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 the United States on the use of the text. 
 
 http://www.archive.org/details/cu31924018726806 
 
ADDRESSES 
 
 AND PAPERS ON 
 
 LIFE INSURANCE 
 
 AND OTHER 
 
 SUBJECTS 
 
 BY 
 
 JOHN F. DRYDEN 
 
 President of The PrudentiaTTnsurance Co. of America 
 and United States Senator from New Jersey 
 
 1902-1907 
 
 NEWARK, NEW JERSEY 
 
 THE PRUDENTIAL INSURANCE COMPANY 
 OF AMERICA 
 
 MCMIX 
 
ISV^'^^V 
 
 THE PRUDENTIAL PRES 
 
INTRODUCTION 
 
 |he life insurance business in the United 
 States of to-day has, within a single gen- 
 
 jeration, attained to proportions wholly 
 unanticipated in 1875, when The Pru- 
 
 'dential came into existence as the first 
 institution to transact Industrial insur- 
 
 [ance in America. On the thirty-first of 
 December of that year the number of legal-reserve Ordinary 
 policies in force was only about 800,000, for the sum of 
 approximately ,^2,016,000,000, in contrast with 25,852,405 
 Industrial and Ordinary policies, for ,^14,518,952,277, in 
 force on December 31, 1908. This enormous and commend- 
 able progress has, in no small measure, resulted from the 
 concurrent development of Industrial insurance, through 
 which a vast number of the American people have learned 
 systematic habits of saving and have come to realize the 
 unquestionable value of family protection through life in- 
 surance with legal-reserve companies. The first Industrial 
 insurance policy in America was issued by The Prudential 
 on November 10, 1875, and out of the most humble begin- 
 nings Industrial insurance has developed into a social insti- 
 tution of universal importance, making effectively for human 
 betterment. Most of the papers and addresses which are 
 here reprinted have to do with the inception, progress, and 
 
Introduction 
 
 results of Industrial and Ordinary life insurance. There are 
 included, however, several papers on insurance economics, 
 taxation, and supervision by the State and Federal govern- 
 ments, and to these have been added a memorial address 
 on Abraham Lincoln and my address in the United States 
 Senate on the Panama canal. 
 
 The address on " The Inception and Early Problems of 
 Industrial Insurance " was contributed to the semi-cen- 
 tenary issue of The Insurance Monitor in 1 905. The 
 limitations of space precluded adequate consideration of the 
 historical and biographical facts connected with the found- 
 ation of The Prudential, emphasis having been placed upon 
 the social and economic conditions giving rise to the success- 
 ful development of a new thrift institution in America. 
 For a more extended account, however, the "History of 
 The Prudential," published in 1900, may be consulted, but 
 even in that work only scant justice has been done to the 
 founders of the Company, who risked everything in what, 
 at that time, was certainly a precarious venture in a new 
 and untried field of insurance. It is to be hoped that some 
 day a full account will be published, with biographical 
 details of the early stockholders, directors, and executive 
 officers, who, in hearty co-operation and with an abiding 
 faith in its future, made of Industrial insurance a practical 
 business success, a beneficent social institution, and of The 
 Prudential one of the foremost life insurance companies in 
 the world. 
 
 The review of "A Quarter Century of Industrial Insurance 
 in the United States" was contributed to The Record, a New 
 York insurance periodical, in 1902. In this address were 
 considered briefly the progress which had been made since 
 the founding of The Prudential, in 1875, and the remark- 
 able results which had been achieved in the face of serious 
 financial and other difficulties. After twenty-five years of 
 unremitting effort, and by painstaking attention to matters 
 
Introduction 
 
 of minute detail of administration, the companies transact- 
 ing Industrial insurance had attained a position where the 
 future success of the business was clearly beyond a ques- 
 tion of reasonable doubt. There were then about eleven 
 million Industrial policies in force in the United States, 
 which, by 1909, had increased to nearly twenty millions. 
 With pardonable pride public attention was directed to the 
 fact that The Prudential had been honored by the inter- 
 national jury of the Paris Exposition with a gold medal, 
 specifically conferred upon it in recognition of the results 
 achieved in the Industrial department, concluding with the 
 remark that " to the general public endorsement of In- 
 dustrial insurance as an effective method of family protection 
 there has thus been added the unqualified approval of an 
 international jury of experts, not only of life insurance as 
 such, but of Industrial life insurance in its relation to public 
 welfare and social betterment." 
 
 In 1904 Yale University inaugurated a course of lectures 
 on insurance before the students of the senior class, and to 
 this I contributed an address on " The Social Economy 
 of Industrial Insurance," which was subsequently reprinted 
 and widely distributed. In this address the place of Indus- 
 trial insurance in practical economics and the utility of this 
 form of wage-earners' protection as a modern thrift institu- 
 tion were considered at some length, emphasis being laid 
 upon the value of Industrial insurance as a preventive of 
 pauperism and as an effective aid in the protection of 
 the family against the ever-present contingency of untimely 
 death. Attention was also directed to the remarkable 
 development of Ordinary insurance through the agents 
 of Industrial insurance companies, initiated successfully 
 by The Prudential in 1886. Perhaps no feature of the 
 business is deserving of more thoughtful and sympathetic 
 consideration than the unquestionable value of Industrial 
 insurance as a method of teaching systematic habits of 
 
 3 
 
Introduction 
 
 saving and the value of small but secure investments. The 
 conclusions advanced were based upon many years of care- 
 ful observation of the actual conditions under which wage- 
 earners progress, gradually but surely, to a higher and more 
 secure economic position ; and as an aid in this direction I 
 held that Industrial insurance had been of incalculable bene- 
 fit to the nation at large. 
 
 During 1906 the New Jersey Legislature appointed a 
 select committee of the Senate to investigate life insurance 
 companies. My evidence before the committee included 
 an extended statement of the practice of Industrial insur- 
 ance in all its details as gradually improved and perfected 
 in the course of years and in the light of an increasing and 
 considerable business experience. The statement also con- 
 tained observations upon the various and many suggestions 
 which had been made from time to time for radical changes 
 and innovations in Industrial insurance, and a brief account 
 of post-office life insurance as practiced in England and its 
 complete failure in actual experience. The review is 
 a comprehensive answer to practically every controversial 
 question raised in connection with public discussions of 
 Industrial insurance, but, among other points, reference was 
 made to the insurance of children and the fact that this 
 practice had the official and unqualified approval of the 
 foremost insurance commissioners and experts of the period. 
 In my concluding remarks to the committee I urgently 
 suggested that they make their investigation as exhaustive 
 and complete as possible, so that the disturbed public confi- 
 dence in life insurance institutions might be fully restored; 
 but, conscious of the interested, partial, and often far from 
 honest motives attacking the business of Industrial insurance, 
 I said: 
 
 "While we cordially welcome any impartial inquiry into 
 our affairs, we have opposed, and we shall continue to oppose, 
 the unworthy efforts of so-called reformers to cast discredit 
 
Introduction 
 
 upon life insurance management and methods in this State. 
 We do not purpose to allow men actuated by selfish and un- 
 worthy motives wilfully and recklessly to destroy or seriously 
 to injure a great and beneficent institution, which it has 
 taken us thirty years to build up. But, for the legitimate 
 object of any impartial, comprehensive, and qualified inquiry, 
 we stand ready to meet any demands which you may make, 
 furnish any facts which you require, submit any record 
 which you wish to inspect, confident that, after you have 
 completed your work, your views will coincide with those of 
 our policyholders, that The Prudential has, from the outset 
 to the present time, been managed with rare skill, with abso- 
 lute integrity, and for the best interests of its millions of 
 policyholders. ' ' 
 
 The select committee fully accepted these views, and in 
 their final report there are no reflections upon the system of 
 Industrial insurance, nor any strictures upon the opinion ex- 
 pressed at the time, that this form of insurance has now 
 by experience been proven to be the only really successful and 
 effective form of wage-earners' insurance in America. 
 
 The world-wide problem of an adequate provision for 
 the aged poor, as made manifest by the many public dis- 
 cussions of State pensions and government and State 
 insurance, suggested to The Prudential the issue of a new 
 policy, adapted to the needs of people of moderate means, 
 whereby at least a small but absolutely certain provision 
 could be made for a definite period, or for the lifetime of 
 dependent survivors. The Prudential having commenced 
 the issue of Monthly Income policies in January, 1908, 
 upon the urgent request of The American Underwriter I 
 contributed to the September issue of that publication an 
 article on "A Method of Providing with Certainty for 
 Dependent Old Age." Life insurance has its inherent 
 limitations, and it is out of the question that voluntary 
 methods of insurance can ever approach in scope or intent a 
 
 5 
 
Introduction 
 
 governmental policy of labor protection against widely 
 different contingencies such as are comprehended under the 
 German system of compulsory insurance. The economic 
 position of the American nation would seem to preclude the 
 necessity for such a policy, at least for many years. Mean- 
 while, as a much more desirable alternative, legal-reserve 
 life insurance, both Industrial and Ordinary, continues to 
 promote successfully the encouragement of thrift and secures 
 effectively the desired self-protection against the financial 
 problems arising out of the uncertainties of human life. If 
 life insurance is ever to become a universal provident institu- 
 tion, I am confident that the Monthly Income policy of The 
 Prudential will prove of immeasurable value in bringing 
 about the ultimate realization of this ideal. 
 
 The progress of American life insurance, as said at 
 the outset, has not only been remarkable, but truly 
 astonishing when comparison is made with the corres- 
 ponding progress in population, wealth, trade, industry, 
 banking, transportation, and other evidences of material 
 advancement. At the same time, when the actual extent of 
 the business of legal-reserve life insurance is subjected to a 
 critical analysis, it is found that there is still a large propor- 
 tion of the population who are not insured at all, or who 
 are insufficiently insured and therefore not adequately pro- 
 tected against the financial consequences of premature death 
 and dependent old age. In 1908 I contributed an article 
 on "The Problem of the Uninsured" to the New York 
 Commercial, in which the number of persons insured under 
 Ordinary policies was estimated at four and a half millions, 
 and, adding to this twelve and a half million persons holding 
 Industrial policies and subtracting half a million of persons 
 estimated to hold both Industrial and Ordinary policies, the 
 fact was brought out that in an aggregate of nearly eighty- 
 six millions of estimated population in 1907, only sixteen 
 and a half million persons were insured at that time with 
 
Introduction 
 
 legal-reserve life insurance institutions. The object was to 
 draw attention to the vast opportunities for successful agency 
 effort and the corresponding duty of every insurance com- 
 pany to bring the knowledge of life insurance beneficence 
 home to the people most in need of this form of protection. 
 
 A commercial enterprise of such magnitude as life insur- 
 ance must necessarily offer many and attractive opportu- 
 nities as a business career. In 1903 the New York Tribune, 
 with commendable enterprise, published a series of articles 
 on "Careers for the Coming Men," to which I contributed 
 a brief address on life insurance as a career. In this article 
 an outline was presented of the essential facts of insurance 
 as a business from both the office and the field point of view, 
 briefly stating the requirements for a successful career in the 
 many departments into which the business of insurance is 
 usually divided. My observations and suggestions were based 
 upon many years of practical experience in the administra- 
 tion of a great life insurance institution and upon a personal 
 knowledge of the success which has been achieved by men 
 in the office and field administrations of The Prudential. 
 
 The economic aspects of life insurance have not 
 received extended consideration from American economists 
 and experts in public finance and taxation. Of all the 
 grave and serious problems which confront American 
 life insurance companies at the present time there is not 
 one that transcends in practical importance the question of 
 taxation. In an address on this subject delivered before the 
 Association of Life Insurance Presidents, in 1908, there was 
 presented for the first time the startling contrast between life 
 insurance taxation in America and in certain foreign countries, 
 in particular the German Empire. The annual tax burden 
 on American life insurance in 1908 exceeded eleven million 
 dollars, equivalent to over two per cent, of the premium 
 income. My plea was for a systematic and thoroughly well- 
 organized effort on the part of all the companies, through 
 
Introduction 
 
 the education of their poUcyholders and their co-operation, 
 to bring about on the one hand a reduction in the tax rate 
 and on the other a well-organized resistance to eflForts on 
 the part of the different States to increase it. I suggested a 
 minimum average tax of one per cent, of the gross premium 
 income, which still would be proportionately very much 
 greater and more of a burden upon the policyholders than 
 the corresponding taxes paid by Ufe insurance companies in 
 Germany. My remarks concluded with the statement that 
 "a uniform premium income tax of one per cent, would be 
 a practical working basis which would more than repay the 
 States for their supervision and protection, and would 
 materially decrease the cost of life insurance to the millions 
 of American policyholders." Acting upon the suggestion, 
 a committee of the Association was appointed, with instruc- 
 tions to devise methods and means by which the suggestion 
 could be carried into practical eflFect. 
 
 Closely related to the problem of over-taxauon is the 
 equally serious problem of over-legislation and over-super- 
 vision of insurance companies in the United States, l-or 
 more than forty years the subject of Federal regulation of 
 insurance has been a matter of pubhc discussion, and as 
 early as 1868 a bill had been introduced into Congress 
 providing for the supervision of life insurance companies 
 by the Federal government. The bill introduced did not, 
 however, become a law, and subsequent efforts in this direc- 
 tion proved equally barren of practical results. After my 
 election to the United States Senate, in 1902, 1 naturally took 
 an active interest in this question, to which I had given much 
 attention from the very outset of my connection with the 
 business of insurance. From time to time the urgency of 
 Congressional action had been brought to my attention by 
 high-minded and absolutely disinterested men, but on careful 
 consideration of their proposed measures it seemed to me 
 that a still more comprehensive statute could be framed, one 
 
Introduction 
 
 which, if ultimately submitted to the United States Supreme 
 Court for a decision as to its constitutionality, would not be 
 found wanting. The bill which I introduced in the Senate 
 aimed specifically at a thorough method of supervision 
 which would do away with the endless and costly multiplica- 
 tion of supervising duties on the part of the insurance de- 
 partments of the different States. At the same time, the 
 bill provided for a material increase in the power and control 
 of the government over the companies engaged in interstate 
 business, to secure on the one hand a larger amount of 
 publicity, and on the other a more rigid adherence to well- 
 framed statutory requirements. The bill was modeled as 
 nearly as possible on the line of the national banking act, 
 which for more than forty years had been found eminently 
 successful, and all the other legislation extending the power of 
 the Federal government over corporations engaged in inter- 
 state commerce was taken into consideration. The object 
 and scope of the bill was fully explained in an address on 
 "The Regulation of Insurance by Congress," before the 
 Boston Life Underwriters' Association in 1904, and the 
 subject was subsequently amplified in an address on "The 
 Commercial Aspects of Federal Regulation," delivered at the 
 annual meeting of the Newark Board of Trade on January 
 18, 1906. The first-mentioned address included much histor- 
 ical matter pertaining to the various efforts made to enact 
 a Federal statute for the national supervision of life 
 insurance companies, while the second presented figures 
 and facts to prove that the bill was demanded by 
 the commercial interests of the nation at large. I had 
 taken pains, through extensive correspondence with com- 
 mercial bodies, banks, merchants, policyholders, and others, 
 to secure an impartial expression of public sentiment, 
 and that expression was not only emphatically and 
 unequivocally in favor of Federal regulation, but it 
 equally endorsed my point of view that insurance, by 
 
Introduction 
 
 modern conceptions, is an element of commerce, and as 
 such is within the meaning of the commerce clause of the 
 Constitution. While these efforts to secure the passage of the 
 bill mentioned were unsuccessful, largely because of the 
 disturbed state of the public mind on all matters pertaining 
 to insurance, resulting from disclosures in the New York 
 insurance investigation, I am confident that it is only a 
 question of time when the interstate business of our insurance 
 companies will be made subject to the effective regulation 
 and control of the Federal government. 
 
 The most important national question which required con- 
 sideration during my term in the United States Senate was the 
 final type of the Panama Canal. As a member of the Senate 
 Committee on Isthmian Affairs, I had an exceptional oppor- 
 tunity to become thoroughly familiar with both sides of the 
 controversy regarding the type of canal, and I became con- 
 vinced, after mature consideration, that a lock canal would be 
 decidedly more advantageous to the nation. I participated in 
 the debate on the question by the address, reprinted in this vol- 
 ume, on "The American Type of Isthmian Canal." In the 
 meantime the controversy has been revived, but it is fortunate 
 that we have in Mr. Taft a President thoroughly familiar with 
 both the theory and the facts of the whole problem, so that 
 there need be no apprehension that the plans for a lock 
 canal will be changed to the more costly and less feasible 
 sea-level proposition. I quote in this connection from a re- 
 cent article by President Taft, which, better than any words 
 of mine, defines the issue confronting the American people: 
 
 "The facts to-day are the same as they were when the lock type was 
 adopted, namely, that it would take at least $200,000,000 more of money and at 
 least five years more of time to construct the sea-level type of canal 150 to 200 
 feet in width ; that the canal when constructed would be dangerous for the 
 passage of the larger vessels ; and that the lock type of canal constructed at 
 $200,000,000 less in cost and five years less in time will be a better canal, a safer 
 canal, and one in which the time of passage for large vessels will be even less 
 than in the sea-level type. . . Meantime the canal will be built and com- 
 pleted on or before the first of January, 1915, and those who are now its severest 
 critics will be glad to have their authorship of recent articles forgotten." 
 
 10 
 
Introduction 
 
 No facts have been brought to my attention which would 
 warrant a material change of view on this important subject, 
 and I am more than ever convinced that the only practical 
 and feasible project for an Isthmian canal is the one to which 
 the nation is deliberately committed — an American project 
 based upon the opinion and experience of American engineers. 
 
 The short address on Abraham Lincoln and Alexander 
 Hamilton, delivered before the East Orange (N. J.) Republi- 
 can Club on the ninty-sixth anniversary of Lincoln's birthday, 
 February 12, 1904, is included as a permanent evidence of 
 my profound respect for both Lincoln and Hamilton as the 
 foremost types of American ideals in constructive statesman- 
 ship. A lifelong Republican and a firm believer in party 
 government and party responsibility, my course in public life 
 has been so profoundly influenced by the teachings of these 
 two men that it seems proper to give permanent expression 
 to my appreciation in this volume. It is not generally known 
 that Alexander Hamilton was the first to express the opinion 
 that the regulation of insurance was within the meaning of 
 the commerce clause of the Constitution, and to a not 
 inconsiderable extent my views on this subject have been 
 influenced by the argument of Hamilton in defending the 
 constitutionality of the United States Bank. The same 
 fundamental principles that make for enduring results in 
 statecraft apply to the administration of business, and the 
 influence of Lincoln and Hamilton on the acts of my public 
 life has extended to the conduct of the great institution which 
 I had the honor and privilege to estabhsh in 1875, under the 
 name of The Prudential Friendly Society, which was sub- 
 sequently changed to The Prudential Insurance Company 
 of America. Social institutions, like political institutions, 
 can endure only if there is economic justification for their 
 existence, and if they prove their social utility by successful 
 adaptation and re-adaptation to the ever-changing condi- 
 tions and circumstances of political and social life. As far 
 
 II 
 
Introduction 
 
 as it has been within my power I have tried to carry this 
 conviction into effect in every important act of my public 
 and business life, and the following addresses and papers 
 are, in a measure, a permanent record of what I have done 
 and have tried to do to realize the aims and ideals of my 
 earlier years. 
 
 Bernardsville, N. J. 
 October 13, 1909. 
 
 12 
 
CONTENTS 
 
 Chapter Page 
 
 Introduction i 
 
 I. The Inception and Early Problems of Indus- 
 trial Insurance 19 
 
 II. The First Quarter Century of Industrial 
 
 Insurance in the United States .... 47 
 
 III. The Social Economy of Industrial Insur- 
 
 ance 65 
 
 IV. The Practice of Industrial Insurance . . 85 
 
 V. A Method of Providing with Certainty for 
 
 Dependent Old Age 121 
 
 VI. The Problem of the Uninsured 133 
 
 VII. Life Insurance as a Career 145 
 
 VIII. The Taxation of Life Insurance in the 
 
 United States 161 
 
 IX. The Regulation of Insurance by Congress 175 
 
 X. The Commercial Aspects of Federal Regu- 
 lation of Insurance 201 
 
 XL The American Type of Isthmian Canal . .219 
 
 XII. Abraham Lincoln and Alexander Hamilton 277 
 
 Appendix 289 
 
 Index 317 
 
 15 
 
Chapter I 
 
 THE INCEPTION 
 
 AND EARLY PROBLEMS OF 
 
 INDUSTRIAL INSURANCE 
 
 PUBLISHED IN 
 
 THE INSURANCE MONITOR 
 
 1903 
 
THE 
 
 INCEPTION AND EARLY PROBLEMS 
 
 OF INDUSTRIAL INSURANCE 
 
 'he semi-centenary of the Insurance Monitor 
 suggests a brief review of the inception and 
 
 [ early problems of Industrial insurance, which 
 
 I may be said to have come into existence in 
 England in 1853, as the result of a pointed 
 
 •reference in a parliamentary report on assur- 
 
 ance associations.* This report, dealing with 
 
 the difficulties and shortcomings of the life insurance com- 
 panies of the period, had called attention to the great 
 need of the industrial population for a more adequate 
 and secure method of life insurance than had hitherto 
 been furnished by the burial clubs and friendly societies. 
 These societies had gradually increased in number, and their 
 membership in 1850 was estimated at three millions, but, 
 however useful and sound as social institutions, making for 
 social betterment and promoting human intercourse, from an 
 insurance point of view they were indeed in a most unfortu- 
 nate predicament. Social in their origin, these societies had 
 in the course of years assumed the character of mutual as- 
 surance societies, which, in addition to their philanthropic 
 objects, assured to their members a sum certain, payable in 
 case of sickness, incapacity in old age, or death. Organized 
 almost exclusively by workingmen not familiar with mathe- 
 matics or vital statistics, the benefits offered to members 
 were invariably out of proportion to the periodical payments 
 exacted in return, and less than a generation was usually suf- 
 ficient to bring a society into bankruptcy, with resulting un- 
 told misery and unhappiness to the surviving membership. 
 Yet so despotic is custom and so ready is the average man to 
 
 * Report from the Select Committee on Assurance Associations, London, 1853, p. 6. 
 
 19 
 
Life Insurance and Other Subjects 
 
 pay for his own experience, that, regardless of the failure of 
 the old, new societies, with but slightly improved tables, would 
 be formed to take their place; a common indifference to the 
 fact that "There is no rule in moral mathematics that can 
 convert three times three shillings into fifteen." 
 
 The management of the Prudential Mutual Assurance, 
 Investment and Loan Association, a company organized in 
 1848 for the transaction of Ordinary business, took notice 
 of the recommendation of the Parliamentary Commission, 
 and in the year following, that is, 1854, commenced the issue 
 of Industrial policies, or of contracts for small amounts of 
 insurance with premiums payable weekly and collected from 
 the houses of the insured.* The necessary tables of pre- 
 miums were framed with exceptional actuarial skill, every 
 phase of the subject was carefully inquired into, and so well 
 was the preliminary work done that even now, after fifty 
 years, Industrial insurance principles and practice in all 
 essentials conform to the original conception of the managers 
 of the Prudential in 1854. If want of security had been 
 the chief defect of the old system of workingmen's insurance, 
 the new system was developed in accordance with established 
 laws of mortality and finance; and while failure had been 
 the rule in the old, security for the payment of the contract- 
 ual obligations was made the cornerstone of the new. 
 
 The first ten years of the history of the Prudential Assur- 
 ance Company (this title having been adopted in 1861) form 
 a most interesting chapter in the wonderful story of life insur- 
 ance. In the face of much opposition and open hostility, 
 the company carried forward its plan of extending real life 
 insurance to the masses, in active competition with a primi- 
 tive but slowly passing type of organization. By January i, 
 1864, it was evident to the careful observer that Industrial 
 insurance in England had come to stay. The income of the 
 company was about sixty thousand pounds, which for the time 
 
 * History of the Prudential Assurance Company, London, 1880, p. 3. 
 
 20 
 
Early Problems of Industrial Insurance 
 
 was a very considerable sum, and it required no special in- 
 sight or discernment to anticipate a time when the new form 
 of thrift would become general and include the larger part 
 of the whole population. The secret of success was simple 
 enough — the company made no promise which it could not 
 keep, and when policies became claims they were promptly 
 paid. 
 
 Only occasional references to the epoch-making experience 
 of the English Prudential are met with in American insur- 
 ance periodicals of this period. The Insurance Monitor, in 
 i860, had called attention to the need of life insurance protec- 
 tion for the poor, but without advancing a definite plan by 
 which this much-to-be-desired end could be attained. Two 
 events, however, occurred, which brought the name and success 
 of the London company quite prominently to the notice of the 
 American insurance managers and others interested in the 
 development of life insurance in this country. A prominent 
 London company, the International, which for some years 
 had been transacting business in Massachusetts, found itself 
 in difficulties with the Insurance Commissioner, Mr. Elizur 
 Wright, who insisted on determining its solvency by means 
 of a net valuation of its liabilities. By this method the com- 
 pany was found insolvent, and after a very animated con- 
 troversy, in which some of the ablest actuaries of both 
 countries participated, it retired from business, the English 
 portion of its outstanding policies being reinsured with the 
 Prudential of London. 
 
 The controversy, as such, but in particular Mr. Wright's 
 critical review of British life insurance methods, in his annual 
 report for 1865 and subsequent years, did much, if not most, 
 to draw attention to the wonderful success of the Prudential, 
 and to the curious, but extremely interesting, opposition 
 to the company by the Chancellor of the Exchequer, 
 Mr. Gladstone. While as early as 1773 attempts had been 
 made to induce the British government to undertake the 
 
 21 
 
Life Insurance and Other Subjects 
 
 business of life insurance, it was not until 1853 that an actual 
 effort was made in this direction.* No practical results had 
 followed, however, and during the eleven years ending with 
 1864 not a single proposal had been received. The almost 
 instantaneous success of the post-office savings banks, how- 
 ever, which had been established in 1861 to take the place 
 of private institutions in a more or less insolvent condition, 
 led Mr. Gladstone to assume the possibility of a corres- 
 ponding opening for government life insurance. Accord- 
 ingly, after much thought and in the face of a strong opposi- 
 tion, a measure was carried and became a law in 1864, by 
 which it was made possible to secure small policies through 
 the post-office. In the parliamentary debates Mr. Glad- 
 stone made numerous and occasionally very bitter attacks 
 on the Prudential, its managers and methods, going so far 
 as to allege its insolvency. The Prudential, in its own de- 
 fense, employed eminent actuaries to report on its actual 
 condition, with the result that the charges of the great Chan- 
 cellor were proven unfounded. Mr. Elizur Wright seems 
 to have taken a keen interest in this controversy, for in his 
 report for 1865 he comments at length upon the measure, 
 giving Mr. Gladstone's plan his hearty endorsement. 
 Himself a strong advocate of government supervision of in- 
 surance interests, he readily agreed with Mr. Gladstone, and 
 suggested a corresponding system of life insurance by the 
 government of the United States. f 
 
 With the highest respect for the ability of both Mr. 
 Gladstone and Mr. Wright, the earnest and disinterested 
 student of life insurance problems cannot very well rest con- 
 tent with a one-sided presentation of the facts in the case. 
 The Industrial companies had gained the confidence of the 
 public, and the new business of the Prudential during 1863 
 alone had reached sixty-eight thousand policies. It requires a 
 
 * On the Financial Statistics of British Government Life Annuities by Frederick Hcndriks Lon- 
 don, 1856. 
 
 t Tenth Annual Report of the Insurance Commissioner of Massachusetts, Boston, 1865 part II 
 pp. 49-51. 
 
 22 
 
Early Problems of Industrial Insurance 
 
 careful reading of the parliamentary debates of the sessions of 
 1864 and 1865, and some knowledge of the dissertations and 
 fugitive essays of writers of the period on government life 
 insurance in its inception, to bring the proposed measure into 
 clear relief as an uncalled-for interference with private enter- 
 prise and with the normal development of a social institution 
 of great magnitude. It is now some thirty-seven years, and 
 the results attained by the two different forms of thrift insti- 
 tutions can be brought in contrast with each other. By 
 January i, 1902, the Industrial companies of England had 
 some twenty-one million policies in force, in contrast to about 
 fifteen thousand policies in force with the government post- 
 office. Or, in other words, to every one policy in force with 
 the government, some fourteen hundred policies are in force 
 with private companies. It is this fact which speaks and 
 which makes further comment unnecessary.* 
 
 The attack on the London Prudential and its business 
 methods, however, had been rather incidental to the general 
 purpose of the government to enter the life insurance busi- 
 ness on the largest possible scale. As pointed out by Mr. 
 Gladstone, the field of life insurance for the masses was not 
 occupied by sound institutions, nor yet by sound and unsound 
 institutions, and such was the enormous breadth of the field 
 that apparently the government alone could be expected to 
 do justice to the vast interests involved.")" The Monitor, in 
 1864, in commenting on the Gladstone measure, called at- 
 tention to the grounds for such interference in the interest 
 of the regular life companies by the statement that, "In no 
 single department of business has there been so much jug- 
 glery and so much false pretension as in life insurance." 
 Thus confronted by government opposition and competition 
 on the one side and general public distrust in life insurance 
 on the other, the Prudential of London continued to develop 
 its business, and the reports for each succeeding year bear 
 
 * On December 31, 1908, the Prudential of London had 17,963,127 Industrial policies in force, 
 t History of the Prudential Assurance Company, p. 22 et seq. 
 
 23 
 
Life Insurance and Other Subjects 
 
 evidence of superior administration and an increasing public 
 demand for Industrial insurance. 
 
 The publicity given to all of the more important facts con- 
 nected with the early development of Industrial insurance 
 in England, but in particular to the business of the Pruden- 
 tial, brought the subject more and more to the attention of 
 the general public. With unusual frankness, the London 
 company had from time to time published a statement of its 
 affairs, and the annual reports of the directors contained 
 much interesting information regarding the rapidly extend- 
 ing Industrial business. The progress of the company since 
 1865 had indeed been phenomenal, and the income by 1869 
 was more than double the income of 1864. The report for 
 1869 quite properly concludes with the statement that "The 
 establishment of this branch has been attended with the 
 happiest results to the classes for whom it was especially 
 designed; the great uncertainty which prevailed with regard 
 to the stability of local institutions and the defective averages 
 which they afforded (leading to very disastrous consequences) 
 have now been replaced by a wide-spread and almost un- 
 bounded confidence in the institution which has been the 
 means of affording to the poor man the advantages hitherto 
 only attainable by the comparatively well-to-do." But the 
 company was as yet only in the infancy of its wonderful 
 career. 
 
 Commenting on the astonishing results attained in Eng- 
 land by so simple and yet effective a method of life insur- 
 ance, the £:vi:/;aw^^ and Review of Philadelphia in 1868 had 
 well said: "The adaptation of life insurance to the convenience 
 of the working classes is an idea whose practical and true de- 
 velopment in the United States is as yet in embryo, but without 
 doubt the penny of the poor man is to have its place in life in- 
 surance accumulations, as well as the dollar of the capitalist." 
 The times were peculiarly suggestive of ideas and plans for 
 the amelioration of the condition of the poor by associated 
 
 H 
 
Early Problems of Industrial Insurance 
 
 effort. The country was in a very prosperous condition after 
 the close of the war, and labor as a distinct element in our 
 national economy assumed more and more an independent 
 position through the rapid development of trade unionism. 
 The, for the time, enormous immigration had brought over 
 a large number of Englishmen, who were in possession of 
 considerable knowledge of friendly society methods and 
 management. Local lodges and affiliated societies were 
 formed by members loyal to their parent institution and 
 with an abundant field for their rapid development. All 
 over the country so-called co-operative societies for sick 
 relief, support in old age, or a funeral benefit payable 
 at death, were formed, almost without exception by the 
 workingmen themselves, without the necessary skill or 
 knowledge of the laws of mortality and finance. The 
 unhappy experience of so many of the English societies 
 had no influence on the organization of corresponding in- 
 stitutions in this country. Of the so-called fraternal socie- 
 ties, workingmen's insurance associations, etc., organized 
 during the later sixties, distinctly for insurance purposes, 
 practically none remains in existence at the present time. 
 It is true of this class of institutions as Mr. John Fiske, 
 the historian, says of all the achievements of mankind, that 
 "It is only after much weary exertion and many a heart- 
 sickening failure that success is attained," and, in another 
 place, that "You cannot invent an institution as you would 
 invent a plow."* Workingmen's insurance on the basis of 
 voluntary thrift was only in embryo in the later sixties, 
 but it was certain to develop within a few years. 
 
 The efforts made during the fifties to place the English 
 friendly societies on a sound foundation had not met with 
 the success anticipated, and by 1870 the problem became 
 once more acute and pressing, so that a special Royal Com- 
 mission was appointed to inquire into and report upon the 
 
 * The Beginninga of New England, by John Fiske, Boston, 1898, p. 16. 
 
 25 
 
Life Insurance and Other Subjects 
 
 subject in all its various aspects. The work of the Com- 
 mission, which in its make-up was indeed a most able one, 
 extended over a number of years; but reports were made 
 during intervals, and of these the second, published in 1872, 
 contained a considerable amount of very useful information 
 relating to Industrial insurance. Among the witnesses ex- 
 amined by the Commission was Mr. (now Sir) Henry Harben, 
 the then secretary of the Prudential, who, in answer to some 
 three hundred questions, explained in great detail every 
 important feature of the management and experience of 
 his company. Already, in 1871, in a paper read before the 
 Institute of Actuaries and discussed by eminent members 
 of that body, Mr. Harben had given publicity to the ele- 
 mentary principles and practices of this new system of life 
 insurance for the masses, so that, with the additional evidence 
 presented before the Royal Commission, it was made possi- 
 ble for others interested in the subject to form a working idea 
 of the problems involved in establishing a similar company 
 in the United States. That such a purpose was being seri- 
 ously considered is made evident by a statement of Mr. 
 Harben's before the Royal Commission, that "In America 
 they want to adopt the Industrial system of assurance, and 
 I, myself, have framed an Act of Congress, with all the 
 necessary schedules for them for the purpose." * The in- 
 surance periodicals of the United States from 1868 to 1872 
 contain occasional references to various eflForts to establish In- 
 dustrial insurance in this country, but not one of the attempts 
 was carried into practical execution. The time, however, had 
 come, and the opportunity was ripe for an experiment in this 
 direction, but none of the large companies seemed inclined 
 to take an interest in the subject. They were entering upon 
 a period of disastrous and far-reaching financial disturb- 
 ances, which paralyzed all efforts at material improvement 
 and, for the time being at least, discouraged new ventures in 
 
 * Third Report of the Royal Commission on Friendly Societies, London, 1873, p. 83 (A. 26,125). 
 
 26 
 
Early Problems of Industrial Insurance 
 
 making life insurance more widely popular among the In- 
 dustrial population. 
 
 For their earnest efforts to provide by insurance for the 
 uncertainties of the future, the workingmen of England and 
 the United States are deserving of unstinted praise. While 
 many societies vs'ere formed by persons seeking their own 
 interests and abusing the confidence of their fellow laborers, 
 far more numerous are the instances where such organiza- 
 tions were established with the very best of motives, by men 
 unselfishly seeking to advance the interests of their class. 
 Nor must it be overlooked, as pointed out by Hardwick in 
 his "History of Friendly Societies,"* that "The now insolvent 
 societies had been formed upon the models submitted to 
 them by the very parties who were supposed at the time to 
 be the very best to advise in such matters. But these facts 
 are too often ignored or forgotten by a certain class of in- 
 dividuals, who idly denounce the efforts of the working class, 
 instead of in a kindly spirit pointing out the most radical 
 method for their eradication." The difficulty in fraternal 
 insurance is fundamental. It is impossible for a purely 
 social and semi-philanthropic institution like a fraternal 
 society to enter into a distinct business arrangement, make 
 promises of a sum certain depending upon life contingen- 
 cies, and retain at the same time its earlier, perhaps more 
 primitive, but certainly more useful, social character. The 
 peculiar function which it fills in the social economy of the 
 people cannot be replaced by any other institution yet de- 
 veloped, but the life insurance function is so successfully 
 carried into effect by entirely responsible companies that 
 even though there be a slight difference in the expense rate, 
 under the very best conditions the possible gain is not com- 
 pensated for by the risk of almost certain loss. 
 
 During the early seventies, however, no opportunity ex- 
 isted for workingmen to avail themselves of the advantages 
 
 * The History, Present Position and Social Importance of Friendly Societies, by Charles Hard- 
 wick, London, 1850. 
 
 27 
 
Life Insurance and Other Subjects 
 
 of sound life insurance, except under conditions which were 
 practically prohibitive. Not only were no efforts made by 
 Ordinary companies to solicit risks on the lives of wage- 
 earners, mechanics, laborers, etc., but the necessary habit of 
 periodical saving had not been formed. Reliance was, there- 
 fore, placed upon institutions without intrinsic merit and 
 which were almost certain to fail within less than another 
 generation. Their number and rapid development, how- 
 ever, gave evidence of a growing interest in life insurance 
 among the masses and a gradual recognition of the superior 
 advantages of commercial institutions conducting the business 
 in conformity to correct principles of insurance science. 
 The history of this period records numerous instances of ef- 
 forts on the part of trades unions to effect arrangements with 
 large companies, but the matter was looked upon in too indif- 
 ferent a light by the managers to assume a practical character. 
 Of what, for the time being, was called the "Bund" system, 
 mostly originating with German benefit societies, only traces 
 now are found in a few existing policies, the liability for 
 which was assumed by responsible companies. It was pointed 
 out by the Exchange and Review in 1869, that "An end 
 being honestly sought, impracticable ways to it, adopted in 
 mistake, will give place to the practicable. With a way open 
 these combinations will gravitate towards the proper life 
 companies, and unions for effecting life insurance with the 
 companies and under special arrangements may be part 
 of the problem of the future, and which may make individual 
 insurance certain and more available." This prediction, 
 however, was not verified by subsequent experience. 
 
 Life insurance and savings banks in the United States 
 were in 1873 in a most precarious condition, complicated 
 by the panic and resulting business depression and the enor- 
 mous depreciation in values. Every financial institution 
 was tested to its foundations, and while a large number of 
 the more recently organized companies went under, the 
 
 28 
 
Early Problems of Industrial Insurance 
 
 gigantic structure of sound life insurance remained unshaken, 
 a monument to the wisdom and prudent forethought of the 
 founders, who, with prophetic insight, had guarded against 
 the shock which sooner or later was certain to come. The 
 wonderful prosperity of the country after the close of the 
 civil war had not been without effect on life insurance trans- 
 actions, and what for the time must have seemed remark- 
 able results had been attained. A large number of new 
 companies had been organized, and by January i, 1871, 
 some seventy-one companies reported to the New York 
 Insurance Department. Following the failure of the Great 
 Western in 1870, a comparatively unimportant institution, 
 one small company after another found itself in difficulties, 
 terminating either in a receivership or the reinsurance of the 
 business in some other, equally weak, institution. Failures 
 in the banking world added largely to the increasing public 
 distress, and what had been in a fair way to become a widely 
 diffused thrift function was by 1875 rather the exception than 
 the rule. Both savings and insurance by this time had prac- 
 tically come to a standstill, and the companies or institutions, 
 instead of making progress, were in the majority of instances 
 unable even to hold their own. 
 
 The American student of the workingmen's insurance 
 problems of this period found himself confronted by a truly 
 astonishing mass of evidence and data pertaining to the theory 
 and practice of friendly societies and related associations, 
 with a few fragmentary essays and reports on commercial in- 
 surance undertakings, such as the Prudential Assurance Com- 
 pany of London. The published evidence, and in a still larger 
 measure public opinion, strongly favored the mutual assurance 
 societies for workingmen, however inherently defective ; pri- 
 marily, no doubt, because in their professed aims they attempt- 
 ed to deal with a large number of wants and needs for which 
 private and public charity would otherwise have to provide. 
 Insurance against sickness and against incapacity in old 
 
 2g 
 
Life Insurance and Other Subjects 
 
 age had so much of intrinsic merit to commend it, that, 
 naturally, in any new undertaking these facts would have to 
 be seriously considered, in that a policy provision to this effect 
 would form a very strong attraction and contribute to 
 gain popular support. Nor was the statistical evidence 
 wanting to place such an institution on a reasonably secure 
 basis. The earlier calculations of the amount of sickness 
 among wage-earners, as reported by the Select Committee 
 of the House of Commons in 1825, had been followed by 
 the investigation and reports of the Southwell Society, and 
 later by the works of Mr. John Finlaison. The Southwell 
 Society tables were published in detail by the Rev. John 
 Thomas Becher in 1829, and in 1830 Mr. Henry Gregson 
 published his suggestions for establishing friendly societies 
 and savings banks. The well-known treatise on friendly 
 societies by Mr. Charles Ansell, published under the aus- 
 pices of the Society for the Diffusion of Useful Knowledge, 
 appeared in 1835, but already, in 1833, Mr. John Finlaison 
 had given publicity to a series of tables of monthly contribu- 
 tions which had the endorsement of Mr. John Tidd Pratt, 
 later the Chief Registrar of Friendly Societies. It was not 
 until 1845, however, that Mr. F. G. P. Neison read his cele- 
 brated "Contributions to Vital Statistics" before the London 
 Statistical Society, which was subsequently reprinted, in a 
 more elaborate form and in different editions, as a standard 
 work of reference on friendly society theory and practice. 
 In 1850, under the direction of Mr. Henry Ratcliffe, a very im- 
 portant report was published on "Observation of the Rate of 
 Mortality and Sickness Existing among Friendly Societies," 
 calculated from the experience of the Manchester Unity of the 
 Independent Order of Odd Fellows. This report was fol- 
 lowed in 1852 by an appendix containing additional data 
 and observations. The work of Mr. Ratcliffe, next to the 
 earlier work of Mr. Neison, forms one of the foundation- 
 stones of modern workingmen's insurance on the basis of 
 
 30 
 
Early Problems of Industrial Insurance 
 
 voluntary thrift. In 1851 Mr. James Henry James published 
 a "Guide to the Formation and Management of Friendly 
 Societies," containing among other tables several in which the 
 contributions from age ten upwards were calculated on a 
 weekly basis. In 1852 a "Return" was published by Parlia- 
 ment, under the supervision of Mr. John Tidd Pratt, contain- 
 ing a mass of data regarding the sickness experience of the 
 registered friendly societies during the five years ending with 
 1850. An elaborate analysis of the "Return" was published 
 in 1853, prepared bv Mr. John Glenn Finlaison, the well- 
 known actuary of the National Debt Office. A further report 
 was published the year following by the same authority, sup- 
 plementary to the earlier observations. In 1859, Mr. Charles 
 Hardwick, the Past Grand Master of the Independent Order 
 of Odd Fellows, published an admirable treatise on the history 
 of friendly societies, including a very suggestive chapter on 
 the practical development of the science of vital statistics. 
 During the same year Mr. Arthur Scratchley issued, as the 
 third division of his comprehensive work on life insurance, 
 a treatise on friendly societies, containing "An Exposition 
 of the True Law of Sickness," with remarks on the exten- 
 sion of Industrial life insurance. Two years later Mr. 
 Ratcliffe issued a supplementary paper on the rate of mor- 
 tality and sickness amongst friendly societies, and this was 
 followed in 1867 by a history of the Odd Fellows, Manchester 
 Unity, by Mr. James Spry, and in 1871 by a pamphlet on 
 "The Manchester Unity," by Mr. F. G. P. Neison. 
 
 Out of this mass of reports, data and observations, it 
 appeared entirely feasible and practicable to reconstruct on 
 a business basis a plan of life insurance for the masses com- 
 bining the three elements of friendly society theory, namely, 
 the assurance of a sum certain payable at death, the pay- 
 ment of a sum certain during sickness, and the payment of 
 a sum certain during incapacity or old age. Subsequent ex- 
 perience proved that under present conditions the operations 
 
 31 
 
Life Insurance and Other Subjects 
 
 of an Industrial company must of necessity be limited to the as- 
 surance of a sum certain payable at death, while the assurance 
 of a stipulated sum during sickness can only with safety be 
 transacted, and then only in a limited way, by fraternal organ- 
 izations having a perfect knowledge of and complete super- 
 vision over the individual members. During the early seven- 
 ties, however, this result could not be foreseen, and in the 
 light of the then available information it seemed better to 
 follow the general principles of friendly society management 
 and practice than to limit the operations of workingmen's 
 insurance to the more simple, but certainly more effective, 
 provision of a sum certain payable at death. 
 
 Our economic history for the decade 1870-1879 is one 
 of panic, disaster and distress. From 1862 the currency had 
 been on a paper basis, and, all assurances to the contrary not- 
 withstanding, specie payments had not been resumed. The 
 value of a dollar might have been anywhere from forty cents 
 to ninety-nine, and it was not until 1875 that the resumption 
 act was passed, to take effect on January i, 1879. Hardly had 
 the act of 1875 become a law when efforts were made to 
 have the same repealed, and but for the strenuous efforts of 
 Senator Sherman this might readily have been the case. In 
 his own words in the Senate, on March 6, 1876, "It is the 
 turning point in our financial history, which will seriously 
 affect the life of individuals and the fate of parties, but, more 
 than all, the honor and good faith of our country." * With 
 the panic of 1873 the wheels of industry had come to a stand- 
 still and unemployment had become general. The mass of 
 the people were entirely unprepared for a long period of en- 
 forced idleness, and tens of thousands from comparative 
 comfort drifted rapidly into debt, and from debt into poverty 
 and pauperism. The relations of employer and employee 
 became more and more strained, ending in the great strikes 
 and labor disturbances of 1877. The condition of the people 
 
 * Speeches and Reports on Finance and Taxation, by Joiin Sherman, New York, 1879, v 493- 
 
 32 
 
Early Problems of Industrial Insurance 
 
 was indeed "calculated to awaken the deepest sympathy in the 
 minds of those who had the well-being of the state at heart." 
 
