United States. Temporary National Economic Committ.

Investigation of concentration of economic power; monograph no. 1[-43] (Volume no. 2) online

. (page 6 of 19)
Online LibraryUnited States. Temporary National Economic CommittInvestigation of concentration of economic power; monograph no. 1[-43] (Volume no. 2) → online text (page 6 of 19)
Font size
QR-code for this ebook


Prepared t>y Sec. i Sxclt. Con,



48



CONCENTRATION OF ECONOMIC POWER



701 families with industrial insurance only, classified according to economic status —
premiums paid, annual income, and average percentage of income paid as pre-
miums



Economic status: Average annual income per family
member



Number

of
families



Nonrelief
families



Relief
families



All
families



Total annual premiums paid



$700 and over
$600 to $699. .
$500 to $599...
$400 to $499..
$300 to $399..
$200 to $299..
Under $200...

Total..

$700 and over
$600 to $699...
$500 to $599..
$400 to $499...
$300 to $399..
$200 to $299..
Under $200...

Total..



45
30
50
70
128
206
172



701



$2, 340. 90


$159. 93


1,735.06


98.80


2, 351. 95


672. 41


2, 924. 96


753. 51


5,511.22


1, 039. 46


6, 346. 95


4, 383. 95


3, 358. 59


5, 342. 67


23, 569. 63


12, 450. 73



$2, 500. 83
1, 833. 86
3, 024. 36
3, 678. 47
6, 550. 68
9, 730. 90
8, 701. 26



36, 020. 36



Total annual income reported



45
30
50
70
128
206
172



$76, 790. 00
51, 145. 00
68, 607. 00
74, 220. 00
130, 420. 00
113, 082. 00
46, 724. 00



701



560, 988. 00



$7, 907. 00
3, 222 00
21, 403. 00
24' 294. 00
28 625. 00
104, 391. 00
103,895.00



$84, 697. 00

64, 367 00

90, 010. 00

8, 514. 00

159, 045. 00

217, 473. 00

150,619.00



293, 737. 00



854, 725. 00



Percentage of income paid for insur-
ance premiums



$700 and over
$600 to $699..
$500 to $599..
$400 to $499..
$300 to $399...
$200 to $299..
Under $200...

Total. .



45
30
50
70
128
206
172



701



3.05


2.02


3.39


3.07


3.43


3.14


3.94


3.10


4.23


3.63


4.73


4.20


7.19


5.14


4.20


4.24



2.95
3.3V
3.36
3.73

4.12
4.47
5.78



4.21



Proportion of total family premiums paid for insurance on the chief
breadwinner. In view of the special interest in the chief breadwinner
and his insurance, to which attention was first directed in chapter III,
it was thought advisable to determine the relative amounts of pre-
miums paid out of family income for his insurance.

There were 1,071 families which held either industrial, or industrial
in combination with ordinary insurance. Of these families there were
63 relief families and 3 nonrelief families in which there were no
breadwinners. The remaining 1,005 families were classified accord-
ing to the number of dependents in each. There were 64 with no de-
pendents, 414 with 1 or 2 dependents, 361 with 3 or 4 dependents,
and 166 with 5 or more dependents. Each of these classes of families
was then broken down to show what percentage of the total premiums
paid by the respective families was paid for insurance on the chief



CONCENTRATION OF ECONOMIC POWER



49



breadwinner. The details of this analysis will be found in table 23,
p. 140, an examination of which will show that while in 56 families
100 percent of the family premium was paid on the chief breadwinner,
there were 182 of these insured families in which no premiums were
paid to maintain insurance on the chief breadwinner. In 275 cases
50 percent or more of the respective family premiums were paid on the
chief breadwinner while in 730 cases the percentages were less than 50
percent.

In general it will be observed that the increase in the number of de-
pendents in the family is associated with a decrease in the percentage
of the total premium paid for the breadwinner's insurance. How-
ever, the absolute amounts of premiums paid on chief breadwinners
remain about the same regardless of the number of dependents. 7 This
indicates that families owning industrial policies tend to regard the
insurance on the breadwinner as something that has little or no con-
nection with the number of persons who are dependent upon the
earnings of the chief breadwinner. It tends to support the conclusion
that industrial insurance on the chief breadwinner is regarded pri-
marily as burial insurance. 8

' Average amounts of insurance and premiums on chief breadwinners in different groups are as follows (see
table 29, p. 146):



Dependents


Insurance

on chief

breadwinner


Premiums
paid on chief
breadwinner


5 and more


$594
567
529
594
576
505




$24. 87


4 '.


