The sun. [volume] (New York [N.Y.]) 1833-1916, 1905-08-01
5THillEE spN, fUEspE Ku6uST n 116jS.
THE UNITED STATES GOVERN.
MENTsAND LIFE INSURANCE.

THE UNITED STATES GOVERN.
NENTy AND LIFE INSURANCE.
Mr.. James NJ. Book on Federal Regula.
tion.
From he North American Repiev for August
Without awaiting the recognition Of Con-
gressional enactment or executive order,
insurance. through the agencies Of steam
and electricity, has natonalized itself.
Il has overieaped territorial boundaries
and outgrown the supervisory power of the
individual States. and President Roosevelt,
therefore, only recognized an established
economic condition rather than constitu-
tonal theory whom. in his last message to
Congress, he said:
The business OF insurance vitality Affects great
MAN OF the people OF the United States, and 10
national and nat local In ~ application. II involves
multitude Of transactions among the people OF the
diflerent States, and between American companies
and forcign 0overnmsnts. I urge that the Con.
gress carefully oonAder whether the power OF the
Be extended 70 cover interstate transactions In
insurance.
More recently In discussing the unhappy
difficulties In the Equitable Life Insurance
Company, which have 90 strongly empha-
oA0OA WIG Sc1oity Va bih8AO ouP0A NAocAy
power, the President again said forcibly,
although unoficially:
II seems 70 me thas what has occurred 70 the
Equitable Life furnishes another argument for
effective Supervision by the national Government.
such supervision can be obtained. ovor all these
great Insurance corporations which DO an inter-
state business.
There are peculiar reasons why insurance
should DO submitted to strict governmental
supervision. Its success depends upon
multiplicity Of contracts in order to estab-
lish q safe average, and even when con-
Quoted on the mutual plan, as distinguished
from q Joint stock company, such multi
plicity Qn the case Of the Mutual Life In
surance Company OF New York over co.,
900 policyholders) necessarily makes It inn
possible for the policyholders to exercise
any but an indirect control over the affairo
Of tho company. Moreover, many Of the
contracts are conditioned upon the death
Of ono Of the contracting parties, and 1t Is
eminently proper that the State should
supervise the faithful execution Of the con-
tract by the surviving party. The bust
meas requires such special knowledge that
few. II any. have the training necessary to
conduct 1t wisely. The expectancy Of life
must be determined scientifically. Tho
earning power Of money must be deter
mined In advance BY able economists. The
Investment Of enormous accumulations OF
assets requires financial skill and experience
Of the highest order. Tho intricate mathe-
NAUTICAL calculations require exceptional
actuarial skill. An inhnitesimRl fractional
variance In such calculations may mark
the difference between . sound proposition
and an illusory scheme. The collapse Of
DO many fratsrnal assessment societies
shows the danger to tho public Of unregu-
lated insurance, and, a. the public can
have neither the knowledge nor the aptitude
to solve for itself these intricate questions,
reasonable governmental supervision Is
not only desirable. but imperative. AL
most every civilized country has appreciated
this necessity. and, in almost all, the in
suranoe department is q bureau Of the de-
partment Of commerce.
The United States IL the only Govern
nent in which such power is decentralized
and permitted to remain In q constituent
State.
While many States have admirable in
surance departments, against whose con-
duct no just complaint can be made, yet in
others arbitrary power over foreign COM
panies has at times degenerated, as arbi-
trary power Is apt to do, into impudent
demands that are little better than official
blackmail. The burden Of expense has, In
many instances, exceeded all legitimate
bounds. In the year 1902 twenty-eight
States received from insurance companies,
exclusive OF property taxes, over 5000 900
in excess OF the cost Of such supervision.
One single State is said TO have collected
moro than the Federal Government re-
in the country; and this unnecessary bur-
den. aggregating each year 100000
ultimately falls upon the policyholder and
Is imposed not upon money making, but
q money saving enterprise. whose lofty
purposes and benefcent results ought to
relieve 1t OF any form OF license taxation
A tax upon the moral obligation Of insur-
ance IL little better than tax on morality.
It burdens the policyholder in the recog-
milton OF moral duty to safeguard those
dependent upon him from the injurious
consequences OF his death. It lie certainly a
tax on thrift. The arbitrary expenses Of
inquisitorial examinations. which too often
rest, - to amount, in the discretion Of an
insurance superintendent. Is form Of Turk
ish satrapy which 10 utterly at variance with
the spirit Of our institutions. For nearly
half a century the insurance companies
have vainly protested against the intoler-
able burden Of such vassalsse to many
masters, and they naturally welcome the
declaration Of President Roosevelt that the
time has come for the Federal Government
to assume the duty Of supervising this i'm
portant and benehoent fundamentally Of
modern life
The difficulty is q legal rather than an
economic one Few reasonable men differ
with respect to the advantage OF having one
central supervising authority rather than
many, and the Federal regulation Of in
surance would have come to pass many
years ago but for the decision Of the ST.
preme Court In the case OF Paul vs. Vir-
ginia, in the year 1893. The validity Of
State statute requiring foreign insurance
companies to obtain a license as a pre-
,<-,,;o;t IN IN hi N oaa waa thare in Question