 With increasing poverty, the health of the people had 
 seriously declined during the early seventies, and while ordi- 
 narily a very healthful country, the United States at this 
 period suffered from widely-extending epidemics, first of 
 small-pox, then of cholera, and finally of yellow fever. The 
 large foreign immigration had materially increased the popu- 
 lation of cities without providing the means for the corre- 
 sponding sanitary requirements, and the average city death 
 rate by 1872 had reached the extraordinary figure of 29.9 
 per 1,000. The mortality of children under fifteen had in- 
 creased to 43.7 per 1,000 during 1871-1875, which contrasts 
 with 28.6 as the prevailing rate during 1896-1900. In 
 Newark, N. J., according to a special investigation* made 
 by Dr. Holden, the general death rate increased from 20.0 per 
 1,000 during 1869 to 33.0 during 1872. In many of the 
 large cities special inquiries were made into the sanitary 
 state of the people, and the medical investigations disclosed 
 an immense amount of preventable sickness and resulting 
 premature mortality. In Boston the demand on the medical 
 charities had more than doubled during the period 1 869-1 874, 
 and a similar condition existed in most of the other large 
 centers of population. 
 
 In New Jersey an investigation was made by the Labor 
 Bureau in 1879, when the health conditions were somewhat 
 improved, but even then the average number of days lost 
 by wage-earners on account of sickness was returned as 14.5, 
 which is more than twice the normal, as determined by the 
 experience of the friendly societies. The natural and im- 
 mediate result of this unfortunate condition affecting the 
 large majority of our population was a demand for organiza- 
 tions corresponding to the English friendly societies, cover- 
 ing broadly the field of insurance protection against sickness, 
 
 * Mortality and Sanitary Record of Newark, N. J,, by Edgar Holden, M. D., Ph. D., Newark, 
 N. J., 1880. 
 
 33 
 
Life Insurance and Other Subjects 
 
 incapacity during old age, and the payment of a definite, 
 if small, amount at death. 
 
 Provident habits were, however, only imperfectly de- 
 veloped among the large mass of our wage-earners during 
 the early seventies. As is usual during long-continued peri- 
 ods of adversity and national distress, moral deterioration 
 followed, and the evidence of this we find in the then pre- 
 vailing amount of intemperance. By the official statistics 
 of the city of Newark, the ratio of arrests for drunkenness 
 was one to every forty-five of the population during 1 873-1 875 
 against one to every one hundred and forty-five during 1899- 
 1901. In other words, drunkenness was more than three 
 times as common thirty years ago as it is to-day. Thus 
 poverty and sickness, combined with intemperance, increased 
 the prevailing amount of pauperism and made dependence 
 upon public and private charities in sickness and distress 
 rather the rule than the exception. 
 
 Pauperism had, in fact, increased to an alarming extent. 
 Evidence as to the thrift habits of the people was collected 
 by official inquiries in Massachusetts and New Jersey, and 
 the conclusions were quite contrary to the current theories 
 as to the saving habits of the population. It was brought 
 out that the vast sums on deposit with savings banks, in- 
 stead of being largely the accumulations of labor, were, 
 quite to the contrary, in considerable proportions the invest- 
 ments of the wealthy. The Labor Commissioner of New 
 Jersey in his report for 1878 had pointed out that "Within 
 the last five or six years it is observed that the well-to-do 
 class have been attracted to these depositories with their 
 unproductive possessions, until they have ceased to reflect 
 in the aggregate the savings of the classes they were origi- 
 nally intended to benefit."* Provident habits, the reports 
 show, were the exception, and as to life insurance, the col- 
 lected workingmen's budgets, or inquiries into family expend- 
 
 * First Annual Report of the Bureau of Statistics of Labor and Industries of New Jersey, Trenton 
 1878, v. 196. 
 
 34- 
 
Early Problems of Industrial Insurance 
 
 itures, give no evidence that payments were made to any 
 extent on this account by the wage-earning portion of the 
 population. 
 
 The economic condition of the masses was indeed de- 
 plorable, and, even by rigid economy, only the fortunate few 
 could provide for more than the necessities of life. The 
 average income of a wage-earner's family in New Jersey 
 was officially returned as ^^513, against average annual ex- 
 penditures of ^521. The characteristic abhorrence of a 
 pauper burial gradually gave way to the necessities of the 
 situation. The usual sources of relief in case of misfortune, 
 sickness or death were no longer available. However in- 
 clined and willing to assist others, each family had cares and 
 difficulties enough of its own. The anxiety of the poor in 
 this respect was truthfully reflected in a statement by the 
 Labor Commissioner of Massachusetts, in his comments on 
 savings banks in 1872: "There is a class of deposits in our 
 large cities that shows the poverty of working women more 
 than argument could do. This class consists of poor women 
 who save and starve for the sake of having enough to bury 
 them." * 
 
 The abhorrence of a pauper burial is so universal that 
 it may be said to form the foundation of life insurance as 
 represented in the more humble sphere of burial clubs and 
 friendly societies. Yet so universal was the distress of this 
 period, and so entirely without means were the poor to pro- 
 vide against this contingency, that the pauper burial rate 
 of the principal cities gradually increased to a maximum 
 point during the period of depression. The unhappy state 
 of the people can perhaps be best illustrated by the contrast 
 of the pauper burial rate during the seventies with the cor- 
 responding rate prevailing at the present time. In New 
 York the rate had gradually increased to thirty-three per 
 10,000 of population, while during the five years 1898-1902 
 
 * Third Annual Report of the Bureau of Statistics of Labor, Boston, 1872. p. 334. 
 
 3S 
 
Life Insurance and Other Subjects 
 
 it has been sixteen. The Newark rate was sixteen, against 
 ten during 1898-1902. There are no earlier official figures 
 for Boston than for 1 880-1 884, but the rate even then was 
 thirteen per 10,000, against less than seven during 1898- 
 1905. The reduction during the intervening years not only 
 reflects the decrease in pauperism and public dependency, 
 but even more so the enormous improvement in the social 
 condition of labor and the increased economic security against 
 the uncertainties of the future. 
 
 If life insurance was comparatively unknown among the 
 poor, considerable progress had been made among the more 
 prosperous element since the close of the war. The failure 
 of a large number of companies had, no doubt, acted as a 
 serious check upon the immediate progress and created 
 wide-spread distrust and apprehensions of further difficulties. 
 The mass of the people, however, viewed the matter with 
 apathy and indifference. The general practice of the com- 
 panies was to solicit risks for amounts of ^1,000 and over, 
 and rather among men in professional and mercantile em- 
 ployments than among wage-earners. The system thus 
 assumed the character of a class institution, apparently de- 
 signed for the sole benefit of the well-to-do. The extension 
 of life insurance principles and practice to the wage-earning 
 millions was, however, gradually being recognized as a com- 
 ing factor in the social economy of the nation, and already, 
 in 1872, the Labor Commissioner of Massachusetts, in his 
 report for that year, had deplored the want of prudent habits 
 and the limited use made by the poor of the savings banks, 
 concluding with the advice that "These considerations sug- 
 gest the important subject of life insurance, as a means of 
 benefiting the workman's family in case of his death. It is 
 not our function to enter at large upon such details; and we 
 content ourselves with merely saying that small investments 
 in life policies will result in great and material aid to a family 
 after the death of its natural protector and support. This 
 
 36 
 
Early Problems of Industrial Insurance 
 
 subject is too important to be overlooked by persons of 
 small means and of small savings."* 
 
 It has been my purpose to show^ that by 1875 the social 
 and economic state of the industrial population of the United 
 States w^as such as to imperatively call for a new form of 
 thrift, better adapted to their special needs than the existing 
 methods represented by savings banks and insecure 
 mutual aid associations. With a knowledge of the facts 
 and conditions which have been set forth with the neces- 
 sary brevity, a feasible project for a modified form of In- 
 dustrial insurance, adapted to the needs of American wage- 
 earners, gradually assumed definite proportions. The year 
 1875 was not, perhaps, the most opportune in which to 
 start a new insurance enterprise, when half of the existing 
 companies of a few years before had gone out of business 
 and some of those remaining were in anything but an enviable 
 position. An opportunity, however, presented itself of se- 
 curing the charter of the "Widows' and Orphans' Benefit 
 Society," organized in the city of Newark, N. J., in 1873, 
 "to assist sick, needy, or disabled members, and to provide 
 for the wants of the widows and families after death." The 
 charter right covered all the essentials of friendly society 
 practice under corporate management, and when the re- 
 organization of the business was effected, in 1875, the new 
 society adopted the title "The Prudential Friendly Society," 
 which was changed in 1877 to "The Prudential Insurance 
 Company of America." The aims of the Society as set forth 
 in the first prospectus were to enable people of small means 
 to provide: 
 
 1st, for relief in sickness or accidents; 
 
 2d, for a pension in old age; 
 
 3d, for an adult burial fund; 
 
 4th, for an infant burial fund. 
 Subsequent experience proved that it would be impossible 
 
 * Third Annual Report of the Bureau of Statistics of Labor, Boston, 1872, p. 525. 
 
 37 
 
Life Insurance and Other Subjects 
 
 under existing conditions to provide in this manner for 
 relief in sickness or old age, and, accordingly, after a few 
 years the business was limited to the insurance of a sum cer- 
 tain payable at death. 
 
 The space is not available for an extended sketch of the 
 early history of the Society and its struggles against over- 
 whelming odds making for failure and the miscarriage of 
 the aims of the founders. The writer was fortunate in asso- 
 ciating with himself men of exceptional ability and high stand- 
 ing in the community, and but for their hearty co-operation 
 and their faith in and unswerving loyalty to the cause of In- 
 dustrial insurance. The Prudential would not have survived 
 the many difficulties experienced during the earlier years. To 
 Mr. Noah F. Blanchard, who in 1879 became the president of 
 the Company, to Dr. Leslie D. Ward, since 1884 the vice presi- 
 dent, and to Mr. Edgar B. Ward, counsel, and since 1893 the 
 second vice president, the writer owes it that his aims and 
 ideals of the early seventies were carried into successful ex- 
 ecution. Those who came into the Company as directors and 
 executive officers not only risked their money, but what was 
 far more to them, their reputation, in a venture which seemed 
 almost certain to fail at a time when the most solid business 
 houses of the country faced ruin and disaster. The work of 
 these men and their aid to the writer to carry into practical 
 effect his ideas and ideals of many years deserve a more 
 extended explanation than is possible on this occasion. The 
 present account is merely a statement of the general social 
 and economic principles and conditions which underlie the 
 business of Industrial insurance. Its rigid conformity and 
 successful adaptation to these principles and conditions have 
 made possible the great success to which it has now attained. 
 
 In his essay on Lombard Street, Mr. Walter Bagehot 
 remarks that "It is often difficult to say why particular trades 
 settle in particular places,"* and it need not be explained now 
 
 * Bagehot's Works, vol. V, p. 10. 
 
 38 
 
Early Problems of Industrial Insurance 
 
 why Newark was selected by the writer as the birthplace of 
 Industrial insurance in America. Nor would it serve our 
 present purpose to go into the details surrounding the organi- 
 zation of the Prudential Friendly Society and its first few 
 years of effort to establish the new system of life insurance 
 for the masses in a State where previously it had been entirely 
 unknown. It is enough to point out that the difficulties were 
 considerable, and that but for the hearty co-operation and abid- 
 ing confidence of a small group of men the experiment would 
 have ended in failure. Newark, in 1875, had a population 
 of about 120,000, and was then, as now, one of the leading 
 manufacturing centers of the country. In many respects 
 the city was an ideal community in which to introduce In- 
 dustrial insurance, in that the large majority of the popula- 
 tion were wage-earners, engaged in a multitude of trades 
 and industries, offering a sufficiently broad basis for the in- 
 troduction of what was then a novel form of insurance. Life 
 insurance in New Jersey had made but small progress dur- 
 ing the early seventies, and the failure of the Newark Savings 
 Institution, and later the disclosure of fraud and mismanage- 
 ment in connection with the New Jersey Mutual Life '•' had 
 almost put a premium on improvidence. Capital had been 
 withdrawn from investment and it was only with great diffi- 
 culty that something less than six thousand dollars were 
 secured by the writer and his associates as a fund with which 
 to begin active business operations. 
 
 The problems confronting the Society at the outset 
 were indeed formidable in the extreme. Success was 
 possible, but not at all probable, and the ultimate fail- 
 ure of the undertaking seemed almost a certainty. While 
 the first application was not received by the Society until 
 the loth of November, 1875, for several years previous care- 
 ful consideration had been given to every important detail 
 of office theory and practice. The actuarial work in con- 
 
 * Report by the Secretary of State of New Jersey on the New Jersey Mutual Life Insurance Com- 
 pany of Newark, Trenton, N. J., 1877. 
 
 39 
 
Life Insurance and Other Subjects 
 
 nection with the construction of the tables of premiums had 
 been entrusted to Mr. J. E. Clark, a competent actuary and 
 professor of mathematics at Yale College, who, with much 
 skill and more than ordinary knowledge of friendly societies' 
 experience, prepared a set of tables which remained in use 
 for a number of years, until the sickness branch was 
 discontinued. There were then no trustworthy American 
 life tables applicable to the transaction of an Industrial busi- 
 ness, and reliance had necessarily to be placed on English 
 tables and data until the Company's own experience made 
 a readjustment of rates and amounts possible. Every step, 
 however, was taken with extreme caution, and, when in 
 course of time the subsequently tabulated experience proved 
 the inexpediency of a sickness insurance business the same 
 was at once discontinued. 
 
 Of the many other problems confronting the Society, 
 only the most important can be referred to. The need 
 of a thorough system of accounts to effectively check the 
 multitude of transactions involved in Industrial insurance was 
 early recognized by the managers; but Mr. Harben had al- 
 ready called attention to this matter in his paper read in 
 1 87 1 and in his evidence before the Royal Commission of 
 1872.* This was necessary, in his own words, "So that the 
 absolute experience of the workings of Industrial business 
 might be ascertained, and if proved that it would be im- 
 practicable to carry it out with any degree of profit that it 
 might be discontinued before any great harm was done." 
 The audit, actuarial and statistical departments of the Com- 
 pany have grown out of this early recognition of the neces- 
 sity for an absolute check on every important transaction 
 and of the idea that a life insurance company's experience 
 includes the entire business operations and not merely 
 the profit and loss account. It is quite safe to say now 
 that no other business enterprise is so thoroughly under 
 
 * Third Report of tbe Royal CominissioD on Friendly Societies, London, 1873. 
 
 4X) 
 
Early Problems of Industrial Insurance 
 
 supervision and control as that of a large Industrial in- 
 surance company. 
 
 Another important problem confronting the Society was 
 the difficulty of organizing an effective and loyal agency force. 
 Two wa^'s were open to this end — the first and more attractive 
 of which was to bring experienced men from abroad, trained 
 and developed in the service of English Industrial companies; 
 while the other was gradually to develop a staff from the very 
 element of the population which it was proposed to reach. 
 The latter course was decided upon as the better, although 
 the instruction and training of entirely raw material required 
 much time and brought about a somewhat slower develop- 
 ment at the start. The Company has had no reason to re- 
 gret this decision, for by consistently adhering to this policy 
 it has secured as loyal a force of men as ever served a com- 
 mercial institution. Many of these men have now been 
 with us for more than twenty years and are the honored 
 leaders of our Old Guard, who, during the most critical 
 period of Prudential history, have stood loyally by their 
 officers and faithfully served the cause with which they had 
 cast their lot. 
 
 While every possible effort had been made to place the 
 Society on a solid foundation, the problem of attracting a 
 large membership was complicated by the unsatisfactory 
 economic condition of the people. The large amount of 
 prevailing involuntary idleness, the general distrust in finan- 
 cial institutions, the novelty of the idea itself, and the lack 
 of a trained agency force, combined to limit the operations 
 of the Society during the first few years to a comparatively 
 narrow field. Viewed from the standpoint of mere numbers, 
 however, the results obtained were quite remarkable. Dur- 
 ing the first complete year of business operations the number 
 of new policies secured was 7,904, against about 2,000 new 
 policies secured during the year by all of the Ordinary 
 companies transacting business in New Jersey. The year 
 
 4^ 
 
Life Insurance and Other Subjects 
 
 following, that is, during 1877, there was a slight increase, 
 and the number of new proposals received was 10,521. This 
 number was doubled during 1878, and, after another year, 
 when the business had been extended to New York and 
 Pennsylvania, the success of Industrial insurance as a dis- 
 tinct business enterprise may be considered as having been 
 established. Other companies now entered the field, active 
 competition led to more determined efforts to extend the 
 business operations to a larger field, and the history of In- 
 dustrial insurance in America since 1879 is no longer ex- 
 clusively the history of The Prudential Insurance Company 
 of America.* 
 
 During the twenty-eight years that have passed. Indus- 
 trial insurance in the United States has made continuous and 
 remarkable progress, and the number of policies in force is 
 now almost fourteen millions, with the business extended 
 to nearly every State of the Union.f The aims of the founders 
 have been realized, and what in 1875 was looked upon as a 
 novelty and with distrust is now regarded by millions as 
 a fixed item of family expenditure. In conformity with 
 the axiom that "only certain steps in advance are possible 
 at any given time," the business has been developed by de- 
 grees until the larger portion of the wage-earning population 
 of the cities in the industrial States are now insured. The 
 method of insurance education has been successful, and 
 out of the simple conception of the Industrial policy and 
 the implied guarantee of a burial fund has grown the im- 
 posing, continent-wide structure of Industrial-Ordinary life 
 insurance. Every Industrial agent is to-day a solicitor for 
 Ordinary policies of ^500 and upwards, with premiums 
 payable quarterly, semi-annually or annually. A vast 
 amount of insurance protection for the benefit of surviving 
 members of the family, for the maintenance of the home, 
 
 * For a comprehensive accoant of the origin and progress of the Company see " The History of 
 The PrndcDtial Inscrance Company of America," by Frederick L. Hoffman, Newark, N. J,, 1900, 
 
 t On December 31, 190fl, there were 19,687,675 Industrial policies in force in the United States, 
 representing $2,668,919,696 of lodnstrial iosarancc. 
 
 42 
 
Early Problems of Industrial Insurance 
 
 for the education of children, and for a variety of other 
 purposes, is thus provided, which but for the preHminary 
 insurance education through the Industrial policy w^ould 
 have been impossible. The future is full of promise for 
 the ultimate development of Industrial insurance as a uni- 
 versal thrift function in the life of the people, and the 
 record of the American companies during the past twenty- 
 eight years is evidence that needed improvements have been 
 introduced whenever the accumulated experience warranted 
 a further step in advance. Just as it is a recognized law of 
 evolution as laid down bv Mr. Herbert Spencer that "No 
 social institution commences its existence in a form like 
 that which it eventually assumes," and that "In most cases 
 the unlikeness is so great that kinship between the first and 
 the last appears incredible," so Industrial insurance in 
 years to come is certain to develop into an agency of still 
 greater usefulness and assume more and more the character 
 of a vast social institution through which most of the eco- 
 nomic uncertainties of industrial life will be effectively pro- 
 vided for. The broad foundation has been laid, millions 
 have been educated in sound life insurance principles and 
 become habituated to svstematic and periodical savings. 
 The foundations of this structure have been laid with care, 
 and the business is conducted principally by large and thor- 
 oughly responsible companies. The nature of the business 
 demands constant vigilance and careful supervision of all 
 its details, and the interests involved are so great that a retro- 
 grade step after these twenty-eight years seems to be utterly 
 inconceivable, while a hopeful outlook for the future appears 
 to be entirely consistent with the remarkable history of the 
 past.* 
 
 * The rapid progress of Industrial insurance in Ihe United States is clearly indicated by the 
 tabic in Appendix E. which presents the Industrial insurance in force with all Industrial companies, 
 and the Industrial insurance in force with The Prudential Insurance Company, which was the pioneer 
 company to transact this form of insurance in the United States. 
 
 43 
 
Chapter II 
 
 THE 
 
 FIRST QUARTER 
 
 CENTURY OF INDUSTRIAL 
 
 INSURANCE 
 
 IN THE 
 
 UNITED STATES 
 
 PUBLISHED IN 
 
 THE INSURANCE RECORD 
 
 1902 
 
THE FIRST QUARTER 
 
 CENTURY OF INDUSTRIAL INSURANCE 
 
 IN THE UNITED STATES 
 
 ]he first American Industrial policy was 
 issued by The Prudential in Newark, N. J., 
 
 lon the tenth of November, 1875. That 
 day may, therefore, properly be considered 
 
 , as the date of the commencement of actual 
 business operations, although for several 
 
 ^ years preceding, careful consideration had 
 been given to the perfection of the necessary details of 
 business management, and the preparation of tables of 
 premium rates had for months been in the hands of a 
 skilled mathematician. Careful attention was paid to the 
 results of life insurance methods in England, and, after ma- 
 ture consideration, the essential principles of the Prudential 
 Assurance Company of London were adopted, but modified 
 to suit American conditions. The London Prudential had 
 commenced the issue of Industrial policies in 1854, and by 
 January i, 1875, had almost 2,000,000 policies in force — a 
 business success at that time without a parallel in the history 
 of insurance or finance. 
 
 The London company had succeeded where the British 
 government had signally failed. Under the personal direc- 
 tion of Mr. Gladstone a system of post-oflSce insurance for 
 working people had been inaugurated during the early part 
 of 1865, with every prospect that in a few years the business 
 operations would equal, if not exceed, the results attained by 
 post-ofiice savings banks. The anticipations were not real- 
 ized. State trading in this direction proved a failure. By 
 1875, when the subject of Industrial insurance was first seri- 
 ously considered on this side of the Atlantic, and after ten 
 years of operations, a total of only 4,478 policies had been 
 
 47 
 
Life Insurance and Other Subjects 
 
 issued by the Post-office Department, while the London 
 Prudential during 1874 issued more than 16,000 Industrial 
 policies a week. 
 
 The progress and results of Industrial insurance, from 
 the commencement of business operations in 1875 to the 
 close of the last year of the nineteenth century, mark a new 
 era in the development of thrift agencies useful to millions 
 of our industrial population. Organized in 1875 by a charter 
 dated February 18, The Prudential was the first organiza- 
 tion of its kind to transact Industrial insurance in the United 
 States. The earlier efforts to provide life insurance for the 
 masses had been failures and in many instances delusions 
 and snares. Public confidence in "workingmen's insur- 
 ance" did not exist previous to the organization of The Pru- 
 dential. Ordinary insurance companies had made con- 
 siderable progress, but not in the direction in which Indus- 
 trial insurance has been so widely extended. The virtues 
 of prudent forethought and self-denial were publicly decried 
 by those who, in the name of health, co-operative, fraternal 
 or workingmen's insurance, had been defrauded not only 
 of the savings of years but of an opportunity to provide with 
 certainty for the immediate future of dependent members 
 of the family. Ordinary life insurance itself was under a 
 cloud and institutions for savings were mistrusted, as an 
 outcome of the results of the financial panic of 1873. Under 
 such circumstances the organization of a new life insur- 
 ance project, combining with established principles un- 
 tried methods of practice, was not a very promising under- 
 taking. 
 
 Life insurance in the United States in 1875 was in a de- 
 plorable state. Beginning with the failure of the Farmers 
 and Mechanics, in 1871, there had been a series of disastrous 
 liquidations, which culminated in the failure of the New 
 Jersey Mutual, in 1877. The daily press was filled with 
 charges of fraud and dishonesty against life insurance 
 
 ^8 
 
First Quarter Century of Industrial Insurance 
 
 managers. The most trustworthy institutions were assailed, 
 together with those least worthy of public confidence. The 
 number of companies transacting business in the State of 
 New York decreased from seventy-one in 1870 to thirty-one 
 in 1879. The number of Ordinary poHcies in force decreased 
 from 817,000 in 1873, the year of the panic, to 595,000 in 
 
 1879- 
 
 Institutions for savings were in a similar condition of 
 popular disfavor and distrust. Failures had been frequent, 
 and with disastrous effects on the development of habits of 
 frugality and self-denial. In New Jersey one of the most 
 respected institutions, in business since 1847, became in- 
 volved as the result of the panic of 1873, and a receiver was 
 appointed in 1878. This bank had at one time 25,000 
 depositors and carried deposits to the extent of over eight 
 millions, or about one-third of all the funds deposited with 
 savings banks in the State. The loss of public confidence is 
 shown in the slow progress made by savings banks during 
 the years 1878-1880. Such conditions naturally affected ma- 
 terially the growth of Industrial insurance during the early 
 years when the operations of The Prudential were confined 
 to New Jersey. 
 
 By January i, 1880, the Company had extended its 
 operations to adjoining States and about 44,000 Industrial 
 policies were in force. This result appears small in the 
 light of subsequent experience, but when we consider the 
 disturbed state of the public mind, the general distrust of 
 life insurance and other methods of thrift, the result is a 
 gratifying evidence of the early recognition of the value of 
 Industrial insurance as an effective method of family pro- 
 tection. Let us contrast the result with the status of Ordi- 
 nary insurance in New Jersey at the beginning of 1880. 
 According to the report of the insurance commissioner there 
 were twenty-six companies transacting Ordinary business 
 in the State. These companies reported only 17,318 policies 
 
 49 
 
Life Insurance and Other Subjects 
 
 in force, or less than half the number of Industrial policies 
 in force with The Prudential after about four years of active 
 corporate existence. Yet some of the Ordinary companies 
 had transacted business for almost forty years, and the largest 
 could show only about 3,500 policies in force in New Jersey. 
 It is evident that the progress of the Ordinary companies 
 could not be looked upon as of much social or economic 
 value. What was needed was energetic missionary work or 
 education of the public in the very elementary principles of 
 life insurance, not only to make clear its value as an invest- 
 ment for surplus earnings, but also to point out the plain duty 
 of providing for the needs of dependent survivors according 
 to the means of the insured. 
 
 There was need of insurance protection in the later 
 seventies, if mortality data of that period can be relied upon 
 as evidence of the extent of misery and want caused by pre- 
 vailing epidemics of infectious diseases, by a high death rate 
 from consumption and an inordinate mortality of children. 
 For ten of the principal cities of this country the combined 
 death rate was 26 per 1,000 during the period 1870-1874. 
 In Newark the rate was even higher, having been 29.6 per 
 1,000 during the same five years. The deaths of children 
 under five years of age formed forty-eight per cent, of the 
 total mortality in the ten cities and fifty per cent, in Newark. 
 There is evidence in these statistics that what was needed at 
 that time was not so much life insurance for the individual 
 as life insurance for the family, including a provision for a 
 sum certain payable in the event of the death of the father, 
 the mother, or child. The unfortunate economic conditions 
 prevailing during the early seventies increased the misery of 
 the poor by the necessity, in the absence of other effective 
 agencies, of public aid or private charity in the burial of the 
 dead. Pauper burials, although not an accurate measure of 
 the distress of the period, reached an average rate of 20 
 per 10,000 of population. During 1881-1885 the rate for 
 
 50 
 
First Quarter Century of Industrial Insurance 
 
 eighteen cities was 18.5, against an average of 12.9 during 
 the five years i 897-1901. 
 
 There is now no longer need on the part of even the very 
 poor to be "thrown in with the city's dead." Year after 
 year the pubHc records show that the taxpayer is relieved 
 more and more of the burden of providing free burial and 
 medical attendance, as the number of people who are com- 
 pelled to rely on these charities are gradually placing them- 
 selves above the need of public or private assistance by be- 
 coming Industrial policyholders. 
 
 Times have changed for the better during the past quar- 
 ter century, but in no direction has there been greater im- 
 provement than in the decreasing rate of mortality, especially 
 of young children under the age of five. In Newark, where 
 formerly one-half the mortality was of children under five 
 years of age, the proportion now is about one-third. The 
 general death rate of Newark has declined from 30 per 1,000 
 during 1870-1874 to 19 during 1896-1900.* Better housing 
 and better food, better wages and shorter hours of labor, com- 
 bined with an increasing intelligence, are the causes responsi- 
 ble for the improvement which has taken place, but when 
 we pause and think how enormously the degree of economic 
 security has been increased during this period we cannot but 
 conclude that in the social progress of the nation Industrial 
 insurance has played an important though, in a measure, 
 an almost unrecognized part. 
 
 In 1879 several well established life insurance companies 
 which had thus far transacted only Ordinary insurance com- 
 menced the issue of Industrial policies also. That competi- 
 tion is the life of trade was proved in this instance with 
 exceptional force, and within another decade Industrial in- 
 surance had assumed a position of national importance. 
 By the first of January, 1891, there were 3,875,102 Industrial 
 policies in force with nine companies, and the efforts of 
 
 * During the period 1901-1908 the average annual death rate of Newark wa3 only 18.6 per 1,000 of 
 population. 
 
 51 
 
Life Insurance and Other Subjects 
 
 another decade added more millions, increasing the total 
 to 11,219,296 in force on the first of January, 1901.* The 
 student of social progress will search in vain for more con- 
 clusive evidence of real social progress than is found in the 
 records of Industrial companies. He will not be able to decry 
 the masses as lacking foresight, prudence and the spirit of 
 self-denial in the face of proof that, by small weekly savings, 
 $1,466,266,088 of Industrial Ufe insurance has been provided 
 for the protection of dependent survivors. The business has 
 reached a position where as a thrift agency, and from the 
 standpoint of the greatest good to the greatest number, it 
 transcends in financial importance all other forms of savings 
 and insurance combined. 
 
 Such results would have been impossible but for the 
 intrinsic merits of this form of life insurance. Industrial in- 
 surance is a development of earlier forms of insurance efforts; 
 it is the result of ages of experiment to adapt the insurance 
 idea to the wants and needs of the masses. It combines 
 the highest degree of absolute security with the necessary 
 degree of convenience, and is almost perfectly adjusted to the 
 conditions of life, the habits and the circumstances of the 
 general population. A workingman earning small weekly 
 wages has not, as a rule, more than a week's earnings ahead 
 of him. Unless the insurance premiums are paid at, or very 
 near to, the time the wages are received, and paid without 
 any delay and trouble, to a collector calling at the house of 
 the insured, there may be the same desire for insurance pro- 
 tection, but the intention will not as a rule be carried out. 
 For this reason the premiums are made payable weekly 
 and they are collected from the houses of the insured. 
 
 For a similar reason the system is made applicable to every 
 member of the family, although in practice most companies 
 limit the ages of admission from one to seventy. Industrial 
 insurance provides primarily for the expenses of burial; 
 
 * On Ihc first of January, 1909, there were 19,687,675 Industrial policies in force in the United 
 States representing $2,668,919,696 of Industrial insurance. 
 
 52 
 
First Quarter Century of Industrial Insurance 
 
 therefore, since death is Hkely to happen to any member of 
 the iamily and as the burden of funeral expenses would fall 
 with nearly equal weight upon all the survivors, a small policy 
 of insurance on the life of every member is evidently, for this 
 object, a better provision than a large sum placed upon a 
 single life. In a condition of economic insecurity where, as 
 has been said, rarelv more than a week's wages is at the dis- 
 posal of a wage-earner, such a system of family protection has 
 evident merits over am' other form which has thus far been 
 devised. The view is held by some, who have not taken the 
 trouble to inquire, that Industrial insurance is primarily for 
 the insurance of children. As a matter of fact, the distri- 
 bution of risks among Industrially insured persons by age 
 and sex is practically the same as that of the general popu- 
 lation as determined by the census. 
 
 As has been pointed out, the Industrial collector calls 
 at the houses of the insured week after week for the premiums 
 falling due. To any one familiar with educational processes 
 it must be clear that such a constant reminder of life insur- 
 ance as a duty and of the necessity of foresight and self-denial 
 must needs have a considerable effect in other directions. 
 As it has proper!}' been said, one cannot develop thrift habits 
 in one important direction without developing similar habits 
 in other directions. The premium receipt book is the account 
 current between the policyholder and the company. By the 
 most simple arithmetical process it is made evident at any 
 time how much has been paid out and how much will be re- 
 ceived in return. The publications issued by the Industrial 
 companies contain all the necessary information as to Inter- 
 mediate and Ordinary insurance. The agents of the com- 
 panies are not only instructed, but they are required, to 
 canvass for Ordinary insurance as well as for Industrial. 
 By degrees the general public has been educated to the 
 advantages of Ordinary insurance. From the payment of 
 weekly premiums, once the habit has become a part of the 
 
 53 
 
Life Insurance and Other Subjects 
 
 household economy, it is but a step to the payment of a 
 quarterly premium on an Ordinary policy. The develop- 
 ment of the Ordinary branch of Industrial companies is a 
 chapter of life insurance history of which the companies have 
 particular reason to be proud. 
 
 As early as 1886 it had become evident to The Pruden- 
 tial that the educational process of Industrial insurance 
 would impose upon the companies the necessity of issuing 
 Ordinary policies. Even as far back as 1880, policies for 
 a round sum of ^500 had been issued on the weekly plan, 
 but this step proved inadequate, and therefore, on January 
 19, 1886, the first Ordinary policy was issued by The Pru- 
 dential, which had, until that date, confined its efforts en- 
 tirely to the transaction of Industrial business. 
 
 The field was new, and once more The Prudential under- 
 took pioneer work. A small amount of Ordinary business 
 had been written by other Industrial companies, but not 
 among the industrial population. In fact, even the large 
 Ordinary companies not transacting Industrial business had 
 had no success in reaching the large element of the popula- 
 tion engaged in manufacturing industries or other indus- 
 trial employments. The efforts of The Prudential proved 
 successful. By January i, 1891, the principal Industrial 
 companies had 13,704 Ordinary policies in force, and by Jan- 
 uary I, 1901, this number had increased to 340,000, or more 
 than the total number of policies in force in the United States 
 in 1866. Most of this business has been written among the 
 industrial population, although the operations have of re- 
 cent years been extended by means of special Ordinary 
 agencies to a class of people in a position to pay for larger 
 policies. The Prudential issues at present all forms of 
 Ordinary contracts, from whole life policies to endowments 
 and annuities. The Company now issues policies from ^^15 
 to $100,000. The educational process has been completed, 
 the object of Industrial insurance has been attained; life 
 
 54 
 
First Quarter Century of Industrial Insurance 
 
 insurance principles have in fact been extended to the masses, 
 and the business is now truly national in its scope, extent 
 and importance. Even the most unfriendly critic will admit 
 that the results attained are a credit to the millions of men 
 and women who by sacrifice and forethought have thus 
 effectively, and to the extent of their ability, made provision 
 for an unknown morrow and the needs of others at an hour 
 when, of all human afflictions, needless, sordid poverty is 
 the greatest. 
 
 The present position of Industrial insurance in the United 
 States is very clearly set forth in a comparison of the num- 
 ber of policyholders with the number of savings banks de- 
 positors, the policyholders in Ordinary insurance companies 
 and the membership in fraternal organizations. As has al- 
 ready been stated, on the first of January, 1901, Industrial 
 companies had 11,219,296 policyholders. According to the 
 last report of the Comptroller of the Currency, on June 30, 
 1900, there were 6,107,083 savings banks depositors in this 
 country, or almost two Industrial policyholders to every one 
 depositor. This comparison is not unfair, even though the 
 Industrial companies have a considerable number of policies 
 on the lives of minors. A large number of savings banks 
 deposits, in regular banks as well as in school savings and 
 penny provident funds, are in the names of children, and, as 
 such, are properly included in the total number of savings 
 banks depositors. Nor must the fact be overlooked that insti- 
 tutions for savings have been in active operation since 18 16, 
 when the Boston Provident Institution was established, and 
 in 1875, when The Prudential commenced operations, there 
 were 771 savings banks, with 2,359,000 depositors. 
 
 A comparison with the development of Ordinary insur- 
 ance in the United States presents a similar contrast. Al- 
 though the Ordinary companies have been in active opera- 
 tion for some sixty years, the sum total of their efforts shows 
 only 3,000,000 policyholders in 1900 against the more than 
 
 55 
 
Life Insurance and Other Subjects 
 
 11,000,000 policyholders of the Industrial companies. In- 
 cluded in the number of Ordinary policyholders are 340,- 
 000 insured on this plan with the principal Industrial com- 
 panies, so that, as the net result of more than half a century 
 of Ordinary insurance operations we have only one Ordinary 
 policy in force to every four Industrial. While the average 
 amount of insurance is, of course, vastly greater, the social 
 and economic result is almost the same, since, according to 
 each one's need, ^500 is as much to the widow of a poor 
 man as ^5,000 to the widow of the moderately well-to-do. 
 
 This comparison may be further extended to fraternal 
 organizations, the majority of which have some more or less 
 effective insurance provision as an additional attraction to 
 the general social and economic objects for which they were 
 originally and primarily established. According to a recent 
 statement, there are now about 2,600,000 members in these 
 organizations,* which number cannot be considered large 
 when we take into account the immense field and opportunity 
 for their development. The insecurity of this plan of family 
 protection is in marked contrast to the methods and results 
 of Industrial insurance, and the general development of life 
 insurance as a provident institution cannot be said to have 
 been advanced by organizations which by frequent failures 
 have done so much to disturb public confidence in this form 
 of family protection. The more extensive development of 
 Industrial insurance is largely the result of the absolute 
 security of invested funds and the certainty that "the promise 
 to pay" will be faithfully carried out at the proper time. 
 
 The history of The Prudential Insurance Company of 
 America is in so large a measure the history of Industrial 
 insurance in the United States that a recently published 
 volume, descriptive of the progress of the Company and of 
 
 *Mr. Albert C.Stevens \a RevUvi of Reviews, iinuzry, 1900; figures for December 31, 1898. Prof. B. 
 H. Meyer estimated the number in force in 1900 at about 5,000,000 in bis article "Fraternal Insurance in the 
 United States," Annals of the American Academy of Political and Social Science, March, 1901, Philadelphia. 
 According to The Insurance Tear Booh (Spectator Co., New York) there were approximately 7,282,000 
 fraternal certificates in force on December 31, 1907, representing about $8,079,743,000 of insurance. 
 
 56 
 
First Quarter Century of Industrial Insurance 
 
 this form of insurance in general, may be referred to as a 
 work of interest and value to those who wish for more 
 knowledge and details.* As pointed out by Prof. Roland 
 P. Falkner in his review of the "History of The Prudential," 
 "It is an authoritative work on a widely diffused form of 
 thrift but little known outside of the working classes, to which 
 it specifically appeals." The book formed part of an ex- 
 hibit of methods and results made by The Prudential in the 
 social economy section of the Paris Exposition of 1900. In 
 the final report of the Commissioner-General to Congress, 
 the subject is referred to at length, including the statement 
 that "Though the Company provides both Ordinary and 
 Industrial insurance, it was with the latter branch that the 
 section of social economy was chiefly concerned and it was 
 for its exhibit in this field that the Company received a Gold 
 Medal." f To the general public endorsement of Industrial 
 insurance as an effective method of family protection there 
 has thus been added the unqualified approval of an inter- 
 national jury of experts, not only of life insurance as such, 
 but of life insurance in its relation to public welfare and social 
 betterment. J 
 
 With more than 11,000,000 policyholders, Industrial in- 
 surance has, in 1901, reached a position where further prog- 
 ress will not only be in the direction of increased numbers, 
 but especially toward a higher development of office and field 
 organization, of the Industrial policy contract, and of the gen- 
 eral relation of Industrial insurance to public welfare. As to 
 further numerical progress, it may be pointed out that the 
 results obtained in New Jersey mark the possibilities in 
 other States. Here we have a population of 1,883,669 and 
 
 * History of The Prudential Insurance Company of America, 1875-1900, by Frederick L. Hoffman; 
 Tbe Prudential Press, 1900. 
 
 t Report on the International Universal Exposition at Paris, 1900, vol. 11, pp. 440, 441, Wash- 
 ington, 1901. 
 
 + A larger exhibit of its business methods and results made by The Prudential at the Louisiana 
 Purchase Exposition, St. Louis, 1904, received the Grand Prize; an exhibit by the Company at tbe 
 Jamestown Tercentennial Exposition received a Gold Medal; and an exhibit of charts showing the 
 mortality from consumption in dusty trades at the International Tuberculosis Congress at Washington, 
 1908, received a Gold Medal, in all cases the highest possible award. No other life insurance company 
 in tbe world has received international honors corresponding to tbose received by The Prudential. 
 
 57 
 
Life Insurance and Other Subjects 
 
 1,268,360 Industrial policies, representing an estimated in- 
 sured population of 975,000. In other words, fifty-two per 
 cent, of the people of New Jersey are to-day insured with 
 Industrial companies on the Industrial plan. Still better 
 results have been obtained in the city of Newark, where the 
 Prudential was organized in 1875. Here we have a popula- 
 tion of 246,000 and about 260,000 policies in force, repre- 
 senting an estimated insured population of 200,000. In 
 other words, about eighty per cent, of the population of 
 Newark are insured with Industrial companies on the In- 
 dustrial plan. It is not going too far to anticipate the time, 
 certainly within another quarter of a century, when the re- 
 sults obtained in New Jersey will be general for the country 
 at large and when, of the insurable population of the 
 cities, four-fifths will be policyholders in Industrial com- 
 panies. Thus far the business has been largely confined 
 to the cities, but by degrees the operations of district mana- 
 gers have been extended to the rural and agricultural sections, 
 indicating possibilities of development and growth in a new 
 direction and in a new field. Even among the more pros- 
 perous elements of our population our experience proves 
 that there are many to whom an Industrial policy is a safe- 
 guard against an hour of need. The proceeds of an Indus- 
 trial policy are often more than sufficient to pay burial ex- 
 penses, leaving the proceeds of an Ordinary life insurance 
 policy or of other investments intact for the benefit of the 
 surviving members of the family. 
 
 The evolution of the Industrial policy contract is in itself 
 a most instructive phase of life insurance development. To- 
 day the Industrial policy contains all the usual provisions 
 and privileges of a regular Ordinary contract, and there has 
 been added in recent years a liberal clause regarding revivals, 
 by which the premiums in arrears can be charged against 
 the policy as a lien without interest, making the lapse of a 
 policy unnecessary when the desire for its continuance 
 
 58 
 
First Quarter Century of Industrial Insurance 
 
 exists. All restrictions as to service in the army and navy in 
 time of V7ar have been removed and the method of claim 
 payments has been materially improved. 
 
 The relation of Industrial insurance to public v^elfare 
 has already been touched upon in the remarks as to the 
 decrease in pauper burials since the introduction of the busi- 
 ness in this country. This, of course, is only one phase of 
 a large and complicated aspect of the general problem, but it 
 is of interest to note that, on the basis of trustv^orthy data 
 supplied by city officials in all parts of the country, it appears 
 that if the earlier pauper burial rate had prevailed during 
 the past five years there would have been approximately 
 140,000 more pauper burials in the cities of the United States 
 than was actually the case. This represents an average 
 annual decrease in the number of pauper burials of 28,000, 
 the large majority of which represent persons who under 
 the earlier conditions would have been buried through the 
 assistance of the State. Since the average cost of a pauper 
 burial is about $"], the annual saving to the cities represents 
 not less than fcoo,ooo. This, however, is only a fraction 
 of the actual saving to the State resulting from this form 
 of family protection. The companies now pay annually over 
 $20,000,000 * in claims to the beneficiaries of Industrial 
 policyholders, and the value of this method of insurance 
 must necessarily increase with the increasing age of the 
 companies. 
 
 In many other directions Industrial insurance is becoming 
 a valuable auxiliary agency in the development of measures 
 and means for the health and general welfare of the masses. 
 The companies are especially interested in problems of pre- 
 ventive medicine, and, as an evidence of this interest. The 
 Prudential last year complied with the request of the execu- 
 tive committee of the London Congress on Tuberculosis 
 for data and charts illustrating its experience. The data 
 
 * During the year 1908 approximately $36,700,000 was paid to Industrial policyholders and their 
 beneficiaries in the United States. 
 
 59 
 
Life Insurance and Other Subjects 
 
 contributed proved a valuable addition to the accumulated 
 experience, and the charts have been permanently placed on 
 exhibition vs^ith the Sanitary Institute of Great Britain.* In 
 this and in many other directions the scientific results of 
 Industrial insurance experience are being made to contribute 
 to measures for the gradual improvement of the conditions 
 of life of the vs^orking people of this country. 
 