22.47


3


21.34


2


23.09


1


22.71


None...


21.54







Other aspects of the insurance on breadwinners are presented in tables 24 and 25, pp. 141-142.



CHAPTER V
Miscellaneous Problems

Complex Nature of a Typical Family's Insurance Pro-
gram — Number of Policies per Family — Multiple
Company Coverage — Lapsation — Advantage Taken of
Discounts for Payment of Premiums at Company
Office — Frequency of Premium Payment — Use of Sav-
ings Institutions.

The study included a number of subjects of considerable interest
in themselves but which were not sufficiently related to the content
of preceding chapters to be included therein. These items are pre-
sented in this chapter. The first deals with the multiplicity of insur-
ance contracts held by the various families and throws some light
upon the confusion that was frequently evident in the policyholder's
mind concerning the exact nature of the insurance protection he had.

Number of policies held by individual families. The 1,666 insured
families owned a total of 10,150 life-insurance policies. Thus there
were 6.1 policies held by the average family with insurance. How-
ever, families exhibited wide variations in the number of policies which
they owned. One family was found with 43 separate life-insurance
contracts in force (see The Baker Family, p. 64). The accompany-
ing data (based on tables 31 and 32, pp. 148-149) summarize an analy-
sis of families classified according to the number of industrial and
ordinary policies found in each family.

Of 1,666 families with insurance:

84 families (5 percent) had 15 or more policies
305 families (18 percent) had 10 or more policies
620 families (37 percent) had 7 or more policies

Individual policies vary considerably with respect to the benefits
and the conditions under which benefits become available. It is
apparent that the larger the number of policies involved in the life-
insurance protection of a family the greater will be the difficulty in
understanding the exact nature of the family's insurance program.
Multiple-company coverage — industrial insurance. As indicated in
the introduction to this report prior to this survey little or no informa-
tion existed regarding the extent to which individual families hold
policies in more than one life-insurance company. 1 It was recognized
that cases of multiple-company coverage arise when individuals in-
sured in different companies become members of the same family
group. It was also recognized that multiple-company coverage in
industrial insurance involving as it would two or more agents making
weekly calls at the home of the insured for the dual purpose of collect-
ing premiums and selling new policies might be responsible for some

i Multiple company coverage with respect to all kinds of insurance is summarized in table 33, p. 150.

51



52



CONCENTRATION OF ECONOMIC POWER



of the confusion existing in family insurance programs. This situa-
tion was explored with the following results:

There were 1,427 families paying premiums on industrial insur-
ance 2 to 1 or more companies. The Metropolitan was collecting
premiums from 750, or over half of the families, and the John Hancock
from 629 families. The Prudential collected premiums from 256
families, and the Boston Mutual from 126 families. A large propor-

Chart 21

extent of duplication in coverage by the three largest
industrial life insurance companies among 1356 families



METROPOLITAN POLICIES




IN 700 FAMILIES




/ 54 1




J METROPOLITAN ^flflffl!




\ yfl IU0






^n^^Ki^HEJH;


41 9






JOHN HANCOCK /


/ ^m 52 ^lli




i ,36 viiiiii




\ PRUDENTIAL ^1111?






JOHN HANCOCK POLICIES


PRUDENTIAL POLICIES


IN 620 FAMILIES


IN 256 FAMILIES





Source: Table



DS-JU99 Frefaret by Sec. t Ixch



tion of these familie was covered by more than 1 company. The
Prudential showed the highest proportion of families which were
paying premiums also to one or more of the other companies — 48
percent or almost half of its total number. The Boston Mutual was
second with 44 percent; the John Hancock next with 36 percent; and
the Metropolitan, with 31 percent, had the lowest proportion of its

' There were 36 families which had industrial policies in .force on which they were not paying premiums,
as their policies were paid-up or extended term insurance.



