United States. Temporary National Economic Committ.

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

. (page 9 of 19)
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insured for an average of $683 of insurance each. The average in-
sured family spent 4.9 percent of its income for insurance premiums,
with amounts spent ranging as high as 24 percent of income in the
case of some families. Policyholders were found to be of both sexes,
every age, every occupation, and to bear every conceivable relation to
the family group. The extent to which children were insured and
insurance carried on persons not living in the immediate family gave
indication of the widespread use of life insurance among these low-
income families.

Further evidence with respect to the social and economic importance
of life insurance was produced in the statistics which showed that life

75



7g CONCENTRATION OF ECONOMIC POWER

insurance is the principal and in many instances the only means of
savings for these low-income families. Of all the families interviewed
as many as 66.1 percent used life insurance as the sole means of accu-
mulating their savings.

It was found that industrial insurance is by far the most important
form of insurance sold to the type of family covered by this survey.
Measured in terms of the number of insured persons there were 79.41
percent who carried industrial insurance. In terms of the number of
families insured over 85 percent carried industrial insurance. Seven
hundred and one families carried no other form of insurance except
industrial insurance. Of all the life insurance in force four out of
every five policies were industrial policies and such policies accounted
for 49.6 percent of the total amount of insurance in force. Sixty-four
percent of the amount paid in premiums was paid as premiums on
industrial policies.

Life-insurance companies have a great social responsibility to
provide their services as efficiently and equitably as possible. In
addition there is a responsibility which rests particularly upon com-
panies writing industrial insurance. In view of the great reliance of
the low income families upon this type of insurance, companies selling
industrial msurance have an obligation to see that these families are
sold the Iliads and amounts of protection best suited to their needs.
In this type of family the amount which can be set aside for premiums
is small aud the great need of this group for better housing conditions,
more food, better clothing and greater opportunities for education
must be recognized. In this type of family, income is unusually
subject to fluctuations and if too large a percentage of the family
income has been allocated to insurance premiums, the result is likely
to be lapse and loss of protection. This survey suggests that the in-
dustrial companies have fallen far short of achieving the ideal. In
brief, a situation is disclosed which demonstrates as far as these 2,132
families are concerned that there is an overloading of policies in many
families, that frequently a higher percentage of the family income is
being spent for insurance, that insurance coverage among the family
members is unevenly distributed, that expensive forms of endowment
and limited payment policies have been placed in families when the
needs of the policyholders could often be served better with a less
expensive type of policy and that as a result of this unsound distribu-
tion and the changing economic circumstances of the policyholders
there is much lapsing of policies. The situation is made particularly
acute by the fact that these tendencies appear more prevalent the
lower the economic status of the family.

The high percentage which premiums bear to the total incomes
of these families reveals other abuses prevalent in the distribution
system. That low-income families, where the average per family
member income is in the neighborhood of $300, should be spending as
much as 24 percent of that income for insurance premiums, is inex-
cusable and it is startling to realize that £.59 percent of the nonrelief
families and 8.67 percent of the relief families spent 10 percent or more
of their income upon insurance premiums.

An examination of the insurance programs of the 1,666 insured
families disclosed but very few cases which from the point of view of
plan of policies, relative cost and distribution of coverage among



CONCENTRATION OF ECONOMIC POWER



77



various members of the family group were entirely satisfactory. 1 This
is not to say that other cases do not exist within this group which are
free of unfavorable criticism from the point of view 01 a planned pro-
gram. Occasionally the lack of insurability of certain members,
religious considerations, or an unwillingness on the part of the policy-
holder proper to follow recommendations which possibly were re-
ceived from his agent may have had some bearing and these facts
cannot be weighed on the basis of the statistical information. The
lack of adequate planning may be partially accounted for by the fact
that 21.3 percent of the families are serviced by industrial agents
representing two or more companies; that 84 families carried more
than 15 policies each at the same time, with numbers ranging as high
as 43 policies in the case of one family ; and that insurance is sold in a
great variety of different combinations both as to classes and plans.
The failure of the distributing system to give proper service to the
insured is clearly demonstrated in the many families where the bread-
winner was inadequately insured. The breadwinner who earns the
principal income of the family is the person whose loss will be most
keenly felt by the family. It is against the loss of this individual's
income that the family's insurance program should be chiefly directed.
In view of these considerations it was startling to find that in the
insured families 11.58 percent of the chief breadwinners and 20.21
percent of the "other breadwinners" were not insured at all, and that
from among 1,071 families which carried industrial insurance there
were 730 cases where the percentage of premiums paid by the family
for insurance on the life of the chief breadwinner was less than 50
percent of the total. Such a tremendous preponderance of mal-
adjusted cases was found that there can be no doubt that the dis-
tributing mechanism for industrial insurance is defective. The over-
emphasis upon endowment and limited-payment policies, particularly
on the lives of children, the failure adequately to insure breadwinners,
the great number of lapsed policies found in many insured families
numbering as high as 35 policies in the case of one family interviewed,
and the sale of insurance to families on relief bear witness to the
weaknesses in the system as it now exists. The matter is made far
more serious by the ever-changing economic circumstances of low-
income families and the apparent absence of any techniques for satis-
factorily readjusting insurance programs in the light of these changing
circumstances.

1 It will serve no useful purpose to reexamine here startling case histories presented in the body of the
report. The following summary will serve to recall these cases to mind:



Case No-.—


Average an-
nual income
per family
member


Number of
policies


Percent of
income paid
for premiums


Percent of
premium on,
chief bread-
winner


1


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264
312
425
422
113

85
142
138

94
364


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13
23
13
43
19
10
11
11
10
12


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12.5
5.4
5.8
10.9
16.4
6.5
18.1
4.8
4.6
8.4


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3.





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5.

6


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15.0


7...


19.6


8..


28.0


9


22.0


10


39.0


11


45.9







78 CONCENTRATION OF ECONOMIC POWER

The above observations are based solely upon a review of the statis-
tical information obtained through the field survey. No final con-
clusions will be offered until the publication of an over-all report on
the entire life insurance study. The report, which is to be released
later, will relate the material made available by the survey with other
facts developed in the course of the hearings before the committee,
including the testimony concerning lapse and agency practices.



APPENDIX I
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APPENDIX 2
Illustration of Letter Sent Families to be Enumerated

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON

Field Survey Office

Harvard Law School

Cambridge, Mass.



Dear

The block in which you live has been selected as one
which has families representative of the people of
Massachusetts .

Within a few days an employee of the United States
Government will call at your home. He will present
his credentials and will explain to you the nature
of the study we are making and why we need your help
in obtaining the information for which he will ask
you.

We hope it will be convenient for you to see our
representative and we shall appreciate your coopera-
tion in answering his questions.

Very truly yours,



Anne Page, Director
Field Survey

82



APPENDIX 3
Copy of Credentials Carried by Enumerators

COPY OF CREDENTIALS CARRIED BY ENUMERATORS



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UNITED STATES OF AMERICA

SECURITIES AND EXCHANGE COMMISSION

Washington, D. C.



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Online LibraryUnited States. Temporary National Economic CommittInvestigation of concentration of economic power; monograph no. 1[-43] (Volume no. 2) → online text (page 9 of 19)