 Much more could be said on so vast and intricate a sub- 
 ject as the causes of the growth and the reasons for the endur- 
 ing stability of so effective a form of thrift as Industrial insur- 
 ance, but the limits of this article forbid a more extended 
 consideration. I cannot better conclude these few obser- 
 vations than by quoting a statement which, though originally 
 applied to savings banks, is equally applicable to our busi- 
 ness : "The institution that lives, succeeds and accomplishes 
 results; which grows, expands and adapts itself to the vary- 
 ing phases of the social necessity which it was ordained to 
 minister unto, is an embodied law of the social fabric; it is 
 an organic function of society itself, and is to be watched, 
 guarded and cared for with solicitude. "f 
 
 The history of the first quarter-century of Industrial in- 
 surance in the United States is a record worthy of the high- 
 est praise, for it represents the results of a successful effort 
 on the part of the American people to provide for their own 
 wants in their own way. The future of the business is full 
 of promise, with every evidence that its operations will be 
 more widely extended and that its utility will be considerably 
 improved. The progress which has been made during a 
 quarter of a century, wonderful as it is, will sink into in- 
 significance in comparison with the progress which will be 
 made during the next twenty-five years, now that the benefits 
 of Industrial insurance are more widely diffused and its value 
 
 * A chart exhibit of the mortality from consumption in dusty trades, contributed by The Prudential 
 to the exhibit of the International Tuberculosis Congress, Washington, 1908, has, in response to numer- 
 ous requests, been reproduced, to be utilized by State and local tuberculosis associations throughout the 
 United States as a most effective aid in the campaign against tuberculosis. 
 
 t A History of Savings Banks, by E. W. Keyes, New York, 1876, vol. I, p. 2. 
 
 6o 
 
First Quarter Century of Industrial Insurance 
 
 is more generally appreciated among the millions of people 
 in the United States. Whatever progress is made, while of 
 the greatest possible benefit to the policyholders interested, 
 will, nevertheless, prove also of material value to the public 
 and the nation. 
 
 6l 
 
Chapter III 
 
 THE 
 
 SOCIAL ECONOMY 
 
 OF INDUSTRIAL 
 
 INSURANCE 
 
 A LECTURE 
 
 DELIVERED BEFORE THE SENIOR CLASS 
 
 OF 
 
 YALE UNIVERSITY 
 
 1904 
 
THE SOCIAL ECONOMY 
 
 OF 
 
 INDUSTRIAL INSURANCE 
 
 Industrial insurance is of comparatively 
 J modern origin in this country. All forms 
 !)of life insurance are the result of slow de- 
 )velopment in theory and practice, but for 
 ' Industrial insurance it may be claimed that 
 \ it is the outgrowth of ages of experiments 
 to provide, by an effective and absolutely 
 certain method, for the financial needs of the mass of the popu- 
 lation at the hour of bereavement. The mass of the people 
 are confronted by the fact that death means a large ex- 
 pense — often a burdensome debt — to meet the cost of burial, 
 or a heavy draft on slender savings, the result of years of ab- 
 stinence and foresight, or the alternative of state or private 
 charity. However remote the chance of death may appear 
 at times, it is an ever-present contingency, for which an ef- 
 fective provision has become a necessity in civilized life. 
 
 Industrial insurance is so called because the system is 
 primarily designed to meet the needs of wage-earners em- 
 ployed in manufacturing industries, and the weekly premium 
 payments coincide with the weekly payment of wages and 
 salaries. The premiums are from five cents to seventy cents a 
 week.* The system provides for family insurance on a com- 
 prehensive plan, and every member of the family at any age 
 from one to seventy, if in good health, is insurable. The 
 weekly premiums for a family of five average about thirty-five 
 or forty cents, being respectively ten cents each for the father 
 and mother and five cents each for the children. The 
 amounts of insurance vary with age, but average about one 
 
 * Policies with three-cent premiums were issued by The Prudential during the period 1875 to 1892. 
 They were discontinued March 21, 1892, but beginning with January, 1907, this form of Industrial policy 
 has again been issued by The Prudential. 
 
 65 
 
Life Insurance and Other Subjects 
 
 hundred and fifteen dollars.* For children under age ten the 
 average is thirty dollars, and for persons over age ten, one 
 hundred and fifty dollars. The system is sufficiently elastic 
 to meet the needs of the most humble laborer, even though 
 advanced in years, as well as the requirements of the more 
 prosperous mechanic or skilled workman, able to pay pre- 
 miums for enough insurance to provide for more than the 
 immediate needs of his family after his death. 
 
 The premiums are collected weekly from the houses of 
 the insured by authorized agents, who are also required to 
 solicit for new insurance. While the collection of weekly 
 premiums necessarily increases the cost of insurance, the 
 difference is relatively small when the great convenience of 
 this method is taken into account. Attempts, especially by 
 the British government, to transact a weekly-payment sys- 
 tem of life insurance without collectors have failed. Efforts 
 to transact a life insurance business on the monthly-pay- 
 ment plan have not been successful to any considerable 
 degree. These are the simple elements of a business which 
 has grown to immense proportions during the twenty-eight 
 years since The Prudential Insurance Company of America 
 was organized, in 1875, as the first company to transact 
 this form of life insurance in this country. The total number 
 of Industrial policies in force in the United States on January 
 I, 1904, was approximately i4,625,ooo.t 
 
 Industrial insurance had its origin in England, and the 
 evolution of the business can be traced backwards by an 
 unbroken record through friendly societies and burial clubs 
 to the trade and craft gilds of the fifteenth century. The 
 development was the inevitable result of economic laws 
 making for a higher degree of efficiency and security in social 
 institutions. This is not the place, however, to go into the 
 
 *The average amount of the Industrial policies in force in the United States, December 31, 1908, 
 was $136. 
 
 t On January 1, 1909, the number of Industrial policies in force in the United States was 
 19,687,675. 
 
 66 
 
The Social Economy of Industrial Insurance 
 
 history of these interesting associations for social better- 
 ment under different conditions of life. They served their 
 purpose at the time, but they would ill meet the conditions 
 of the present.* 
 
 In 1853 a comprehensive investigation was made by a 
 Parliamentary committee into the practice of life insurance 
 companies in England, and among other conclusions the 
 committee advanced the view that "the ground hitherto occu- 
 pied by these useful institutions (life assurance associations) 
 has been comparatively limited, and that their application 
 is capable of a great extension, not only in the higher and mid- 
 dle classes of society, but also among the humbler classes, 
 to whom it has recently been very considerably applied." 
 
 Acting on this suggestion, the Prudential of London, 
 organized as an Ordinary life insurance company in 1848, 
 made inquiries and ascertained that, almost without excep- 
 tion, the then existing so-called friendly societies and burial 
 clubs were in an unsound financial condition, while many 
 indeed had failed, with disastrous results to the people they 
 were supposed to benefit. A modest attempt had been made 
 by the Industrial and General and by the British Industrial, 
 among other English companies, to transact the business of 
 life insurance for wage-earners on a commercial basis, but 
 the results had not been very encouraging. The Prudential, 
 however, realized the immense opportunity to extend the 
 principles of life insurance to the broad field of workingmen's 
 insurance in general. On the recommendation of the best 
 available actuarial talent, required for the construction of 
 tables and plans. The Prudential, in 1854, comrrtenced the 
 business of Industrial insurance, destined to make it one 
 of the great life insurance companies of the world. 
 
 During the fifty years which have passed since the in- 
 troduction of Industrial insurance the business has been 
 
 * See article on Gilds, in Walford's Insurance Cyclopedia, vol. V, p. 341 et seq.; also article on 
 Friendly Societies, by the same author, Insurance Cyclopedia, yol. IV, p. 379 etseq. 
 
 67 
 
Life Insurance and Other Subjects 
 
 extended to almost all civilized countries, with more or less 
 success; but the development has been greatest in English- 
 speaking countries, and there are now (January i, 1904) more 
 than forty millions of Industrial policies in force in the 
 world. Of this number over one-half are in force in the 
 United Kingdom, about four millions in Germany, and not 
 far from half a million in Australia.* 
 
 There are now (1904) in force in this country almost 
 fifteen million Industrial policies; or, with five policies to a 
 family, it would appear that about three million families in 
 the United States are insured with Industrial companies for 
 sums which range from ^15 to ^1,000. When we take into 
 consideration the fact that there are about fifteen million 
 families, we have it that at present about one family out of 
 every five is financially interested in the success and future of 
 this form of life insurance in the United States. When we 
 further consider the fact that the total number of savings 
 banks depositors is only about seven millionsf — although we 
 have had savings banks since the beginning of the nineteenth 
 century, and Industrial insurance for only a little more 
 than one-fourth of that period — it will be conceded that 
 Industrial insurance is a social institution of great magnitude. 
 
 The office practice of Industrial insurance is, in a general 
 way, almost identical with the practice of an Ordinary com- 
 pany, using that term in a technical way; and nearly all of 
 the Industrial companies transact, in fact, an Ordinary busi- 
 ness as a complement to their particular system of family 
 insurance on the weekly - premium - payment plan. The 
 essential points of difference arise out of the vast number of 
 necessary office transactions resulting from the weekly col- 
 lection of premiums from the houses of the insured and the 
 character of the class of risks assumed under Industrial poli- 
 cies. It would carry me too far to discuss, even in a general 
 
 * A conservative estimate of the number of Industrial policies in the world on January 1, 1909, 
 is 58,000,000. 
 
 t On January 1, 1909, there were about 9,000,000 depositors in savings banks in the United States. 
 
 68 
 
The Social Economy of Industrial Insurance 
 
 way, the office and field administration of an Industrial 
 company, and my remarks are, therefore, limited to essential 
 points. 
 
 First. The calculation of premium charges for both in- 
 fantile and adult risks is upon a sound actuarial basis de- 
 rived from trustworthy mortality tables. The premiums vary 
 with age, but there are practically no restrictions as to occu- 
 pation or residence. Careful inquiry is made as to the moral 
 character of the risks assumed. 
 
 Second. The collection of premiums from the houses of 
 the insured is made by authorized collectors, or agents, who 
 are under a most effective system of supervision, supple- 
 mented by an audit system of weekly accounts and debits 
 and credits, by which defalcation, fraud, and intentional 
 errors are made difficult and, generally speaking, impossible. 
 Every policyholder has a premium receipt book in which 
 the weekly payments must be entered by the agent, while at 
 the same time a corresponding entry is required to be made 
 in the agent's collection book. The system has worked so 
 well that during the half-century since Industrial insurance 
 has been in operation no important changes have been 
 made in this branch of office practice. 
 
 Third. To every person insured is issued a policy which 
 in all essentials conforms to the contract issued to Ordinary 
 policyholders. The language used is so plain and free from 
 confusing technicalities that it is seldom indeed that there 
 are controversies or misunderstandings between the com- 
 pany and the insured. The contract provides for a definite 
 sum payable in the event of death in return for a definite 
 weekly premium; but, in addition, certain privileges and 
 options are granted to the insured, which provide for a paid- 
 up policy after three years, for additional benefits after five 
 years, for cash dividends after fifteen years, and for a cash 
 surrender value after twenty years. 
 
 Fourth. Every policy contains a provision that all 
 
 69 
 
Life Insurance and Other Subjects 
 
 premiums must be paid in advance on the Monday of the week 
 for which they are due. In the event of a policy being more 
 than four weeks in arrears for non-payment of premiums, 
 the agent is required to report the policy for lapse. Most 
 of the lapses of Industrial policies occur during the early 
 weeks of policy duration, when only a few premiums have 
 been paid. Policies can be revived without difficulty pro- 
 vided the arrears do not exceed one year, but it is required 
 that the applicant for revival pass a medical examination 
 or furnish other evidence of being in good health. There 
 are no fines, and every facility is granted to keep the policy 
 in force. If the arrears exceed thirteen weeks the policy 
 may be revived without the payment of arrears, but in place 
 thereof a non-interest bearing lien will be issued, the amount 
 of which is deducted from the face value of the policy 
 when it becomes payable as a claim. 
 
 Fifth. In the event of death every effort is made to pay 
 the claim as soon as possible, to carry into effect the general 
 intent of Industrial insurance to provide for the burial 
 expenses of the insured. The proof of death, however, re- 
 quires to be supplemented by documentary evidence: a, 
 claimant's certificate; b, certificate of identity; c, certificate 
 of the superintendent or assistant superintendent; d, certifi- 
 cate of the undertaker; e, certificate of the attending physi- 
 cian. 
 
 Sixth. The agency system of Industrial companies is 
 in a measure unique and deserving of special mention. A 
 large number of agents are necessarily required to conduct 
 the office and field operations of a company insuring millions 
 of risks, for I may point out in passing that 95 per cent, of the 
 entire Industrial business is carried on by three companies.* 
 The office organization consists of a large number of depart- 
 ments, which cannot very well be dealt with on this oc- 
 casion. I have elsewhere, in my address on "Life Insurance 
 
 * On December 31, 1908, 93.2 per cent, of the Industrial policies in force in the United States 
 were with the three largest companies. 
 
 70 
 
The Social Economy of Industrial Insurance 
 
 as a Career," elaborated upon this part of my subject. The 
 field operations require a superintendent in charge of a dis- 
 trict, who is aided by a number of assistant superintend- 
 ents, under whose direction is an agency force that varies 
 in number according to the size of the territory. On 
 an average an agent makes collections from about five 
 hundred to six hundred policyholders, but his compensation 
 is so adjusted that it is necessary for him, in addition, to 
 solicit for new insurance. By this means it is to his 
 pecuniary interest to prevent the lapsing of policies and to 
 increase as far as possible the number of policies in force. 
 The amount of collectible premiums is called the "debit," 
 and the agent is held responsible for the condition of his 
 accounts. His books and papers are periodically inspected 
 by assistant superintendents who have a thorough knowledge 
 of the business and are personally familiar with all the 
 insured, so that in the event of the resignation or death of 
 the agent there is no interruption or intermission in the 
 collection of the weekly premiums. 
 
 With these facts clearly stated we may now consider 
 the place of Industrial insurance in practical economics. 
 President Hadley very properly draws a distinction between 
 public and private wealth, and points out that "the growth 
 of national wealth depends upon causes far deeper and 
 more profound than those that the statesman or legislator 
 can control." * In life insurance we have a species of ma- 
 terial wealth representing more than two and a quarter 
 billions of accumulated funds as security for the faithful 
 discharge of promises made and obligations incurred, and, 
 in addition, a vast amount of economic security resulting 
 from the successful elimination of a risk inherent in the un- 
 certainty of human life. We may, therefore, it seems to me, 
 speak of life insurance, and in particular of Industrial insur- 
 ance, as "public wealth" in the true and complete sense of 
 
 * Economics, by Arthur T. Hadley, New York, 1897, p. 12. 
 
 71 
 
Life Insurance and Other Subjects 
 
 President Hadley's definition. He insists upon the supreme 
 importance of security and the institution of property, to ren- 
 der possible the progress, social, moral, and economic, of the 
 race, for it is only by accumulated wealth that men are more 
 or less removed from the immediate and destructive pres- 
 sure of poverty. While, no doubt, much of human poverty 
 is unavoidable and inherent in the very constitution of society, 
 a vast amount of existing misery is preventable by the devel- 
 opment of right habits of savings and insurance — by frugal- 
 ity and efficient industry. Abstinence from the immediate 
 use of money as soon as earned is of the utmost importance 
 in the economic development of the people. No other means 
 have yet been discovered to insure the economic security of 
 the masses as effectually as by insurance. President Hadley 
 well says that "great evils arise from trusting too much to 
 Providence and not making a distinct personal effort to meet 
 the contingencies of life," and no method has yet been devised 
 by which the contingency of death, especially of premature 
 death, can be better provided for than by life insurance. 
 Although the sphere of Industrial insurance is limited to the 
 providing of relatively small sums as security against death, 
 they are large indeed when considered from the viewpoint 
 of the masses who consume their weekly wages almost as 
 soon as earned. 
 
 The place of life insurance in social economics is, there- 
 fore, most important. The accumulation of capital, the strug- 
 gle of the masses for property and economic independence, 
 the possibility of a more equitable and general distribution of 
 wealth, are all problems which rest fundamentally upon the 
 power and habits of the people to save. But saving habits 
 are acquired only with great difficulty, and the ordinary sav- 
 ings bank is far from being the evidence of workingmen's 
 thrift which it is often assumed to be. Hon. Carroll D. 
 Wright has estimated that not more than one-half of the sum 
 on deposit with savings institutions represents accumulations 
 
 72 
 
The Social Economy of Industrial Insurance 
 
 of wage-earners, the remainder being the investments of the 
 relatively well-to-do. Industrial insurance serves both an 
 economic and a social purpose. It is the most effective, even 
 though perhaps the most elementary, education in thrift 
 which has yet been developed. The weekly premium pay- 
 ments develop systematic habits of saving and lead to the 
 accumulation of millions which but for this method of insur- 
 ance would be expended largely for needless and often vicious 
 purposes. The usual method of accumulating savings banks 
 deposits is in marked contrast to Industrial insurance premium 
 payments, in that, as a rule, deposits are made at irregular 
 intervals and not in the small sums which represent true fore- 
 sight, frugality, and abstinence from needless expenditures. 
 
 The weekly premium payments soon become a habit of 
 life, even with the young, who in time learn to pay the five 
 or ten cents a week necessary to meet the expense of their 
 own insurance. The education in thrift, however, does not 
 end here. Systematic habits of saving are developed which 
 have their effect in other directions, and the conclusion is 
 quite in accordance with our experience that general saving 
 habits, accumulations in savings banks, or payments for 
 building loans, /oZ/oiu Industrial insurance rather than precede 
 it, and are most widely diffused among the people where In- 
 dustrial insurance is most general as a mode or method of 
 family protection. For illustration: In this country Philadel- 
 phia, Pa., and Dayton, Ohio, are often referred to as cities 
 in which building and loan associations have made most 
 progress, but they are also cities in which Industrial insurance 
 is most general as a method of family insurance. In England, 
 it is claimed on good authority that school savings banks 
 and penny provident funds have been most successful in 
 Manchester, Liverpool, and Birmingham, but these are also 
 the cities in which Industrial insurance is almost universal, 
 so much so that at least four-fifths of the entire population 
 of these cities hold Industrial policies. 
 
 73 
 
Life Insurance and Other Subjects 
 
 Industrial insurance is not only of great value as an aid 
 to the development of general saving habits and the accu- 
 mulation of property, but it is a contributory agent of great 
 importance in the progress and public appreciation of other 
 forms of insurance — Ordinary life, fraternal, accident, fire 
 insurance, etc. Industrial insurance has enormously extended 
 the field of other methods of insurance by familiarizing the 
 mass of the population vrith the elementary principles and 
 beneficial results of a method of life insurance particularly 
 adapted to special needs. Industrial insurance came into 
 existence in the United States at a time when public faith in 
 financial institutions, savings banks. Ordinary life insurance 
 companies, and, especially, so-called workingmen's insurance 
 on the co-operative plan was profoundly shaken by panics 
 and financial depressions and evidences of mismanagement 
 and fraud. Industrial insurance has 'kept faith with the 
 people, and every promise made has been fully carried out. 
 Security, stability, permanency, have been the watchwords, 
 and no social institution of to-day is established on a more 
 scientific and trustworthy theory of mortality and finance than 
 the vast structure of Industrial insurance with its more than 
 forty millions of policyholders in different parts of the world. 
 It is not going too far to say that this method of life insur- 
 ance protection forms to-day one of the most effective 
 measures making directly or indirectly for accumulation of 
 property. However small the premium payments and how- 
 ever small in many cases the individual returns, the fact 
 remains that fifty-two times a year payments are made, and 
 these lessons in thrift and accumulation are taught and 
 brought home to an element of the population which is 
 most in need thereof. 
 
 We often hear the old complaint that there is no real prog- 
 ress, but only a shifting of wealth, by which the poor are made 
 poorer and the rich grow richer. Relatively this is true, 
 for, by contrast, in a more advanced society the condition 
 
 74 
 
The Social Economy of Industrial Insurance 
 
 of the very poor becomes more striking and apparently 
 less necessary. Actually, however, our progress during the 
 past half-century has been real and of vast benefit to the mass 
 of our population, who in an ever-increasing proportion are 
 attaining a relatively high degree of economic security and 
 social well-being. The object of all thrift agencies is not only 
 to aid persons to become savers in the first instance and to 
 accumulate a fund for future contingencies, but also "that 
 they may have the consciousness of being removed (by their 
 own efforts) from the burden of relief-receiving." 
 
 Industrial insurance provides a sum certain, from ^15 
 to ^1,000, at a time when in many households no ready 
 money is otherwise available for the expenses incident to 
 death and the last illness. The problem reduces itself to 
 the necessity: that the burial of the father or the child must 
 be paid for, that it will cost at least from ^15 to ^100, and 
 that this sum must be provided for either by the convenient 
 method of Industrial insurance or by a draft upon a sum 
 possibly accumulated during years of careful husbandry of 
 slender resources or by the incurrence of a debt with the 
 undertaker and the doctor. With the last as the alterna- 
 tive, it is an open question whether an undertaker can be 
 found who will take the risk, and there will often be no 
 escape from the necessity of an appeal to the public poor 
 fund or for private charitable relief. The poor have their 
 standard of life and customs as thoroughly established as the 
 well-to-do or the rich, and, however humble their station, 
 they prefer the burial of their dead at their own expense in a 
 manner which to them represents the common decencies 
 of life. 
 
 Deep at the root of the problem of life insurance for the 
 the poor lies their abhorrence of a pauper burial and their 
 willingness to provide out of present savings for a future 
 contingency and the ever-present possibility of premature 
 or unexpected death. As the result of the introduction of 
 
 75 
 
Life Insurance and Other Subjects 
 
 Industrial insurance into the United States there is now re- 
 turned to policyholders about ^^25,000,000 per annum in the 
 payment of claims alone, and the relative number of pauper 
 burials has been materially reduced during the past twenty 
 years. On the basis of a conservative estimate there would 
 be 25,000 more pauper burials per annum in American cities 
 if this system were not in almost universal operation. From 
 a moral and sentimental point of view, therefore, the value 
 of Industrial insurance as making for a higher standard of 
 family life cannot be overestimated. It certainly is a matter 
 of considerable importance in the life and struggle of many 
 who are on the very verge of pauperism and dependency to 
 know that at the end of their earthly difficulties they will 
 not be cast away in a potter's field. 
 
 But the good effect of Industrial insurance as a direct 
 means of reducing pauperism does not end here. In many 
 instances a sufficient sum remains, after the payment of 
 funeral and doctors' bills, to establish the widow in some kind 
 of business, on a small scale perhaps, but sufficient to provide 
 the necessary means of support for herself and children. As 
 a rule there will be other savings available, for Industrial in- 
 surance suggests the advantage and importance of other 
 forms of investment and encourages economy in family ex- 
 penditures. How far the burden of poor-relief, indoor and 
 out, has been actually diminished cannot be stated with even 
 approximate accuracy, but there are some very significant 
 data for certain States and cities which indicate that, re- 
 gardless of a large immigration, there has been, during 
 recent years, a relative and substantial decrease In the num- 
 ber of paupers and In the amount paid out for poor-relief. 
 
 The indirect results of Industrial insurance are, there- 
 fore, of very considerable importance. Just as the vast ac- 
 cumulations In savings banks are to a considerable extent 
 the aggregate of a large number of small deposits, so in In- 
 dustrial insurance the assets of about ^150,000,000, held as 
 
 76 
 
The Social Economy of Industrial Insurance 
 
 reserve and surplus, represent a vast amount of capital as 
 the result of small weekly payments which average about 
 ten cents.* These accumulations do not stand for idle capital, 
 but for public wealth in the complete sense of the term. It 
 is wealth made available for the conduct of general busi- 
 ness, of active enterprise, and other social and economic 
 ends. Of the two billions of assets held by American legal 
 reserve life insurance companies 75 per cent, is invested in 
 stocks, bonds, and mortgages, 8 per cent, in real estate, 6 per 
 cent, in loans on policies, and the rertiainder in other forms of 
 investment and as cash in bank. The absolute necessity for 
 life insurance companies to earn a certain rate of interest 
 on their investments makes it of the highest importance that 
 the assets should be constantly employed in profitable en- 
 terprises, thus increasing materially the national prosperity 
 and social security of the people. 
 
 I, therefore, do not go too far in holding that the indirect 
 results of this form of insurance, with its encouragement of 
 systematic saving, are at least equally important with the di- 
 rect results represented by the annual payment of over $25,- 
 000,000 in claims, etc., to Industrial beneficiaries. The cre- 
 ation of capital by this method of insurance is indeed of far- 
 reaching importance, even to the laborer or wage-earner, whose 
 economic security and opportunity for employment are en- 
 hanced by the real amount of capital made thus available for 
 increased production. There is no more generally accepted 
 postulate in economics than that "in proportion to the in- 
 crease in capital the share of the annual product falling to 
 capital is augmented absolutely but diminished relatively, 
 while the share falling to labor is increased both absolutely 
 and relatively." Considered from this point of view alone 
 Industrial insurance makes for a more general and equitable 
 distribution of wealth. 
 
 The success of Industrial insurance may be summed up 
 
 * On December 31, 1908, the aggregate reserve held by the Industrial companies for the protection 
 and benefit of the Industrial policyholders and their beneficiaries was approximately $220,000,000. 
 
 77 
 
Life Insurance and Other Subjects 
 
 in a remark made by Abraham Lincoln, that "with public 
 sentiment on its side everything succeeds — with public 
 sentiment against it nothing succeeds." The system of 
 family insurance forms an integral part of the domestic econ- 
 omy of the American people. Organized in the State of 
 New Jersey, the progress in local development has been 
 most complete in that State and in the adjoining States of 
 New York and Pennsylvania. In New Jersey there are 
 now about 1,500,000 Industrial policies in force, indicating 
 that about 65 per cent, of the aggregate population is in- 
 sured. In certain sections of Newark, of New York City, 
 of Philadelphia, and of other large cities, the system is so 
 general that from 75 to 95 per cent, of all insurable persons 
 hold Industrial policies. 
 
 We have made a number of investigations to ascertain 
 the actual extent of Industrial insurance in various cities, and 
 there is one significant fact which we have learned, especially 
 in and around Newark — that the proportion of population 
 insured on the Industrial plan is somewhat higher among 
 those who own their own homes than among those who do 
 not. Whether as cause or effect, the fact remains that the 
 progress and development of the business have been most 
 satisfactory among the thrifty and stable element of our in- 
 dustrial population. We can go further and say that policy- 
 holders are in other respects a superior class. For illustra- 
 tion: We find by our mortality statistics that the death rate 
 of insured children is less than the mortality of children 
 in the general population as determined by the census. Our 
 percentage of deaths from intemperance and alcoholism is 
 less than that expected by the general standard of mor- 
 tality, and, finally, we find that our ratio of deaths from 
 homicide and suicide is below the average for the country 
 at large. I mention these facts, which are supported by ir- 
 refutable evidence, to show that there is a close relation be- 
 tween Industrial insurance and the progress and well-being 
 
 78 
 
The Social Economy of Industrial Insurance 
 
 of the industrial population, and that the Industrial policy- 
 holders represent a more thrifty, more temperate, and more 
 law-abiding element than the uninsured. 
 
 It remains for me to speak of the evolution of Industrial 
 insurance and the adaptation of the business to new condi- 
 tions. When established, in 1875, the financial and indus- 
 trial conditions were such as to call for an elementary form 
 of life insurance, with absolute security as the first considera- 
 tion. By slow degrees public confidence in insurance and 
 financial institutions was restored, and as early as 1881 it 
 became necessary to issue a special policy for the round sum 
 of ^500, to meet a distinct and increasing demand from the 
 superior element of our industrial population. By 1886 the 
 insurance education of the masses had gone far enough to 
 make it seem advisable, and, in fact, necessary, to establish 
 an Ordinary department. That was less than twenty years 
 ago; but during the intervening period the three Industrial 
 companies which transact 95 per cent, of the business in this 
 country have built up a vast Ordinary business with about 
 720,000 policies and ^800,000,000 of insurance in force.* 
 At least one-half of this sum — and perhaps three-fifths — rep- 
 resents Ordinary insurance on the lives of wage-earners, or 
 persons in positions or situations practically outside of the 
 field of the solicitor for exclusively Ordinary companies. 
 The number of persons insured with Industrial companies 
 for both Industrial and Ordinary is indeed quite large and 
 constantly increasing. The Industrial policies are held pri- 
 marily for the payment of expenses incident to death; the Or- 
 dinary for family protection, education of children, and other 
 purposes of social and economic importance. Coincident with 
 the progress and evolution of Industrial insurance there has 
 been a material improvement in the Industrial policy con- 
 tract, which to-day contains all the essential and important 
 provisions and privileges of the regular Ordinary policy. So 
 
 * On December 31, 1908, the Industrial companies had 1,295,942 Ordinary policies in force, repre- 
 senting $1,317,887,524 of insurance. 
 
 79 
 
Life Insurance and Other Subjects 
 
 we see how close is the relation between the two forms of in- 
 surance and how important is Industrial insurance as an 
 education in general insurance theory and practice, making 
 gradually, but with certainty, for the social and economic 
 security of the people. 
 
 If there is any one thing that "social classes owe to each 
 other" it is that all shall aim and work to diminish the need- 
 less suffering and unnecessary burdens of those for whose 
 well-being and future protection we are individually or so- 
 cially responsible. The evidence is conclusive that the mass 
 of our population is engaged in a heroic struggle to escape 
 from dependent poverty to relative economic and social free- 
 dom, and whatever contributes toward this much-to-be-de- 
 sired end is certainly deserving of sympathetic consideration. 
 I believe that in Industrial insurance we have a most valu- 
 able aid in this effort for social betterment on a large 
 scale, and the evidence is conclusive that a vast amount of 
 direct and indirect good is accomplished by this elementary, 
 but effective, form of thrift. During the almost thirty years 
 since Industrial insurance has been in active operation in 
 this country, gradual but constant progress has been made 
 toward a higher degree of social efficiency, so that we may 
 hopefully look forward and anticipate a time when this form 
 of insurance will be indeed a social institution of universal 
 utility, in every respect a far-reaching power for good, di- 
 rectly to the people and indirectly to the nation. I believe 
 that the evidence warrants the conclusion that Industrial 
 insurance makes first for private wealth and second for 
 public wealth, as well as directly and indirectly for the all- 
 important end of a higher degree of security for the indu.s- 
 trial population of this land. 
 
 80 
 
Chapter IV 
 
 THE PRACTICE OF INDUSTRIAL 
 INSURANCE 
 
 STATEMENT MADE 
 
 TO A SELECT COMMITTEE OF THE 
 
 NEW JERSEY SENATE 
 
 APPOINTED TO INVESTIGATE 
 
 LIFE INSURANCE 
 
 1906 
 
THE PRACTICE OF INDUSTRIAL 
 INSURANCE 
 
 'ndustrial insurance is life insurance for 
 I small amounts, chiefly on the lives of wage- 
 ' earners and members of their immediate 
 families, with premiums payable weekly 
 and collected from the houses of the in- 
 sured. Industrial insurance had its origin 
 in England, where, after the dissolution 
 of the gilds under Henry VIII, friendly societies assumed 
 the task of providing for the needs of members in sick- 
 ness or at death, in return for fixed contributions.* In 
 course of time the insurance element of this primitive 
 method of social science attracted the attention of scientific 
 men, and by slow degrees the system was perfected until the 
 rates, or premium charges, were adjusted to the ages of the 
 insured. In many, in fact in very many, of these societies 
 the assumption of an enormous rate of mortality did not 
 receive proper consideration until the societies had fallen 
 into a hopeless state of insolvency, and a large number of 
 disastrous failures of friendly societies and burial clubs is a 
 matter of historical record. From time to time Parliament 
 made inquiry into the subject, and in 1853 a committee of 
 the House of Commons recommended the extension of life 
 insurance to the masses upon the same sound principles of 
 mortality and finance which underlie level-premium insur- 
 ance on the so-called Ordinary plan. Acting upon this 
 suggestion, the Prudential Assurance Company of London, 
 in 1854, began the transaction of a new form of insurance, 
 which was thenceforth called Industrial,f to distinguish it 
 from other plans, but chiefly because it was intended to 
 meet the needs and conditions of the industrial, or wage- 
 
 * Annals of the British Peasantiy, London, 1895, pp. 82-96. 
 t History of the Prudential Assurance Company, London, p. 3. 
 
 85 
 
Life Insurance and Other Subjects 
 
 earning, element of the population — in other words, the pre- 
 ponderating majority of the people of England. 
 
 At first the progress was slow. Caution was necessary 
 lest a serious error of judgment in matters of office and 
 agency administration should expose the new experiment 
 in insurance to the risk of possible failure. From the outset 
 the chief consideration was security, the absolute certainty 
 that the contract agreement made with the people, in the form 
 of insurance, would be kept. The public had been robbed 
 by bubble companies and swindled by societies often parad- 
 ing under high-sounding names, which, upon the plea of 
 fraternal interest, mercilessly fleeced the very poor of their 
 last shilling. The question of the cost of the new form of in- 
 surance protection was, for the time, subordinate to the vastly 
 more important consideration of absolute security. The 
 essential point was then, as it is to-day, that the contract 
 agreement, as embodied in the policy, for the ultimate pay- 
 ment of a definite sum in return for a specific weekly 
 premium, should be faithfully kept. That promise of good 
 faith is the rock upon which Industrial insurance has been 
 built, and it is upon that rock that the immense popularity 
 of this plan rests and challenges the admiration of the 
 world. 
 
 After the first decade, or by about 1864, the business had 
 reached proportions which left no question of doubt that 
 within a comparatively few years the system of Industrial 
 insurance would become a universal provident institution in 
 the United Kingdom. The government of the day was made 
 aware of the truly wonderful success of the Prudential, and 
 upon the suggestion and urgent request of Mr. Gladstone, 
 a system of post-office life insurance was established, which, 
 it was supposed, in conjunction with the post-office savings 
 bank, would attract the people in large numbers in active 
 competition with private companies.* 
 
 * A Hisrory oi Banks for Savings, by Wm. Lewins, London, 1866, pp. 345 et seq. 
 
 86 
 
The Practice of Industrial Insurance 
 
 Mr. Gladstone's plan was worked out with considerable 
 skill upon the theory that the comparatively high initial ex- 
 pense of obtaining new insurance could be eliminated by 
 making every post-office an insurance agency, where applica- 
 tions could be filled out, where policies could be secured, and 
 where premiums could be paid. In time every postmaster 
 became more or less an insurance agent for the government. 
 Extensive publicity was given to the matter in various ways, 
 but the attempt was a complete failure. Experience proved 
 that the collector was indispensable, that the business would 
 not come voluntarily, that the insured would not take the 
 trouble to call at the post-office even once a fortnight, or 
 once a month, to make the necessary periodical premium 
 payments. All the appeals, by placards, leaflets, or otherwise, 
 to the people to insure upon their own account through the 
 post-office proved a waste of effort; the public simply paid 
 no attention to the plan and continued to affiliate in ever- 
 increasing numbers with the Prudential and with other In- 
 dustrial companies which had been organized in the meantime. 
 
 The public did not want the kind of insurance offered 
 by the government. The mass of the people were in need 
 of insurance protection adjusted to their conditions and habits 
 of life. They required a system of family protection, under 
 which a small, but certain, sum would become payable in the 
 event of the death of any member of the family. The gov- 
 ernment ignored this point. The Industrial companies met 
 an existing need by methods derived from long experience. 
 When it had been found, by observation, inquiry and ex- 
 perience, that the real problem to be met was one oi family 
 insurance, including the children, the companies adjusted 
 their practice to this need, and upon the basis of reliable 
 mortality data developed the essentials of the system of 
 Industrial insurance practically as it is carried on to-day 
 throughout the civilized world.* 
 
 * History of the Prudential Assurance Company, London, p. 12. 
 
 87 
 
Life Insurance and Other Subjects 
 
 The government system of post-oiBce life insurance is 
 still in operation. In the forty years that have passed, the 
 post-office has issued 23,641 policies, and 13,080 policies are 
 in existence to-day. The large majority of these are on the 
 lives of post-ofl&ce employees. The premium charges are 
 about the same as — at some ages even higher than — the 
 corresponding premium charges of private companies. The 
 returns to policyholders have not been more favorable, but 
 if anything less satisfactory, than those to policyholders 
 of private institutions.* Efforts have been made from time 
 to time to put new life into the plan, but to no purpose. A 
 committee of Parliament in 1882 made a long report upon 
 the subject and suggested changes, which, if adopted, would 
 have made the post-office experiment practically a counter- 
 part of the Prudential. The committee suggested the em- 
 ployment of solicitors, and the possible utilization of letter- 
 carriers for this purpose. Children, it was recommended, 
 should be admitted at least at as low an age as eight years, 
 and this suggestion was adopted .f There is no need for me 
 to go further into details, and it is sufficient to say that last 
 year (1905) the Post-office Insurance Department issued 
 only 741 new policies, against about 750,000 policies issued 
 by the London Prudential alone. In forty years the govern- 
 ment issued about the same number of policies as the Pru- 
 dential issues in ten days. J 
 
 The agitation of the subject and the success of the In- 
 dustrial plan of insurance in England attracted much atten- 
 tion in this country. Conditions of labor and life were much 
 the same. A large number of so-called fraternal or co- 
 operative insurance societies were imposing upon the mass of 
 the people, and failure after failure brought the facts to public 
 
 * For an extended discussion of the British systetn of post-office life insurance companies, see 
 the Spectator of September 14 and 28, 1905. 
 
 t Report from the Select Committee on Post-ofHce Annuities and Life Assurance Policies, 1882, 
 pp. 6-7. 
 
 X During 1907 the Post-office Insurance Department issued only 492 life insurance policies and in 
 1906 only 641. 
 
 88 
 
The Practice of Industrial Insurance 
 
 attention, and the cause of sound workingmen's insurance be- 
 came an issue which, in 1875, led me to organize in this State 
 the Prudential Friendly Society, the first institution of its 
 kind in America. I had studied the plans and methods of 
 English societies and companies with care, and I had made 
 myself familiar with the various reports of a Royal Com- 
 mission, appointed in 187 1, and which held sittings for a 
 number of years, to inquire into the state of friendly societies, 
 burial clubs and Industrial insurance in England. I soon 
 realized that the existing plans of so-called fraternal or co- 
 operative insurance societies in this country were defective, 
 and that they could not possibly succeed. My investigations 
 of the subject extended over several years before I took 
 active steps to organize a society upon sound principles, 
 which, like the Prudential of London, should become a 
 household word in America and mark the beginning of a 
 new method of thrift, of saving and insurance, in time to be 
 universal throughout the United States. My investigations 
 and experience convinced me later that a stock company 
 would answer the purpose better than a mutual organi- 
 zation, and The Prudential Insurance Company of America 
 was the result. 
 
 I have often had occasion to review the steps of our early 
 history as they are more fully set forth in the "History of 
 The Prudential"* and in various papers and public addresses 
 on the subject of Industrial insurance. It is a wonderful 
 history and without a parallel in the whole range of philan- 
 thropic or charitable enterprises. It is a chapter in the 
 history of the American laborers' struggle for economic inde- 
 pendence as deserving of credit and consideration as the 
 problems of wages, working hours, and effective protection 
 against accident and disease. Whatever opinion may be 
 held, the facts are indisputable, that no other system of 
 voluntary saving or insurance can compare with our business 
 
 * History of The Prndcntial losurance Company of America, 1875-1900, by Frederick L. Hoffman, 
 Prndential Press, 1900. 
 
 89 
 
Life Insurance and Other Subjects 
 
 in the number of contributors to a common fund. To-day 
 in this country there are some sixteen million Industrial 
 policies in force, in the world at large about forty-six million 
 policies — a most effective protection against certain con- 
 tingencies of life which cannot be met otherwise than by 
 this method or plan of Industrial insurance.* It is chiefly in 
 English-speaking countries that Industrial insurance has at- 
 tained to the degree of a universal provident institution. But 
 gradually the system is gaining a foothold in other countries, 
 and among them I may mention Germany, where compulsory 
 insurance, so-called, is supposed to meet all the needs of the 
 people, and yet Industrial insurance companies now have 
 over five million policies in force.f The business has made 
 progress in Austria, Switzerland, Norway, Denmark, and 
 other states of continental Europe. It has reached a compar- 
 atively high degree of development in Australia, in Canada, 
 and even in South Africa. Everywhere the foundation prin- 
 ciples are the same, everywhere the business is chiefly 
 conducted by stock companies and upon the plan of weekly 
 contributions collected from the houses of the insured. So 
 much may be said in brief for Industrial insurance as a 
 world-wide method of thrift and protection, as a universal 
 provident institution without a parallel in the history of 
 commercial and philanthropic enterprises. 
 
 Previous to the introduction of Industrial insurance as 
 a method of family protection, the wage-earning element of 
 the population was compelled to rely more or less upon in- 
 secure co-operative Insurance societies or public charity for 
 aid and assistance in the event of death. To-day, happily, 
 this necessity no longer exists. To-day the protection of 
 the family by life insurance is recognized to be a social and 
 civic duty, and a pauper burial is held to be a needless dis- 
 grace. Pauperism as such has materially declined. The ratio 
 
 * On December 31, 1908, there were approximately 58,000,000 Industrial policies in force in the 
 world and about 19,688,000 of that total were in force in the United States. 
 
 t For an extended article on Industrial insurance in Germany, see the American Underwriter for 
 June, 1908. 
 
 90 
 
The Practice of Industrial Insurance 
 
 of persons in almshouses in the United States was 13 per 
 10,000 in 1880, against only 10 in 1903, according to the 
 most recent data published by the Federal government.* 
 If the earlier ratio prevailed at the present time there would 
 be 24,000 more paupers in almshouses than is actually the 
 case. But in New Jersey the rate has fallen from 19 per 
 10,000 in 1890 to less than 10 in 1903 — the lowest point 
 reached by any State of the North Atlantic division. 
 We may rightfully claim some of the credit for this im- 
 provement in the condition of the poor in American cities. 
 We claim, upon the facts of our experience, that we have, 
 in a large measure, educated the masses in the first principles 
 of saving and insurance. We claim that the good resulting 
 from this method of thrift has powerfully reacted upon the 
 entire social economy of the people and that millions to-day 
 save and invest, who, but for the persistent teachings of In- 
 dustrial insurance, would squander their money or waste 
 their surplus funds, as was common before Industrial insur- 
 ance came into existence. 
 
 I have spoken of the decline in pauperism and of the 
 relative decrease in the number of persons in almshouses. 
 I may go further and call attention to the remarkable decline 
 in the pauper burial rate of American cities. We do not 
 insure the lowest pauper element — if for no other reason, 
 than the self-evident one that this class is without the 
 means to pay the premiums with regularity — but we do insure 
 a large proportion of comparatively poor people, who, but for 
 this system of insurance, would be in constant danger of be- 
 coming public burdens in the event of a death in the family, 
 of father, mother, or child. We offer to these people the only 
 effective means yet devised to provide for their own needs at 
 their own cost, by a slight deduction from their weekly in- 
 come. The excellent results of the system are proved by the 
 pauper statistics of large cities. The average annual pauper 
 
 * Paupers in Almshouses, 1904, Washington, D. C, 1906— special report of the Bureau of the 
 Census, prepared by Mr. John Koren. 
 
 91 
 
Life Insurance and Other Subjects 
 
 burial rate before Industrial insurance came into existence 
 was 23.4 per 10,000 of population; it had fallen to 15.6 by 
 1890, and to 1 1.8 by 1904. Upon the lowest estimate of 
 expense the annual saving to American tax-payers on ac- 
 count of this reduction is ^50,000 a year. At least 30,000 
 persons are now buried annually, without state or charitable 
 assistance, who would be buried in the potter's field if the 
 present burial rate of paupers were the same as the rate pre- 
 vailing before the introduction of Industrial insurance. 
 
 This fact alone would justify the system of Industrial 
 insurance, if for no other reason than that it makes for a 
 higher standard of life, for increased self-respect among a 
 large class of people, struggling manfully to elevate them- 
 selves from a lower to a higher scale of living. The self- 
 respect of the poor and of the moderately well-to-do is ma- 
 terially raised by the consciousness that in the most solemn 
 hours of life the sorrow and suffering are not intensified by a 
 sense of impending disgrace incurred in a burial in the 
 potter's field. If Industrial insurance had done no more 
 than this, it would fully have justified its existence". But 
 this is a comparatively small matter when we take into 
 account the aggregate of benefits resulting from this form 
 of insurance. Above all would I place the education in 
 sound insurance and in the value of investment and the 
 enhanced faith in the value of property, which sooner or later 
 lead to saving and insurance and investment in many other 
 directions. 
 
 For thirty years our agents have been teaching to millions 
 of men and women the first principles in the practice of 
 sound life insurance. From the smallest beginnings the 
 business has developed into one of enormous proportions. 
 Commencing with a five-cent or ten-cent policy, millions of 
 wage-earners have thus made their first start in the struggle 
 for economic security, concluding with a savings-bank account 
 or an Ordinary policy sufficient in amount to carry the family 
 
 92 
 
The Practice of Industrial Insurance 
 
 over a period of want. As early as 1886 The Prudential 
 found it necessary to take this tendency into account, yield- 
 ing to the lesson of experience and the pressure of its agents 
 to issue Ordinary policies to Industrial policyholders. The 
 demand was specific and reasonable. We at first were 
 apprehensive, and we therefore commenced on a small scale. 
 It required some years to educate our agency force to the 
 new conditions, but in time we perfected our present system, 
 under which every Industrial agent writes Ordinary insur- 
 ance, chiefly among the Industrial policyholders. So suc- 
 cessful have we been in this respect that last year, 1905, of 
 our total issue of Ordinary business 64.5 per cent, was 
 written by Industrial agents, and of all the Ordinary busi- 
 ness in force 60.1 per cent, has been secured by our Industrial 
 field force. 
 