CONCENTRATION OF ECONOMIC POWER



53



families with policies in other companies. Of the total 1,427 families
1 out of 5 held industrial insurance in 2 or more companies. A sum-
mary of the multiple company coverage follows (details are given in
table 34, p. 151):

Extent of multiple company coverage in 1 ,427 families paying premiums on industrial

insurance





Number of families with industrial policies


Companies


1-company
'amilies


2-company

families


3-company
families


Total


Metropolitan -


520

401

132

71


200
200
102
42


30
28
22
13


750




629




256




126






Total families


1,124


272


31


1,427






Percent of families with industrial insurance




69.3
63.7
SI. 6
56.4


26.7
31.8
39.8
33.3


4.0
4.5
8.6
10.3


100




100




100


Boston Mutual


100






Total percent


78.7


19.1


2.2


100







The complexity resulting may be described by the situation in
regard to the Metropolitan. Of the 200 two-company families in
which the Metropolitan was represented, 131 had John Hancock poli-
cies, 48 had Prudential policies, and 21 had Boston Mutual policies.
Among the 30 three-company families in which the Metropolitan was
represented, 18 had both John Hancock and Prudential policies, 9 had
both John Hancock and Boston Mutual policies, and 3 had both
Prudential and Boston Mutual policies.

Chart 21 on page 52 illustrates the extent of multiple company
coverage as it relates to the industrial insurance of three companies
only: the Metropolitan, John Hancock, and Prudential. In 261 or
19.2 percent of the 1,356 families involved, at least 2 different com-
panies (and in 18 families all 3 companies) had industrial policies in
force.

Lapse and surrender experience of families enumerated. In table
35, page 152, there are summarized the facts which reflect the lapse
and surrender experience of families enumerated. This information
is based not only upon the lapsed policies actually examined by the
enumerators but also upon the answers recorded to the question as to
whether the families had ever cash-surrendered or lapsed policies other
than those shown the enumerator. In all, there were 1,879 families
for which this information Was obtained; 728 or 38.74 percent indi-
cated that they had previously held policies which' had lapsed or had
been surrendered prior to the day of enumeration. It will be ob-
served that the lapse and surrender experience of the families which
were insured was quite different from that of the families which had



54 CONCENTRATION OF ECONOMIC POWER

no insurance when the enumerator called upon them. Of the insured
families 34.27 percent and of the uninsured families 64.29 percent
reported lapse or surrender experience. In both insured and unin-
sured families the reported lapse or surrender experience was consider-
ably greater among the families on relief than it was among the families
not on relief .

Discount for making payments at office of company. Holders of
industrial policies in the Metropolitan or of industrial policies in the
Prudential or John Hancock issued after January 1, 1937, and Jan-
uary 1, 1939, respectively, may reduce their premium payments if
they will make them directly at the offices of their respective com-
panies. 3 Of the 1,273 families which answered the question intended
to determine the extent to which advantage was taken of the discount
for paying at the office, only 363 indicated that they had ever followed
this practice. This result is necessarily qualified by the fact that
certain of the 363 families may have taken the advantage in the past
but were not at the time of enumeration making payment at the
company office. On the other hand, enumerators discovered that
many families were not aware of this opportunity to reduce their
premiums. Also the • answers enumerated do not disclose how
successful families were in maintaining the regularity of office pay-
ments throughout the year.

Families' preference as to frequency of premium payments. The
1,427 families which were paying premiums on industrial insurance
were interrogated to discover whether the families could conveniently
pay insurance premiums on a monthly basis as well as to determine
on which basis they preferred to pay. All but 81 of these families
were reported on this question. Four hundred ninety-eight indicated
that they could pay on a monthly basis, while 848 indicated that they
could, not. Of the 498 families which indicated that they could pay
on a monthly basis, 214 preferred uhe convenience of weekly payments.
Of the 848 families which could not pay monthly, 744 indicated that
they preferred payments on a weekly basis. (See table 36, p. 152.)

These results indicated the current preference, based upon con-
venience. Enumerators were not allowed to indicate the premiums
would be lower on a monthly basis. The great predominance of
families which find it convenient to pay on a weekly basis is evidence
of one of the great appeals of industrial insurance.

