is his duty, " whenever he shall deem it expedient so to do," and in particular whenever he shall suspect any statement 1 Each State has its own official standard of valuation. In New York, for example, the American Experience Table of Mortality, com bined with 4^ per cent, interest, is the standard. In Massachusetts it is the Seventeen Offices Experience (British) Table, and 4 per cent.