 What has been the result .'' The total amount of Ordi- 
 nary insurance in force has increased enormously. The 
 three principal Industrial companies have to-day nearly one 
 million Ordinary policies in force for the sum of nearly one 
 billion dollars. Most of this insurance protection is on the 
 lives of workingmen, or wage-earners — men of small means 
 and small income. The average policy is for about one 
 thousand dollars, a substantial sum of money, capital in the 
 true sense of the word, made readily available at a time when 
 other resources usually fail or come to an end. This is of 
 immense value as a means of family protection, as providing 
 funds for education, as security against the loss of a home, 
 against burdensome debt, and even against the poorhouse 
 as a last resort. You cannot separate this result from In- 
 dustrial insurance. It is an integral part of the system to- 
 day; a natural consequence of the education in thrift and 
 systematic saving of small amounts, the one method of in- 
 surance being as important, and in fact as indispensable, as 
 the other. 
 
 When Industrial insurance was introduced in New Jersey 
 
 93 
 
Life Insurance and Other Subjects 
 
 in 1875, life insurance progress was almost at a standstill, 
 and many years of patient effort were necessary to re- 
 store public confidence in these useful institutions. The 
 failure of the New Jersey Mutual, with its history of fraud 
 and mismanagement, would ordinarily have been sufficient 
 to cast the shadow of discredit upon any form of thrift, how- 
 ever meritorious otherwise; but countless benefit societies, 
 so-called, workingmen's insurance schemes of all kinds, 
 rising rapidly in public favor, reaching a maximum point of 
 growth, and then collapsing, to the loss and grief of the mem- 
 bers, had undermined the faith of the working people in the 
 intrinsic value of all forms or methods of insurance. What 
 the London Prudential had done for the English working- 
 men. The Prudential Insurance Company of America did 
 for the wage-earners of the United States. The cause of 
 genuine thrift was advanced to a point where the true merits 
 of life insurance were recognized, where its value was clearly 
 proved, and where a return to the older and insecure condi- 
 tions of helpless dependence was made forever impossible. 
 The growth of the business since that time is a matter 
 of official record. In 1880 the number of Ordinary policies 
 in force in New Jersey was 20,350, or $T,J of insurance per 
 capita. By 1890 this had increased to 34,605 policies, or 
 $t>2 per capita, and by 1905 to 165,109 policies, or $14^1 per 
 capita. Even greater have been the results in the Industrial 
 branch. From nothing at the beginning, in 1875, the busi- 
 ness progressed to 248,659 policies in 1885, 1,268,360 policies 
 in 1900, and 1,687,885 poUcies in 1905. The present amount 
 of Industrial insurance protection upon the lives of the peo- 
 ple of this State (New Jersey) is ;^2 12,2 14,727, chiefly with 
 four companies. The Prudential and the Colonial, both of this 
 State, the Metropolitan, of New York, and the John Han- 
 cock Mutual, of Massachusetts. About nine hundred thou- 
 sand Industrial policies, among a little more than two million 
 population, are in force with The Prudential alone. In Essex 
 
 94- 
 
The Practice of Industrial Insurance 
 
 county The Prudential has over a quarter of a milHon Indus- 
 trial policies in force among a population of something over 
 four hundred thousand. No other section of the United States 
 can show better results. In no other State is insurance, both 
 Ordinary and Industrial, so universal and so generally in 
 favor. The record speaks for itself and requires no further 
 comment, but from the lakes of the Jersey hills to Cape May 
 practically every other household is a patron of our Company, 
 every family is more or less interested, and two workingmen 
 out of every three are Prudential policyholders. This is a 
 record, I believe, without parallel in insurance history. 
 
 The figures quoted emphasize the assertion that Indus- 
 trial insurance is family insurance, including men and 
 women, and children above the age of one year. Objections 
 have been raised against the practice of issuing small policies 
 upon the lives of children, but the objectors have never, to 
 my knowledge, sustained their views by facts and evidence 
 deserving of serious consideration. Generally reference has 
 been made to an alleged case of murder for burial money 
 during the early forties, a mention of which, by Thomas 
 Carlyle, in "Past and Present," is probably the sole source 
 of information relied upon.* The proof was not conclusive 
 even in that classic case of long ago, and no proof has since 
 been produced that the system of issuing policies upon the 
 lives of children has been injurious to child life and well- 
 being. With a recklessness unworthy of men otherwise care- 
 ful and deliberate, a few writers have cast serious reflections, 
 not only upon the companies transacting Industrial insur- 
 ance, but even more so upon the millions of wage-earners, 
 men of industry and toil, who for years have found this form 
 of insurance best adapted to their needs.f 
 
 Little indeed do these men know of the real life of the 
 
 * Past and Present, by Thomas Carlyle, centenary edition, New York, 1897, vol. X, p. 4, first 
 published in 1843. See also Kay's Social Condition and Education of the People in England, New York, 
 1863, pp. 82-94. 
 
 t For a fall statement of the controversy on this subject, see Life Insurance of Children, by Fred- 
 crick L. Hoffman, Newark, 1903. 
 
 95 
 
Life Insurance and Other Subjects 
 
 people, of their motives for sacrifice and of their efforts to 
 attain to a higher standard of life, efforts far transcending 
 in pure unselfishness any corresponding desire among the 
 more prosperous and well-to-do. More truly has a keen 
 and impartial inquirer, in behalf of the United States De- 
 partment of Labor, said: "These figures show that insurance 
 is held in high esteem, but they do not tell how great a moral 
 force it is in the lives of the poor. How is it that people 
 who are barely holding soul and body together, and who are 
 so sorely pressed by the demands of the present, will sur- 
 render so large a part of the income, sometimes a tithe of it, 
 to the purchase of a benefit that can accrue only in the future ? 
 The sentiment which prompts the poor to invest in insurance 
 is akin to piety; if death should come into the family they 
 want the household to be protected from harsh and profane 
 influences and they want the departed one to receive a de- 
 cent burial."* And this view we know, in the light of thirty 
 years' experience, to be the absolute and indisputable truth. 
 The facts in the case are that the amount of the average 
 claim paid in the case of insured children of ages under ten is 
 less than thirty dollars, while in comparison the average burial 
 expenses of a child are forty dollars, or more. The amounts 
 of insurance which can be obtained are strictly limited, and no 
 premium higher than ten cents per week is received upon the 
 life of a child. The subject has several times been carefully 
 investigated by Parliament in England, in different States 
 of this country, and in Canada, but no legislative verdict is 
 on record which sustains the false and even malicious allega- 
 tion of wrong and crime against the wage-earners of this 
 and other countries. In the commonwealth of Australia 
 the whole subject quite recently received exhaustive con- 
 sideration, and, after discussing every phase of it in Parlia- 
 ment, a bill was passed in which the specific amounts allowed 
 to be granted were in strict conformity with the office practice 
 
 * Bulletin of the Bureau of Labor, No. 64, May, 1906, pp. 613 and 614. 
 
 96 
 
The Practice of Industrial Insurance 
 
 of the companies, and about the same as the maximum 
 amounts which can be insured for in this country.* 
 
 In this connection I may call your attention to the fact 
 that although under the original plan of Mr. Gladstone the 
 British system of post-office insurance fixed the minimum 
 age at sixteen, the special committee of 1882 recommended 
 a material change in this respect and said: "As regards 
 the minimum age, it has been reported that in the case of 
 these small insurances, which are chiefly made the object of 
 pacing funeral and medical expenses and providing nursing, 
 the motive which prompts a father or mother to insure their 
 own lives must make them equally desirous to insure the 
 lives of their children. Your committee, therefore, recom- 
 mend that the insurances for small amounts, say not 
 exceeding ^^5, should be permitted in the case of children 
 between eight and fourteen years." To this significant state- 
 ment the committee add: "In recommending this extension 
 of insurance to children, your committee attribute much im- 
 portance to the encouragement which may thus he given to 
 continue insurance in after life." The recommendation, I 
 may add, was adopted.f 
 
 I may also direct your attention to another important 
 fact which I do not think is generally known. The Salva- 
 tion Army in England has for a number of years transacted 
 Industrial insurance as a distinct branch of its philanthropic 
 enterprise, but upon a business basis and with rates and 
 policy conditions about the same as those of the strictly 
 commercial companies like the Prudential, the Pearl, or 
 the British Workmen's. In 1901 the society had 266,000 
 Industrial policies in force, and now has probably not far 
 from half a million. Although General Booth had called 
 attention to the allegations of child-murder for insurance 
 money in his well-known book, "In Darkest England and 
 
 * Parliamentary debates. Commonwealth of Australia, session 1904-1905. 
 
 t Report from the Select Committee on Post-office Annuities and Life Assurance Policies, London, 
 1882. 
 
 97 
 
Life Insurance and Other Subjects 
 
 the Way Out" (p. 83), the insurance branch when estab- 
 Hshed followed private insurance companies in all details, 
 including children, even from their birth, as insurable 
 members of the family. From time to time the Salvation 
 Army has publicly discussed this subject and the suggested 
 Parliamentary prohibition of the practice. After calling atten- 
 tion to the words of the General, that "the abuse of a thing 
 is no argument against its use," it was stated, in 1900, that 
 "it would be just as reasonable to prohibit chemists from 
 dealing with poisons, which are admittedly useful in cer- 
 tain quantities, because of suicide through improper use; or 
 to prohibit people from riding a bicycle because there have 
 been some fatal accidents. There never has been any legal, 
 or, indeed, any other proof of abuse of child life assurance to 
 justify any change in the present law." I do not think that 
 any one will question the sincerity and sound common sense 
 of this view, expressed by an agency for social reform which 
 has the universal approbation of mankind and which, among 
 other eflForts to ameliorate the condition of the poor, has 
 found it necessary to adopt the system of Industrial insur- 
 ance in all its essentials as it has been carried on for many 
 years by private companies in England and in the United 
 States.* 
 
 I have called your attention to the fact that in this State 
 (New Jersey) Industrial insurance has assumed proportions 
 equaled in no other State, and I might have gone further 
 and said that in the city of Newark there are whole sections 
 and blocks of houses where from 60 per cent, to 95 per cent, 
 of all the people are industrially insured. It is safe to 
 say that of the entire child population in this city the pre- 
 ponderating majority are insured, yet during thirty years of 
 active business operations there has never been a single case 
 of alleged child-murder or neglect on account of insurance in 
 this city. In this State as a whole the mortality rate of 
 
 * Assurance, the official gazette of the life insurance department of the Salvation Army, vol. Ill, 
 p. 224, London, December, 1900. 
 
 98 
 
The Practice of Industrial Insurance 
 
 children is to-day less than half of what it was in 1879, when 
 deaths were first systematically reported by the State. Be- 
 fore 1875 the death rate of Newark was 30 per 1,000 and 
 the deaths of children under five formed 50.5 per cent, of the 
 whole mortality. The death rate in 1905 was 17.5 per 1,000, 
 and only about 31 per cent, were deaths of children under 
 five. What is true of Newark is true, more or less, of every 
 large city in New Jersey and in the United States. 
 
 In the thirty years since we have been in business many 
 substitutes for Industrial insurance have been suggested and 
 the field has always been open to any company which would 
 offer a more attractive, cheaper, or otherwise more satisfac- 
 tory plan. Time and again new propositions have been 
 brought forward, but not one has been successful. These 
 plans and suggestions have necessarily received our careful 
 consideration. It has often been suggested that the pre- 
 miums should be collected monthly, but the many companies 
 which transact insurance on the monthly-payment plan 
 have failed to reach even a fair proportion of the mass of 
 the people. We adhere to the fundamental principle of In- 
 dustrial insurance, which requires its adaptation to the needs 
 and conditions of the whole wage-earning population. It is 
 this which makes it a truly democratic institution; it is this 
 which gives to it the character of a universal provident fund. 
 Single-premium-payment insurance has been suggested, by 
 which every premium would purchase a small, but specific, 
 sum of insurance payable in the event of death. We have 
 looked into this matter; it has been tried by some companies, 
 but the people do not take to it — they simply do not seem to 
 want it. It has also been suggested that we combine our 
 form of insurance with a provision for a benefit in the case 
 of sickness. We tried that experiment for several years when 
 we commenced operations, and found it impossible to 
 conduct the business with safety and security, so we aban- 
 doned it. The Prudential of England and other Industrial 
 
 99 
 
Life Insurance and Other Subjects 
 
 companies have tried sickness insurance and found it im- 
 possible. The British government considered the subject, 
 but found this suggestion impracticable. It has also been 
 suggested that we should issue policies for deferred annu- 
 ities, payable in old age, say, after sixty. We have carefully 
 considered this also, but find that the weekly-premium-pay- 
 ment system under present conditions seems to preclude the 
 adoption of this suggestion as a practical solution. Indus- 
 trial insurance is primarily insurance for a definite sum 
 payable in the event of death, for the purpose of paying 
 the cost of burial, cemetery plots, nursing, last illness, etc. 
 Only as a secondary consideration does the element of possi- 
 ble investment enter into the proposition, or the laudable 
 attempt to provide for the immediate support of surviving 
 members of the family. The average premium of ten cents 
 a week cannot perform a miracle. Yet even as the matter 
 stands, we estimate that annually at least ;^ 12,000,000 of the 
 claim-payments of Industrial companies remain as a surplus 
 or provision for the more pressing needs of surviving mem- 
 bers of the family after the payment of burial and other 
 incidental expenses. In other words, all of the proposed 
 substitutes for Industrial insurance have in theory or in actual 
 practice fallen short of all the requirements to which Indus- 
 trial insurance primarily owes its world-wide success. 
 
 It has, for illustration, been suggested to us that we 
 should allow a deduction to be made equal to the collector's 
 commission in cases where Industrial policyholders prefer 
 to pay the premiums at our local office. This plan has 
 been tried by the London Prudential and found impractica- 
 ble.* The business of Industrial insurance is one of vast 
 detail, but simple in its general elements, and it is chiefly 
 because o£ uniformity in method and of strict adherence 
 to definite rules and regulations, admitting of no exceptions, 
 that the enormous mass of necessary office transactions is 
 
 * History of the Prudential Assurance Company, London, p. 9. 
 
 100 
 
The Practice of Industrial Insurance 
 
 reduced to a working basis. If we were to allow exceptions 
 to be made in matters of this kind, hopeless confusion would 
 be the result, not only in the field, but also in our office ac- 
 counts. For a week or a month the premiums would proba- 
 bly be paid at the office, for another week or month the de- 
 mand would be for the collection of the premium from the 
 house of the insured. Failure to make the premium-pay- 
 ment at the office would still require the services of an agent 
 to call upon the insured, and thus, for practical purposes, 
 instead of there being a saving in expense, the probability 
 is that the expense would be increased. That was the con- 
 dition in England, and it is reasonable to suppose that in 
 the nature of the case the same would be true here. 
 
 Then, again, it has been proposed that the State should 
 undertake this form of insurance. Several States are now 
 making inquiry into the subject, and in Illinois a modified 
 form of compulsory labor insurance is under consideration. 
 New Zealand tried the experiment for a number of years, 
 but abandoned the effort.* The British government has 
 been urged to extend its post-office system by making letter- 
 carriers insurance solicitors and collectors of weekly premi- 
 ums, but it was made clear to the Committee of Inquiry in 
 1882 that if this were done the number of carriers would 
 have to be largely increased and their chief duty, of letter de- 
 livery, would become subordinate to the secondary purpose 
 of insurance.^ This much, however, is clear, that Industrial 
 insurance cannot be carried on without solicitors or collect- 
 ors. The agent is the life of the business. The agent is 
 indispensable, not only to secure the business, not only to 
 
 * For an extended discassion of government life insurance of New Zealand, see Spectator, New 
 Yoric insurance periodical, June 8 and 22, 1905. 
 
 t In 1908 a report was made by the Departmental Committee on the Encouragement of the Life 
 Insurance System of the Post-office, in which there occurs the following significant statement (p. 5); 
 "It is a matter of common knowledge that the budget of the wage-earning classes is calculated on a 
 weekly basis, and it is essential to recognize this in any scheme which is to appeal to and be well received 
 by such classes; and we think that it should be embodied in any plan for providing further insurance 
 facilities. We are not prepared to suggest a house-to-house weekly collection of premiums such as is 
 practised by the industrial insurance companies, as we recognize that any such arrangement would very 
 greatly increase the expenses of the Post-office system; but we think that an approximate equivalent to 
 the weekly collection of premiums might be provided by other means, possibly by a development of the 
 stamp-slip system at present in use in connection with savings bank accounts." 
 
 lOI 
 
 NOV 
 
 % Llft'^'l' 
 
Life Insurance and Other Subjects 
 
 collect the premiums, but to keep the insurance in force. 
 His interest in the continuance of the insurance in force 
 is as real as the interests of the policyholders and the 
 company. Government with all its power cannot transact 
 Industrial insurance except by adopting the methods of the 
 companies. It could offer no greater security; it would 
 probably operate at a greater expense. The British govern- 
 ment rates in the post-office system are not lower than the 
 rates of the British Prudential. They are even higher than 
 the non-participating rates of the American Prudential. The 
 rates of the Industrial branch of the New Zealand Govern- 
 ment Life Insurance Department were not essentially 
 different from those of private companies. The latter have 
 been successful where the former has failed.* 
 
 The only alternative is compulsion. The German gov- 
 ernment has worked out an elaborate scheme of working- 
 men's insurance, but there is nothing in this plan which can 
 possibly be suggested as a solution of American economic 
 problems unless we are also willing to introduce radical 
 changes in the theory and form of our government. Compul- 
 sion is the foundation principle of the German system and 
 insurance is only a catchword. The German system is not 
 insurance, but, as has truly been said, it is a modified method 
 of employers' liability on the one hand, and an ingenious 
 method of poor-law administration on the other. The founda- 
 tion principle is that the industry in which a man is employed 
 should stand a large share of the burden — ostensibly the 
 employer chiefly, but finally the expense, or a large share 
 of it, falls upon wages. The basis for the workman's con- 
 tribution is not the rate of mortality among the class to 
 which he belongs, but his annual rate of compensation, or 
 wages. The employer pays a part, the employee contributes, 
 and the state makes up the rest. It is an admirable system 
 in theory, no doubt; it has its attraction for social reformers; 
 
 * Government Life Insurance in New Zealand, Spectator, June 22, 1905. 
 
 102 
 
The Practice of Industrial Insurance 
 
 it is, apparently, adapted to the paternal state; but I am 
 confident, after a careful study of the matter, that it is in- 
 applicable to the needs and requirements of a free people in 
 a free democracy like the American Republic. 
 
 The impracticable character of these suggestions of sub- 
 stitutes for Industrial insurance is self-evident. Insurance 
 as a social institution is the result of many years of gradual 
 development, and changes and improvements in the system 
 are the outcome of experience. The Industrial con- 
 tract, or policy, of to-day is a very different document from 
 the policy issued in 1875. The Industrial policy now pro- 
 vides for paid-up insurance after three years, for additional 
 benefits after five years, for cash dividends after fifteen years, 
 and for cash surrender values after twenty years. There are 
 no restrictions as to hazardous occupations, residence, and 
 death from suicide, consumption, heart disease, etc. Im- 
 provements in the policy contract have been made retroactive 
 to existing policyholders. Corresponding improvements 
 have been made in every branch of the business. The 
 foundation principle remains the same, but the practice has 
 been modified in the light of experience. That one word 
 "experience" comprehends all. Year after year we have 
 learned valuable lessons; year after year we have incorporated 
 these lessons into our practice. The record of these im- 
 provements is a part of our history; in a measure it is the 
 history of Industrial insurance. 
 
 It is a record of which we are proud. In no other 
 country is Industrial insurance more popular than in this, 
 unless it is in England, where the business has been in 
 existence for nearly twice the period of time. In no other 
 country is Ordinary insurance among Industrial policy- 
 holders as popular and as widely in use. The people who 
 are our patrons and who have been premium-payers for many 
 years know and clearly comprehend its value. The hundreds 
 of thousands of beneficiaries to whom claims have been paid 
 
 103 
 
Life Insurance and Other Subjects 
 
 are satisfied; the millions of policyholders who have received 
 additional benefits, cash dividends, or cash surrender values, 
 are equally satisfied and make no complaint. Nor could it 
 well be otherwise. The contract of Industrial insurance 
 is plain. It is easily understood. A child can add up its 
 cost; a child can figure out that the few who live to extreme 
 old age must pay in more than they can expect to receive in 
 return, but the people know equally well that while less than 
 is paid in is received in return in a comparatively few cases, 
 more than is paid in in premiums is received in return by 
 the many who die prematurely, from accident or disease. 
 
 I cannot better illustrate this point than by referring to a 
 few of the more striking instances which emphasize the value 
 of Industrial insurance in the case of exceptional accidents 
 or national calamities. The loss of the battleship Maine, on 
 February 14, 1898, involved twenty-one Industrial policies in 
 The Prudential. Only ;^628 had been paid in premiums, while 
 1^3,529 was paid in claims. The only death in the naval 
 battle at Santiago, on July 3, 1898, was that of a policyholder 
 of The Prudential, who had paid ^86.70 upon two Industrial 
 policies and whose heirs received ^353.26 in payment of the 
 claim. In the Windsor Hotel fire in New York we had a 
 loss under an Industrial policy upon which only thirty cents 
 had been paid in premiums and under which we paid ^61.50* 
 as a partial benefit — enough to pay the funeral expenses. In 
 a tenement-house fire in Newark, N. J., on March 12, 1900, 
 several persons died who were Industrial policyholders of 
 The Prudential, who had paid ^13.75 in aggregate premiums, 
 and whose heirs or beneficiaries received ^192.75 in set- 
 tlement of the claims. In the great fire of the docks of the 
 North German Lloyd, at Hoboken, June 30, 1900, seven 
 persons were killed who were insured with us under nine 
 Industrial policies. Only ^^325 had been paid in premiums 
 and to the heirs or beneficiaries we paid ^1,006.56 in return. 
 Among those killed in the Iroquois Theater disaster, twenty- 
 
 104. 
 
The Practice of Industrial Insurance 
 
 three were Industrial policyholders of The Prudential, who 
 had paid $515 in premiums, in return for which we paid 
 $3,423 to the beneficiaries. I could give hundreds of similar 
 illustrations, but I conclude with a reference to the Slocum 
 disaster, in which 212 persons perished who were insured 
 with The Prudential under 336 policies. We had received 
 38,331 in premiums, and we paid in claims ^38,147. 
 
 We paid promptly in these cases, as, I need hardly say, 
 we always do. Claims are paid without undue delay, but 
 every safeguard is employed to protect the interests of the 
 Company against possible imposition and fraud. An Indus- 
 trial policy is a promise to pay a sum certain in the event of 
 death — that is all there is to it — and the people know and 
 understand. In all these many years we have had very little 
 litigation. Search, if you please, the books which treat of 
 the law of insurance; look up the list of cases referred to, 
 and out of the thousands of cases an extremely small num- 
 ber are references to The Prudential. Vance* on the Law 
 of Life Insurance, the latest work on the subject, cites 
 about three thousand cases, of which only two are decisions 
 affecting The Prudential. We avoid needless litigation, by 
 policies which are free from ambiguities and vexatious re- 
 strictions, but we safeguard our interests by making use of 
 ^very proper means, by intelligent medical examination and 
 careful inspection, to secure a sound and healthy class of 
 risks from the outset. 
 
 From time to time we have made favorable changes in 
 our policy conditions or in our premium rates, and in all cases 
 we have made such changes retroactive, so as to apply to 
 all policyholders, irrespective of the duration of insurance. 
 The voluntary concessions to Industrial policyholders which 
 we have made so far have cost The Prudential about ^6,- 
 500,ooo.f These concessions affect millions of contracts 
 
 * Handbook of the Law of Insurance, by William Reynolds Vance, St. Paul, Minn., 1904. 
 t The voluntary concessions to Industrial policyholders of The Prudential by December 31, 1908, 
 had cost over $11,486,000. 
 
 105 
 
Life Insurance and Other Subjects 
 
 which did not originally provide for a participation in the 
 benefits conferred. Of the claims paid last year, thirty-one 
 per cent, were settled upon a more favorable basis than the 
 original contract called for. To-day every policy is a profit- 
 sharing contract — conditional, it is true, in some respects, but 
 as truly profit-sharing in all essentials as an Ordinary policy. 
 Save for the higher cost, due to the high mortality of the 
 class insured and the expense of special accommodations 
 involved in the collection of the weekly premiums, there is 
 no material difference between an Industrial and an Ordi- 
 nary policy contract. 
 
 Agents are as necessary to the business of life insurance 
 as fuel is to the locomotive. Without agents there would 
 be no insurance, or so little of it that it would be strictly a 
 class institution for the exceptionally intelligent or thrifty. 
 Compulsion alone could overcome the difficulty. Compul- 
 sion in the United States is out of the question. That volun- 
 tary thrift, as represented by insurance, requires the services 
 of agents, is made clear by the experience of non-agency 
 companies in England. There are at least three such com- 
 panies, of which the London Equitable is the oldest, having 
 been established in 1762. Other companies of this class 
 are the London Life, established in 1806, and the London 
 Metropolitan, established in 1835. These companies boast 
 of their low expense rate; they appeal to the public through 
 advertising and in various other ways, but their business is 
 so insignificant that they are strictly class institutions and 
 of small economic value to the nation. In 1904, for illus- 
 tration, the London Equitable wrote only 258 new policies, 
 the London Life wrote 252, and the London Metropolitan 
 wrote 174. In contrast, the London Prudential, employing 
 agents at a reasonable compensation, wrote 71,874 new 
 Ordinary policies and (approximately) 675,000 new Indus- 
 trial policies during 1905, and the American Prudential 
 wrote 96,355 new Ordinary policies and 1,576,215 new In- 
 dustrial policies. 
 
 106 
 
The Practice of Industrial Insurance 
 
 Thus the agency companies do the business, insure the 
 people, and bring the blessings of Hfe insurance to thousands 
 and millions of afflicted homes. The non-agency companies 
 may in some cases offer slightly better individual advantages, 
 but these advantages would disappear at once if the com- 
 panies made a deliberate effort to secure a larger share of new 
 business. The differences in the premium charges of agency 
 and non-agency companies are quite unimportant, however, 
 when a fair comparison is made of the non-participating 
 rates, where every element of uncertainty in final cost has 
 been eliminated. I find, for illustration, that the London 
 Equitable, at age 30, would charge fco.33 per ;^i,ooo of 
 whole life insurance, against ^22.58 charged by the Lon- 
 don Prudential and only Sig.JJ charged by the American 
 Prudential. The assumed advantages of life insurance 
 without agents, therefore, do not materialize upon a more 
 careful inquiry into the facts of actual conditions and 
 experience. 
 
 The agency expense is a necessary and legitimate item 
 in the management of a progressive life insurance company. 
 The chief aim should be, of course, to keep the expense 
 within reasonable limits. The Prudential has made strenu- 
 ous efforts in this direction. Our expense rate has been 
 normal and below that of many other companies, but time 
 is necessary for a decided improvement. We have every 
 reason to believe that in the not far distant future our ex- 
 pense rate in the Industrial branch will be reduced still 
 further, as our business becomes more concentrated and as 
 our agency force becomes better educated to the needs of the 
 business and better adapted to the conditions which govern 
 success. It is too early to say what the reduction may 
 amount to, but we are confident that in time the Industrial 
 business will be secured at a lower rate of expenditure. In 
 the light of English experience during more than fifty years, 
 we have made astonishing progress. We have perfected 
 
 J07 
 
Life Insurance and Other Subjects 
 
 many details of our office and agency administration, but 
 we have been compelled to go slowly in some directions, 
 since we could not take the risk of disturbing our entire 
 organization. With painstaking care we have inquired into 
 the facts of every problem and with patience we have traced 
 the lesson of our experience out of the immense body of 
 accumulated data, which to us are more safe and satisfactory 
 guides to the future than the notions or schemes of individ- 
 uals who expect a ten-cent weekly premium to perform a 
 miracle. 
 
 Industrial insurance is life insurance at retail, and for 
 this reason, in part at least, the cost is higher than in Ordi- 
 nary life insurance, where the premiums are payable quar- 
 terly, semi-annually, or annually, and require to be sent to 
 the office of the company. Just as retail prices are higher 
 than wholesale prices, so the cost of a commodity is en- 
 hanced by additional privileges of accommodation such as 
 are represented in the collection of the weekly premium from 
 the houses of the insured. This accommodation is of great 
 value and necessarily requires to be paid for. Wage-earners, 
 for self-evident reasons, conform their scale of living and 
 family expenditures to the weekly principle because the in- 
 come is also upon that basis. It is a convenience to the 
 workingman to have the insurance collector call at his house 
 for the premiums, and for that convenience he is willing to 
 pay. Efforts which have been made to dispense with col- 
 lectors have invariably proved a failure. Considering the 
 accommodation, in addition to the insurance protection, In- 
 dustrial insurance is, without question, one of the cheapest 
 of commodities. It would be impossible to give as much for 
 the money — as much convenience and accommodation to 
 circumstances on the one hand, and as much life insurance 
 protection on the other — ^were it not that the business is 
 one of millions of small transactions and concentrated in 
 comparatively small areas. The fact of special accommo- 
 
 io8 
 
The Practice of Industrial Insurance 
 
 dation in the collection of the premiums is one of the 
 reasons why Industrial insurance is more expensive than life 
 insurance on the Ordinary plan. 
 
 In a measure Industrial insurance is instalment insur- 
 ance. No article can be sold on the part payment plan 
 without an increase in the cost. The facts are so self-evident 
 that they require no extended explanation. Every article 
 sold on the instalment plan is more expensive than the same 
 article sold for cash. A S400 piano on the instalment plan 
 can be had for cash for probably ^300, while the original 
 cost is estimated to be only ^150. A sewing-machine which 
 can be bought for cash for $20 or $z^ will cost from ;^45 to 
 $60 on the instalment plan. Coal bought by the bushel 
 will cost $9 or more a ton against ,^6.75 or less a ton when 
 bought in the regular way. Even in the case of a single-trip 
 railway ticket the cost will be approximately 100 per cent, 
 greater than the cost per trip of a loo-trip ticket. This is 
 true of business generally and is the result of the expense 
 of special accommodation and special risk, whether it be 
 the work of a ticket agent making one hundred individual 
 sales or of an Industrial insurance agent making at least fifty- 
 two calls at the house of the insured each year. It is the 
 special accommodation which enhances the cost, and I 
 wish to be emphatic upon this point, that the increase 
 in cost on this account is less in the case of Industrial 
 insurance than in many similar commercial transactions 
 where goods or articles are sold on credit or on the instal- 
 ment plan. 
 
 No fair comparison can be made, therefore, of the 
 premium charges for Industrial insurance and those of 
 Ordinary companies, because at the outset the conditions 
 are not similar. Not only is the special accommodation in 
 the one wanting in the other, but, what is of even greater 
 importance, the class of people insured under Industrial poli- 
 cies, primarily wage-earners, are employed in industries more 
 
 lOQ 
 
Life Insurance and Other Subjects 
 
 or less subject to a higher accident, sickness, or mortality 
 rate than the class insured under Ordinary policies. Upon 
 the basis of our Industrial experience we know that the 
 mortality rate of adult Industrial policyholders is not far 
 from being double the rate prevailing among Ordinary 
 policyholders. The reason for this higher mortality is 
 readily ascertained upon careful inquiry into the facts. It is 
 in part due to the conditions of life, occupation, environ- 
 ment, and various other elements which determine the dura- 
 tion of human existence. The more favorable mortality of 
 Ordinary policyholders is, in a large majority of cases, the 
 result of a more careful medical selection than would be 
 possible in the transaction of the business of Industrial insur- 
 ance. A very considerable proportion of those who are 
 policyholders in Industrial companies would not be accepted 
 by Ordinary life companies, because of nativity, occupation, 
 residence, etc. In other words, in its final analysis, the prob- 
 lem is one of safe insurance on the Industrial plan, applicable 
 to the mass of the population, and of reasonable cost, or 
 no insurance at all. 
 
 But it is argued that of every one hundred dollars received 
 in premiums we pay but a comparatively small proportion — 
 say 33 per cent. — in claims, dividends, surrender values, etc. 
 This statement is not sustained by the recorded facts of the 
 business. In return for every one hundred dollars received in 
 premiums, plus the interest accumulation and gain from other 
 sources, we return in due course of time the exact equivalent 
 to our policyholders, in strict accordancewith the policy agree- 
 ment. To every policyholder we pay the full amount of his 
 policy or whatever there may be due, and we have never on the 
 one hand made an increase in our premium charges nor on 
 the other made a deduction of a single dollar from the face 
 value of a policy not warranted by the contract itself. To 
 one man we may pay thirty dollars after having received 
 only fifty cents in weekly premiums, while to another we 
 
 no 
 
The Practice of Industrial Insurance 
 
 may pay eighty dollars after having received as much as that 
 amount in premiums. The one had insured in early life, 
 with the prospect of having to pay for many years; the 
 other insured near the age of sixty or seventy, with the 
 prospect of, at most, having to pay for a comparatively 
 short period of time. It is an inherent absurdity to take 
 an individual case and reason therefrom in regard to a 
 business which is entireh' one of averages and which exists 
 solely because of this very fact. It is the principle of asso- 
 ciation which lies at the root of all insurance and by which 
 the many contribute to a common fund so that the least for- 
 tunate, who die earl}-, may enjoy the blessings of life insur- 
 ance protection for the family, in part without doubt at the 
 expense of those more fortunate who survive to old age. 
 That is life insurance pure and simple; it is the same in In- 
 dustrial as in Ordinary or in fraternal insurance, and in the 
 nature of the case it must ever remain so. The value of in- 
 surance lies in the certainty that the amount specified in the 
 policy will be paid in the event of death, whether death occurs 
 early or after many years. Here, again, I may repeat that 
 the people know and understand and it goes without saying 
 that they are sufficiently intelligent and free to decide in 
 matters of this kind — perhaps much more so than their ill- 
 informed critics who would wantonly destroy this form of 
 thrift without the power and ability to furnish a practical and 
 better substitute. 
 
 One of the most important problems in Industrial insur- 
 ance is the lapse rate. We have from the outset emphasized 
 in every way possible the importance of policy continuance. 
 As early as 1880, at least, and probably before, we issued 
 special instructions to policyholders in arrears, pointing 
 out the advantages of continuing, and emphasizing the 
 policyholders' loss incurred in terminating the policy 
 contract. In thousands of instructions and letters to our 
 policyholders and the agency force we have emphasized the 
 
 III 
 
Life Insurance and Other Subjects 
 
 importance of attention to this point. Had we never lapsed 
 a policy we would to-day have more policies in force than 
 any other life insurance company in the world. Had we 
 never lapsed a policy we would be the richest and most 
 prosperous of all insurance corporations. But lapses are 
 unavoidable — as unavoidable in Industrial as in Ordinary 
 or in fraternal insurance. The element of waste is com- 
 mon to all industry, and our object, as is the case in 
 all commercial enterprises, is to reduce waste to the 
 lowest possible minimum. We are making progress from 
 year to year. We have never had as low a lapse rate as 
 we had during last year. But we expect to make still 
 further improvements in this direction. It is a question of 
 time, as in all other commercial problems. But our records 
 prove that year after year, in one direction or another, 
 improvements have been effected, important changes have 
 been instituted or liberal concessions have been made, to 
 which, we claim, is due the public faith in Industrial in- 
 surance as the safest, soundest method of life insurance for 
 the plain people. 
 
 The importance of the lapse question, from the policy- 
 holders' point of view, however, is easily and generally ex- 
 aggerated. Lapses, in the aggregate, are a serious loss to 
 the company, but only a small loss, if any, to the insured. 
 He has had his insurance for the time being, and the special 
 accommodation in the collection of the premium. For 
 weeks a solicitor may have spent a part of his time to write 
 the policy; week after week he has called at least once 
 for the premium due, all without result, since the policy- 
 holder has changed his mind and declines to take the policy. 
 We allow four weeks of grace, after which the policy must 
 be lapsed. Every such lapse means also a loss to the 
 agent, whose special salary is based upon net increase. 
 Of the lapses, 37 per cent, have been less than thirteen weeks 
 in force. Of those which have been more than three years 
 
 112 
 
The Practice of Industrial Insurance 
 
 in force nearly 50 per cent, are revived. We make every 
 reasonable effort to induce lapsed policyholders to revive 
 their policies, even to the extent of not charging for the 
 medical examination. We even go further and advance the 
 money due, in the form of a lien, and we have ^26,000,000 
 of insurance in force under such liens, which are deducted 
 from the amount payable in the event of death. We cannot 
 do much more, for we are governed by the same inexorable 
 laws of business which determine success in commercial 
 affairs generally. 
 
 While lapses are a serious problem, every year finds the 
 Company further advanced and more popular than the year 
 before. In 1890 we had 1,228,332 Industrial policies in 
 force, 3,908,622 in 1900, and on December 31, 1905, we had 
 a total of 6,117,575 Industrial and 372,940 Ordinary policies 
 on our books.* We direct attention to this fact because it is 
 of transcending importance. It shows that a large number 
 of our policyholders persist and are constant, feeling secure 
 and satisfied that in the event of death not only will the sum 
 specified in the policy be paid without question, but that in 
 all probability a substantial addition will be made as the 
 result of special benefits or privileges or because of our 
 voluntary concessions. In some cases the result is not as 
 satisfactory as we might wish. We emphasize in every way 
 the importance of insurance in early life; we, however, can- 
 not very well refuse to insure those who are of older ages, 
 just because if they should live for many years they would 
 pay in more than they would receive in return. We accept 
 risks up to the age of 70 years next birthday, but we do this 
 only to round out our system of family insurance. We would 
 much prefer that all should insure early, but in the nature 
 of the case this cannot be. Many who have been well-to-do in 
 middle life, but who become poor in old age, find in an Indus- 
 trial policy the only safeguard against a burial in the potter's 
 
 * On December 31, 1908, there were 7,258,704 Industrial and 473,035 Ordinary policies in force 
 with The Prudential. 
 
Life Insurance and Other Subjects 
 
 field. We cannot as a matter of business policy or simple hu- 
 manity refuse to issue policies to persons, say over 60, but, 
 while hardships occur in isolated cases of extreme longevity, 
 we have generally taken the facts into consideration, and as 
 far as possible and advisable have dealt liberally with such 
 exceptions upon their merits. In 1904 we introduced a new 
 feature, which has proved of great value. All who attain 
 to age 80 and who have paid premiums for ten years are re- 
 lieved from further payment thereafter, paid-up insurance 
 for the full amount of the policies being issued. In this 
 and many other directions The Prudential has met the wishes 
 and needs of policyholders, and their appreciation is made 
 evident by the constant increase in our business and by the 
 infrequency of serious complaint.* 
 
 I have gone into these matters at some length because of 
 my desire to explain fully and clearly the practice of the Com- 
 pany in all essentials and in simple justice to its millions of 
 policyholders, who are representative of all that is best in our 
 national traits and character. We have always been ready 
 and willing to give the utmost publicity to the facts of our 
 business and we have even gone so far, at the request of the 
 United States Government, as to exhibit the essential facts 
 and features of Industrial insurance at international exposi- 
 tions, at Paris in 1900 and at St. Louis in 1904. The first- 
 named exhibit received the high honor and recognition of a 
 gold medal, while to the last the international jury awarded 
 the "grand prize," the highest honor ever conferred upon an 
 insurance company in this or any other country. In our 
 exhibits we set forth for the information of all who might be 
 interested every essential of the business, concluding with 
 data illustrating the intimate connection between Industrial 
 
 * In very recent years the Company has made several other changes of far-reaching importance. 
 In the Industrial branch, beginning with the Industrial policies bearing the date of January 7, 1907, 
 and thereafter, no further premiums are required after the insured has attained the age of seventy-five. 
 The benefits or amounts of insurance at all the younger ages were substantially increased, and at certain 
 ages they were doubled. The Industrial rates under these provisions are, however, non-participating. 
 On July 1, 1909, the table of benefits was again increased and made to apply to all policies issued since 
 January 1, 1907, and in force July 1, 1909. 
 
 114. 
 
The Practice of Industrial Insurance 
 
 insurance and the general public welfare. We even went 
 further than this, and at the close of the St. Louis Exposi- 
 tion, upon request, we presented a copy of the exhibit, 
 consisting of 178 charts and diagrams, to Harvard University, 
 where it has been placed in the Social Museum and is now 
 readily accessible to their men of science and to students of 
 social facts and forces. Our Paris exhibit was, upon request, 
 presented to the Social Museum of that city.* 
 
 We have published an outline of our history in a volume 
 which has been praised as a contribution of great value 
 to American economic history, and we have from time to 
 time given publicity to many important facts of our ex- 
 perience — I mention this simply to emphasize our willing- 
 ness to give publicity to the real facts of the business and in 
 every way to encourage intelligent study and research into the 
 underlying principles and methods of Industrial insurance. 
 Much further than this we cannot go, for we are simply a life 
 insurance company, not a philanthropic organization to 
 be guided by sentiment. We are a business concern, in 
 which every factor receives the most painstaking considera- 
 tion, for the purpose of producing the best possible results to 
 our policyholders, in a field of open competition with other 
 life insurance companies and with other methods of saving 
 and investment. 
 
 After thirty years of effort there are now some six and a 
 half million policies in force with The Prudential in this and 
 many other States. We limit the field of our operations to 
 the United States, believing that here the opportunities for 
 growth and development are for the time sufficient, and better 
 than in other lands.f We have established for ourselves a 
 name which has become a household word in America, 
 and with jealous care we consider everything that is likely 
 to advance the interests of our policyholders and enable us 
 
 * Subsequent exhibits of The Prudential at the Jamestown Tercentennial Exposition and at tiie 
 International Tuberculosis Congress were also honored by the highest possible awards. 
 
 t In response to an increasing demand, largely from Canadian policyholders in the United 
 States, The Prudential in 1909 entered the Dominion of Canada, opening offices in all of the large cities. 
 
Life Insurance and Other Subjects 
 
 further to extend the principles of life insurance to the 
 masses, until in time practically every American household 
 shall be under the protection of an Industrial or Ordinary 
 life insurance policy. We firmly believe that the true inter- 
 ests of the plain people are better advanced by sound life 
 insurance than by any other method of saving or invest- 
 ment, and we are confident that history will sustain our 
 position and do justice to the cause and the mission of 
 Industrial insurance. 
 
 In conclusion, I would say that I welcome this or any 
 other impartial legislative inquiry into the important subject 
 of life insurance and the administration of life insurance 
 companies, including The Prudential. We readily complied 
 with every request of the New York State legislative com- 
 mittee in 1905, for data or verbal testimony, and we have 
 done likewise in the case of the present investigation (1906) . 
 There is nothing whatever by way of testimony or data 
 in the possession of the Company's officers or contained in 
 our archives that you may not call for and that we shall not 
 be pleased to furnish. We invite the most complete and 
 exhaustive investigation, not only in justice to ourselves, 
 but equally in justice to our policyholders. For thirty 
 years we have managed the Company with but a single 
 thought, and that has been to make The Prudential not only 
 one of the greatest, but also one of the best life insurance com- 
 panies in the world. We have been successful, and "The Pru- 
 dential" has become in America synonymous with honesty 
 and strength. We cannot urge you too strongly to make 
 your investigation as exhaustive and complete as possible, so 
 that public confidence in these useful institutions, which is 
 now somewhat disturbed, may be fully restored. While we 
 cordially welcome any impartial inquiry into pur affairs, we 
 have opposed, and we shall continue to oppose, the unworthy 
 efforts of so-called reformers to cast discredit upon life in- 
 surance management and methods in this State. We do not 
 
 116 
 
The Practice of Industrial Insurance 
 
 propose to allow men actuated by selfish and unworthy mo- 
 tives wilfully and recklessly to destroy, or seriously to injure, 
 a great and beneficent institution, which it has taken us thirty 
 years to build up. But, for the legitimate object of any im- 
 partial, comprehensive, and qualified inquiry, we stand ready 
 to meet any demands which you may make, furnish any facts 
 which you may require, submit any record which you may 
 wish to inspect, confident that after you have completed your 
 work your views will coincide with those of our policyholders, 
 that The Prudential has, from the outset to the present time, 
 been managed with rare skill, with absolute integrity, and 
 for the best interests of its millions of policyholders. 
 
 117 
 
ChA PTE R V 
 
 A METHOD OF PROVIDING 
 
 WITH CERTAINTY^ 
 
 FOR DEPENDENT OLD AGE 
 
 PUBLISHED IN 
 
 THE AMERICAN UNDERWRITER 
 
 1908 
 
A METHOD 
 
 OF PROVIDING WITH CERTAINTY 
 
 FOR DEPENDENT OLD AGE 
 
 \HE problem of dependent old age has for 
 I many years attracted the earnest attention 
 jof statesmen, economists, and others seri- 
 sously interested in questions of social re- 
 iform. Sanitary and medical science combine 
 /to lengthen human life and to enlarge the 
 iproportion of those who live beyond the 
 age of sixty, but the problem of self-support in old age is 
 correspondingly increased by such a prolonging of human 
 existence, and the economic results may become very serious 
 during long periods of commercial depression and industrial 
 distress. The problem is naturally more acute in countries 
 which suffer from the burdens of over-population and from 
 the cost of former wars and heavy present military expendi- 
 tures, combined with natural economic disadvantages and 
 artificial trade restrictions. As a proposed solution of the 
 problem of poverty and dependence in old age, so-called 
 state pension schemes have of recent years been introduced 
 in Germany, Austria, and a number of other countries. 
 The most important movements in this direction are the 
 universal old-age pension system of New Zealand and the 
 non-contributory, but qualified, pension plan recently intro- 
 duced in England. 
 