Premiums paid for 259 persons living away from their respective
families. As indicated elsewhere in this report, the families enumer-
ated paid the premiums on life-insurance policies written on the lives
of 259 persons who were not living with their respective families.
Such arrangements were found in a total of 171 families, 46 of which
families were receiving some form of relief. In table 37 these families
are shown classified according to the percentage of their respective
total insurance premiums paid on insurance covering personsv living
away from their families. A wide variation in the relative importance
of these payments is evident. Two families paid as much as 100
percent of their entire expenditure for insurance on policies of absent

' "If, while there is no default in the payment beyond the grace period, notice of the desire to pay pre-
miums directly to the company and through an agent is given to the company at any office which maintains
an account for receiving direct payment of premiums, then, after premiums have thereafter been paid
directly to such an office continuously for a period of 1 year without default beyond the grace period, the
company will, at the expiration of such year, return as an allowance for such direct payment, a sum equal
to 10 percent M the total of the year's premiums so paid." Quotation from the Metropolitan Industrial
Department Rate Book. Part 12, R. 5906, 6121.



CONCENTRATION OF ECONOMIC POWER 55

persons. However, there is concentration of families between 20
percent and 30 percent and over half of these families pay less than
20 percent upon absent persons.

Noncontributory and partially contributory insurance. Of the

10,150 insurance policies found in force in the families enumerated
there were 670 policies representing $501,218 of insurance upon which
the full premiums were not being currently paid out of the incomes of
the families respectively involved. The bulk of this (over 82 percent)
is represented by insurance, generally group insurance, arranged for by
employers in behalf of their employees. There were 134 certificates
or policies representing $123,345 of insurance on which the families
of the insured paid nothing. In addition, there were 251 certificates
or policies for an amount of $294,150 upon which employees con-
tributed part of the premium.

The balance of the insurance — that represented by 285 policies for
an amount of $83,732 — was entirely paid-up. This insurance was of
two classes, industrial and ordinal . Of the industrial there were
55 policies upon which the entire premium had already been paid; 9
policies in force as paid-up whole life for reduced amount; and 192
policies classified as "extended term," upon which no premiums were
being paid. In the case of industrial insurance, paid up or extended
insurance usually arises merely as a result of nonforfeiture benefits —
not by exercise of options. The latter two groups of policies had
arisen as a result of the exercise of options under nonforfeiture pro-
visions of the policy contracts. There were 24 ordinary policies for a
total amount of $21,182, classified as paid-up, and 5 ordinary policies
for an amount of $5,000, classified as extended term. (See table 38,
p. 153.)

Use of visiting nurse service. Roth the Metropolitan and the
John Hancock offer visiting nurse services free to their industrial
policyholders. In an attempt to discover the extent to which policy-
holders had availed themselves of this service a question concerning
its use was included in the schedule. 4

The answers to this question (table 39) were tabulated separately
for nonrelief and relief families, and, in each group, families were
further subdivided on the basis of economic status. Of the 1,216
eligible families which replied to this question, 515, or 42 percent, had
at some time made use of the nursing services. Relief families ap-
peared to have availed themselves of this service to a slightly greater
degree than the nonrelief families. When the families are examined
with respect to their economic status it appears that the poorer
families made more use of the nursing services than those r whose
incomes were higher. For example, of the nonrelief families 28.34
percent in the high-income group and 53.23 percent in the low-income
group had made use of the visiting nurse service

Use of life insurance and other savings institutions by families
enumerated. It is recognized that life-insurance companies differ in
many respects from such institutions as mutual savings banks, and
that insurance premiums paid by policyholders are not the same as
savings deposited in the bank. Nevertheless, the savings feature is
frequently stressed in the sale of life insurance and certain kinds of

' When the schedule was drafted it was thought that this service was offered solely by the Metropolitan.
Before enumeration started it was discovered that the John Hancock also offered this service. Verbal
instructions to the enumerators directed them to ask the question of families insured in both of
these companies.

2.-507S3 — 10 — No. 2 5



56 CONCENTRATION OF ECONOMIC POWER

policies, particularly endowment policies 6 (and to a considerable
extent limited payment life policies) are purchased primarily as means
of accumulating savings.

In order to determine the relative extent to which the families
included in the survey depended upon life insurance in comparison
with other forms of savings institutions, a question directed toward
this point was included in the schedule. Families were asked which,
if any, of such institutions as savings banks, savings departments of
commercial banks, cooperative banks, postal savings, or credit unions,
were used by any members of the family. All but 100 of the 2,132
families answered this question. The results of this inquiry are
summarized in table 40, in which families are shown classified accord-
ing to economic status. It is at once apparent from the figures that
economic status has a direct bearing upon the prevalence with which
families reported using savings institutions. In the group as a whole
only 13.5 percent of the families in the lowest-income group and 64.1
percent of those in the highest-income group used financial institu-
tions other than life insurance. On the other hand, 69 percent of
the families in the lowest-income group and 89 percent of the families
in the highest-income group were insured. It is thus apparent that
the lower the family income the greater is the extent of dependence
upon life insurance. 6

In the group as a whole, 78 percent of the families were using life
insurance, while only 30 percent of the families were using any insti-
tutions other than life insurance for the accumulation of savings.
There were only 466 families which were not insured at all, but 1,431
families reported that none of their members made use of the other
types of formal savings institutions. Whereas 1,056 families held
insurance and no other form of savings, there were only 60 uninsured
families which made use of these savings institutions. These facts
stress the predominant importance of life insurance in the families
included in the survey. These families rely upon life insurance to a
far greater extent than they do on all other forms of savings institu-
tions combined.

s It was shown (p. 42) that 42.2 percent of all industrial premiums are paid on endowment policies. Refer-
ence to table 10 will show that 55.78 percent of all industrial endowments were written on the lives of children
under 10 years of age. where presumably the savings aspect has its greatest appeal.

• It was shown earlier (p. 20) in this report that the lower the economic status of the family the greater is
the relative importance of industrial insurance.



CHAPTER VI
Case Studies: Insurance Programs of Selected Families

Criteria for Judging a Family's Insurance Program —
Classes of Insurance — Plans of Insurance — Family
Members Insured — Illustrations of Various Family In-
surance Programs.

In order to appraise critically the kinds and amounts of insurance
found in force in a particular family it is necessary to know a great
many facts about the family and its members. Life insurance is so
intimately tied in with the existence and ultimate objectives of a family
that one must know not only the number of family members, their
sex and age, but also their capacities, their desires and their expecta-
tions with respect to the future. It is necessary to know what re-
sources the family possesses, the nature of its income and the prospect
of its stability. In addition, consideration must be given to the occu-
pation and health of the family members, as these may indicate whether
or not they are insurable.

It is obvious that the wide variation existing among families makes
it impossible to set forth categorically the specifications for an insur-
ance program that would have universal application. However, for
a family on relief or one with income barely sufficient to provide food,
clothing and shelter, two general principles can be stated which should
enable one to judge whether or not such a family's insurance is well-
planned. These principles are based on the relative cost of insurance
and the distribution of the insurance on the various members of the
family.

The first principle is that the individual should not commit himself
to pay more premiums than he may expect to be able to continue.
Lapsation which results from attempting to carry too heavy a premium
burden is very costly. From this it follows that in the families about
which we are chiefly concerned the individual should avail himself of
the least expensive class of insurance for which he is eligible and which
his financial circumstances warrant.

Evidence was presented in the hearings 1 that showed the wide
difference in the cost of ordinary and industrial insurance and the
differences in the costs of insurance policies written on different plans.
As among classes, little will be said of fraternal insurance. It is
relatively insignificant in amount and is available only to a limited
number of individuals. Group insurance is also relatively unimportant
in amount. It, too, is generally available only to individuals who
happen to be employed by those business concerns that have deemed
it a wise labor policy to purchase wholesale insurance for their em-
ployees. In most instances it is probable that individuals would be
ill-advised not to avail themselves of the protection of a group policy

1 Part 12, Exhibit Nos. 1004, 1034-1037.

57



58 CONCENTRATION OF ECONOMIC POWER

if such an opportunity were open to them. It is also probable, inas-
much as the continuation of protection at the low cost of a group policy
depends upon the continuity of employment with a particular em-
ployer, that it would be unwise for a family to depend entirely on


1 2 3 4 6 8 9 10 11 12 13 14 15 16 17 18 19

Online LibraryUnited States. Temporary National Economic CommittInvestigation of concentration of economic power; monograph no. 1[-43] (Volume no. 2) → online text (page 6 of 19)