 While proposals have been made to introduce a system 
 of non-contributory state pensions in old age in Massa- 
 chusetts and some other States, our satisfactory economic 
 condition precludes the serious consideration of such propo- 
 sitions for many years to come. It is advisable, however, 
 to point out the serious economic fallacy which underlies 
 every proposition for a non-contributory old-age pension 
 
 121 
 
Life Insurance and Other Subjects 
 
 system, for, while the political expediency of such a scheme 
 may perhaps be defended, its economic justification is en- 
 tirely out of the question. What those in favor of such a 
 system are pleased to call a "pension" is, in fact and in truth, 
 only poor relief disguised in its most insidious form, because 
 most likely to deceive even those whose sturdy sense of per- 
 sonal independence would otherwise revolt against the accept- 
 ance of a clear gift of public funds raised chiefly by the taxa- 
 tion of corporations and the well-to-do. To admit, how- 
 ever, that state aid or support in old age for the large 
 majority of wage-earners and others of limited means is in 
 fact a pressing necessity is to concede that the social and 
 economic development of the nation has been in the wrong 
 direction, that the education in thrift has been defective, and 
 that the virtues of intelligent self-denial and self-sacrifice 
 have been replaced by considerations of selfish indulgence 
 and indifference to the welfare of others. Even a casual 
 consideration of the facts of our social progress, as made 
 evident by the prevailing rate of wages, hours of labor, im- 
 proved sanitary conditions, home ownership, savings accu- 
 mulations, and insurance, plainly contradicts the occasional 
 assertion that there is any real necessity for state aid in the 
 form of old-age pensions for the support of widows and 
 orphans on the one hand and of the aged, incapacitated 
 and infirm on the other.* 
 
 Universal poor relief in old age, disguised as a state pen- 
 sion, is certain to undermine the moral fiber and in particular 
 the thrift function of the entire nation, and is bound to pro- 
 duce in course of time the most disastrous results. The 
 American aim and ideal is for the highest possible degree 
 of economic independence, and such independence through- 
 out life, particularly in old age, can only be gained by rational 
 education in family expenditures, savings, and insurance, 
 and by a decidedly higher degree of industrial efficiency 
 
 * See Old Age Pensions by the Rev. Edward Everett Hale, Boston, n. d. (1907?). 
 
 122 
 
A Method of Providing for Old Age 
 
 of the workers of the nation. The only permanent solution 
 of the problem of poverty is through the development of the 
 virtues of self-reliance, forethought, and thrift, and no social 
 institution offers more substantial aid in this effort than life 
 insurance, in any one of its many and varied forms, success- 
 fully and practically adapted to the needs of the people. 
 
 Notwithstanding the progress which life insurance has 
 made, there remain vast unrealized possibilities for effect- 
 ing, through the life insurance principle, a permanent and 
 general solution of the problem of dependent old age, and 
 the most important step in this direction is the development 
 of the monthly income policy, to which I wish to draw atten- 
 tion in some detail, to emphasize its social and economic value 
 as a practical and most desirable solution of the problem of 
 needless poverty. 
 
 The economic importance of life insurance as a provi- 
 dent institution is recognized by all who have given the 
 subject intelligent consideration. Life insurance, it is 
 hardly necessary to point out, has immeasurably aided in the 
 moral and material progress of the nation, and during 
 1907 $204,453,191 * was disbursed by legal reserve com- 
 panies in the form of claim payments, matured endow- 
 ments and annuities. In addition, large sums were dis- 
 bursed by fraternal benefit and mutual aid societies. Only 
 the beginning, however, has been made, and the greatest 
 development of life insurance as a universal provident in- 
 stitution is for the future, when a large proportion of the 
 benefits as they become due will be paid out in monthly instal- 
 ments. By this plan provision can be made with absolute 
 certainty to secure the objects of insurance protection. At 
 present, unfortunately, it is too often the case that large sums 
 paid out at death to beneficiaries under life insurance policies 
 are in part or in their entirety wasted or lost because of seri- 
 ous mistakes in the management of the invested funds. It 
 
 * Insurance Year Book (Spectaloi Company, N. Y.), 1908, p. 767. 
 
Life Insurance and Other Subjects 
 
 is, unfortunately, a fact of everyday experience that the 
 numerous and bewildering schemes and plans by which the 
 inexperienced or ignorant are induced to invest their savings 
 in speculative or other ill-advised enterprises continue to 
 flourish to the great injury of the public. The monthly 
 income policy safeguards against the loss of the principal 
 and provides with certainty an income, for a period of at 
 least twenty years, which cannot be encumbered, depre- 
 ciated, or wasted in speculative or otherwise undesirable 
 investments. 
 
 The monthly income policy emphasizes what it is of the 
 utmost importance for the insured to realize, and that 
 is the specific value of the insurance protection provided 
 for surviving members of the family or for self-protection 
 in old age. Such a policy in specific terms leaves no 
 doubt, nor is there any chance of error in over-estimating 
 the value of the benefits ultimately to be derived from 
 the investment. The amounts payable every month are 
 specifically stated in the policy and are fully and clearly 
 understood by the insured. A large majority of those 
 whose incomes are on a weekly or monthly basis have but 
 a very limited conception of the actual income-producing 
 value of even comparatively large amounts. The incomes 
 derived from such investments are often precarious, fluctu- 
 ating in amount, and under given circumstances they may 
 be reduced to a minimum or be entirely lost. No such 
 disaster can overtake the investments in a monthly income 
 policy, which combines absolute certainty with the specific 
 guarantee of a definite sum payable to the beneficiary 
 on the first of every month. To the poor, the prosperous, 
 and the well-to-do alike, the monthly income policy fur- 
 nishes an ideal form of family protection, or self-support 
 in old age, superior to any other present method of sav- 
 ings, investment, or insurance. For it requires no extended 
 argument to prove that a definite understanding, not only 
 
 12^ 
 
A Method of Providing for Old Age 
 
 of the policy terms, but of the ultimate results of life insur- 
 ance protection, is of the utmost importance to the bene- 
 ficiaries under such policies. 
 
 A minimum of subsistence in conformity to the American 
 standard of life requires at least an annual income of $360, 
 which it is practically impossible to provide by savings alone 
 in the large majority of cases, but vphich can be provided 
 through life insurance by a reasonable exercise of frugality, 
 self-sacrifice and rational economy. One-third of this amount 
 can easily be provided out of so small an income as ^10 a 
 week, or S520 per annum, and, of course, the lower the age 
 and the larger the income the less difficult the problem of 
 how to provide adequately for dependent survivors or for 
 self-support in old age. 
 
 The proceeds of a thousand-dollar policy at a minimum 
 expenditure of S360 per annum are used up in three years for 
 necessary family needs. This fact is rarely, however, brought 
 clearly home to the uninsured or to the under-insured, and 
 many are content with one or two thousand dollars of in- 
 surance protection when a better realization of the produc- 
 tive value of these amounts would induce more economical 
 habits and lead to a corresponding increase in the premium 
 payments for life insurance protection. This truth, which 
 is an axiom in life insurance experience, requires to be more 
 emphatically brought home to the many who are under-in- 
 sured, and they should be made to realize that it requires 
 at least $1,756 of insurance protection to provide a monthly 
 income of ^10 for a period of twenty years. When this im- 
 portant fact is more generally understood the common error 
 of placing too much reliance upon a thousand-dollar policy 
 as sufficient protection will be replaced by more adequate 
 amounts of insurance for the benefit of surviving members 
 of the family or for the needs of self-support in dependent 
 old age. 
 
 These observations and conclusions set forth and define 
 
 125 
 
Life Insurance and Other Subjects 
 
 the first principles which should govern in any general con- 
 siderations of life insurance for the purpose of family and 
 self-protection. Even to provide a minimum income of 
 ^10 a month for the needs of dependent survivors for a 
 period of twenty years requires a not inconsiderable degree 
 of self-denial and economical management of the family 
 income on the part of those who live on small salaries or 
 average wages. At age 30 the cost of a policy providing ;^io 
 a month for a period of twenty years on the whole life non- 
 participating plan is ^^33.47, which is equivalent to 5.58 per 
 cent, of an income of ^600 per annum, and to only 4.65 per 
 cent, of an income of ^720 per annum. To emphasize how 
 very large is the group of those who receive wages or salaries 
 of even less than ^720 per annum, reference may be made 
 to the Federal civil service, in which 36 per cent, of the male 
 employees receive incomes of less than this amount, while 
 of male wage-earners generally only 20.7 per cent, receive 
 as much as I15 a week or more. To those who aim to 
 make at least a minimum provision for family needs in the 
 event of death, it should not be impossible, with rational 
 economy, to provide by insurance out of an income of ^600 to 
 ;^720 per annum a guaranteed income of ^15 a month, pay- 
 able for a period of twenty years. Such a provision may, 
 on first consideration, appear small, but it will provide with 
 certainty for the specific needs of the family, and its great 
 economic value lies in the fact that it is a definite amount 
 payable at definite intervals and with certainty for a definite 
 period of time, that it cannot be wasted or lost, encumbered 
 or depreciated, but remains as safe and secure as the income 
 derived from government bonds. 
 
 The cost of such insurance protection varies necessarily 
 with the age of the insured and with the plan selected as best 
 adapted to personal needs. The following table gives speci- 
 men premium rates of monthly income policies on the non- 
 participating plan, providing ;^io a month for twenty years. 
 
 126 
 
A Method of Providing for Old Age 
 
 Specimen Premium Rates of Monthly Income Policies 
 (Non-participating) 
 
 Providing $io a Month for Twenty Years 
 
 Age 
 
 Whole Life 
 
 20-Pay'l Life 
 
 20-Year End't 
 
 30- Year End't 
 
 20 
 
 626.24 
 
 339.64 
 
 ^73.28 
 
 %6.04 
 
 25 
 
 29.41 
 
 43-13 
 
 73-90 
 
 46.92 
 
 30 
 
 33-47 
 
 47-39 
 
 74-77 
 
 48.31 
 
 35 
 
 38.76 
 
 52.62 
 
 76.16 
 
 50.60 
 
 40 
 
 4576 
 
 59.16 
 
 78.46 
 
 54-41 
 
 45 
 
 55-20 
 
 67.62 
 
 82.46 
 
 60.76 
 
 50 
 
 68.11 
 
 78.91 
 
 89-35 
 
 71-05 
 
 55 
 
 85.91 
 
 94-38 
 
 100.87 
 
 
 60 110.64 116.24 119-55 
 
 At the age of 20 the cost is $26. 24 on the whole Hfe plan, 
 ^^39.64 on the 20-payment life plan, and %6.04 on the 30- 
 year endowment plan. The rates naturally increase with 
 increasing age, but, as emphasizing one very desirable form 
 of self-protection in old age, attention may be called to the 
 30-year endowment rate at age 30, which, according to the 
 table, is only $48.31, or less than $12. week. Even an in- 
 come of but $10 a week, with reasonable economy, ought to 
 permit of a saving of less than one-tenth to provide a definite 
 income to the insured after the age of 60, when the active 
 working period of life has practically come to an end. By 
 this payment of less than $1 a week it lies within the power 
 of practically every American to provide at least the minimum 
 of subsistence with certainty for his own future, or a sum 
 equal to the probable maximum which any government pen- 
 sion scheme could ever expect to provide. 
 
 In all of the propositions which have been made for govern- 
 ment pensions few have gone further than to suggest a maxi- 
 mum amount of ^2.50 a week. Considering, however, that a 
 very large proportion of wage-earners and those in receipt of 
 
 127 
 
Life Insurance and Other Subjects 
 
 salaries or other incomes receive more than ;^520 per annum, 
 and that in fact a very large proportion outside of the wage- 
 earning group receive over ;^ 1,200 per annum, it requires no 
 extended calculations to prove that the cost of adequate pro- 
 vision for old age through life insurance on the monthly in- 
 come plan is entirely within the means of all who really wish 
 to maintain their self-respect by providing for self-support 
 at their own cost and out of their own means. At age 30 the 
 30-year endowment premium of ^^48.31 is but 4.03 per cent, 
 of an annual income of ^1,200, which, without difficulty, in 
 the case of normal families at least, could be economically 
 managed to allow of a provision for an income of ^25 a month 
 at a cost of $120.77, or 10.06 per cent, of the income. In 
 the case of an income of $2,500 the income to be provided 
 should not be less than $25 a month, and this could easily 
 be increased to $50 a month by economical and prudent 
 management of the family resources. These are the possi- 
 bilities of self-protection in old age and self-support for 
 dependent survivors of the family which the monthly income 
 policy offers, and which, no doubt, will enormously enhance 
 the social and individual value of insurance protection and 
 make, within a measurable period of time, legal-reserve 
 life insurance on the non-participating plan, in truth and in 
 fact, a universal provident institution throughout the land. 
 
 128 
 
Chapter VI 
 
 THE PROBLEM OF THE 
 UNINSURED 
 
 PUBLISHED IN 
 
 THE NEW YORK COMMERCIAL 
 
 1908 
 
THE PROBLEM OF THE UNINSURED 
 
 JiFE insurance In the United States is to- 
 (day an economic necessity, and the peri- 
 'odical premium payments have become 
 fixed items of family expenditure. Life 
 ^insurance is no longer a novelty or a 
 /class institution, but a universal method of 
 ^providing with certainty for the needs of 
 others and for self-support in old age. While very commend- 
 able progress has been made in the direction of popularizing 
 legal-reserve life insurance with all of the widely different 
 elements of the population, much remains to be done to 
 make life insurance in fact a universal provident institution. 
 On December 31, 1907, there were approximately 6,100,- 
 000 Ordinary policies in force in the United States, in- 
 suring over eleven and a half billion dollars of legal-reserve 
 insurance protection. On the same date the number of 
 Industrial policies exceeded 18,700,000, insuring two and 
 a half billion dollars of legal-reserve Industrial insurance 
 protection.* Panics, depressions, and hard times have had 
 no perceptible unfavorable effect upon the recent growth of 
 the business, for life insurance premium payments are, in 
 the majority of instances, small periodical deductions from 
 the luxuries and not from the real necessities of life. By 
 rational economy it is easily within the means of all above 
 the pauper class to secure the home and the family, to 
 maintain self-respect, and to provide for old age in a modest 
 way through legal-reserve life insurance with sound and 
 solvent companies in every section of the country from 
 Alaska to the Everglades. 
 
 The number of policies in force is, of necessity, much 
 larger than the number of persons insured. Quite a con- 
 siderable proportion of life insurance policyholders are 
 
 * By December 31, 1908, the number of Industrial policies in force had increased to over 19,687,- 
 000, and the amount of Industrial insurance to nearly $2,669,000,000. 
 
 ^33 
 
Life Insurance and Other Subjects 
 
 insured under more than one policy, and with more than one 
 company, but it would seem safe and conservative to assume 
 that the 6,100,000 existing Ordinary policies (December 31, 
 1907) represent approximately 4,500,000 insured persons of 
 the adult American population. It is equally safe to assume 
 that the 18,700,000 existing Industrial policies (December 31, 
 1907) represent approximately 12,500,000 insured persons 
 holding Industrial policies, but quite a large number of 
 these policyholders are insured on both the Ordinary and In- 
 dustrial plans. To arrive at an approximate estimate of the 
 number of persons insured with legal-reserve life insurance 
 companies, it is therefore necessary to make a deduction on 
 this account, and 500,000 will probably approximately repre- 
 sent the number who hold both Industrial and Ordinary 
 policies. 
 
 After making these deductions there remains a net 
 total of about 16,500,000 persons insured in legal-reserve 
 life insurance companies in the United States at the 
 present time, out of an aggregate population of over 
 86,000,000, according to the official estimate for 1907. This 
 estimate of the insured population is, of course, exclusive of 
 the large number of persons who hold membership certifi- 
 cates in fraternal, assessment and other so-called beneficial 
 insurance associations. 
 
 The aggregates of American life insurance are truly im- 
 posing, but they obscure the more serious problem, and that 
 is the mass of the uninsured. After deducting the 16,500,000 
 of insured population from the total population, there re- 
 mains the enormous aggregate of nearly 70,000,000 who are 
 at present not insured with legal-reserve life insurance 
 companies. Since the legal-reserve plan is the only method 
 of life insurance which has generations of human experience 
 to sustain it, and which is based upon the scientific principles 
 of the law of mortality and sound theories of finance, all 
 other forms of life insurance are more or less in the nature 
 
 134 
 
The Problem of the Uninsured 
 
 of speculation and are otherwise unsatisfactory attempts to 
 substitute unsound for sound and solvent methods of in- 
 surance. 
 
 Progress, however, is being made from year to year, and 
 the ratio of sound life insurance to population is continually 
 increasing. In 1898, or ten years ago, the ratio of Ordinary 
 policies was 3.3 to every 100 inhabitants, which by the end 
 of 1907 had risen to 7.1. There had been in the meantime, 
 an actual increase of 3,650,000 in the number of Ordinary 
 policies in force, equivalent to 151 per cent. While the normal 
 annual rate of progress is not as rapid as the best interests 
 of the population at large seem to demand, it is con- 
 servative and in conformity with the best practices of the 
 business. But for the disturbed conditions affecting life 
 insurance progress during the past few years, the actual rate 
 of increase during the last decade would, however, have been 
 much greater. The normal yearly addition to the number 
 of Ordinary policies in force in the United States is about 
 500,000, but during the last three years the average annual 
 increase has been only about 200,000 policies. By degrees, 
 however, the ground lost is being recovered, for public con- 
 fidence in life insurance, as such, was never seriously 
 disturbed. 
 
 I cannot better emphasize this statement than by directing 
 attention to the progress made in other fields of financial 
 and commercial effort during the same period. While 
 during the decade ended with 1907 the increase in the 
 number of Ordinary policies was, as stated, 151 per cent., 
 the increase in the amount of money in circulation in the 
 United States was only 50 per cent., in bank clearings 139 per 
 cent., in the amount of loans and discounts by national banks 
 1 1 per cent., in the amount on deposit in savings banks 72 per 
 cent., in the amount on deposit in State banks 61 per cent., in 
 the Government revenue 64 per cent., in the value of imports 
 133 per cent., and, finally, in the value of exports 53 per cent. 
 
Life Insurance and Other Subjects 
 
 This statistical evidence is conclusive proof that the prog- 
 ress of life insurance during the last decade has been at a 
 more rapid rate than the progress of the nation in other 
 important directions, and there is every reason to believe 
 that the development of Ordinary legal-reserve life insur- 
 ance in this country, in the immediate future, will far exceed 
 the progress of the business during the recent past. 
 
 The advance of Industrial insurance in the United States 
 during the same period has been actually much greater, as 
 measured by mere numbers, but relatively less in propor- 
 tion to population, on account of the very much larger num- 
 ber of policies already in existence. The ratio of Industrial 
 policies to population has increased from 12 to every 100 in- 
 habitants in 1898 to 22 in 1907. The actual increase in the 
 number of Industrial policies during the decade has been 
 nearly 10,000,000, while the relative increase has been 112 per 
 cent. To fully grasp the significance of this statement, the 
 analysis, however, must be extended to include the local devel- 
 opment of the business in the principal manufacturing States. 
 In New Jersey, for illustration, where the business had its 
 beginning only as far back as 1875, the ratio of Industrial 
 policies to population is 81 to every 100, against 22 for the 
 country as a whole. For New York the corresponding ratio 
 is 49, and for Ohio 26. The results which have been attained 
 in New Jersey measure the possibilities of the growth and 
 development of the business in other industrial States, for 
 to-day active efforts are being made to develop Industrial 
 insurance in practically every city of the United States, from 
 Maine to California. Considering that more than one- 
 third of the inhabitants of the country live in cities, the out- 
 look for the development of Industrial insurance is, indeed, 
 most encouraging. 
 
 To emphasize somewhat more in detail the possibili- 
 ties of the future of Ordinary legal-reserve life insurance 
 in the United States, attention may be directed to the 
 
 J5<5 
 
The Problem of the Uninsured 
 
 wonderful progress which has been made by Hfe insurance 
 in New Zealand, where the ratio of Ordinary policies to popu- 
 lation is 13 to every 100 inhabitants, against only 7 for the 
 United States. There are no material differences in economic 
 conditions to account for this much more rapid degree of 
 progress in the colony of New Zealand, but the results clearly 
 indicate the possibilities of the development of Ordinary 
 life insurance in the United States. If at the present time 
 (1907) our proportion of Ordinary policies to population 
 were the same as the existing proportion of this business in 
 New Zealand, the actual number of Ordinary policies in the 
 United States would be nearly 12,000,000, instead of only a 
 trifle over 6,000,000. 
 
 One probable reason why there has not been as much 
 progress in American Ordinary life insurance in the past as 
 the natural resources, opportunities, and material well-being 
 of the United States would warrant is that until within a 
 comparatively short period of years no serious effort had 
 been made to reach the many millions of our industrial or 
 wage-earning population. Through the persistent efforts of 
 Industrial agents, however, the mass of the people are grad- 
 ually being educated in the principles and practice of sound 
 life insurance. To an ever-increasing extent. Ordinary poli- 
 cies are being written by Industrial agents among an element 
 who in the past were practically let alone by exclusively 
 Ordinary companies and forced to rely upon the less satis- 
 factory and less secure methods of fraternal, or assessment, 
 insurance. Under conditions of peace and plenty this 
 factor will have a most important and increasing effect in 
 enlarging the field of legal-reserve Ordinary life insurance, 
 chiefly among an element not reached by the agents or 
 solicitors of exclusively Ordinary companies.* 
 
 Another important factor which will go far toward 
 increasing the opportunities for developing legal-reserve 
 
 * On December 31. 1908, there were 1,295,942 Ordinary policies in force with the Industrial life in- 
 surance companies of the United States, representing $1,317,887,524 of insurance. 
 
Life Insurance and Other Subjects 
 
 Ordinary life insurance is the increasing accessibility of the 
 farming regions of the country. Within the last decade an 
 immense interurban electric railway system has been devel- 
 oped which has brought a larger area within easy reach 
 of the solicitor than was accessible in the past. Good roads 
 are being extended in every direction, and the automobile, 
 among other methods of conveyance, is being used to bring 
 the insurance solicitor to the most remote farm and fire- 
 side. The rural free delivery system has also become a 
 substantial aid, while the large increase in railway mileage 
 has opened up new farming regions, formerly very difficult 
 of convenient and economical access. All these factors 
 combined tend strongly to promote the more rapid future de- 
 velopment of life insurance business throughout the country. 
 But there is still another important factor demanding consid- 
 eration, and that is the much higher prices realized for farm 
 products of all kinds, which enable the agricultural popula- 
 tion of the present day to make larger use of life insurance 
 protection than was formerly possible. 
 
 As further emphasizing the possibilities of the progress of 
 Industrial insurance in the future, attention may be directed 
 to the success which has been achieved in England, where, 
 however. Industrial insurance has been in existence for some 
 twenty years longer than in the United States. In the United 
 Kingdom, with a population of 44,000,000, there are now in 
 force some 25,600,000 Industrial policies, or 58 to every 100 
 inhabitants.* If the same ratio obtained in the United States, 
 there would now be in force more than 50,000,000 Industrial 
 policies instead of the 18,600,000 actually in existence. We 
 might, therefore, more than double the existing amount of 
 Industrial insurance in the United States without equaling 
 the attained ratio of business to population in a country 
 with social and economic conditions far from being as favor- 
 able as in the United States. 
 
 * In addition tliere are in force some 8,000,000 policies on the weekly plan with collecting 
 friendly societies. 
 
The Problem of the Uninsured 
 
 Finally, it is necessary to take into account the normal 
 increase of the American population, which is about i,6oo,- 
 000 per annum, as the result of an excess of births over deaths 
 and of an excess of immigration over emigration. If the 
 American life insurance companies did nothing more than 
 to take care of this normal increase in the population, and if 
 their actual increase in business only kept pace w^ith the 
 increase in population, they would indeed make a most 
 commendable record. Actually we add only about 200,000 
 Ordinary policies per annum under existing conditions, and 
 less than 1,000,000 Industrial policies, so that we are not 
 making the progress in business results which the increase 
 in population would warrant. Under the economic condi- 
 tions which normally prevail in the United States favoring 
 the rapid progress and material well-being of the foreign- 
 born, this element of the population, which alone constitutes 
 a large field, is most in need of rational insurance education 
 on the one hand, and of sound insurance protection on the 
 other. 
 
 Life insurance, as an economic necessity, represents an 
 immense force making for social betterment, which cannot 
 be hindered by occasional disturbances in business, or by 
 financial panics and industrial depressions. Life insurance, 
 constituting as it does one of the absolute essentials of 
 our social and material progress, is a force which must 
 continue to increase with the progress of the nation in 
 material wealth and with its advance in civilization. We hear 
 much of the alleged need of state pensions in old age, and 
 claims are made for the necessity of state insurance, some 
 even going so far as to suggest a compulsory system, such as 
 is in operation in Germany and Austria; but contemplating 
 the wonderful results which private initiative has achieved in 
 the United States in this field of voluntary thrift, my mind 
 does not recall a similar achievement in other fields of com- 
 merce, finance or philanthropy, nor can I conceive of a social 
 
 139 
 
Life Insurance and Other Subjects 
 
 institution more deserving of public favor and public support 
 than legal-reserve life insurance as it has been developed 
 vs^ithin the last generation in the United States. The evi- 
 dence is overwhelming that the future of American life 
 insurance is full of great possibilities and that the results 
 attained in the past will be insignificant compared with 
 the still more wonderful achievements of the time to come. 
 
 140 
 
Chapter VII 
 
 LIFE INSURANCE AS A CAREER 
 
 PUBLISHED IN 
 
 THE NEW YORK TRIBUNE 
 
 1903 
 
LIFE INSURANCEAS A CAREER 
 
 ; IFE insurance, in the words of DeMorgan, 
 'though based upon self-interest, is the 
 most enHghtened and benevolent form 
 jwhich the projects of self-interest ever 
 \took. Stripped of its technical terms and 
 its commercial associations, it may be pre- 
 ■ sented in a point of view which will give 
 it strong moral claims to notice." In its origin a British in- 
 stitution, life insurance has developed most rapidly and on 
 the largest scale in the United States. Practically unknown 
 in this country a hundred years ago, and of insignificant 
 proportions even fifty years later, the last half century and, 
 in particular, the last decade record what must be conceded 
 to be the most marvelous business success of this or any 
 age. 
 
 While there are many forms of insurance protection, 
 legal-reserve life insurance alone offers the absolute assur- 
 ance that the obligations incurred and the promises made 
 will be met. Of legal-reserve companies there are about 
 eighty in active operation, with about four million Ordinary 
 and about thirteen and a half million Industrial policies in 
 force. The accumulated assets of these companies exceed 
 ,^2, 000,000,000, and the annual payments to policyholders, 
 ,^200,000,000. The annual income is more than ^500,000,000, 
 while the surplus to policyholders exceeds ^^300,000, 000.* 
 
 Life insurance has been defined as a social device for 
 making accumulations for meeting uncertain loss of capital, 
 which is carried out through the transfer of the risks of many 
 to one person, or to a group of persons, in clear recognition 
 of the principle that "the aggregate danger is less than the 
 sum of individual dangers, for the reason that it is more 
 
 * On December 31, 1908, there were about 171 legal-reserve companies, with over six million 
 Ordinary and nearly twenty million Industrial policies in force. The accumulated assets of these compa- 
 nies were then nearly $3,400,000,000 and the annual payments to policyholders were about $336,000,000. 
 The annual income was nearly $704 ,000,000, and the surplus to policyholders a little more than $474,000,000. 
 
 H5 
 
Life Insurance and Other Subjects 
 
 certain, and that uncertainty of itself is an element of 
 danger."* Primarily devised to provide for the support of 
 widows and orphans, the practice has been developed and 
 enlarged so as to include the secure investment of surplus 
 earnings, in conjunction with the insurance of a sum pay- 
 able at death. 
 
 In virtue of these principles the system of legal-reserve 
 life insurance has been developed to an extraordinary ex- 
 tent, but, however widely diffused, it is safe to state, with 
 a reasonably thorough knowledge of the facts, that the real 
 development of the business is of the future rather than of the 
 present, and that the actual progress which has been made 
 during the last thirty years will be in contrast, rather than 
 in comparison, with the far greater progress and further ex- 
 tension of the business during the next thirty years. 
 
 This, then, appears on its face to be a reasonable proposi- 
 tion, that for a business career many young men would choose 
 well and wisely to attach themselves to what already is 
 one of the most important commercial enterprises of the 
 age. Subject to no violent fluctuations, of an enduring 
 character, and growing at a rapid rate, the administration 
 and management of this business require an army of men of 
 integrity, exceptional ability, energy, and insight, and to men 
 of this type life insurance off"ers not only adequate compen- 
 sation, but more than average remuneration. In no business, 
 it is safe to say, is the division of labor carried so nearly to 
 perfection and at such little cost to the individual. In 
 life insurance the greatest possible range of opportunity is 
 given to every individual worker, whether in the office or 
 outside, and the gradations of employment are such that at 
 least a moderate amount of success is within the reach of all 
 who conform to the simplest principles of industry, energy, 
 and integrity. 
 
 Broadly speaking, there are two distinct methods of life 
 
 * William Roscher, Principles of Political Economy, translated by J. J. Lalor, New York, 1878, 
 vol. II, p. 261. 
 
 14.6 
 
Life Insurance as a Career 
 
 insurance on the legal-reserve plan, namely, Ordinary and 
 Industrial. Of the two the latter is relatively the more im- 
 portant, in that it reaches a very much larger number of 
 people. The essential difference is in the method of pay- 
 ing the premiums, in that Industrial premiums are payable 
 weekly and collected from the homes of the insured, while 
 Ordinary premium payments are quarterly, semi-annual, or 
 annual, and are required to be sent to the office of the 
 company. A further distinction is that the average amount 
 of insurance is about $i2o[$i37 in 1908] on the Industrial, 
 against about $2,ioo[$i,932 in 1908] on the Ordinary plan. 
 These two distinct methods of life insurance, although 
 derived from the same fundamental basis of mortality and 
 finance, offer different opportunities for young men who 
 make a choice of life insurance as a career. 
 
 Again speaking broadly, the work of a life insurance com- 
 pany is divided into office work and field work, or administra- 
 tive and agency work. By the latter term, in Industrial 
 insurance, are understood the soliciting for new business and 
 the continued collection of the weekly premium ; in Ordinary 
 insurance, only the soliciting for new business and the collec- 
 tion of the first annual premium. The home office work is 
 practically the same except in so far as the administration of 
 an Industrial-Ordinary company is more intricate and more 
 subdivided into different departments, on account of the 
 enormous number of risks insured. With an Industrial 
 company (such as The Prudential) the number of risks is 
 counted by the million, and the new proposals for insurance 
 average from twenty to thirty thousand weekly. This re- 
 quires a large office machinery for accounting, inspection, 
 tabulation, analysis, etc., and for this reason the home office 
 of an Industrial company may be said to offer a wider field 
 for the development of individual talent. 
 
 The field work of Ordinary and Industrial agents has 
 much in common, and yet there is a radical difference. Both 
 
 147 
 
Life Insurance and Other Subjects 
 
 classes of agents have to secure business by personal solici- 
 tation, with this difference, that the former reaches the more 
 prosperous element of the population, while the latter is ex- 
 pected to canvass largely among the families of wage-earners 
 or people of small means. This work is thoroughly super- 
 vised by district superintendents and assistant superintend- 
 ents, who are reponsible for the most effective development 
 of their respective districts. While the average amount of 
 insurance under Industrial policies is about one-seventeenth 
 of that of the Ordinary, the opportunity for insuring the entire 
 family increases correspondingly the opportunities for mak- 
 ing an agency a position of material importance. The usual 
 method is to transfer to a new agent a certain amount of col- 
 lectible premiums, and through this introduction to the busi- 
 ness he becomes familiar with the territory and soon adapts 
 himself to the local conditions. Promotion is rapid from 
 the position of an agent to that of an assistant superintendent, 
 with a guaranteed salary, and to the still higher position of 
 district superintendent. Very little technical education is 
 required for Industrial field work, and the chief elements of 
 success are energy, tact and integrity. 
 
 Additional attractions for employment as life insurance 
 field workers are the opportunity for outdoor life, contact with 
 different elements of the population, and, perhaps most of 
 all, the certainty of finding remunerative employment in any 
 part of the country — in fact, in almost any part of the civilized 
 world. A good solicitor for life insurance can secure a pay- 
 ing position an}^where, and he will be readily employed if he 
 can furnish satisfactory references and proper credentials. 
 
 Ordinary solicitors require a fairly thorough technical 
 instruction in the general principles and practice of insur- 
 ance, since the large variety of plans of insurance offered to 
 the public by different companies makes competition very 
 keen, and success often depends upon a perfect knowledge 
 of the intricacies of the business. The more thoroughly the 
 
 148 
 
Life Insurance as a Career 
 
 Ordinary solicitor realizes the necessity for energetic personal 
 canvassing the more likely it is that success will be attained. 
 It has been found by experience that life insurance agency 
 work cannot be advantageously carried on in connection 
 with other employment. An agent should understand the 
 essential principles of life insurance and have a thorough 
 knowledge of every plan of insurance sold by his company 
 and its chief competitors. The men who succeed best are 
 those who limit themselves in their arguments to a straight- 
 forward statement of the facts in the case — in other words, 
 to the cost of insurance and the results to be realized by the 
 insured. Men who intelligently adapt themselves to the 
 exigencies of the occupation are practically certain to meet 
 with modest success, and reasonably certain to meet with 
 more than average success, such as would follow correspond- 
 ing efforts in other directions. Every agent should also make 
 himself familiar with the history of his company and with its 
 business principles and office practice, as well as with the 
 general history of life insurance and the readily compre- 
 hended arguments in favor of this form of family protection. 
 The general status of the life insurance solicitor has very 
 materially improved within recent years, largely because of 
 the superior class of men who are now attracted to this call- 
 ing. The arguments in favor of insurance have become more 
 intelligent, the literature distributed for the information of 
 the public has been freed from technicalities and misleading 
 controversial arguments, while at the same time the public at 
 large has become more thoroughly familiar with the value 
 and advantages of life insurance protection. Other things 
 equal, it is safe to say that the best success is attained in com- 
 munities in which a large number of companies are repre- 
 sented and are actively engaged in the extension of their busi- 
 ness. To agents, Industrial as well as Ordinary, who will 
 adapt themselves to the normal conditions under which suc- 
 cess is granted, life insurance offers to-day exceptional oppor- 
 
 H9 
 
Life Insurance and Other Subjects 
 
 tunities for remunerative employment and for rapid pro- 
 motion to higher grades of field management, as well as to 
 the administrative branch of the business — probably better 
 than banks, railways, and other financial and commercial 
 enterprises. 
 
 The general management of a life insurance company is 
 under a board of directors or trustees, according to the charac- 
 ter of the institution — ^whether proprietary or mutual. The 
 direct administration is in charge of oflicers and officials, to 
 each of whom specific duties are assigned. The president's 
 duties are to maintain a general supervision over and direction 
 of the business of the company, both in the office and in the 
 field, but in particular he must give his attention to the care 
 and investment of the company's funds and to other financial 
 transactions — a great and far-reaching responsibility. 
 
 The vast ofiice machinery of a large company is exceed- 
 ingly complex, and not readily separated into its integral 
 parts; but there are usually three groups of officers — the 
 first, or executive, being in general charge of the office and 
 field administration; the second representing law, finance, 
 and real estate; and the third the actuarial, medical, and 
 statistical departments. 
 
 The Ordinary field administration is always under the 
 immediate direction of an executive officer, usually one of 
 the vice presidents. The territory is divided into sections, 
 each of which is in charge of a manager, who will have 
 under him general and special agents, whose principal duty 
 is to solicit for new insurance. Ordinary agents are not paid 
 a salary, but they receive a commission on new policies 
 secured and a renewal interest in the subsequent preiwiums 
 paid. In this manner permanent relations are established 
 between the company and its Ordinary field force, and re- 
 munerative incomes are built up by degrees as the result of 
 intelligent effort. The office work in connection with the 
 Ordinary department is quite as involved as an intricate 
 
 150 
 
Life Insurance as a Career 
 
 method of bookkeeping, and therefore offers a ready field for 
 the development of individual ability. 
 
 The Industrial field operations are also alv^ays under the 
 charge of an executive officer, generally a vice president, and 
 subordinate to him there are division managers, to each of 
 whom a particular section of the country is assigned. The 
 actual field work is managed by a district superintendent 
 with assistant superintendents, under each of whom there 
 are a number of agents, who collect the weekly premiums 
 and solicit new insurance. Industrial agents are paid a 
 commission for collecting the regular weekly premiums and 
 a special commission for new insurance written. Industrial 
 agents also write Ordinary insurance and thus considerably 
 increase their incomes. The superintendents and assistants 
 are paid a fixed salary, but they have an interest in the prog- 
 ress of the district and they receive additional compensa- 
 tion for Ordinary insurance secured through their own 
 efforts. Inspectors are employed for the purpose of in- 
 vestigating different districts and for occasionally taking 
 charge of districts during the temporary absence of the 
 superintendent, or for other reasons. 
 
 The general office organization is divided into a large 
 number of departments, each of which is under a manager 
 and assistant manager, who in most cases have reached their 
 positions after having started as clerks and often as office boys. 
 The most important departments are the secretary's, super- 
 visor's, cashier's, auditor's, bookkeeper's, policy issue, claim, 
 purchasing, editorial, advertising, mail, printing, and supply. 
 Some companies have their own printing department, man- 
 aged as a distinct commercial enterprise, with work limited 
 to the needs of the company. Life insurance companies 
 usually issue weekly or monthly publications for the instruc- 
 tion of the agency force and the information of the 
 general public. 
 
 The qualifications for employment in the general office 
 
 151 
 
Life Insurance and Other Subjects 
 
 departments vary, but as a rule the commencement is in an 
 inferior position, from which promotions are made to junior 
 clerks, special clerks, assistant managers and department 
 managers as occasions arise. The employment is practi- 
 cally permanent, once a position of some importance 
 has been attained, for the unqualified are early forced out of 
 the service after a sufficient trial. 
 
 Most of the legal work of a life insurance company is in 
 connection with the passing upon titles, securities, invest- 
 ments, etc., but there is opportunity for the development of 
 legal talent of a high order, and aside from the usual quali- 
 fications, a special knowledge of corporation law, insurance 
 law, and medical jurisprudence is necessary and of exceptional 
 value. 
 
 Under direction of the president, the finances are in im- 
 mediate charge of a comptroller, a treasurer, and a cashier. 
 The general duties in this department resemble the manage- 
 ment of banks, trust companies, etc., and there are accord- 
 ingly separate divisions for the conduct of the different 
 branches of the work. 
 
 The actuary has entire charge of the actuarial depart- 
 ment, which includes the scientific calculation of premium 
 rates and the equally complex mathematical considerations 
 of policy valuations. The actuarial department, on account 
 of its highly specialized character, is divided into sections, 
 according to the extent of the business transacted, and while 
 actuarial work is largely mathematical it is by no means en- 
 tirely so. The marvelous development of the business and 
 the multiform supervision of life insurance companies by 
 the different States, as well as the large variety of policies 
 issued by modern and progressive companies, impose upon 
 the actuary very responsible duties and functions. The 
 actuary is required to possess not only a general knowledge 
 of insurance principles and practice, but also of general 
 mortality and vital statistics, insurance law, and the practice 
 
Life Insurance as a Career 
 
 of accounting, together with a thorough knowledge of the 
 theory and practice of taxation, the value of public securities 
 and other investments, and finally, of corporation and pub- 
 lic finance. The modern actuar)', in fact, must have a 
 broad knowledge of the practice of life insurance in all its 
 branches to render accurate judgment upon many impor- 
 tant questions of business administration. 
 
 The medical department is in charge of the medical direct- 
 ors, who primarily supervise the acceptance of risks on the 
 basis of individual medical reports made by local medical 
 examiners. Every risk is passed upon by office medical ex- 
 aminers, and undesirable risks are rejected. The require- 
 ments for employment in this department are various, but a 
 thorough knowledge of the theory and practice of medicine, 
 medical jurisprudence, physical diagnosis, urinalysis, etc., is 
 essential. Local medical examiners are paid a fee for each 
 examination, the amount of which varies according to special 
 and well-defined circumstances. 
 
 Some companies maintain a statistical department, under 
 the direction of a statistician, whose duties include the collec- 
 tion and analysis of data pertaining to life insurance, the 
 tabulation and analysis of medical statistics, special investi- 
 gations into mortality problems and a variety of other duties 
 not readily defined. The special requirements are a thorough 
 knowledge of the theory and practice of general statistics, 
 some knowledge of mathematics, and a broad understanding 
 of social and economic problems and of longevity as affected 
 by occupation, climate, habits, heredity, etc. An indispens- 
 able part of the statistical department is a well-equipped 
 library of insurance, medicine, law, economics, finance, etc. 
 
 In a general way, it may be said that the scientific tem- 
 perament is most likely to lead to success in home office ad- 
 ministration. This term is here made use of in the widest 
 sense. Perhaps the first principle of success is absolute 
 accuracy, which, in other words, means a careful training 
 
 153 
 
Life Insurance and Other Subjects 
 
 of all one's faculties, since the trained eye is able to see where 
 the untrained eye discerns nothing. Scientific training, as 
 well as all higher education, distinctly qualifies a man for 
 administrative responsibility. 
 
 The work of a home office may be compared to the work 
 of a general staff of an army, the very purpose of which, in 
 a large measure, is to seek the problems that ordinary ob- 
 servers cannot see. If anywhere there is necessity for the 
 preaching and practice of what President Roosevelt calls the 
 gospel of intelligent work, it is in the office and field adminis- 
 tration of a life insurance company. There is an increasing 
 demand, not only for men of energy and ability, possessing 
 integrity, tact, and perseverance, but also for specialists, to 
 bring to a higher degree of efficiency the numerous minor 
 departments for the investigation of facts and forces beneath 
 the surface of everyday business experience. The demand 
 for young men of exceptional ability is out of all proportion 
 to the available supply, and there is abundant opportunity 
 for the profitable employment of men of higher education, 
 who are practically certain, other things being equal, to make 
 a greater success in the field of life insurance than in most 
 other branches of commercial enterprise. 
 
 Higher education in life insurance as a business has dur- 
 ing recent years been introduced into colleges and univer- 
 sities, and some of the leading institutions now have general 
 courses in insurance which possess considerable intrinsic 
 merit, aside from the encouragement given to the develop- 
 ment of special talents. The education of field men forms 
 part of the work of every large insurance institution, and, 
 aside from manuals of instruction, special literature on par- 
 ticular subjects, leaflets explaining particular policy forms, 
 etc., meetings and conferences are held, at which agents are 
 addressed by qualified speakers, for the discussion of prob- 
 lems of practical field administration. 
 
 The work of agency instruction is supplemented by life 
 
 I5i 
 
Life Insurance as a Career 
 
 underwriters' associations, which usually combine social and 
 educational advantages. The education of the general pub- 
 lic in insurance principles and practice is also an important 
 means of business extension, and all the larger companies 
 publish literature for the information of the public, setting 
 forth the advantages of particular forms of insurance, or deal- 
 ing with matters of general interest, such as the taxation of 
 life insurance companies, the social duty of insurance, the 
 comparative advantages of life insurance as a mode of thrift, 
 etc. Some companies have published their history, and a 
 number of valuable works on the technical aspects of life in- 
 surance have been placed on the market by insurance pub- 
 lishers. There are many valuable journals devoted entirely 
 to insurance matters, and State insurance departments an- 
 nually publish reports which contain a mass of information, 
 with the essentials of which every agent or office man should 
 make himself familiar. The social aspects of life insurance 
 are gradually being recognized by writers on questions of 
 social reform and by students of political economy. 
 
 There is, therefore, a considerable basis of theory and 
 experience available to students of insurance problems, rea- 
 sonably sufficient for the preliminary technical education of 
 those who make a choice of life insurance as a business career. 
 The opportunities for individual development are exceptional, 
 but the business is exacting in its details, and the competition 
 between different companies is so keen that all that goes to 
 make character in a man is required for individuals to attain 
 more than a moderate success. While it is entirely true to 
 say that modest success is possible to any one who will exert 
 himself with a reasonable degree of efficiency and energy, 
 it is equally true that the most exacting demands are made 
 upon trained minds to meet the increasing needs of a rapidly 
 growing business. Those who have carefully observed 
 the tendency of the business have no hesitancy in making 
 the prediction that within another thirty years the present 
 
Life Insurance and Other Subjects 
 
 position of life insurance will appear as insignificant as the 
 position of the business in 1875 appears to us at the present 
 time; and it would seem to be a perfectly rational view that 
 the intelligent, industrious and tactful young man is not likely 
 to be in error in making a choice of life insurance as a busi- 
 ness career. 
 
 ^56 
 
Chapter VIII 
 
 THE TAXATION OF 
 LIFE INSURANCE 
 
 AN ADDRESS DELIVERED AT THE ANNUAL MEETING 
 
 OF THE ASSOCIATION OF LIFE INSURANCE 
 
 PRESIDENTS 
 
 NEW YORK, DECEMBER 4, 1908 
 
THE TAXATION 
 
 OF LIFE INSURANCE IN THE 
 
 UNITED STATES 
 
 f^^ M^ft^-ia i^S^ F THE many important questions and prob- 
 
 't^^ ^^t^'/i:' lems in life insurance administration, one 
 
 v'"^ of the most serious at this time demanding 
 ^!^IJ^ A' -'Ki consideration and public discussion is the 
 
 I 
 
 'fx^,?5r:5s^^w?^*;, unjust and burdensome taxation of life in- 
 
 ' yAi'/ surance mterests. 1 he Association of Life 
 
 ^^^^ Insurance Presidents performs only a press- 
 ing public duty by bringing this matter to public attention. 
 Practical suggestions are urgently needed as to the best 
 methods and means by which a further increase in the tax 
 rate can be effectually resisted and a material reduction in 
 the existing tax burden secured. 
 
 In my brief discussion of the subject I have purposely 
 avoided technical details and theoretical considerations, so as 
 to emphasize more clearly the intensely practical aspect of 
 the subject as it confronts th^ administrative officers of 
 American life insurance companies at the present time. 
 Whatever opinion may be held as to where the burden of 
 taxation falls in other matters, there can be no doubt as 
 regards life insurance, for there the policyholder, and the 
 policyholder only, pays the tax and carries the burden. 
 
 It requires no lengthy argument to establish the principle, 
 both in morals and economics, that life insurance as an in- 
 stitution making so decidedly for human betterment should 
 not be taxed at all. No reasonable objections can be raised 
 to the taxation of the real property owned by life insurance 
 companies, provided it is taxed at the same rate as the prop- 
 erty of other commercial institutions. Nor can serious ob- 
 jections be made to reasonable license fees nor to the 
 expenses of an effective system of State supervision, since 
 
 i6i 
 
Life Insurance and Other Subjects 
 
 these, in the aggregate, do not impose a very heavy burden 
 upon the policyholders. On the other hand, in the case of 
 State supervision the policyholders are materially benefited 
 by increased security against possible maladministration. 
 
 The real evil, however, which confronts the companies at 
 the present time is the excessive rate of taxes on premiums, 
 which, constituting as they do readily apparent evidences of 
 existing wealth, are for that reason among the most conven- 
 ient sources of State taxation. It is, however, apparently for- 
 gotten that by indirection life insurance, by offering protection 
 at moderate cost against the uncertainties of human life, 
 relieves the State from the possible and serious burden of sup- 
 porting dependent survivors and the dependent poor in their 
 old age. No other social institution, not even savings banks 
 or building and loan associations, useful as they are, serves so 
 unselfish and laudable a purpose as life insurance companies 
 at the present time. In return for this service to the State life 
 insurance should be exempted from a large share of the taxes 
 which are now imposed upon the business largely because the 
 accumulations are a matter of public record and easily reached 
 by the tax-collector as visible evidence of existing wealth. 
 
 It would, however, serve no practical purpose at this 
 time to raise the purely academic question as to whether 
 insurance should be taxed at all, for the exigencies of govern- 
 mental policy will continue to demand a fair share of the 
 policyholders' accumulations for general purposes of public 
 taxation. It is useless to strive for the unattainable. The 
 real question, then, which confronts the administrative offi- 
 cers of life insurance companies is not whether life insur- 
 ance as an institution should be taxed at all, but rather what 
 should be the most practical and equitable method, and 
 what should be the maximum rate consistent with the needs 
 of government. An equitable method and rate having once 
 been established, any future attempt to increase life insur- 
 ance taxation should be most vigorously opposed. 
 
 162 
 
The Taxation of Life Insurance 
 
 The facts and considerations which I shall present are 
 rather for the purpose of emphasizing an important duty on 
 the part of all administrative officers of life insurance com- 
 panies. We should enlist public opinion generally and the 
 co-operation of the policyholders in particular, in a deter- 
 mined effort to oppose any further increase in the tax burden 
 already carried by the companies, and, as far as possible, to 
 secure a material reduction in the rate, making it more 
 compatible with the high aims and purposes of life insurance, 
 which are for the public good. 
 
 In round figures, American legal-reserve companies, with 
 a gross premium income of $533,000,000 during 1907, paid 
 in taxes, licenses and fees for State supervision over $1 1,000,- 
 000, or a sum equivalent to 2.1 per cent, of the premium 
 income.* In the last ten years the companies have paid in 
 taxes of all kinds the enormous sum of nearly ^^85,000,000, 
 and by just so much the net cost of life insurance in the 
 United States has been increased, to the decided detriment of 
 the companies and their policyholders. 
 
 The general method of insurance taxation in the United 
 States is sufficiently well understood to require no extended 
 discussion to emphasize the practical difficulties which con- 
 front the administrative officers of insurance companies. It 
 needs only to be pointed out that every State has its own 
 method, as a rule so complex and involved as to materially 
 increase the office expenses of the companies in the book- 
 keeping, auditing, legal, and other departments. For the 
 purpose of illustration, however, I may state that in Mass- 
 achusetts the general tax is one-fourth of one per cent, on 
 reserves; in Ohio the tax is two and one-half per cent, on the 
 gross premium income, less return premiums and reinsur- 
 ance premiums received from other companies; in Indiana 
 three per cent, of the premium income after deducting losses; 
 
 * During 1908, 171 American legal-reserve companies, with a gross premium income of $545,858,- 
 410, paid in taxes, licenses, and fees for State supervision $12,352,292, a sum equivalent to 2.26 per cent, 
 of the premium income. 
 
 163 
 
Life Insurance and Other Subjects 
 
 in the District of Columbia one and one-half per cent, after 
 deducting dividends ; in Arkansas two and one-half per cent, 
 on premiums, less losses and commissions; and in New 
 Hampshire, among others, one per cent, on gross receipts. 
 
 Equally complicated is the method of rendering the 
 annual accounts. For example, the final date for tax pay- 
 ments varies all the way from January 31st, in Kentucky, 
 to November 30th, in Massachusetts. Among other sug- 
 gestive facts, mention may also be made of the method 
 in Montana, where counties tax excess premiums received 
 over losses and ordinary expenses incurred; in Kentucky a 
 tax of two per cent, on gross premiums is charged, and 
 certain cities levy an additional tax of one and one- 
 half or two and one-half per cent, on premiums received 
 on new business; in South Carolina quarterly returns are 
 required to be made to the State, showing premium receipts 
 by counties; while in Texas the system is such that most of 
 the large and representative companies have left the State. 
 The mere clerical labor involved in meeting these widely 
 varying requirements is a very considerable item of cost to 
 the policyholders, which is not included in the enormous 
 total previously given. 
 
 Changes are made nearly every year in the taxing methods 
 of some State or other, which demand constant vigilance to 
 avoid heavy penalties for failure to comply with mere techni- 
 calities. "Each age," as has been well said by a distinguished 
 authority on taxation, "has its own system of public reve- 
 nue . . . and ideals of justice in taxation change with the 
 alteration in social conditions."* There is, therefore, hope 
 that in the future the method of insurance taxation will be- 
 come more uniform and simplified. There is indeed strong 
 encouragement in the effort of this association, in co-opera- 
 tion with the Insurance Commissioners of the different 
 States, with other bodies of underwriters, and most of all 
 
 * Essays in Taxation, by E. R. A. Seligman; New York, 1900, p. 1. 
 
 i6^ 
 
The Taxation of Life Insurance 
 
 through the intelligent and active co-operation of policy- 
 holders, to bring about such changes as are most conducive 
 to the conservation of the vital interests that are at stake. 
 
 Legislatures in time will realize the serious implication 
 of the words of Chief Justice Marshall, "that the power to 
 tax involves the power to destroy," and that overtaxation of 
 life insurance interests must unquestionably be followed 
 by serious consequences to the people as a whole. Con- 
 ceding the truth that "good law is not always sound eco- 
 nomics,"* it is equally true that economic and moral princi- 
 ples must in the end govern any rational legislation for the 
 common good. The position which the companies take 
 in this matter is, I think, not opposition to taxation, as such, 
 but to overtaxation in a most serious form, unquestionably 
 detrimental to the best interests of the policyholders and 
 the public at large. 
 
 To make this assertion as clear and concise as possible, 
 and conclusive for the end in view, we may compare the tax 
 burden imposed upon life insurance companies in this coun- 
 try and in Germany, omitting details and dealing only in 
 round numbers with the facts, for which there is official 
 authority, derived from readily accessible sources. I have 
 selected the German Empire for purposes of comparison 
 because its economic and financial conditions are at a decided 
 disadvantage as compared with those of the United States. 
 The problem of meeting ever-increasing military, colonial, 
 and other expenditures has left to that country few sources 
 for additional taxation. It might well be assumed, therefore, 
 that the exigencies of the situation would induce the Ger- 
 man government to exact the largest revenues practicable 
 in the form of taxation from the life insurance companies 
 of the Empire. However, according to the official returns, 
 in Germany, during 1907, life insurance companies, with 
 an annual premium income of over one hundred and twenty 
 
 * Essays in Taxation, by E. R. A. Seligman; New York, 1900, p. 137. 
 
Life Insurance and Other Subjects 
 
 million dollars, paid in taxes of all kinds only about three 
 hundred thousand dollars, or less than one-fourth of one 
 per cent, of the premium income ! This is indeed a humili- 
 ating contrast with our American experience. 
 
 In brief, if the rate of taxation paid by German life in- 
 surance companies prevailed in the United States there would 
 be an annual saving to the policyholders of our country of 
 many millions of dollars. Considering the enormous natural 
 resources of this country, its superior economic conditions, 
 the much lighter burdens of military expenditures and pen- 
 sions, it is greatly to the credit of the German Empire that 
 it should have refrained from drawing, for the purpose of 
 general taxation, upon the funds representing the best evi- 
 dence of thrift, self-sacrifice, and self-denial which can be 
 exhibited by any people, in any form, at any time. Other 
 illustrations could be cited to emphasize further the asser- 
 tion of overtaxation of life insurance in the United States, 
 in comparison with foreign countries, but it would only be 
 cumulative evidence. 
 
 I would, therefore, suggest that one per cent, of the pre- 
 mium income, in lieu of all other charges except taxes on real 
 estate, should hereafter be considered the maximum pre- 
 mium income tax rate on life insurance that should ultimately 
 obtain throughout the United States. I realize, of course, 
 that theoretically some other basis than premium income 
 might prove a more satisfactory method, but we must 
 take into account existing conditions and the actual practice 
 of many years. The method of taxing life insurance 
 premiums as a convenient basis of taxation is certainly 
 more firmly established than any other. To bring about a 
 material reduction in the tax rate, less radical changes in 
 present laws will be necessary if this method of taxation is 
 made general throughout the country. To secure the adop- 
 tion of a theoretically more perfect and satisfactory plan of 
 life insurance taxation seems hopeless. A uniform premium 
 
 i66 
 
The Taxation of Life Insurance 
 
 tax of not more than one per cent, would not be an insupport- 
 able burden upon the policyholders. The yield of such a 
 tax would in any event very much more than pay the 
 necessary cost of State supervision. 
 
 But it is not only the present problem of overtaxation 
 which confronts the companies — even more of a menace is 
 the constant risk of a further increase in the rate as the re- 
 sult of new statutory requirements. Unfortunately, legisla- 
 tures are apt to proceed upon the theory of an eminent 
 French statesman: "So to pluck the goose as to produce the 
 largest amount of feathers with the least possible amount of 
 squealing."* 
 
 Looking backwards over a period of years, it appears 
 that twenty years ago the rate was not much over one per cent., 
 and by 1892 it had increased to 1.5 per cent. During the 
 Spanish-American war there was a further rise to 2 per 
 cent, in 1898, and to 2.2 per cent, in 1899, while during 1906 
 and 1907 the rates have been 2.07 per cent, and 2.08 per 
 cent., respectively.f The question may well be asked. Where 
 is this increase to stop .'' and whether there is not a practical 
 certainty that the rate will go up to 2.5 per cent, unless the 
 Association of Life Insurance Presidents, in behalf of the 
 policyholders, adopts a definite policy to oppose any and 
 every increase which may be proposed in any one of the 
 different States. Such resistance is a public duty imposed 
 upon the association and upon the companies individually, 
 to safeguard the interests of the policyholders, who are 
 otherwise a defenseless prey of ill-advised legislation and 
 irrational methods of overtaxation. 
 
 It is an encouraging sign that the subject of life insurance 
 taxation has been taken up by the National Convention of 
 Insurance Commissioners. Their special committee on tax- 
 ation in its recent report condemns the taxing of life insurance 
 
 * Colbert, as qaoted by Hadley, in his Economics, p. 450. 
 
 t During 1908 the taxes paid by American legal-reserve life insurance companies were $12,352,292, 
 or equivalent to 2.26 per cent, of the premium income. 
 
Life Insurance and Other Subjects 
 
 companies except on real estate owned and for State super- 
 vision, and points out that the present premium income tax 
 is discriminatory and excessive. Realizing, however, that as 
 a practical solution of the problem a premium tax of some 
 kind is likely to prevail, they make, among other recom- 
 mendations, the following: "That the rate of the premium 
 income tax, if one be imposed, shall be fixed by methods 
 that will give some assurance of equality of the rate with 
 that of other taxpayers." The suggestion I have already 
 made, of establishing a uniform premium tax of one per cent., 
 is in close agreement with this recommendation. 
 
 Every policyholder has a direct personal interest in this 
 tax problem, and the value of his aid and co-operation in 
 the efforts of this association to resist any further increase 
 in the rate and to work deliberately for a material reduction 
 cannot be overestimated. Such a reduction in the case of 
 burdensome or unjust taxation is not without precedent. 
 The income tax levied during our great exhausting Civil 
 War never amounted to more than 2.5 per cent, on gross in- 
 comes, or identically the same as the rate of life insurance 
 taxation now exacted by law in certain States. Although 
 the Federal income tax was the immediate result of the 
 greatest war in modern history, it was not permitted to con- 
 tinue a day longer than the needs of the nation absolutely 
 required. The arguments which were then put forward in 
 Congress for its reduction or repeal apply with far greater 
 force and more justice to the reduction or repeal of taxes 
 now imposed upon life insurance premiums.* 
 
 Insurance history is not without precedent for favorable 
 changes in tax legislation, for in times past, when the benef- 
 icence of insurance was less clearly realized, taxes which 
 were practically prohibitive were imposed upon fire insurance 
 premiums.f In response to a clear presentation of the facts 
 the earlier prevailing tax rate has been reduced, and in cor- 
 
 * Speeches and Reports on Finance and Taxation, by John Sherman; New York, 1879, p. 371. 
 t Taxation and the Funding System, by J. R. McCuIlocb; London, 1845, pp. 285 et scq. 
 
 i68 
 
The Taxation of Life Insurance 
 
 responding proportion the business has increased, to the 
 incalculable benefit of mankind.* It is historically true that 
 the very stamp taxes imposed by England upon the Ameri- 
 can colonies, including stamp taxes upon insurance, were 
 less burdensome, all things considered, than the taxes im- 
 posed upon insurance interests at the present time. 
 
 It is an accepted canon of taxation, laid down by Adam 
 Smith more than a century ago, that "the subjects of every 
 State ought to contribute toward the support of the govern- 
 ment as nearly as possible in proportion to their respective 
 abilities — that is, in proportion to the revenue which they 
 respectively enjoy under the protection of the State." But 
 the revenue of life insurance companies is not the revenue 
 of corporations for profit-making purposes, but the accum- 
 ulation of a trust fund chiefly for the support of dependent sur- 
 vivors who might otherwise become a charge upon the State. 
 
 It is another accepted canon of public finance that "taxa- 
 tion should never touch what is necessary for the existence 
 of the contributor," and certainly no argument is required to 
 sustain the contention that life insurance protection is an 
 imperative necessity to safeguard the mass of our people 
 against the humiliating need of State or private charit- 
 able aid. Life insurance in itself is a voluntary tax, self- 
 imposed by the most thrifty element of the nation and for 
 the most commendable objects, and to tax such effort is to 
 hinder thrift and to hinder the development of the finest 
 traits of national life and character.f 
 
 But I am well aware of the practical difficulties which 
 confront life insurance companies in securing radical reforms 
 in taxation. My main object has been to emphasize the 
 facts of the situation and to urge the serious consideration 
 of the subject upon the administrative officers of life insur- 
 ance companies and upon earnest and impartial students of 
 
 * The Fire Insnrance Duty ! History of tlie Agitation for Abolition or Reduction, Showing the Duty 
 to be Bad in Principle, Obstructive to the Progress of Insurance, and Opposed to the Public Interest. 
 London, 1863. 
 
 + Public Finance, by C. F. Baatable; London, 1903, pp. 411.421. 
 
 169 
 
Life Insurance and Other Subjects 
 
 insurance methods and their results, but most of all upon 
 the vast body of American policyholders who carry a needless 
 burden of expense from which it is the duty of the State, as 
 far as possible, to relieve them. 
 
 I therefore repeat that if the German Empire, with its 
 vast burden of military, colonial, and other expenditures far 
 in excess of ours, refrains from taxing its life insurance 
 policyholders more than a quarter of one per cent, of the pre- 
 mium income, there can be no economic or political justi- 
 fication for imposing a tax of two per cent, (eight times as 
 much) upon the premium income of American life insurance 
 companies.* If the great State of New York, with its nu- 
 merous State and municipal expenditures of all kinds, refrains 
 from taxing life insurance companies more than one per cent, 
 of the gross premium income, I insist that there is no 
 justification on the part of other States to tax life insurance 
 companies at a higher rate. 
 
 If the average rate were reduced to one-half of what it is 
 at the present time, and if it were accepted as an established 
 practice in taxation that premium receipts of life insurance 
 companies should under no circumstances be taxed more 
 than one per cent., there would at the present time be a sav- 
 ing to the policyholders of about five million dollars a year, 
 which would revert to them in the form of larger dividends 
 or a corresponding reduction in premiums. 
 
 The problem before us is a practical one. Life insurance 
 is greatly overtaxed. The prospect of securing the general 
 adoption of a perfect system of taxation is too remote for 
 serious consideration. A uniform premium income tax of 
 one per cent, would be a practical working basis. It 
 would more than repay the States for their supervision and 
 protection and would materially decrease the cost of life in- 
 surance to the millions of American policyholders. 
 
 * The German rate of insurance taxation is derived from the annual report of the Imperial super- 
 vising insurance department, Berlin, 1908. 
 
Chapter IX 
 
 THE 
 
 REGULATION OF INSURANCE 
 
 BY CONGRESS 
 
 AN ADDRESS DELIVERED 
 
 AT A MEETING OF THE BOSTON LIFE 
 
 UNDERWRITERS' ASSOCIATION 
 
 NOVEMBER 22, 1904 
 
THE REGULATION OF INSURANCE 
 BY CONGRESS 
 
 Insurance in all its branches is to-day one 
 j of the most important elements of general 
 .progress. Within twenty years the funds 
 i)of level-premium life insurance companies 
 ; alone have increased from five hundred 
 /million to more than two thousand million 
 ) dollars, while the annual income during the 
 same period has increased from less than one hundred million 
 to more than five hundred million dollars. A business of 
 such vast proportions, especially as carried on by chartered 
 companies, has properly been made an object of the special 
 solicitude of the State, and almost from the very beginning of 
 insurance as transacted by moneyed corporations we meet 
 with a well-defined attempt at State legislation, which in 
 course of time has been developed into a complex system of 
 supervision, regulation, and control. The resulting problems 
 to the companies and to their policyholders are serious, and 
 demand the most careful and expert consideration. 
 
 The modern system of State supervision, which originated 
 in Massachusetts in 1855, has since been adopted, more or less, 
 by every State and Territory, until a company transacting 
 a national business is subject to supervision and regulation 
 by some fifty different supervising authorities or insurance 
 departments. Aside from the great expense involved in this 
 form of oversupervision, the companies are required to de- 
 vote much time and thought to meet demands for special 
 information, which, when furnished, is of no practical use 
 either to the State or to the policyholders. There is prob- 
 ably no other business in which the art of accounting and 
 audit is carried to such a high degree and in which the 
 details of management and operation are so thoroughly 
 well known and understood as in insurance. Not only do 
 
 175 
 
Life Insurance and Other Subjects 
 
 the companies suffer from overlegislation, resulting in a 
 body of laws often making that a duty in one State which 
 might be a crime in another, but without exception this sys- 
 tem of voluntary thrift, foresight, and prudence is made the 
 subject of excessive taxation, until the burdens have grown to 
 be such as are not imposed upon any other form of enter- 
 prise. During a period of forty years the American life in- 
 surance companies alone have paid in the form of taxes the 
 enormous sum of about one hundred million dollars. The 
 present annual amount paid in taxes, licenses, fees, etc., is 
 about nine million dollars.* This practice of overtaxation 
 is contrary to every sound theory of social and political 
 economy, which holds that life insurance, as such, should 
 not be burdened with taxes in any form; but it seems to be 
 the modern theory of the State that these taxes may be im- 
 posed and that they may be increased whenever at its 
 pleasure a State legislature sees fit to do so. 
 
 These and other problems have been confronting the 
 companies for almost fifty years, but in a more aggravat- 
 ing, vexatious, and burdensome form at the present day, 
 until the time has come when it behooves us seriously to con- 
 sider whether relief cannot be had from Congress in the 
 form of an act substituting Federal regulation of the inter- 
 state insurance business of the companies for the present 
 method of oversupervision by some fifty different insurance 
 departments. The policyholders and the agents, as well as 
 the companies, are vitally interested in this question, and 
 this is my excuse for bringing the matter once more before 
 you, for I understand that on at least two previous occasions 
 you have given consideration to this subject. 
 
 My treatment of the subject will be largely historical, 
 for it is not so much what I myself may believe to be the best 
 policy, as what the logic of events and actual experience, 
 extending over a period of years, demonstrates beyond 
 
 * The taxes paid during 1908 by legal-reserve life insurance companies of tlie United States 
 amounted to $12,352,292. 
 
The Regulation of Insurance by Congress 
 
 controversy to be required for the absolute security and pro- 
 tection of insurance policjholders. I shall therefore draw 
 freely for my remarks from the writings of those who, 
 with exceptional ability and insight, have considered the 
 problem in its various aspects, from the inception of the 
 idea, in 1864, to the present time. The literature of the sub- 
 ject is very extensive, and I can touch upon only a few essen- 
 tial points, but I make grateful acknowledgment of the efforts 
 of all who in the past have done so much to advance the 
 cause of Federal regulation, especially during the period 
 when the outlook for ultimate success was almost hope- 
 less. But for these early labors in behalf of a cause of the 
 utmost importance to insurance interests, the present status 
 of the question would not warrant the firm belief that the 
 time is near when favorable Congressional action may be 
 expected to put an end to what has become an intolerable 
 situation to the insurance companies and their policyholders. 
 
 For forty years efforts have been made to secure for in- 
 surance the same Federal recognition as a national business 
 that has been extended to railroads, telegraphs, banks, 
 and many other commercial interests. The passage of a 
 national banking act in 1864 suggested, in 1865, the first 
 agitation for the Federal regulation and control of insurance 
 as a business entitled to Federal protection against interstate 
 warfare or the corporation antagonism of one State against 
 every other. The history of this effort is of much interest, 
 since it explains more recent tendencies in the same direc- 
 tion and emphasizes the vitality of the idea of Federal 
 regulation. 
 
 As early as 1865 the companies found it necessary and 
 thought it expedient to address to Congress a memorial asking 
 for relief from the burdens of oversupervision and over- 
 legislation.* The proposed remedy was to be a national 
 incorporation act by which the companies would become 
 
 * iDSaraDce Moniror, 1865, p. 191. 
 
Life Insurance and Other Subjects 
 
 Federal institutions in the same manner as national banks 
 had been established under the act of 1864. Accordingly, 
 in 1868, a bill was introduced in the Senate* conforming in its 
 general provisions to the memorial of 1865, but it is hardly 
 necessary to say that the bill failed to become a law, a fate 
 that may be expected of any measure which would attempt to 
 deprive the States of their constitutional rights to create cor- 
 porations to engage in interstate commerce. The movement 
 at the time, however, had many influential friends and sup- 
 porters, and among others Mr. Elizur Wright, the well-known 
 Insurance Commissioner of Massachusetts, who, in his report 
 for 1865, gave the weight of his authority to the idea of 
 Federal supervision and regulation in the following language: 
 
 "Inasmuch as insurance is a general interest, and every 
 insurance institution should be secured as much as possible 
 against the adverse operation of local causes, it is difficult for 
 us to perceive why the supervision of all insurance companies 
 of every sort intended to operate beyond the limit of State 
 lines should not be a function of the general government. 
 There seems to be no less reason for regulating it by a na- 
 tional bureau than for taking the census or encouraging 
 agriculture or invention by one. Simplicity and economy 
 alone seem to require it. And since the citizens of every 
 State do, as a matter of fact, largely avail themselves of every 
 constitutional right to the privileges of citizens of other States, 
 it may well be questioned whether, in regard to life insurance 
 especially, any State can protect itself as well as it might 
 be protected by the general government." 
 
 Even at this early period it was recognized that most 
 valuable aid would be derived from the support and co- 
 operation of agents and underwriters generally. Accord- 
 ingly Mr. C. C. Hine, the late editor of the Insurance Mont- 
 tor, prepared a circular in support of a national insurance 
 law, which was widely distributed over the country. The 
 
 * Reprinted io full in the Insurance Times, 1868, v. 42. 
 
 178 
 
The Regulation of Insurance by Congress 
 
 language of the circular applies in part to present-day 
 conditions as truthfully as to those of forty years ago : 
 
 "Legislation in the several States toward the insurance 
 companies of sister States has proceeded in a spirit of per- 
 sistent and injurious hostility, until it has created an almost 
 prohibitory burden of taxes, forced loans, deposits, licenses, 
 subsidies, compulsory advertising fees, etc., etc.. State, 
 county, and municipal, that would surpass the belief of one 
 not familiar therewith. Generally these laws do not look 
 to the real security of the policyholder or the strength of the 
 companies, but are apparently conceived in a temper of ex- 
 tortion and unfriendliness to enterprises that are the hand- 
 maids of commerce and the guardians of all our destruct- 
 ible values." 
 
 Naturally these propositions for Federal interference in 
 what was apparently a domestic affair of the States were 
 strongly opposed by those who adhered to a narrow theory 
 of States' rights against the larger conception of nationality. 
 To the friends of the measure it was clear, however, that the 
 business, within a measurable distance of time, was des- 
 tined to become more and more national in character and 
 extent, and as such was even then rightfully entitled to Fed- 
 eral recognition and regulation. The prevailing opinion 
 in favor of such a measure was ably set forth in a learned 
 article in the Monitor,"^ which said in part: 
 
 "At an early period of our history the want of uniformity 
 in our trade relations had resulted in serious inconveniences, 
 and in 1787 Alexander Hamilton, in the Federalist, declares 
 that the interfering and unneighborly relations of some States, 
 contrary to the true spirit of the Union, have, in different 
 instances, given fair cause of umbrage and complaint to 
 others, and it is to be feared that examples of this nature, 
 if not restrained by a national control, will be multiplied 
 and extended until they become not less serious sources of 
 
 * Insnrance Monitor, 1866, pp. 53-54. 
 
Life Insurance and Other Subjects 
 
 animosity and discord than injurious impediments to the in- 
 tercourse between the different parts of the confederacy. In 
 spite of the precautions subsequently taken, Mr. Hamilton's 
 predictions have, as our insurance companies can testify, 
 been literally fulfilled, and nothing but decisive Congressional 
 legislation can prevent the accomplishment of the remainder 
 of this prophecy, which is, that we may reasonably expect 
 from the gradual conflicts of State regulations that the citi- 
 zens of each will at length come to be treated by the others 
 in no better light than that of foreigners and aliens." 
 
 These apprehensions of interstate warfare have been ful- 
 filled to the letter in more recent years. 
 
 In 1868 a new factor entered into the consideration of 
 the subject, unexpected at the outset. A decree was ren- 
 dered by the United States Supreme Court in the case of 
 Paul vs. Virginia, and made public some time during Decem- 
 ber, which seemed, for the time at least, effectually to bar 
 all hope of relief from oversupervision and overlegislation 
 through the Federal government. Insurance, by this de- 
 cision, was declared not to be commerce, and therefore not 
 subject to Federal control. This decision has given rise 
 to endless discussions, which it would be neither profitable 
 nor desirable to revive at the present time. The argument 
 may be summed up in the statement that while the decision 
 of the Supreme Court seemed to dispose of the view that in- 
 surance was commerce, in the same manner as banking, 
 transportation, telegraph messages, etc., it in fact did not do 
 so. That decision, and those which have followed, did not re- 
 late to the real point involved in a consideration of the regula- 
 tion of the insurance business as interstate commerce by the 
 Federal government. This point cannot be considered by 
 the Supreme Court until after Congress has passed a law reg- 
 ulating such business in general conformity with the Inter- 
 state Commerce Act. 
 
 It is the opinion of qualified authorities who have given 
 
 180 
 
The Regulation of Insurance by Congress 
 
 most careful consideration to this aspect of the subject, and 
 who have properly taken account of several recent important 
 decisions of the Court involving similar questions, that under 
 the implied and resulting powers of the Constitution the 
 Supreme Court would not withhold the verdict of constitu- 
 tionality from an act of Congress declaring interstate insur- 
 ance to be interstate commerce. 
 
 The defeat of the bill in 1868 did not discourage those 
 who were in favor of national regulation and supervision. 
 The insurance journals of the period contain many able and 
 instructive dissertations illustrating the evils and burdens 
 of oversupervision and overlegislation and pointing to 
 the necessity for relief through Congress. What has given 
 rise to so many perplexing situations during recent years, 
 on account of conflicting laws and conflicting opinions of 
 the Insurance Commissioners of the different States, or of 
 different Commissioners of the same State, was anticipated 
 in an article in the Insurance Times of 1869,* from which I 
 quote in part as follows: 
 
 "The cost, immense and oppressive as it will prove, is 
 not, however, the only consequent grievance of which the 
 companies will have cause to complain. The laws of the 
 different States will conflict, and their partiality will lead 
 to hostility, retaliation, bitterness of feeling, mutual injury, 
 and disaster. It is impossible to foresee one-half of the 
 long train of evils which will certainly afflict insurance 
 through this multiform and onerous legislation in so many 
 different sections. The ruinous system is already taking 
 root, and before it becomes ineradicable the leading insur- 
 ance companies ought to combine and move at once, with 
 all the influence and power they can command, to save them- 
 selves from destruction by this many-headed hydra." 
 
 These apprehensions of serious danger, threatening the 
 very existence of the companies, were proven by subsequent 
 
 * March, 1869, p. 179. 
 
 i8i 
 
Life Insurance and Other Subjects 
 
 bitter experience to be well founded. Those who are 
 familiar with the dark side of insurance history during the 
 early seventies need not be reminded of the considerable 
 number of failures of companies, many of which, it is clear to 
 us to-day, might have been saved under a more effective system 
 of State supervision and control. It has been stated time and 
 again by those thoroughly familiar with the facts* that insur- 
 ance companies otherwise destined to a long career of useful- 
 ness were wrecked and forced into liquidation by a defective 
 system of State supervision, which attempted to manage 
 the companies, instead of leaving the management and the 
 responsibility therefor to the officers, stockholders, or trustees. 
 
 While up to this time most of the agitation for Federal 
 supervision had come from the life insurance companies; 
 some of the large fire and accident companies now com- 
 menced to take an active interest in the subject. The late 
 president of the Travelers was one of the first to favor Federal 
 regulation, and he adhered to that view to the end of his life. 
 Aid also came from an unexpected source, in that the Treas- 
 urer of the United States, in his annual report to the Secre- 
 tary, called attention to the need of Federal regulation of 
 insurance.^ Two life insurance companies had been granted 
 national charters, under which they were required to make 
 deposits with the national government. After calling attention 
 to the need of adequate legislation, Mr. Spinner concludes: 
 
 "In this connection it may perhaps not be inopportune 
 to suggest the propriety of having established by law of 
 Congress a governmental bureau, to have charge of the 
 affairs of all kinds of insurance companies and associations 
 in the same manner as the Comptroller of the Currency 
 now has charge of the affairs of all the banks that issue 
 paper money in the United States." 
 
 I am citing these illustrations as evidence of the univer- 
 sality of the idea and the growth of the conviction that for 
 
 * State Snpervision of Insurance, in the Independent for 1891. 
 t Annaal Report of the Secretary of the Treasury for 1871, p. 266. 
 
 182 
 
The Regulation of Insurance by Congress 
 
 the more eflPective protection of the interests of insurance 
 policyholders the increasing importance of the business de- 
 manded its nationalization by the Federal government. The 
 companies have never objected to supervision by the State 
 from which they derive the charters which give them 
 corporate existence. What they do object to and what 
 they protest against in behalf of their policyholders is over- 
 supervision and overlegislation by other States, much, if 
 not most, of which is a distinct hindrance and in many 
 respects a serious menace to the best administration of these 
 useful institutions. 
 
 That the demand for Federal legislation came not alone 
 from the companies is made evident by suggestions for an ap- 
 peal to be made to Congress by life insurance policyholders, in 
 1877, requesting the Federal government to interfere in their 
 behalf and pass a law calculated to reduce or mitigate their 
 wrongs and hardships and prevent their recurrence.* If 
 these efforts were to small purpose, they nevertheless had 
 considerable educational value. A few years later, in a special 
 pamphlet, Mr. Nat Tyler, of Washington, D. C, for the 
 first time brought the subject before the public in a conven- 
 ient form, but then, as now, most of the objections against 
 the passage of a Federal insurance law were based upon 
 the assumption that the decision in the case of Paul vs. 
 Virginia would act as a bar and that the United States Su- 
 preme Court would declare such an act unconstitutional. 
 This, in my opinion, as I have previously pointed out, is 
 an unwarranted assumption not sustained by the facts of 
 our constitutional history. I have it on high authority that 
 since the Constitution went into effect, in 1789, there have 
 probably not been a score of cases in which an act of Con- 
 gress has been declared unconstitutional, and of these I do 
 not think even one affects Congressional action regarding 
 the clause regulating commerce between the States. 
 
 * Insurance Times, 1877, p. 631. 
 
 ^S3 
 
Life Insurance and Other Subjects 
 
 The continued agitation for Federal regulation of in- 
 surance in 1885 induced the then Commissioner of Massa- 
 chusetts, Mr. Tarbox, to consider the subject in the light 
 of his own experience, and his conclusion was as follows: 
 
 "I am not satisfied that insurance has yet so far outgrown 
 State jurisdiction as to become a fit subject of Federal control 
 and regulation. But I recognize the embarrassment it may 
 suffer from this conflict of laws of the diff^erent States. This 
 consideration enforces the wisdom of a generous reciprocity 
 between the States, and counsels that legislation affecting 
 insurance interests should be framed in a liberal spirit and 
 regardful to relations and effects without, as well as within. 
 State boundaries. For while, for certain political objects, the 
 States are several, in commercial intercourse they are one. If 
 State legislatures will wisely respect this community of States 
 and the reciprocal obligation it creates, the time is remote, 
 if ever, when occasion will arise for Federal intervention." 
 
 Unfortunately for the companies and their policyholders, 
 State legislatures rarely act wisely on questions of interstate 
 comity, and we have during recent years seen more of inter- 
 state warfare and of antagonism against the corporations 
 of other States than, as far as I know, had been the case in 
 the past. Few men have written more ably upon this as- 
 pect of the question than the late Mr. Batterson,* who, re- 
 ferring to the case of a western State, said : 
 
 "When Wisconsin, for example, by an act of her legisla- 
 ture, forbade the corporations created by other States from 
 removing causes of action to the Federal courts, it was well 
 known that the act was unconstitutional, but it was done 
 because the penalty of expulsion was considered sufficient 
 to prevent any corporation from availing itself of a guaran- 
 teed right. To this guarantee the State of Wisconsin be- 
 came a party by the most solemn obligation when she ratified 
 the Constitution and was admitted to the Union of States. 
 
 * Interstate Warfare and How It Afiects the Insurance Business, Hartford, Conn., 1898, p. 13. 
 
 184. 
 
The Regulation of Insurance by Congress 
 
 Moved, however, by local prejudice, she deliberately re- 
 pudiated her guarantee and expelled the company to which 
 she owed this sacred obligation. It was an act of bad faith 
 in the performance of her undertaking to sustain the Con- 
 stitution for the unworthy purpose of compelling an en- 
 franchised corporation to submit to her own tribunals with- 
 out exercising the guaranteed right of removal." 
 
 It is legislation of this nature which lies at the root of 
 the agitation for Federal regulation and, if necessary, for 
 Federal control. It was, in fact, the passage of so-called 
 deposit laws by the different States during the early sixties 
 which produced the revolt against oversupervision and over- 
 legislation as inimical to the best interests of the policy- 
 holders and opposed to the best interests of the companies. 
 
 In 1892 life insurance was indirectly represented in Con- 
 gress by Mr. John M. Pattison, the president of the Union 
 Central Life Insurance Company. Mr. Pattison introduced 
 a bill* providing for the national supervision of insurance 
 companies and the national jurisdiction over all insurance 
 companies, of whatsoever kind, engaged in an interstate 
 business. It provided for a national bureau of insurance 
 at Washington, to be presided over by a commissioner of 
 insurance, with power to issue licenses to the companies, 
 authorizing them to do business in any State or Territory, 
 subject to no other requirements than those enacted by 
 the Congress of the United States and by the State in 
 which the company was organized. The companies were 
 required to make reports to the national bureau practically 
 identical with the reports made to the various State depart- 
 ments at that time, but they were not to be required to make 
 thereafter reports to the insurance departments of any 
 other State than the one from which they had derived their 
 
 * Reprinted in full in Views, 1892, p. 160. Views is an insurance publication established in 
 Washington, D. C, in 1889, by Mr. Max Cohen, editor, primarily for the purpose of agitating the ques- 
 tion of national regulation of insurance, of which Mr. Cohen has made a life study. Views is a mine of 
 valuable information, including reprints of most of the important measures and papers bearing on the sub- 
 ject which have been published during the last fifteen years. 
 
Life Insurance and Other Subjects 
 
 charter. The bill, in spite of many excellent provisions, 
 was, unfortunately, weighted down with too many minor 
 provisions and matters of detail, which gave rise to an oppo- 
 sition sufficiently strong to prevent a favorable report. 
 
 Mr. Pattison, in 1893,* in a discussion of his bill, pointed 
 out that it was not intended to abolish State supervision as 
 such, for even if that were possible he would not consider it 
 desirable. The object was to give the United States govern- 
 ment control of the interstate business of the insurance 
 companies, leaving to the commissioner of each State con- 
 trol of everything pertaining to the fire, life, and accident 
 companies of his own State. Had the measure passed, the 
 resulting relief to the companies from oversupervision and 
 overlegislation would have been very considerable. 
 
 The defeat of the bill of 1892 only increased the agitation 
 for Congressional action and every further discussion at- 
 tracted friends and supporters to the proposed measure 
 providing for the regulation of insurance by the Federal 
 government. Some of the strongest advocates of such a 
 measure were insurance commissioners of large experience, 
 and at nearly all the annual conventions following 1895 the 
 matter was discussed in papers of great merit and permanent 
 value as contributions to the literature of this important 
 subject. Among those who came out openly in favor of a 
 Federal law governing insurance was Mr. William A. Fricke, 
 the then Insurance Commissioner of Wisconsin, who first 
 mentioned the subject in his report for 1895, where he said: 
 
 "The reasons for national regulation of insurance are 
 many — the objections few. We have now forty-nine differ- 
 ent insurance codes, forty-nine different modes of taxation, 
 and almost forty-nine different kinds of supervision; there is 
 no attempt at uniformity of legislation; with a national de- 
 partment we should have better insurance laws, they could 
 not be so localized and tainted with local prejudices." 
 
 * Address at meeting oi Boston Life Underwriters' Association — Views, 1893, p. 253, 
 
 i86 
 
The Regulation of Insurance by Congress 
 
 Mr. Fricke has restated his position from time to time 
 with admirable clearness and a thorough grasp of the princi- 
 ples involved and the results to be obtained. 
 
 There are those, of course, who conscientiously believe in 
 our present system and consider national regulation as an 
 unwarranted interference with the rights of the States. It is 
 held that by co-operation of insurance commissioners much 
 oversupervision may be avoided, and it is but right to say 
 that some good has been accomplished in this direction; but, 
 reviewing the thirty-five annual conventions of insurance 
 commissioners which have been held since the first meeting 
 in 1 87 1, the unsuccessful efforts to secure uniformity, and 
 most of all co-operation, among the States in the vital matter 
 of expensive investigations do not make the outlook for the 
 future encouraging. As an illustration, I may recall that at 
 the annual convention in 1898* the committee on laws and 
 regulations reported a resolution which read as follows : 
 
 "That as the Constitution of the United States requires 
 each State to accord full faith and credit to the public acts, 
 records, and judicial proceedings of every other State, 
 in the benign and patriotic spirit of this requirement, the 
 insurance department of each State should, as far as pos- 
 sible, leave the supervision of every insurance company of 
 another State to the proper department of that State, accept- 
 ing the results and records of its supervision and examina- 
 tions; and, in particular, the special examination of the assets, 
 methods, and accounts of a company should as far as possible 
 be conducted, when such examination is necessary, by the de- 
 partment under whose jurisdiction it is organized, and that the 
 department of any State should decline to undertake such 
 special examination of a company of another State in which 
 a similar department is established by law, unless upon the 
 invitation of such department, or, unless such department, 
 after direct request for the results of an examination has 
 
 * PToceedings of tbe 29tb Session, p. 64. 
 
 187 
 
Life Insurance and Other Subjects 
 
 been made, shall have refused to report the same in satisfac- 
 tory detail or neglects to make such examination within a 
 reasonable period of time." 
 
 If this idea could have been carried out it would have 
 removed one of the most serious objections to the present 
 system of State supervision, but it is significant to find that 
 the resolution failed of adoption by an overwhelming 
 majority. 
 
 What is known as the "Piatt Bill"* was introduced in 
 the United States Senate, December, 1897; in a general way 
 it conformed to the present-day requirements, outlined in the 
 Pattison bill of 1892. The Piatt bill, for various reasons, 
 among others on account of the pressure of business result- 
 ing from the war with Spain, failed of passage, and even on 
 reconsideration at a later session efforts to obtain favorable 
 action were unsuccessful. Referring to this attempt to 
 secure Federal legislation on the subject of insurance, the 
 Spectator, in January, 1898, said in part as follows: 
 
 "It seems clear that it is the duty of Congress to so legis- 
 late, from time to time, as to keep the laws of the country 
 abreast with modern ideas, and to accord recognition to 
 everything that will stimulate and facilitate interstate com- 
 merce and friendly and business intercourse between the 
 citizens of the different States. The growth of the country 
 and its development in wealth and prosperity are dependent 
 upon its so doing. It has the power most unquestionably un- 
 der the Constitution to designate the factors that go to make up 
 interstate commerce, and to legislate for their regulation and 
 supervision. It has so legislated regarding railroad and 
 steamboat transportation, regarding banking, telegraph 
 lines, etc., and it has but to declare insurance to be a neces- 
 sary factor of interstate commerce to have it recognized as 
 such by the courts of the country." 
 
 This view of the matter covers the subject in its essentials 
 
 * Reprinted in full in Views, 1897, pp. 279-81. 
 
 i88 
 
The Regulation of Insurance by Congress 
 
 and defines the position upon which any further efforts to 
 secure national recognition must rest. Insurance is to-day 
 one of the most important factors which enter into com- 
 merce, trade, and industry, and whatever can be said in 
 favor of the national regulation of banks and railways holds 
 good with equal force in the case of insurance. Just as we 
 would not for a moment tolerate the idea of repealing our 
 national banking and interstate commerce legislation, so, I 
 am satisfied, the people would never regret the passage of an 
 act of Congress regulating insurance between the States. It 
 is my firm conviction that such an act would be productive 
 of most excellent results, increasing the security of insurance 
 to the policyholders, diminishing the now considerable 
 amount of needless clerical labor to meet the requirements 
 of some fifty different States and Territories, decreasing the 
 expense rate, decreasing the burden of taxation, increasing 
 the returns to policyholders, and thus decreasing the cost 
 of insurance, broadening the scope of administration, and, 
 in a word, nationalizing the business. Such an act would 
 give to insurance the protection of the Federal government, 
 to which it is rightfully entitled, because its universality and 
 high social and economic functions now make it indispensa- 
 ble to the welfare of the people of this nation. 
 
 Something substantial has been achieved during the past 
 year. The new Department of Commerce and Labor, through 
 the Bureau of Corporations, is by law required to report upon 
 insurance companies and their business. In the original 
 draft of the measure providing for the organization of the 
 Department of Commerce and Labor, a bureau of insur- 
 ance was provided for and the Committee on Interstate 
 and Foreign Commerce of the House of Representatives 
 reported in favor of such a bureau,* holding that " the 
 insurance interests of our country have become so great, 
 and the business of insurance is so essentially a matter of 
 
 * "Organization and Law of the Departinent of Commerce and Labor," Washington, D. C, 1904, 
 p. 542, et acq. 
 
 189 
 
Life Insurance and Other Subjects 
 
 interstate business, and hence largely beyond any effectual con- 
 trol by the State authorities, that your committee has recom- 
 mended the establishment of a bureau of insurance . . . 
 
 " It seems evident that it is time for the national gov- 
 ernment to take such notice of, and exercise such control 
 over, insurance companies as it may be entitled to under the 
 Constitution, to the extent, at least, of the publication of 
 information of general interset." 
 
 In debate, however, the measure met with strong oppo- 
 sition from those who relied in the main upon the antiquated 
 theory derived from the Paul vs. Virginia decision. As a 
 compromise, the duty of the Bureau of Corporations with 
 respect to insurance was limited to the gathering and 
 publication of useful information concerning corporations 
 engaged in interstate commerce, including corporations en- 
 gaged in insurance. For the present this may be considered 
 a substantial gain, for we have now for the first time Federal 
 recognition of insurance as a factor of progress demanding 
 national consideration. 
 
 We may recall that it is hardly more than a year 
 since a department of commerce and labor was established, 
 after an agitation which also carries us back to 1864, when 
 it was first proposed to organize a department of industry. 
 Ten years later a bill was introduced in the House providing 
 for the establishment of a department of manufactures and 
 mining. During the twenty years following, practically 
 every year some request or other was made of Congress to 
 give a special recognition to commerce and manufactures 
 hy providing for a separate department with representation 
 in the Cabinet. It was not until 1903 that these efforts, 
 extending over a period of almost forty years, were crowned 
 with success. A similar history of continuous effort pre- 
 cedes the enactment of nearly every important measure. 
 Hence we may look hopefully forward and anticipate favor- 
 able action which will finally give to insurance the same 
 
 igo 
 
The Regulation of Insurance by Congress 
 
 Federal recognition which has been given to other important 
 national interests. 
 
 What I have said must not be construed into an attack 
 on State supervision as such, for I have personally the high- 
 est regard for many of the commissioners, with whom I 
 have often come in contact and with whom I have had con- 
 siderable business relations during almost thirty years. I 
 believe, with Mr. John A. McCall, president of the New 
 York Life Insurance Company, that State supervision of 
 insurance, within proper limitations, has served a useful pur- 
 pose and is to-day indispensable to the conduct of the busi- 
 ness. I believe its scope could be broadened and its effective- 
 ness increased, especially in the direction of stamping out 
 fraudulent insurance enterprises and preventing the robbery 
 of the public by ill-advised and often criminal methods of 
 deception in the name of insurance. My remarks apply 
 primarily to oversupervision and overlegislation, especially 
 in so far as the interstate business of the companies is 
 affected. I believe that in a great nation like ours no 
 hindrance should be placed upon the highest development 
 of this form of protection for the masses in every section 
 of the land. I am opposed to the abuse of the principle of 
 State supervision which has for its aim the control of the 
 companies by dictatorial and arbitrary methods, and which, 
 by abrogating the legitimate functions of executive officers 
 by a forced policy or method of business conduct, tends to 
 produce conditions at variance with the established and 
 tried principles which underlie the insurance business. 
 
 We cannot, if we are faithful as trustees of a sacred 
 charge of immense magnitude, abandon our position as 
 executive officers to an insurance commissioner who is 
 practically certain to be a man of much less experience than 
 ourselves. What President Alexander has said* of the 
 difficulties of his company (the Equitable) with the Prussian 
 
 *The Hazard of Inexperience, a lecture delivered in the Yale Course on Insurance, Yale Alumni 
 Weekly Supplement, July. 1904, p. 121. 
 
 igi 
 
Life Insurance and Other Subjects 
 
 government applies equally to the difficulties of our home 
 companies with the different State governments, namely, 
 that we are not willing to transfer the executive authority 
 of our companies to the capitals of the various States, and 
 that we must firmly decline to comply with demands which 
 are as unreasonable as they are unjust. 
 
 At the outset I spoke of the marvelous development of 
 American life insurance during the last twenty years. This 
 wonderful growth is but a part of the progress of the nation 
 at large, which challenges the admiration of the world and 
 which justifies the earlier hopes and aspirations of the found- 
 ers of our Republic. Little, however, could even the most 
 sanguine have foreseen of the universal prosperity and high 
 standard of life insurance to which we have attained in so re- 
 markably short a period. We anticipate no reaction, but, 
 on the contrary, we look forward to a future in which this 
 business of ours will, more and more, assume the beneficent 
 mission of a universal provident institution. This develop- 
 ment is advanced by the largest amount of freedom consist- 
 ent with safety, and whatever tends to hinder this growth 
 is decidedly pernicious. 
 
 That a large amount of liberty in the management of life 
 insurance companies is not inconsistent with the best in- 
 terests of the people is shown in the successful workings 
 of the act passed by the British Parliament in 1870, for the 
 regulation of insurance in that country. Although more 
 than thirty years have passed, few amendments have been 
 made to this simple but effective statute. Nor need we 
 apprehend an abuse of Federal power in the regulation of 
 insurance between the States any greater than experience 
 has proven in the successful workings of the National Bank- 
 ing Act of 1864. It may be of interest to you to learn that 
 the total cost of examinations in connection with the gov- 
 ernment supervision of over five thousand national banks 
 during 1903 was only ;^325,ooo, or an average of about 
 
 igz 
 
The Regulation of Insurance by Congress 
 
 for each bank. The maximum cost of such an examination 
 of a bank with large resources has only been ^2,700. While 
 the comparison is not of exactly comparable institutions, it 
 is, nevertheless, an extremely suggestive one. No system 
 of national supervision or regulation will entirely prevent 
 failures among banks any more than it will prevent acci- 
 dents on railways or the occasional mismanagement of 
 insurance companies. All government in this respect has 
 its limitations, for, finally, human institutions derive their 
 worth from the character of those who are responsible for 
 their management. 
 
 That something is intrinsically wrong in our present sys- 
 tem of oversupervision and overlegislation is made clear 
 by reference to my earlier statement of an annual tax burden 
 of some nine million dollars paid by life insurance compa- 
 nies alone; and I may cite as a pertinent illustration the case 
 of the Wisconsin Insurance Department, which last year 
 collected over five hundred thousand dollars from insurance 
 companies, while less than twenty thousand dollars were 
 required for the administration of the department. North 
 Carolina collects annually over two hundred thousand dol- 
 lars from insurance companies, while less than five thousand 
 dollars are required for the maintenance of the department. 
 This practice of excessive taxation is, of course, common to 
 many other States. Such facts as these, and I quote illustra- 
 tions ready at hand, warrant the conclusion that in many 
 cases these departments exceed their proper function and 
 become mere agencies for the collection of taxes from certain 
 corporations of other States, which are, in fact, social insti- 
 tutions which ought to be relieved largely or wholly from 
 burdens that retard the highest development of foresight, 
 prudence, and thrift among our people. 
 
 Insurance is to-day a universal provident institution reach- 
 ing all classes and affecting, more or less, all commercial inter- 
 ests. It is an essential element of human progress and a method 
 
 193 
 
Life Insurance and Other Subjects 
 
 and means for the uplifting of the masses to a higher level 
 of economic security. It has become national in character, 
 and few companies confine their operations to a single State; 
 in fact, if operations were so limited they might prove dis- 
 astrous and make the conduct of the business impossible. 
 The American Constitution was wisely framed to meet for 
 all time our needs as a free and progressive people and this 
 instrument is applicable to, and has never failed to meet, 
 new conditions and new problems which in the course of 
 time must inevitably arise as society advances and civiliza- 
 tion develops conditions unthought of at an earlier date. 
 In the words of the distinguished jurist, Stephen Dudley 
 Fields,* "the framers of the government could not fore- 
 see all exigencies which might arise in the future, and, 
 therefore, after expressing the great ends for which the 
 government was framed and the powers conferred upon 
 it, they meant to leave the choice of means generally to the dis- 
 cretion of Congress." It is upon this inherent element of 
 adaptability in our Constitution to meet the requirements of 
 new conditions that we may safely rely for a favorable ruling 
 from our highest tribunal, should the Supreme Court ever be 
 required to pass upon the question whether an act of Congress 
 regulating insurance between the States is constitutional. 
 
 It is difficult for me to understand why insurance is not 
 commerce within the meaning of the Constitution when, from 
 the first to the last, every authority on the history of commerce 
 has conceded insurance to be an indispensable factor in com- 
 mercial growth and development. Of the men who helped to 
 frame the Constitution, few, if any, gave more careful con- 
 sideration to the commerce clause than Alexander Hamilton, 
 and his famous argument on the constitutionality of the 
 United States bank contains a specific reference to insurance, 
 apparently overlooked by those who have written upon the 
 subject of insurance regulation by Congress. Hamilton, after 
 
 * Id the case of William McCardle, InTolving the coDstitutiODality of the methods employed to re- 
 organize the government of the rebellious States, 1868. 
 
The Regulation of Insurance by Congress 
 
 pointing out that all the powers conferred in the Constitution 
 are not specifically mentioned, enumerates certain "palpable 
 omissions" and items "which admit of little, if any, question," 
 and among these "the regulation of policies of insurance."* 
 
 Hamilton, no doubt, had made a study of insurance law 
 and was familiar with the great work of Park, first pub- 
 lished in 1786, or about five years before he delivered his 
 "Opinion." Park wrote, what holds true to-day even more 
 than a hundred years ago, that: 
 
 "The utility of this species of contract in a commercial 
 country is obvious, and has been taken notice of by very 
 distinguished writers upon commercial affairs. Insurances 
 give great security to the fortunes of private people, and by 
 dividing amongst many that loss, which would ruin an in- 
 dividual, make it fall light and easy upon the whole society. 
 This security tends greatly to the advancement of trade and 
 navigation, because the risk of transporting and exporting 
 being diminished, men will more easily be induced to engage 
 in an extensive trade, to assist in important undertakings, 
 and to join in hazardous enterprises, since a failure in the 
 object will not be attended with those dreadful consequences 
 to them and their families which must be the case in a coun- 
 try where insurances are unknown." 
 
 A similar view of the close relation of insurance to 
 commerce appears to be held by every important writer 
 upon the origin of insurance"}" and the law of insurance in 
 its most modern interpretation. Hence, the omission of any 
 reference to insurance in the commerce clause of the Con- 
 stitution would seem to be due to the same cause which 
 Chief Justice Marshall, in the leading case of Gibbons vs. 
 
 * Legal Masterpieces, edited by Vecder, St. Paul, Minn., 1903, toI. I. p. 229. 
 
 tCorbyn Morris, in An Essay Towards Illustrating the Science of Insurance, published in 
 London, 1747, wrote: "Insurance is that .^i<2, whereby the national Commerce is supported . . . It is 
 evident, that Insurances give Tranquillity and Cheerfulness to the extensive Trader : These only make 
 it justiiiablc for him to venture in many Branches of Commerce, which are of great Benefit to the Nation : 
 These enable him to lay a steady Foundation of Credit, To procure Money upon easy Terms, And to bring 
 his Goods cheap to the foreign Markets. It is indeed from these only that he can often be said to be 
 worth anything with Certainty, or can at some times justly pretend to borrow at all ; And to these the 
 Nation is indebted, that many useful Articles of Trade are rendered either reasonable, or practicable, to 
 be carried on by its Subjects." 
 
Life Insurance and Other Subjects 
 
 Ogden, has held to apply to navigation. In the words of 
 the great Chief Justice: "All America understands, and has 
 uniformly understood, the word 'commerce' to compre- 
 hend navigation. It was so understood, and must have been 
 so understood, when the Constitution was framed." And in 
 the same sense I believe all America to-day understands the 
 word "commerce" to comprehend insurance, and I am firm in 
 my conviction that whenever Congress shall find it expedient 
 to legislate upon the subject, or when in the course of time 
 the necessity shall arise, insurance between the States will 
 be made a matter of Federal legislation. 
 
 It may, of course, be argued that if the framers of the 
 Constitution intended to confer this power upon Congress, 
 insurance would have been expressly mentioned. The 
 Constitution is an instrument dealing with general condi- 
 tions, and not with special conditions which may arise in the 
 course of time and become more and more important. 
 
 Insurance, when the Constitution was adopted, was of 
 only local importance and was limited practically to the 
 marine branch of the business. The development of the 
 modern system of insurance, especially of life contingencies, 
 has resulted in new conditions and new problems which are 
 plainly beyond the power of the States to supervise or regu- 
 late. Insurance is not a thing of an hour, but is an enduring 
 institution, and I cannot but think that a broad and im- 
 partial consideration of the subject will ultimately obtain 
 for what is now a national business legitimate and effective 
 regulation by the national government. I earnestly hope 
 that the time is not far distant when, as a permanent relief 
 from the needless and increasing burdens of oversupervision, 
 overlegislation and overtaxation, and as an additional security 
 for the protection of our policyholders, we shall have an act 
 of Congress regulating insurance between the States. 
 
 ig6 
 
Chapter X 
 
 THE COMMERCIAL ASPECTS OF 
 
 FEDERAL REGULATION 
 
 OF INSURANCE 
 
 AN ADDRESS DELIVERED 
 
 AT THE 
 
 THIRTY-EIGHTH ANNIVERSARY BANQUET 
 
 OF THE 
 
 NEV7ARK BOARD OF TRADE 
 
 JANUARY 18, 1906 
 
THE COMMERCIAL ASPECTS OF FEDERAL 
 REGULATION OF INSURANCE 
 
 )he proper supervision, regulation and con- 
 trol of insurance companies have become 
 problems of national importance, chiefly 
 !■ because of the enormous extent of the busi- 
 sness and the fact that the contracts are, in 
 \the majority of cases, made by parties resi- 
 [dent in one State vs^ith parties resident in 
 another. There has, therefore, come about a perfectly nat- 
 ural demand that insurance companies should be made sub- 
 ject to the restrictive povs^er and general supervision of the 
 Federal government, in much the same manner as the Fed- 
 eral government exercises control over national banks, and 
 railways engaged in interstate commerce. The proposi- 
 tion appeals with peculiar force to commercial interests, 
 since in one way or another insurance enters into all of our 
 commercial transactions and forms a substantial item of ex- 
 pense in every mercantile account. Insurance constitutes a 
 part of the price of nearly every article sold for public con- 
 sumption, and while the unit cost of insurance is infinitesimal, 
 the aggregate paid for fire, marine, inland, and miscellaneous 
 insurance amounts to about three hundred and fifty million 
 dollars per annum — a not inconsiderable burden upon our 
 commerce, both at home and abroad. Insurance, in other 
 words, is a factor in commerce and peculiarly a mercantile 
 interest, and whatever way the business can be advanced, its 
 cost reduced, and the security made more certain concerns all 
 who are engaged in commerce, transportation, or mercantile 
 transactions generally. 
 
 For some years efforts have been made to secure for in- 
 surance adequate and consistent national laws along the same 
 lines as have been followed in interstate commerce generally, 
 in national banking, and, since 1898, in bankruptcy. In 
 
 201 
 
Life Insurance and Other Subjects 
 
 the last Congress I introduced a bill to this effect, but only 
 to secure for it a public expression of opinion as to its merits. 
 The new bill* introduced by me this week is a modified and 
 materially improved measure, which, if passed, will bring the 
 insurance business within the full scope and power of Federal 
 laws. After carefully considering the subject for many 
 years, both in the light of theory and large practical experi- 
 ence, I have become convinced that legislation of this charac- 
 ter is demanded by the necessities of our national growth 
 and our progress in industry and commerce, and that what 
 is to-day a vast business of national extent is, as such, en- 
 titled to the protection, care, and solicitude of Congress. 
 
 It is difficult to realize the immense growth and the 
 marvelous changes in our position as a commercial nation 
 during recent years without the aid of a mass of statistical 
 data, which would be out of place on this occasion. In a 
 general way, however, I may point out that this country is 
 to-day different in all essentials, save our fundamental polit- 
 ical principles, from what it was at the time when the Con- 
 stitution was adopted. In 1790 our population was four 
 millions, as contrasted with more than eighty millions at the 
 present time. In 1790 the aggregate value of our exports 
 was estimated at ^20,000,000, or a per capita of about ;^5, in 
 contrast with which we now export about $1,500,000,000 
 per annum, or ;^i8 per capita. The adoption of the Constitu- 
 tion not only made us a nation, but stamped upon us our com- 
 mercial character, which destined us, in due course of time, 
 to attain to the leading position in the world of commerce, 
 trade, and industry. Chiefly, however, our growth has been 
 in the direction of internal development, and our inland trade 
 and general business to-day is of vastly greater proportions 
 than both our exports and imports combined. At the time 
 of the constitutional convention there were no railways, 
 no canals of commercial value, hardly any wagon-roads 
 
 * Senate 3026, 59th Congress, 1st Session, January 15, 1906. 
 
 202 
 
The Commercial Aspects of Insurance 
 
 connecting one State with another, no business corporations 
 of importance, and no insurance companies or insurance 
 business in the sense and to the extent that that term is now 
 commonly understood and as it is established by commercial 
 custom and usage. The times and conditions have changed, 
 and our earlier restricted policy has been replaced by a broad 
 conception of national interest and expansion. 
 
 Our internal expansion and development began with the 
 era of internal improvements (1806), and this has continued 
 until the United States of to-day is an imperial domain with 
 more productive wealth per capita and a more general meth- 
 od of distribution than any other country in the world. By 
 1800 only nine hundred and three post-offices had been estab- 
 lished, with an annual revenue of $280,000, while to-day there 
 are some seventy-five thousand offices, with an annual reve- 
 nue exceeding $150,000,000. There was then no telegraph, 
 which to-day transmits over one hundred million messages 
 per annum, and no telephone, the general utility of which 
 can neither be expressed in figures nor computed in mone- 
 tary equivalents. There was then but the very beginning 
 of insurance, which to-day is the foremost single financial in- 
 terest in this land. Marine insurance was the first to become 
 a commercial necessity, perhaps more so at that time than 
 at the present, on account of the great development of 
 steam navigation, the more accurate charting of the coast, 
 resulting in a lesser number of shipwrecks, the extension and 
 perfection of our magnificent lighthouse service, and, last 
 but not least, a more intelligent and efficient pilotage. Fire 
 insurance followed, and soon became recognized even by 
 moralists as a duty incumbent upon the debtor in order to 
 fully protect the interest of the creditor.* Without fire in- 
 surance protection the world's inland commerce could not be 
 carried forward to-day on anything like the existing scale, nor 
 would it be possible to secure the vast amount of mortgage 
 
 * Jonathan Dymood, Essays on Morality. New York, 1836, p. 111. 
 
Life Insurance and Other Subjects 
 
 indebtedness at the prevailing low rates of interest. While 
 it is true that a considerable part of our inland commerce is 
 not specifically protected by insurance, an open policy of 
 insurance, as a rule, protects the carrier, who assumes the 
 responsibility to the shipper in the event of loss. In all our 
 immense warehouse and elevator transactions the fire in- 
 surance policy is as much a necessity as the certificate estab- 
 lishing the ownership of the goods in storage or awaiting 
 shipment. In addition to these, numerous other forms of 
 insurance have been developed, all of which have become 
 more or less indispensable aids to commerce and industry. 
 Among these I may mention fidelity and surety, employers' 
 liability, plate-glass, credit, and general accident insurance. 
 All of these forms of insurance protection reduce the element 
 of uncertainty in commercial operations and increase com- 
 mercial efficiency, and, directly or indirectly, as the case may 
 be, increase to a considerable extent our commercial ex- 
 pansion both at home and abroad.* 
 
 This point of view is not new, but nearly as old as the 
 business of insurance itself, and commercial losses due to 
 fire, shipwreck, and other casualties are no longer met by 
 general charitable contributions, but the reimbursement for 
 such losses is made through associated effort represented by 
 corporations transacting the business of insurance. As early 
 as 1796 this aspect of the insurance problem was brought to 
 the attention of Congress in an attempt to secure pecuniary 
 relief for the sufferers from a great conflagration which de- 
 stroyed the larger portion of the city of Savannah. It was 
 urged in the argument in favor of the plea that not a public 
 building, not a place of public worship or of public justice 
 remained, that all was a wide waste of ruin and desolation; 
 and the speaker expressed the hope that some relief would 
 be afforded the city in its unexampled distress. In reply, 
 however, it was said, and very properly so, that if Congress 
 
 * See also Report of the Merchant Marine Commission, Senate Report 2755, 58th Congress, 3rd 
 Session, index p. 1926. 
 
The Commercial Aspects of Insurance 
 
 were to set a precedent in this direction and accustom the 
 public to rely upon the national legislature for relief in cases 
 of this kind, there would be neither any occasion for insurance 
 companies nor any inducement to improve the methods of 
 building. This, I think, is the first reference to insurance 
 in the debates of Congress.* 
 
 Under modern conditions insurance has become a neces- 
 sity-, for individual protection or that of the family can no 
 longer be left to friends and relatives, v^ith burdens enough 
 of their own, but the risk inherent in the uncertainty of human 
 existence must be, and is, assumed by insurance corporations. 
 Contracts made to this effect with well-established companies 
 are carried out to the letter, and very often beyond the letter 
 of the mere written agreement between the insurer and the 
 insured. In whatever respect insurance management may 
 have failed to meet the highest expectation or the most severe 
 test of public criticism, it is something very considerably to 
 the credit of American insurance companies that on the whole 
 and with no important exceptions they should so successfully 
 have met their contract obligations dollar for dollar, not only 
 to the letter of the law, but in a spirit of justice and fair 
 dealing to the insured. It is due to this fact that insurance 
 has become a national interest, and is now included in prac- 
 tically every sphere of human activity, every branch of trade 
 and industry, every line of progress and development, in 
 which this nation, advancing at a more rapid rate than any 
 other, has forged its way to the foremost position among 
 the civilized countries of the world. Insurance to-day is not 
 a local interest in the ordinary sense of the word, but, on the 
 contrary, it is an interstate or a national interest in the vast 
 majority of the transactions which are carried on between 
 the companies and the policyholders. 
 
 All of the large companies are practically national in the 
 extent of their operations, transacting business in every State 
 
 * BcDtoD's AbridgemeDt of the Debates of Congress from 1789 to 1856, vol. II, v ^^- 
 
Life Insurance and Other Subjects 
 
 and Territory of the Union, and this is because of modern 
 commercial necessities and not merely as a matter of profit- 
 able business extension. Goods shipped from Duluth or St. 
 Louis to the seaboard to be transshipped to foreign ports are 
 covered by a single policy of insurance which begins from the 
 time of shipment in the West and continues to the time the 
 goods are delivered in foreign lands. This, in the case of 
 marine insurance, not only makes the business national but 
 international, and, as such, peculiarly a subject of Federal 
 supervision and regulation. Another element which enters 
 into the problem and which has often been ignored is the 
 fact that our population is largely of a migratory character, 
 and people insured in one State, by removing to other States, 
 while continuing their contracts under existing conditions, 
 become subject to different laws, and often to a radically 
 different interpretation of the law. 
 
 Insurance is not a subject which should be exposed to the 
 fluctuations of public opinion as expressed in the form of 
 frequent statutory enactments under our system of repre- 
 sentative government in some fifty different States and Terri- 
 tories. In conformity with the usage of other commercial 
 nations, it should be exclusively under the regulation of the 
 State of incorporation and the Federal government. Such 
 regulation, I am convinced, will be effective and economical 
 and produce a far better state of affairs than exists at the 
 present time. I have it on good authority that during the 
 last five years not less than three thousand bills were intro- 
 duced into the different State legislatures, more or less affect- 
 ing the interests of insurance companies. This amount 
 of legislation, new and amendatory, is uncalled for, and 
 is demanded neither by the growth of the business nor 
 by the contractual relations between the companies and 
 their policyholders. In other countries, such as Germany 
 and Switzerland, where an earlier federation of states, or 
 cantons, had produced conditions similar to those existing 
 
 206 
 
The Commercial Aspects of Insurance 
 
 in this country to-day, in the course of time insurance has 
 become the subject of exclusive Federal regulation. 
 
 My views and convictions in this matter are not wholly 
 the result of my personal experience in the business of 
 insurance. To satisfy myself full}' as to whether my views 
 were sustained by those whose business experience or per- 
 sonal interest in public affairs had given them a peculiar 
 opportunity to judge of the necessity and advantage of Fed- 
 eral supervision of insurance, I addressed a carefully framed 
 circular to some eight thousand associations and individuals, 
 throughout the United States, and of these nearly ninety per 
 cent, favor the idea and heartily endorse, often by long 
 letters, the effort to secure Congressional action upon this 
 subject.* 
 
 Among others to whom my letter of inquiry was addressed 
 were some seven hundred commercial bodies or organizations, 
 and of this number ninety-six per cent, pronounced them- 
 selves in favor of Federal supervision. In many instances 
 deliberate action was taken upon the matter and a formal 
 expression of the members was secured, emphasizing the 
 wide-spread interest in the subject and the deep conviction 
 that Federal action upon this matter would be desirable and 
 would be approved by the public generally. Hence, I have 
 fully satisfied myself that the commercial interests as repre- 
 sented in well-established organizations are practically a unit 
 in favor of the proposed regulation of insurance by Congress. 
 As to the further question, whether or not insurance should 
 properly be considered an element or instrumentality of 
 commerce, eighty per cent, of the commercial bodies to 
 whom the circular was addressed replied in the affirmative. 
 The inquiry was also addressed to a large number of the 
 presidents of national banks, upon the theory that, these 
 institutions having for many years been under Federal super- 
 vision and regulation, their officers were in an exceptional 
 
 * For details see Appendix A, pp. 289-293. 
 
 2oy 
 
Life Insurance and Other Subjects 
 
 position to express an opinion as to whether Federal regula- 
 tion of insurance would be desirable or not. In addition it 
 must be taken into consideration that these banks, in a gen- 
 eral way, are interested in insurance to the extent that many 
 loans upon goods in transit or in storage require the addi- 
 tional guarantee of a certificate of insurance before the loan 
 will be granted or an advance made by the bank. Of those 
 making answer to my letter of inquiry, ninety-one per cent, 
 of the bank presidents were in favor of Federal regulation 
 of insurance, while seventy-two per cent, held insurance to 
 be commerce, or an element or instrumentality thereof. 
 
 These are but a few illustrations of the expression of pub- 
 lic opinion which I have collected to satisfy myself and others 
 that the movement for Federal regulation of insurance is a 
 national one and that it has the hearty and emphatic support 
 of the interests specifically affected, as well as of the large mass 
 of our population generally. I may add that of a large num- 
 ber of prominent policyholders, holding life insurance poli- 
 cies of not less than ;^25,ooo, and in the aggregate approxi- 
 mately ;^75,ooo,ooo of insurance, and being therefore vitally 
 and financially interested in all that pertains to the solvency 
 and economical management of the companies, ninety-two 
 per cent, expressed themselves in favor of Federal regulation 
 of insurance, while eighty per cent, of this class held insur- 
 ance to be commerce or an instrumentality thereof. I am, 
 therefore, not aware of any measure which may come before 
 Congress for serious and earnest consideration which has so 
 fully and heartily the endorsement of intelligent public opin- 
 ion. And I do not hesitate to say that it is my belief that 
 if the proposition could be submitted to a popular vote, or 
 if an expression of opinion could be secured from the vast 
 mass of policyholders of all branches of insurance, the verdict 
 would be practically unanimous in favor of the enactment 
 of a Federal law regulating interstate insurance transactions. 
 
 Any new legislative proposition must, as a matter of 
 
 208 
 
The Commercial Aspects of Insurance 
 
 course, be framed or designed to stand the final test of con- 
 stitutionality when interpreted by our court of last resort. 
 Some very plausible reasons have been advanced to shovp^ 
 that the proposed Federal regulation of interstate insur- 
 ance transactions would not be within the powers granted 
 by the Constitution, and in particular not within the mean- 
 ing of the commerce clause of that instrument. Objections 
 of this kind are properly entitled to serious consideration, 
 but it is well to keep in mind that similar objections have 
 been raised against most of the great measures which have 
 come before Congress for consideration at nearly every ses- 
 sion from the very foundation of our government. Nor 
 could it well be otherwise. The Constitution is not a legal 
 code, but a written instrument, general in its terms, every 
 provision of which is, and will ever remain, subject to inter- 
 pretation by the Supreme Court as cases or conditions arise 
 which may make this necessary. The Constitution is in- 
 tended to endure and meet our needs for all time, and, from 
 Marshall down, the interpretation of the different clauses 
 has, as a rule, been in a spirit of broad construction, to give 
 to this government the character of a nation and not merely 
 that of a federation of States. 
 
 Constitutional objections, as I have said, have been raised 
 against most of the measures and legislative acts which have 
 received consideration by Congress and to which we owe our 
 growth and development as a nation. Washington had 
 hardly issued his famous declaration of neutrality, which, 
 without doubt, saved this country from a disastrous war, 
 when bitter accusations were made against him of an un- 
 warranted exercise of his powers. Washington was opposed 
 by Madison but sustained by Marshall, and the verdict of 
 history is read in the language of Justice Story,* that "Proba- 
 bly at the present day (1835) not a single statesman can be 
 found of any influence, in any party, who does not deem 
 
 * John Marshall, Life, Character and Judicial Services, by John F. Dillon, TOl. Ill, pp. 350-353. 
 
 20p 
 
Life Insurance and Other Subjects 
 
 the measure to have been as well founded in constitutional 
 law as in sound policy." Jay had no sooner completed his 
 treaty with England than the point was raised, and sus- 
 tained by apparently irrefutable arguments, that the treaty 
 was unconstitutional and that Congress did not have the 
 power to ratify it. In fact, it was maintained that "The 
 negotiation of a commercial treaty by the Executive was 
 an infringement of the Constitution and a violation of the 
 power given to Congress to regulate commerce." In all 
 the many and perplexing questions which have agitated our 
 nation from time to time, the point of constitutionality in 
 legislative enactments has invariably been brought forward. 
 This is true, for illustration, of the controversy relating to 
 the assumption of State debts, the several embargo acts, 
 the enforcement act, the bank charter, the militia question, 
 territorial extension and the creation of new States, the con- 
 scription scheme, and many other controversies and disputes. 
 The point of constitutionality was raised in the Missouri 
 compromise, and was not settled by a decree of the Supreme 
 Court until thirty-five years later. The great question of 
 internal improvements, than which, perhaps, not one dur- 
 ing the earlier years of our national existence was of greater 
 importance, was bitterly fought upon the ground of constitu- 
 tionality, and had the narrow spirit of constitutional con- 
 struction been successful we should be very far from having 
 attained our present imposing position. Bitter, again, was 
 the constitutional struggle over the tariff laws, which, it 
 was held, should be passed solely for the purpose of raising 
 revenue and not for the purpose of protection, but, fortu- 
 nately for the best interests of the people and the nation, 
 the narrow spirit was set aside by the broad principles of 
 a liberal construction of the Constitution as an instrument 
 designed to meet our needs as a nation and not merely as 
 a federation of States. 
 
 Similar constitutional objections have been raised against 
 
 210 
 
The Commercial Aspects of Insurance 
 
 the enactment of a Federal insurance law. It is pointed 
 out that there have been a number of decisions of the Su- 
 preme Court to the effect that insurance is not commerce, 
 and that, therefore, Congress has no power over interstate 
 insurance transactions. The fact is overlooked, or not fully 
 considered, that the subject has never been presented to the 
 Court upon an issue raised under a Federal statute, and that 
 the cases which have been decided have only an indirect 
 bearing upon the point here in view, and do not warrant a 
 negative policy of action on the part of Congress any more 
 than corresponding objections have prevented action in other 
 cases. The Supreme Court itself would not render an ad- 
 vance opinion upon the subject, so it cannot be held to be 
 the duty of a member of Congress to be influenced by mere 
 theoretical speculations of lawyers and laymen. 
 
 As a matter of fact, it is a well-established principle of 
 the judiciary department that "Every statute is considered 
 valid as long as there is any reasonable interpretation by 
 which it may be held so. The Legislature is presumed to 
 have acted within its powers, and only the strongest proofs 
 to the contrary are suflScient to nullify its act. Congress 
 must wantonly go very far outside the plain meaning of the 
 Constitution before the Court will interfere to prevent the 
 operation of the law." In the case of Fletcher vs. Peck (6 
 Cranch, 87), Marshall stated the preponderance of proof 
 which shall be necessary to justify the Court in ignoring an 
 act of the Legislature. He said: "The question, whether 
 a law be void for its repugnancy to the Constitution, is at 
 all times a question of delicacy, which ought seldom, if ever, 
 to be decided in the affirmative in a doubtful case. The 
 Court, when impelled by duty to render such a judgment, 
 would be unworthy of its station could it be unmindful of 
 the solemn obligations which that station implies. But it 
 is not on slight implication or vague conjecture that the Legis- 
 lature is to be pronounced to have transcended its powers, and 
 
 211 
 
Life Insurance and Other Subjects 
 
 its Acts to be considered as void. The opposition between 
 the Constitution and the law should be such that the judge 
 feels a clear and strong conviction of their incompatibility 
 with each other." 
 
 Now, I would be unmindful of my own duty in this re- 
 spect and my own sacred oath of office as a Senator of the 
 United States to support the Constitution, if I had not 
 made every reasonable effort to convince myself by the 
 necessary evidence that the facts in the case, the indisput- 
 able facts gathered from every trustworthy source, sustain 
 the theory of this proposition and emphasize its practical 
 importance as a national necessity. It is also well to 
 keep in mind that the Supreme Court itself has very 
 seldom been a unit in decisions upon the constitutional 
 interpretation of the commerce clause, and the legislative 
 department could hardly be expected to be unanimous upon 
 a question upon which the Court itself has as a rule been 
 divided.* In nearly every case which has been before the 
 Court regarding the power of Congress over interstate and 
 foreign commerce at least one, and in many cases several 
 dissenting opinions have been filed. The Constitution gives 
 the Federal government specific power over post-offices and 
 post-roads, over patents and copyrights, over bankruptcy, 
 and over commerce in the broadest possible sense of the 
 word. By implication, and not by specific enumeration, 
 Congress has established a system of lighthouses and erected 
 custom-houses, has authorized a coast survey and a survey 
 of rivers and harbors, has created a bank and developed our 
 national banking system, and, as confirmed by decisions of 
 the Supreme Court under the commerce clause, Congress has 
 power and control over railways, telegraphs, express com- 
 panies, and even over lottery tickets. 
 
 The Constitution has met our needs in the past, and will, 
 without question, meet our needs in the future. Interpreted, 
 
 * James S. Rogers, on the Ezclasiveness of the Power of Congress over Interstate and Foreign Com- 
 merce, in the American Law Register, September and October, 1905. 
 
 212 
 
The Commercial Aspects of Insurance 
 
 as it has been, in a broad and liberal spirit, there is 
 every reason to hope that the plain necessities of the 
 situation will justify a favorable opinion if the case of 
 insurance should come before the Supreme Court. That 
 insurance in everyday language is an element and instru- 
 mentality of commerce is established by every treatise 
 on commercial lav7 and usage, by every dictionary of 
 commerce, and by the consensus of public opinion which 
 I have taken pains to secure upon this point. Insurance 
 is to-day, as it has been for centuries, a part of the 
 law merchant of the principal commercial nations, and 
 in every important country except ours insurance is the 
 subject of regulation by the national or supreme govern- 
 ment. I rely with confidence upon the theory of broad 
 constitutional construction in this as in all matters of 
 doubtful constitutionality which vitally affect our national 
 welfare.* 
 
 In the admirable and never-to-be-forgotten words of 
 Chief Justice Marshall: "To say that the intention of the 
 instrument must prevail; that this intention must be collected 
 from its words; that its words are to be understood tn the sense 
 in which they are generally used by those for whom, the in- 
 strument was intended; that its provisions are neither to be 
 restricted into insignificance nor extended to objects not com- 
 prehended in them nor contemplated by its framers, is to 
 repeat what has already been said more at large and is all 
 that can be necessary." And in passing upon the constitu- 
 tionality of the law creating a United States bank, Marshall 
 gave utterance to words which have been so often repeated 
 that they have become an axiom in our constitutional his- 
 tory, namely: "Let the end be legitimate, let it be within 
 the scope of the Constitution, and all means which are appro- 
 priate, which are plainly adapted to that end, which are not 
 prohibited, but consistent with the letter and spirit of the 
 
 * Lex Mercatoria Rediviva, or, The Merchant's Directory, by Wyndham Beawes, London, 1752; 
 article, "Insurance," p. 261. 
 
Life Insurance and Other Subjects 
 
 Constitution, are constitutional."* When we consider the 
 enormous extent of insurance, how it affects every commercial 
 and private interest, how it enters every home from one end 
 of the land to the other, how it sustains individual effort, 
 enhances individual credit, and provides security against 
 possible contingencies not to be guarded against by any 
 other means yet devised, I question if the ingenuity of man 
 could invent or design another method so completely within 
 the spirit of our nationality and an interest of such supreme 
 importance to the people of this land. 
 
 A Federal insurance law will not deprive the States of any 
 rights specifically reserved to them under the tenth amend- 
 ment. The States, under the bill introduced by me, will 
 retain all the rights and powers over their own corporations 
 which constitutionally belong to them, but the bill will put 
 an end to the multiform system of State supervision and regu- 
 lation over insurance corporations, which has no justification 
 in any sound theory of constitutional rights or in any com- 
 mon-sense conception of State duty. The bill will put an 
 end to interstate chaos and terminate an intolerable condi- 
 tion of affairs jeopardizing the interests and at times the very 
 existence of companies transacting interstate business. The 
 bill will place insurance companies upon a national basis 
 and give to the business a national character. The bill will 
 bring insurance companies engaged in interstate business 
 under the regulation of the Federal government, and provide 
 a system of supervision and examination, thorough, exacting 
 and complete. The bill will increase the value of every 
 form of insurance, materially enhance the security of the 
 policyholders, and broaden the field of business operations 
 to an extent impossible under the present system of super- 
 vision and control by some fifty different States and Terri- 
 tories. The States will continue to supervise insurance 
 corporations of their own creation, but they will be deprived 
 
 * Marshall's Complete Constitutional Decisions, annotated by John M. Dillon; Chicago, 1903. 
 
 214. 
 
The Commercial Aspects of Insurance 
 
 of power to supervise corporations of other States and to 
 legislate regarding them, chiefly for the purpose of raising 
 revenue or of harassing the companies by vexatious stat- 
 utory requirements. It is not a theory, but a condition, 
 which confronts the companies and their policyholders, 
 who in their aggregate capacity represent the nation and 
 not individual States. The policyholder is primarily and 
 chiefly interested in the security and value of his contract, 
 in the rate of premium which he pays, and in the safe 
 and economical administration of the company with which 
 he insures. It is not a question with him whether the com- 
 pany is located in the particular State in which he lives, or 
 in some other State. As a life insurance policyholder living 
 to-day in one State, he may to-morrow live in another, but 
 his contract of insurance goes with him, and protects and 
 sustains him in the event of calamity or loss. It is not a 
 theory that this business is national in extent and character, 
 but an incontrovertible fact readily within the comprehension 
 of any one who will carefully consider the vast extent of the 
 business operations and the true character of insurance 
 transactions. It is upon this ground that the advocates of 
 Federal supervision rest their arguments and anticipate a 
 favorable ruling from the Supreme Court in the event of the 
 constitutionality of a law to this effect being brought to a test. 
 This great interest is entitled to recognition by the Federal 
 government. It needs the government's prudent, consistent 
 and eff'ective supervision. It is not confined in its operations 
 even to the limits permitted to our flag. It is inseparably 
 interwoven with our national prosperity on land and sea. 
 Until this question is disposed of wisely and permanently it 
 is a matter that will not be laid at rest. 
 
 215 
 
Chapter XI 
 
 THE AMERICAN TYPE 
 
 OF 
 
 ISTHMIAN CANAL 
 
 SPEECH IN 
 
 THE SENATE OF THE UNITED STATES 
 
 JUNE 14, 1906 
 
THE AMERICAN TYPE OF 
 ISTHMIAN CANAL 
 
 "It is a subject upon which opinions will differ and upon which honest con- 
 victions may be widely at variance, but in a question of such surpassing import- 
 ance to the nation, I, for one, shall side with those who take the American point 
 of view, place their reliance upon American experience, and show their faith in 
 American engineers." 
 
 The Senate having under consideration the bill (S. 6191) to provide for the 
 construction of a sea-level canal connecting the waters of the Atlantic and Pacific 
 oceans, and the method of construction — 
 
 Mr. Dryden said: 
 
 ||R. President: the Panama Canal problem 
 *has reached a stage where a decision should 
 . be made to fix permanently the type of the 
 (waterway, whether it shall be a sea-level or a 
 'lock canal. An immense amount of evidence 
 ion the subject has in the past and during 
 I recent years been presented to Congress. 
 An overwhelming amount of expert opinion has been col- 
 lected, and an International Board of Consulting Engineers 
 has made a final report to the President, in which experts 
 of the highest standing divide upon the question. The 
 Senate Committee on Interoceanic Canals has likewise 
 divided. It is an issue of transcendent importance, involv- 
 ing the expenditure of an enormous sum of money, and 
 political and commercial consequences of the greatest 
 magnitude, not only to the American people, but to the world 
 at large. 
 
 The report of the International Board has been printed 
 and placed before Congress. A critical discussion of the 
 facts and opinion presented by this Board, all more or less 
 of a technical and involved nature, would unduly impose 
 upon the time of the Senate at this late day of the session. 
 In addition, there is the testimony of witnesses called before 
 the Senate committee, which has also been printed in three 
 large volumes, exceeding 3,000 pages of printed matter. To 
 
 2ig 
 
Life Insurance and Other Subjects 
 
 properly separate the evidence for and against one type of 
 canal or the other, to argue upon the facts, which present 
 the greatest conflict of engineering opinion of modern times, 
 would be a mere waste of effort and time, since the evidence 
 and opinions are as far apart and as irreconcilable as the final 
 conclusions themselves. It is, therefore, rather a question 
 which the practical experience and judgment of members 
 of Congress must decide, and I have entire confidence that 
 the will of the nation, as expressed in its final mandate, will 
 be carried into successful execution, whether that mandate 
 be for lock canal or sea-level waterway. 
 
 The Panama Canal presents at once the most interesting 
 and the most stupendous project of mankind to overcome 
 by human ingenuity " what Nature herself seems to have 
 attempted, but in vain." From the time when the first 
 Spanish navigators extended their explorations into every 
 bay and inlet of the Central American isthmus, to discover, 
 if possible, a short route to the Indies, or " from Cadiz to 
 Cathay," the human mind has not been willing to rest con- 
 tent and accept as insurmountable the natural obstacles on 
 the Isthmus which prevent uninterrupted communication 
 between the Atlantic and the Pacific. Excepting, possibly, 
 Arctic explorations, in all the romantic history of ancient 
 and modern commerce, in all the annals of the early navi- 
 gators and explorers, there is no chapter that equals in in- 
 terest the never ceasing efforts to make the Central American 
 isthmus a natural highway for the world's commerce — a 
 direct route of trade and transportation from the uttermost 
 East to the uttermost West. 
 
 As early as 1536 Charles V ordered an exploration of the 
 Chagres River to learn whether a ship canal could not be 
 substituted for an existing wagon road, and Philip II, in 
 1561, had a similar survey made in Nicaragua for the same 
 purpose. From that day to this the greatest minds in com- 
 merce and engineering have given their attention to the 
 
 220 
 
The American Type of Isthmian Canal 
 
 problem of an interoceanic waterway; every conceivable plan 
 has been considered, every possible road has been explored, 
 and every mile of land and sea has been gone over to find 
 the best and most practical solution of the problem. 
 
 The history of these early attempts is most interesting, 
 but it is no longer of practical value, for it has no direct 
 bearing upon present-day problems. Most of the efforts 
 were wasted, and many of them were ill advised, but the 
 present can profitably consider the more important lessons 
 of the past. It was written in the book of fate that this 
 enterprise, the most important in the world of commerce and 
 navigation, should be American in its ending as it had been 
 in its practical beginning. From the day when the first 
 train of cars crossed the Isthmus from Panama to Aspin- 
 wall, to facilitate the transportation of passengers and freight 
 across the narrow belt of land connecting the northern and 
 and southern continents, the imperative necessity of a ship 
 canal was made apparent. Just as that railway followed 
 the earlier wagon roads of the Spanish adventurers, so a ship 
 canal will naturally succeed or supplement the railway. 
 
 Natural conditions on the Isthmus materially enhance 
 the physical difficulties to be overcome in canal construc- 
 tion. Even the precise locality or section best adapted to 
 the purpose has for many years been a question of serious 
 doubt. The Isthmus of Tehuantepec, the Nicaraguan 
 route, the utilizing of a lake of large extent, and finally the 
 narrow band of land and mountain chain at Panama, each 
 offers distinct advantages peculiar to itself, with correspond- 
 ing disadvantages or local difficulties not met with in the 
 others. Many other projects have been advanced; in all, 
 at least some twenty distinct routes have been laid out by 
 scientific surveys, but the most eminent American engineer- 
 ing talent, considering impartially the natural advantages 
 and local obstacles of each, finally, in 184Q, decided upon 
 the isthmus between the Bay of Panama and Limon 
 
 221 
 
Life Insurance and Other Subjects 
 
 Bay as the most feasible for the building of the railroad, 
 and some fifty years later, for the building of the Isth- 
 mian Canal. Every further study, survey, and inquiry 
 has confirmed the v?isdom of the earlier choice, which has 
 been adopted as the best and as the permanent plan of 
 the American government, which is now to build a canal at 
 the expense of the nation, but for the ultimate benefit of 
 all mankind. 
 
 The Panama railway marked the beginning of a new era 
 in the history of interoceanic communication. The great 
 practical usefulness of the road soon made the construction 
 of a canal a commercial necessity. The eyes of all the world 
 were upon the Isthmus, but no nation made the subject a 
 matter of more profound study and inquiry than the United 
 States. One surveying party followed another, and every 
 promising project received careful consideration. The con- 
 flicting evidence, the great engineering difficulties, the natural 
 obstacles, and, most of all, the Civil War, delayed active 
 efforts; but public interest was maintained and the general 
 public continued to view the project with favor and to 
 demand an American canal. 
 
 During the seventies a French commission made surveys 
 and investigations on the Isthmus which terminated in the 
 efforts of De Lesseps, who undertook to construct a canal, 
 and, in 1879, called an international scientific congress to con- 
 sider the project in all its aspects and determine upon a practi- 
 cal solution. The United States was invited to be represented 
 by two official delegates, and accordingly President Hayes 
 appointed Admiral Ammen and A. C. Menocal, of the United 
 States Navy, both of whom had been connected with surveys 
 and explorations on the Isthmus. Mr. Menocal presented 
 his plan for a canal by way of Nicaragua, but it was evident 
 that the Wyse project, of a canal by way of the Isthmus of 
 Panama, had the majority in its favor, and the only question 
 to determine was whether the canal to be constructed should 
 
 222 
 
The American Type of Isthmian Canal 
 
 be a sea-level or a lock canal. The American delegates were 
 convinced, in the light of their knowledge and experience, 
 that a sea-level canal would be impracticable, if not impos- 
 sible. In this they were seconded by Sir John Hawkshaw, 
 a man thoroughly familiar with canal problems, and who 
 exposed the hopelessness of an attempt to make a sea-level 
 ship canal, pointing out that there would be a cataract of 
 the Chagres River at Matachin of 42 feet, which in periods 
 of floods would be 78 feet high, and a body of water that 
 would be 36 feet deep, with a width of 1,500 feet. 
 
 Opposition to the sea-level project proved of no avail. 
 The facts were ignored or treated with indifference by 
 the French, who were determined upon a canal at Panama 
 and at sea level, resting their conclusions upon the success at 
 Suez, with which enterprise many of those present at the con- 
 gress, in addition to De Lesseps, had been connected. But 
 the problems and conditions to be met on the Isthmus of 
 Panama were decidedly different from those at Suez, and 
 subsequent experience proved the serious error of the sea- 
 level plan as finally adopted. The congress included a large 
 assemblage of non-professional men, and of the French en- 
 gineers present only one or two had ever been on the 
 Isthmus. The final vote was seventy-five in favor of and 
 eight opposed to a sea-level canal. Rear-admiral Ammen 
 said : "I abstained from voting on the ground that only able 
 engineers can form an opinion after careful study of what is 
 actually possible and what is relatively economical in the 
 construction of a ship canal." Of those in favor of a sea- 
 level canal not one had made a practical and exhaustive study 
 of the facts. The project at this stage was in a state of hope- 
 less confusion. In spite of these obstacles, De Lesseps, with 
 undaunted courage, proceeded to organize a company for the 
 construction of a sea-level canal. 
 
 As soon as possible after the adjournment of the scientific 
 congress of 1879 the Panama Canal Company was organized, 
 
 223 
 
Life Insurance and Other Subjects 
 
 with Ferdinand De Lesseps as president. The company pur- 
 chased the Wyse concession, and by 1880 sufficient funds had 
 been secured to proceed with the preliminary work. The 
 next two years were used for scientific investigations, surveys, 
 etc., and the actual work commenced in 1883. The plan 
 adopted was for a sea-level canal having a depth of 29.5 feet 
 and a bottom width of 72 feet. This plan in outline and in- 
 tent was adhered to practically to the cessation of operations 
 in 1888. 
 
 In that year operations on the Isthmus came to an end 
 for want of funds. The failure of the company proved dis- 
 astrous to a very large number of shareholders, mostly 
 French peasants of small means, and for a time the project 
 of interoceanic communication by way of Panama seemed 
 hopeless. The experience, however, proved clearly the utter 
 impossibility of private enterprise carrying forward a project 
 of such magnitude and which had attained a stage where 
 large additional funds were needed to make good enormous 
 losses, due to errors in plans, to miscarriage of effort, and, 
 last but not least, to fraud on a stupendous scale. With 
 admirable courage, however, the affairs of the first Panama 
 Canal Company were reorganized, after the appointment of 
 a receiver, on February 4, 1889. A scientific commission 
 of inquiry was appointed to reinvestigate the entire project 
 and report upon the work actually accomplished and its 
 value in future operations. The commission, made up of 
 eminent engineers, sent five of its members to the Isthmus to 
 study the technical aspects of the problem, and a final report 
 was rendered on May 5, 1890. The recommendation of the 
 commission was for the construction of a canal with locks, 
 the abandonment of the sea-level idea, and for a further and 
 still more thorough inquiry into the facts, upon the ground 
 that the accumulated data were "far from possessing 
 the precision essential to a definite project." This took 
 the project of canal construction out of the domain of 
 
 22^ 
 
The American Type of Isthmian Canal 
 
 preconceived ideas based upon guesswork into the sub- 
 stantial field of a scientific undertaking for commercial pur- 
 poses. The receiver at once commenced to reorganize the 
 affairs of the company, and accordingly, on October 21, 1894, 
 the new Panama Canal Company came into existence under 
 the general laws of France. The charter of the new com- 
 pany provided for the appointment of a technical committee 
 to formulate a final project for the completion of the canal. 
 This committee was organized in February, 1896, and 
 reached a unanimous conclusion on November 16, 1898, 
 embodied in an elaborate report, which is probably the most 
 authoritative document ever presented on an engineering 
 subject. The recommendation of the commission was 
 unanimously in favor of a lock canal.* 
 
 The subsequent history of the De Lesseps project and the 
 American effort for a practicable route across the Isthmus 
 are still fresh in our minds and need not be restated. The 
 Spanish-American war and the voyage of the Oregon by way 
 of Cape Horn, more than any other causes, combined to direct 
 the attention of the American people to conditions on the 
 Isthmus, and led to the public demand that by one route or 
 another an American waterway be constructed within a rea- 
 sonable period of time and at a reasonable cost. It will serve 
 no practical purpose to recite the subsequent facts and the chain 
 of events which led to the passage of the act of March 3, 1899, 
 which authorized the President to have a full and complete 
 investigation made of the entire subject of Isthmian canals. 
 
 A million dollars was appropriated for the expenses of a 
 commission, and in pursuance of the provisions of the act the 
 President appointed a commission consisting of Rear-admiral 
 Walker, United States Navy, president, and nine members 
 eminent in their respective professions as experts or engineers. 
 A report was rendered under the date of November 30, 1901, 
 in which the cost of constructing a canal by way of 
 
 * Report of the New Panama Canal Company oi France; Senate Document 188, 56th Congress, Ist 
 session, February 20, 1900. 
 
Life Insurance and Other Subjects 
 
 Nicaragua was estimated at ^189,864,062 and by way of 
 Panama at 5 184,233,358, including in the last estimate 
 $40,000,000 for the estimated value of the rights and property 
 of the New Panama Canal Company. The company, however, 
 held its property at a much higher value, or some ^109,000,- 
 000, which the Commission considered exorbitant, and thus 
 the only alternative was to recommend the construction of a 
 canal by way of the Nicaraguan route. Convinced, how- 
 ever, that the American people were in earnest, the New 
 Panama Company expressed a willingness to reconsider the 
 matter, and finally agreed to the purchase price fixed by the 
 Isthmian Commission. 
 
 By the Spooner act, passed June 28, 1902, Congress au- 
 thorized the President to purchase the property of the New 
 Panama Canal Company for a price not exceeding ;^40,000,- 
 000, the title to the property having been fully investigated and 
 found valid. The Isthmian Commission, therefore, recom- 
 mended to Congress the purchase of the property, but the 
 majority of the Senate Committee on Interoceanic Canals 
 disagreed, and it is only to the courage and rare ability of the 
 late Senator Hanna and his associates, as minority members 
 of the committee, that the nation owes the abandonment of 
 the Nicaraguan project, the acquirement of the Panama 
 Canal rights at a reasonable price and the making of the 
 project a national enterprise. 
 
 The report of the minority members of the Senate com- 
 mittee was made under date of May 31, 1902. It is, without 
 question, a most able and comprehensive dissertation upon 
 the subject, and forms a most valuable addition to the truly 
 voluminous literature of Isthmian canal construction. The 
 report was signed by Senators Hanna, Pritchard, Millard, and 
 Kittredge. "We consider," said the committee, "that the 
 Panama route is the best route for an Isthmian canal to be 
 owned, constructed, controlled, and protected by the United 
 States." It was a bold challenge of the conclusions of the 
 
 226 
 
The American Type of Isthmian Canal 
 
 majority members of the committee, but in entire harmony 
 with and in strict conformity to the views and final con- 
 clusions of the Isthmian Commission. The minority report 
 was accepted by the Congress and a canal at Panama became 
 an American enterprise for the benefit of the American people 
 and the world at large. 
 
 Such, in broad outline, is the present status of the Panama 
 Canal. A grave question presents itself at this time, which 
 demands to be disposed of by Congress, and to which all 
 others are subservient. Shall the waterway be a sea-level or 
 a lock canal .? It is a question of tremendous importance — a 
 question of choice equally as important as the one of the route 
 itself. A choice must be made, and it must be made soon. 
 All the subsidiary work, all the related enterprises, depend 
 upon the fundamental difference in type. Opinions diflFer 
 as widely to-day as they did at the time when the project 
 was first considered by the international committee in 1879. 
 Engineers of the highest standing at home and abroad have 
 expressed themselves for or against one type or the other, but 
 it is a question upon which no complete agreement is possible. 
 In theory a sea-level canal has unquestionable advantages, 
 but, practically, the elements of cost and time necessary for 
 the construction preclude to-day, as they did in 1894, when 
 the New Canal Company recommenced active operations, 
 the building of a sea-level canal. It is not a question of 
 the ideally most desirable, but of the practically most expedient, 
 that confronts the American people and demands solution. 
 
 The New Panama Canal Company had approved the 
 lock plan, which placed the minimum elevation of the sum- 
 mit level at 97.5 feet above the sea and the maximum level 
 at 102.5 f^^^ above the same datum. In the words of Prof. 
 William H. Burr: 
 
 It provided for a depth of 29.5 feet of water and a bottom width of canal 
 prism of about 98 feet, except at special places, where this width was increased. 
 A dam was to be built near Bohio, which would thus form an artificial lake, 
 
 22'/ 
 
Life Insurance and Other Subjects 
 
 with its surface varying from 52.5 to 65.6 feet above the sea. The location of 
 this line was practically the same as that of the old company. The available 
 length of each lock chamber was 738 feet, while the available width was 82 feet, 
 the depth in the clear being 32 feet 10 inches. The lifts were to vary from 26 to 
 33 feet. It was estimated that the cost of finishing the canal on this plan would 
 be $101,850,000, exclusive of administration and financing. 
 
 The Isthmian Commission of 1899-1901 considered the 
 project, re-examined into the facts, and as stated by Pro- 
 fessor Burr— 
 
 The feasibility of a sea-level canal, but with a tidal lock at the Panama end, 
 was carefully considered by the Commission, and an approximate estimate of the 
 cost of completing the work on that plan was made. In round numbers this 
 estimated cost was about $250,000,000, and the time required to complete the luork 
 ivould probably be nearly or quite tivice that needed, for the construction of a 
 canal nuith locks. The Commission therefore adopted a project for the canal 
 locks. Both plans and estimates were carefully developed in accordance there- 
 with. 
 
 Professor Burr, now in favor of a sea-level canal, then 
 concurred in the report in favor of a lock canal. 
 
 Since the Panama canal became the property of the na- 
 tion a vast amount of necessary and preliminary work has 
 been done preparatory to the actual construction of the 
 canal. A complete civil government of the Canal Zone has 
 been established, an army of experts and engineers has been 
 organized, the work of sanitation and police control is in 
 excellent hands, and the Isthmus, or, more properly speaking, 
 the Canal Zone, is to-day in a better, cleaner, and more 
 healthful condition than at any previous time in its history. 
 A considerable amount of excavation and necessary im- 
 provements in transportation facilities have been carried to 
 a point where further work must stop until the Isthmian 
 Commission knows the final plan or type of the canal. The 
 reports which have been made of the work of the Com- 
 mission during its two years of actual control are a complete 
 and affirmative answer to the question whether what has 
 been done so far has been done wisely and well, and the 
 facts and evidence prove that the present state of affairs on 
 the Isthmus is in all respects to the credit of the nation. 
 
 228 
 
The American Type of Isthmian Canal 
 
 Now, it is evident that the question of plan or type of 
 canal is largely one for engineers to determine, but even a 
 layman can form an intelligent opinion, without entering 
 into all the details of so complex a problem as the relative 
 advantage or disadvantage of a sea-level versus a lock canal. 
 This much, however, is readily apparent, that a sea-level 
 canal will cost a vast amount of money and may take twice 
 the time to build, while it will not necessarily accommodate 
 a larger traffic or ships of a larger size. A lock canal can be 
 built which will meet all requirements; it can be built deep 
 enough and wide enough to accommodate the largest ves- 
 sels afloat; it can be so built that transit across the Isthmus 
 can be effected in a reasonably short period of time — -in a 
 word, it is a practical project, which will solve every pend- 
 ing question involved in the construction of a transisthmian 
 canal in a practical way, at a reasonable cost, and within a 
 reasonable period of time. 
 
 To determine the question the President appointed an 
 International Board of Consulting Engineers. The Board 
 included in its membership the world's foremost men in en- 
 gineering science, and the report is without question a most 
 valuable document. The President, in his address to the 
 members of the Board on September ii, 1905, outlined his 
 views with regard to the desirability of a sea-level canal, if 
 such a one could be constructed at a reasonable cost within a 
 reasonable time. He said — 
 
 If to build a sea-level canal will but slightly increase the risk and will take 
 but little longer than a multilock high-level canal, this, of course, is preferable. 
 But if to adopt the plan of a sea-level canal means to incur great hazard and to 
 incur indefinite delay, then it is not preferable. 
 
 The problem as viewed by the American people could 
 not be more concisely stated. Other things equal, a sea- 
 level canal, no doubt, would be preferable; but it remains to 
 be shown that such a canal would in all essentials provide 
 safe, cheap, and earlier navigation across the Isthmus than 
 a lock canal. 
 
 22Q 
 
Life Insurance and Other Subjects 
 
 For, as the President further said on the same occasion, 
 there are two essential considerations: First, the greatest 
 possible speed of construction; second, the practical cer- 
 tainty that the proposed plan will be feasible; that it can be 
 carried out with the minimum risk; and in conclusion that — 
 
 There may be good reason why the delay incident to the adoption of a plan 
 for an ideal canal should be incurred ; but if there is not then I hope to see the 
 canal constructed on a system which will bring to the nearest possible date in the 
 future the time when it is practicable to take the first ship across the Isthmus — 
 that is, which will in the shortest time possible secure a Panama waterway 
 between the oceans of such a character as to guarantee permanent and ample 
 communication for the greatest ships of our Navy and for the largest steamers on 
 either the Atlantic or the Pacific. The delay in transit of the vessels owing to 
 additional locks would be of small consequence when compared with shortening 
 the time for the construction of the canal or diminishing the risks in the con- 
 struction. In short, I desire your best judgment on all the various questions to 
 be considered in choosing among the various plans for a comparatively high- 
 level multilock canal, for a lower-level canal with fewer locks, and for a sea-level 
 canal. Finally, I urge upon you the necessity of as great expedition in coming 
 to a decision as is compatible with thoroughness in considering the conditions. 
 
 The Board organized and met in the city of Washington 
 on September i, 1905, and on the loth of January, 1906, or 
 about four months later, made its final report to the Presi- 
 dent through the Secretary of War. The Board divided 
 upon the question of type for the proposed canal, a majority 
 of eight — five foreign engineers and three American engineers 
 — being in favor of a canal at sea-level, while a minority of 
 five — all American engineers — favored a lock canal at a sum- 
 mit level of 85 feet. The two propositions require separate 
 consideration, each upon its own merits, before a final opinion 
 can be arrived at as to the best type of a waterway adapted 
 to our needs and requirements under existing conditions. 
 
 Upon a question so involved and complex, where the most 
 eminent engineers divide and disagree, a layman cannot be 
 expected to view the problem otherwise than as a business 
 proposition which, demanding solution, must be disposed of 
 by a strictly impartial examination of the facts. Weighed 
 and tested by practical experience in other fields of com- 
 mercial enterprise, it is probably not going too far to say, as 
 
 230 
 
The American Type of Isthmian Canal 
 
 in fact it has been said, that there is entirely too much mere 
 engineering opinion upon this subject and not a well-defined 
 concentrated mass of data and solid convictions. It is 
 equally true, and should be kept in mind, that the time given 
 by the Board to the consideration of the subject in all its 
 practical bearings, including an examination of actual con- 
 ditions on the Isthmus, was limited to so short a period 
 that it would be contrary to all human experience that this 
 report should represent an infallible or final verdict for or 
 against either of the two propositions. 
 
 It is necessary to keep in mind certain facts which may be 
 concisely stated, and which I do not think have been pre- 
 viously brought to the attention of Congress. While the 
 Board had been appointed by the President on June 24,1905, 
 the first business meeting did not take place until September 
 I, and the final meeting of the full Board occurred on Novem- 
 ber 24th of the same year. This was the twenty-seventh 
 meeting during a period of eighty-five days, after which there 
 were three more meetings of the American members, the last 
 having been held on January 31, 1906. Thus the actual 
 proceedings of the full Board were condensed into twenty- 
 seven meetings during less than three months, a part of 
 which time — or, to be specific, six days — was spent on the 
 Isthmus. 
 
 The minutes of the proceedings have been printed and 
 form a part of the final report made to the President under 
 date of January 10, 1906. They do not afford as complete 
 an insight into the business transactions of the Board as 
 would be desirable, and the evidence is wanting that the 
 subject was as thoroughly discussed in all its details, with 
 particular reference to the two propositions of a sea-level 
 or a lock canal, as would seem necessary. Very important 
 features necessary to the sea-level plan were treated in the 
 most superficial way, guessed at, or wholly ignored. I do 
 not hestitate to say that no banking house in the world called 
 
 231 
 
Life Insurance and Other Subjects 
 
 upon to provide funds necessary for an enterprise of this 
 magnitude as a private undertaking would advance a single 
 dollar upon a project as it is here presented by the majority 
 of the Board to the American Congress as the final conclu- 
 sion of engineers of the highest standing. The Board, as I 
 have said, divided upon the question, and by a majority of 
 eight pronounced in favor of a sea-level against a minority 
 of five in favor of a lock canal. Let us inquire how this con- 
 clusion, of momentous importance to the nation, was arrived 
 at and whether the minutes of the Board furnish a conclusive 
 answer. 
 
 As early as the sixth meeting, or on September i6th — that 
 is, after the Board had been only fifteen days in existence — 
 a resolution was introduced by Mr. Hunter, chief engineer 
 of the Manchester Ship Canal, requesting that a special 
 committee be appointed to prepare at once a project for a 
 sea-level canal. 
 
 Mr. Spooner. — What was the date of the resolution with 
 respect to the lock canal ? 
 
 Mr. Dryden. — October 3d, seventeen days afterwards. 
 
 In marked contrast, it was not until after the Board had 
 visited the Isthmus and while the members were on their 
 way home — that is, at sea — on October 3d, that, on motion 
 of Mr. Stearns, a corresponding committee was appointed 
 to prepare plans for a lock canal. The recital of dates is 
 of very considerable importance, for it is evident that there 
 was a decided and early preference on the part of certain 
 members of the Board for a sea-level canal, and that to this 
 particular project more attention was given and a more de- 
 termined attempt was made to secure data in its defense 
 than to the corresponding project for a lock canal. That 
 is to say, while the special committee for the considera- 
 tion of a sea-level canal had been appointed on Septem- 
 ber 16, the corresponding committee to consider the lock 
 project was not appointed until October 3d, or seventeen 
 
 232 
 
The American Type of Isthmian Canal 
 
 days later, with the additional disadvantage of the Board 
 being on the ocean, with no opportunity to send for persons 
 and papers during the short period of time remaining to take 
 into due consideration all the facts pertaining to a lock canal, 
 for, as I have said before, the last business meeting was held 
 on November 24th. 
 
 Mr. Foraker. — Mr. President 
 
 The Vice President. — Does the Senator from New Jer- 
 sey yield to the Senator from Ohio ? 
 
 Mr. Dryden. — Certainly. 
 
 Mr. Foraker. — I would like to ask the Senator whether 
 on the 1 6th of September, when this motion was made by 
 Mr. Hunter, if I remember correctly, the Board of Engineers 
 had completed their investigations and explorations on the 
 Isthmus ? I did not observe. 
 
 Mr. Dryden. — No. 
 
 Mr. Kittredge. — Mr. President 
 
 The Vice President. — Does the Senator from New Jer- 
 sey yield to the Senator from South Dakota .? 
 
 Mr. Dryden. — I yield. 
 
 Mr. Kittredge. — If the Senator from New Jersey will per- 
 mit me, I will be glad to answer the question of the Senator 
 from Ohio. The Board of Consulting Engineers sailed from 
 New York on the 28th of September for the Isthmus and 
 returned about the middle or 20th of October. 
 
 Mr. Foraker. — Sailed from the Isthmus ? 
 
 Mr. Kittredge. — Sailed from New York for the Isthmus. 
 
 Mr. Foraker. — Then the motion was made by Mr. Hun- 
 ter before the Board of Engineers left the United States. 
 
 Mr. Kittredge. — Certainly; to appoint a committee of 
 investigation. 
 
 Mr. Dryden. — I should like to say at this point that while 
 I have gladly yielded to Senators, I think it is quite probable 
 that before I get through I shall cover any questions that 
 may be asked. I would prefer to complete my remarks, 
 
 233 
 
Life Insurance and Other Subjects 
 
 and then I shall be very glad to answer any questions that 
 Senators may choose to ask. 
 
 Mr. Foraker. — I beg pardon. 
 
 Mr. Dryden. — I was glad to yield to the Senator. 
 
 Mr. Foraker. — The speech is a very interesting one. 
 
 Mr. Dryden. — There is nothing in the minutes of the 
 Board which disclosed that either proposition received the 
 necessary deliberate consideration of the extremely complex 
 and important details entering into the two respective projects, 
 but it is evident that, regarding the sea-level proposition at 
 least, there was a decided bias practically from the outset 
 which matured in the majority report favoring that propo- 
 sition. What was in the minds of the members, what was 
 done outside of the Board meetings, by what means or 
 methods conclusions were reached, has not been made a 
 matter of record and is not, therefore, within the knowledge 
 of Congress. 
 
 It is true that the respective reports of the two commit- 
 tees were brought before the Board as a whole on November 
 14th and that the subject was discussed at some length on 
 November i8th, when each member of the Board ex- 
 pressed his views for or against one of the two projects. 
 But there remained only ten days before the last business 
 meeting of the Board was held, when the foreign members 
 sailed for home. The final reports, as they are now before 
 Congress, apparently never received the proper and ex- 
 tended consideration of the Board as a whole, and the minority 
 report favoring a lock canal seems never to have been dis- 
 cussed upon its merits at all. When I recall the very diflFer- 
 ent procedure of the technical commission appointed by 
 the New Panama Canal Company, which extended its con- 
 sideration of the subject from February 3, 1896, to Septem- 
 ber 8, 1898, during which time ninety-seven stated meetings 
 and a large number of informal meetings were held, I say, 
 it seems to me, from a practical business point of view, 
 
 234- 
 
The American Type of Isthmian Canal 
 
 casting no reflection upon either the abihty or the fairness 
 of judgment of the members of the International Board, that 
 the mere element of time should weigh decidedly in favor of 
 the verdict of the technical commission of 1898, vp^hich v^as 
 unanimous for a lock canal. 
 
 Of the technical commission of 1896- 1898, Mr. Hunter, 
 chief engineer of the Manchester Ship Canal, was a member, 
 and he at that time, without a word of dissent, joined the 
 other members in giving the unanimous and emphatic ex- 
 pression of the committee in favor of a lock canal. 
 
 Mr. Teller.— Ml. President 
 
 The Vice President. — Does the Senator from New Jer- 
 sey yield to the Senator from Colorado .'' 
 
 Mr. Dryden. — Certainly. 
 
 Mr. Teller. — Will the Senator kindly repeat the date of 
 that .? 
 
 Mr. Dryden. — Of the technical commission of 1 896-1 898, 
 Mr. Hunter, the chief engineer of the Manchester Canal, 
 was a member. The technical commission was of the new 
 French company. 
 
 Mr. Teller. — You refer to the commission of the new 
 French company .? 
 
 Mr. Dryden. — Yes, sir; the commission of the new French 
 company. 
 
 Why he should now change his views and convictions 
 and why he should now be so emphatic and pronounced in 
 favor of a sea-level project is not set forth in anything that 
 has been printed or been communicated to the Senate Com- 
 mittee on Interoceanic Canals. This hurried action, this 
 scanty consideration, as I have stated, is the foundation upon 
 which the advocates of the sea-level plan rest their appeal 
 for support. This is the report and the evidence upon which 
 Congress is requested to pronounce in favor of a sea-level 
 project and give its indorsement to a plan which will involve 
 the country in at least ^100,000,000 of additional expendi- 
 
 235 
 
Life Insurance and Other Subjects 
 
 ture and which will delay the opening of the canal for practi- 
 cal purposes of navigation possibly for ten years or more 
 after the lock canal can be finished and opened for use. 
 
 The Isthmian Commission restates certain points in a 
 clear and precise way, which leaves no escape from the con- 
 clusion that both as to time and cost the majority members of 
 the Board materially underestimated important factors, and 
 that they have every reason to believe that the total estimate 
 of cost of a sea-level canal should be raised to ^72,000,000, 
 and that the estimate of time for construction should be in- 
 creased to at least fifteen and a half years. But under cer- 
 tain readily conceivable conditions it is practically certain 
 that the construction of a sea-level canal will consume not 
 less than twenty years. 
 
 The Isthmian Commission re-examined carefully the 
 question of relative efficiency of the proposed sea-level canal 
 compared with a lock canal, and they pronounce emphatic- 
 ally and unequivocally in favor of the lock project. They 
 consider that the assumed danger from accidents to locks by 
 passing vessels or otherwise is greatly exaggerated, and 
 hold that while no doubt accidents may occur, and possibly 
 will occur, such dangers can and will be sufficiently guarded 
 against by an effective method of supervision and control. 
 They hold that a lock canal properly constructed and man- 
 aged is in no sense a menace to the safety of vessels, and 
 that much practical experience and particularly the half- 
 century of successful operation of the "Soo" Canal have 
 demonstrated the contrary beyond dispute. They point out 
 that the canal with locks at a level of 85 feet will be a water- 
 way three times the size, in navigable area, of the projected 
 sea-level canal, and, omitting the locks from consideration, 
 will therefore afford three times the shipping facilities. 
 
 They show that in the sea-level canal there will be many 
 and serious curves, while in the lock canal the courses are 
 straight and changes of direction will be made at intersecting 
 
 236 
 
The American Type of Isthmian Canal 
 
 tangents, the same as in our river navigation, in v^^hich 
 serious accidents are practically unknown. They show 
 that the courses in a lock canal can be marked with ranges 
 which will greatly facilitate navigation, particularly at night. 
 The Commission points out that the argument of the majority 
 of the Board, that locks will limit the traffic capacity of the 
 canal, carries very little if am" weight, and they refer to the 
 experience of the "Soo" Canal, through which there passes 
 annually a larger traffic than through all the other ship canals 
 of the world combined. 
 
 Finally, the Isthmian Commission discusses the cost of 
 operation and maintenance. The majority of the Board 
 submit no details upon this most important item in canal 
 construction and subsequent operation. What banking 
 house in the world would advance a single dollar upon a canal 
 or railway project upon a mere statement of the probable 
 ultimate cost, but with no corresponding information as 
 to cost of maintenance and operation ! Having been ap- 
 pointed to re-examine into all the facts, and, so to speak, to 
 reconsider the entire project, the majority seriously erred 
 in omitting from their report the necessary data and calcula- 
 tions for an accurate and trustworthy estimate of the cost 
 of operation and maintenance of a sea-level canal. 
 
 From this point of view and in the light of the facts as 
 presented by the Board for or against either project, the 
 Isthmian Commission could not consistently act otherwise 
 than to give their final approval to the more specific and practi- 
 cal recommendations of the minority members of the Board, 
 and they properly say that "it appears that the canal pro- 
 posed by the minority of the Board of Consulting Engineers 
 can he built in half the time and for a little more than half of the 
 cost of the canal proposed by the majority of the Board." They 
 advance a number of specific reasons why a lock canal when 
 completed will for all practical purposes — commercial, mili- 
 tary, and naval — be a better canal than a sea-level waterway 
 
 237 
 
Life Insurance and Other Subjects 
 
 with a tidal lock, as proposed by the majority members of 
 the Board. 
 
 The report of the Board was carefully and critically ex- 
 amined by Chief Engineer Stevens, of the Isthmian Com- 
 mission and in actual charge of engineering matters on the 
 Isthmus. Mr. Stevens is a man of very large practical 
 American engineering experience, and he adds to the find- 
 ings of the Commission the weight of his authority, decidedly 
 and unequivocally in favor of a lock canal. He states as 
 the sum of his conclusions that, all things considered, the 
 lock or high-level canal is preferable to the sea-level type, 
 so-called, for the reason that it will provide a safer and quicker 
 passage for ships; that it will provide beyond question the 
 best solution of the vital problem of how safely to care for the 
 flood waters of the Chagres and other streams; that provision 
 is offered in the lock project for enlarging its capacity to 
 almost any extent at very much less expense of time and 
 money than can be provided for by any sea-level plan; that 
 its cost of operation, maintenance, and fixed charges, in- 
 cluding interest, will be very much less than any sea-level 
 canal, and that the time and cost of its construction will 
 not be more than one-half that of a canal of the sea-level 
 type; that the lock project will permit of navigation by night, 
 and that, finally, even at the same cost in time and money, 
 Mr. Stevens would favor the adoption of the high-level 
 lock canal plan in preference to that of the proposed sea- 
 level canal. 
 
 To these observations and comments the Secretary of 
 War, under whose supervision this great work is going on, 
 adds his opinion, which is decidedly and unequivocally in 
 favor of a lock canal. In his letter to the President, Mr.Taft 
 goes into all the important details of the subject and reveals a 
 masterly grasp of the situation as it confronts the American 
 people at the present time. He calls attention to the fact 
 that lock navigation is not an experiment; that all the locks 
 
 238 
 
The American Type of Isthmian Canal 
 
 in the proposed canal are duplicated, thereby minimizing 
 such dangers as are inherent in any canal project, and he 
 adds that experience shows that with proper plans and regu- 
 lations the dangers are much more imaginary than real. 
 He goes into the facts of the proposed great dam to be con- 
 structed at Gatun and points out that such construction 
 is not experimental, but sustained by large American ex- 
 perience, which is larger, perhaps, than that of any other 
 country in the world. He gives his indorsement to the views 
 of the Isthmian Commission and its chief engineer that the 
 estimated cost of time and money for completing a sea- 
 level canal is not correctly stated by the majority members 
 of the Board, and that the cost, in all probability, will be at 
 least $25,000,000 more, while, in his opinion, eighteen to 
 twenty years will be necessary to complete the sea-level 
 project. He also holds that the military advantages will 
 be decidedly in favor of a lock canal. 
 
 This is practically the present status of facts and opinions 
 regarding the canal problem as it is now before Congress, 
 except that since January the Senate Committee on Inter- 
 oceanic Canals has collected a large mass of additional and 
 valuable testimony. Restating the facts in a somewhat 
 different way, Congress is asked to give its final approval 
 to the sea-level proposition, chiefly favored by foreigners, 
 and to give its disapproval to the project of a lock canal, 
 favored by American engineers. Congress is asked to rely 
 in the main upon the experience gained in the management 
 of the Suez Canal, where the conditions are essentially and 
 fundamentally different from what they are or ever will be 
 on the Isthmus of Panama, and to disregard the more than 
 fifty years' experience in the successful management of the 
 lock canals connecting the Great Lakes. Congress is asked 
 to pronounce against the lock canal because in the manage- 
 ment of the ship canal at Manchester several accidents have 
 occurred, due to carelessness or ignorance in navigation, 
 
 239 
 
Life Insurance and Other Subjects 
 
 and we are asked to disregard the successful record of the 
 "Soo" Canal, in the management of which only three acci- 
 dents, of no very serious importance, have occurred during 
 more than fifty years. 
 
 In no other country in the world has there been more ex- 
 perience with lock canals than in this. For nearly a hundred 
 years the Erie Canal has been one of our most successful 
 of inland waterways, connecting the ocean with the Great 
 Lakes. The Erie Canal is 387 miles in length, has 72 locks, 
 and is now being enlarged to accommodate barges of a thou- 
 sand tons, at a cost of ^101,000,000. We have the Ohio 
 Canal, with 150 locks; the Miami and Erie Canal, with 93 
 locks; the Pennsylvania Canal, with 71 locks; the Chesa- 
 peake and Ohio Canal, with 73 locks; and numerous other 
 inland waterways of lesser importance. It is a question of 
 degree and not of kind, for the problem is the same in all 
 essentials and confronts Congress as much m the proposed 
 deep waterway connecting tide-water with the Great Lakes, 
 in which locks are proposed with a lift of 40 feet, or more, 
 or very considerably in excess of the proposed lift of the 
 locks on the Isthmian canal. 
 
 The proposed ship canal from Lake Erie to the Ohio 
 River provides for 34. locks. The suggested canal from 
 Lake Michigan to the Illinois and Mississippi rivers pro- 
 vides for 37 locks, and, finally, the projected ship canal from 
 the St. Lawrence River to Lake Huron contemplates 22 
 locks. So that lock canals of exceptional magnitude are 
 not only in existence, but new canals of this type are con- 
 templated in the United States and Canada. 
 
 In other words. Congress is asked to regard with prefer- 
 ence the judgment and opinions of foreign engineers and 
 to disregard the judgment and opinions of American engi- 
 neers We are seriously asked to completely disregard 
 American opinion, as voiced by the Isthmian Commission, re- 
 sponsible for the enterprise as a whole; as voiced by the 
 
 24.0 
 
The American Type of Isthmian Canal 
 
 Secretary of War, responsible for the time being for the proper 
 execution of the work; as voiced by Chief Engineer Stevens, 
 v^^ho stands foremost among Americans in his profession, and 
 finally, as voiced by all the engineers now on the Isthmus, 
 who have a practical knowledge of the actual conditions, 
 and who are as thoroughly familiar as any class of men with 
 the problems which confront us and with the conditions 
 which will have to be met. I for one, leaving out of consid- 
 eration for the present details which are subject to modifica- 
 tion and change, believe that it will be a fatal error for the 
 nation to commit itself to the practically hopeless and vision- 
 ary sea-level project and to delay for many years the open- 
 ing of this much needed waterway connecting the Atlantic 
 with the Pacific. I for one am opposed to a waste of untold 
 millions and to additional burdens of needless taxation, 
 while the project of a lock canal offers every practical ad- 
 vantage, offers a canal within a reasonable period of time and 
 at a reasonable cost, offers a waterway of enormous advan- 
 age to American shipping, of the greatest possible value to 
 the nation in the event of war, and the opportunity for the 
 American people to carry into execution at the earliest possi- 
 ble moment what has been called the "dream of navigators," 
 and what has thus far defied the engineering skill of Euro- 
 pean nations. 
 
 But in addition to the evidence presented for or against 
 a sea-level or lock canal project by the two conflicting re- 
 ports of the Board of Consulting Engineers, there is now 
 available a very considerable mass of testimony of American 
 engineers who were called as witnesses before the Senate 
 Committee on Interoceanic Canals. The testimony has 
 been printed as a separate document and makes a volume 
 of nearly a thousand pages. Much of this evidence is con- 
 flicting, much of it is mere engineering opinion, much of 
 it comes perilously near to being engineering guesswork, 
 but a large part of it is of practical value and may safely be 
 
Life Insurance and Other Subjects 
 
 relied upon to guide the Congress in an effort to arrive at a 
 final and correct conclusion respecting the type of canal best 
 adapted to our needs and requirements. 
 
 A critical examination and review of this testimony, as 
 presented to the Senate Committee from day to day for 
 nearly five months, including the testimony of administra- 
 tive officers and others, relating to Panama Canal affairs 
 generally, is not practicable at this late stage of the session. 
 Among others, the committee examined Mr. John F. Stevens, 
 chief engineer, upon all the essential points in controversy, 
 regarding which, in the light of additional experience 
 and a very considerable amount of new and more exact 
 information, Mr. Stevens reaffirms his convictions in favor 
 of the practicability and superior advantages of a lock 
 canal. 
 
 In opposition to the vi^ws and conclusions of Mr. Stevens, 
 Prof. William H. Burr pronounced himself emphatically 
 in favor of the sea-level project. As a member of the former 
 Isthmian Commission, reporting upon the type of canal, 
 Mr. Burr had signed the report in favor of the lock project, 
 but as a member of the Board of Consulting Engineers he had 
 sided with the majority favoring the sea-level canal. Thus 
 engineering opinion is as apt as any other human opinion 
 to undergo a change, and the convictions of one year in 
 favor of a proposition may change into opposite convictions, 
 favoring an opposite proposition, only a few years later. 
 Mr. William Barclay Parsons, also a member of the Board 
 of Consulting Engineers, who had signed the report in favor 
 of the sea-level project, gave further evidence before the 
 committee, restating his views and convictions in favor of 
 the sea-level type. Mr. William Noble, an engineer of large 
 experience, for some years in charge of the "Soo" Canal, and 
 who, as a member of the Board of Consulting Engineers, 
 had signed the report in favor of a lock project, restates his 
 views and convictions in favor of a lock canal. Mr. Noble 
 
 242 
 
The American Type of Isthmian Canal 
 
 had also been a member of the Isthmian Commission of 
 1902, reporting at that time in favor of a lock canal. 
 
 Mr. Frederick P. Stearns, the foremost American authori- 
 ty on earth-dam construction, gave evidence regarding the 
 safety of the proposed dams at Gatun and other points. 
 His views and conclusions are based upon large practical 
 experience and a profound theoretical knowledge of the 
 subject. Mr. Stearns had also been a member of the Con- 
 sulting Board of Engineers and as such had signed the 
 report of the minority in favor of the lock project. He re- 
 affirmed his views favoring a lock canal with a dam at Gatun. 
 Mr. John F. Wallace, former chief engineer, gave testimony 
 in favor of the sea-level type and strongly opposed the lock 
 project. Col. Oswald H. Ernst, United States Army, than 
 whom probably few are more thoroughly familiar with con- 
 ditions on the Isthmus and the entire project of canal con- 
 struction, declared himself to be strongly in favor of the lock- 
 canal project. 
 
 Gen. Peter C. Hains, United States Army, equally well 
 qualified to express an opinion on the subject in all its im- 
 portant points, pronounced himself strongly and unequivo- 
 cally in favor of a lock canal. 
 
 Gen. Henry L. Abbot, United States Army, one of the 
 highest authorities on river hydraulics, thoroughly familiar 
 with Mississippi River flood problems, a former member 
 of the International Technical Commission, of the New 
 Panama Canal Company, and for a time its consulting engi- 
 neer, a member of different Isthmian commissions, and also 
 a member of the consulting board, re-emphasized his con- 
 viction, sustained by much valuable evidence, in favor of 
 the lock canal project. General Abbot, as a member of 
 the consulting board, had signed the report of the minority 
 in favor of a lock canal. Gen. George W. Davis, United 
 States Army, for a time governor of the Canal Zone and 
 president of the International Board of Consulting Engineers, 
 
 H3 
 
Life Insurance and Other Subjects 
 
 restated his views and convictions as opposed to the lock 
 canal type and in favor of the sea-level project. The last 
 witness, Mr. B. M. Harrod, an engineer of large experi- 
 ence, for many years connected with levee construction and 
 familiar with the flood problems of the Mississippi River, 
 submitted a statement in which he restated his views in favor 
 of a lock canal. 
 
 So that, summing up the evidence of twelve engineers 
 examined before the committee (including Mr. Linden W. 
 Bates), there were eight American engineers strongly and 
 unequivocally in favor of a lock canal, while four expressed 
 their views to the contrary. Subjecting the mass of testi- 
 mony to a critical examination, I cannot draw any other 
 conclusion or arrive at any other conviction than that the 
 lock project, in the light of the facts and large experience, has 
 decidedly the advantage over the sea-level proposition. And 
 this view is strengthened by the fact that the opinion of the 
 engineers most competent to judge — that is, men like Mr. 
 Noble, who has thoroughly studied lock canal construction, 
 management, and navigation, who as a member of the 
 United States Deep Waterway Commission re-examined 
 probably as thoroughly as any living authority into the entire 
 subject of the mechanics and practice of lock canals— is em- 
 phatically opposed to the sea-level proposition. 
 
 When a man like Mr. Stearns, of national and inter- 
 national reputation as a waterworks engineer, who for 
 many years has been in charge of the extensive construc- 
 tion work of the Massachusetts Metropolitan Water and 
 Sewerage Board, and who probably has as large a practical 
 and theoretical knowledge of earth-dam construction as any 
 living authority, declares himself to be strongly in favor of 
 the lock project and believes in the entire safety of the dams 
 required in connection therewith, I hold that such a judgment 
 may be relied upon and that it should govern in national 
 affairs as it would govern in private affairs if the canal 
 
 244 
 
The American Type of Isthmian Canal 
 
 construction were a business enterprise and involved the risk 
 of private capital. When we find a man like Mr. Harrod, 
 who for many years has been in charge of levee construction 
 in Louisiana, thoroughly familiar with the theory and prac- 
 tice of river and flood control, express himself in favor of 
 the lock project and in opposition to the sea-level canal, I 
 hold that we may with entire confidence accept his judgment 
 as a governing principle in arriving at a final decision re- 
 specting the type of the canal to be finally fixed by the 
 Congress. 
 
 And, going back to the minority report of the Board of 
 Consulting Engineers, we find that Mr. Joseph Ripley, the 
 general superintendent at present in charge of the " Soo " 
 Canal, and Mr. Isham Randolph, chief engineer of the sani- 
 tary district of Chicago, and thoroughly familiar with canal 
 construction and management, both American engineers of 
 much experience and high standing, pronounce themselves 
 in favor of a lock canal. When confronted by these facts, 
 I for one would rely upon American engineers, American 
 conviction and American experience, and accept the lock- 
 canal proposition. 
 
 In this matter, as in all other practical problems, we may 
 safely take the business point of view, and calculate without 
 bias or prejudice the respective advantages and disadvan- 
 tages; and the more thorough the method of reasoning and 
 logic applied to the canal problem the more emphatic and in- 
 controvertible the conclusion that the Congress should decide 
 in favor of a plan which will give us a navigable waterway 
 across the Isthmus within a measurable distance of time and 
 with a reasonable expenditure of money, as opposed to a 
 visionary theory of an ideal canal which may ultimately be 
 constructed, possibly for the exclusive benefit of future gen- 
 erations, but at an enormous waste of money, time, and 
 opportunity. I do not think we want to repeat at this late 
 stage of the canal problem the fatal error of De Lesseps, who, 
 
 H5 
 
Life Insurance and Other Subjects 
 
 when he had the opportunity in 1879 to make a choice of a 
 practical waterway, being influenced by his great success 
 at Suez, upon the most fragmentary evidence and in the 
 absence of definite knowledge of actual conditions, decided 
 beforehand in favor of a sea-level canal. It was largely his 
 bias and prejudice which proved fatal to the enterprise and 
 to himself. 
 
 I may recall that the so-called "international congress of 
 1879" was a mere subterfuge; that the opinions of eminent 
 engineers, including all the Americans, were opposed to a sea- 
 level project and in favor of a lock canal, but De Lesseps had 
 made his plans, he had arrived at his decision, and in his own 
 words, at a meeting of the American Society of Civil Engi- 
 neers held in January, 1880, said, "I would have put my hat 
 on and walked out if any other plan than a sea-level canal 
 project had been adopted." 
 
 The situation to-day is very similar to the critical state of 
 the canal question in 1902. What was then a question of 
 choice of route is to-day a question of choice of plan. What 
 was then a geographical conflict is to-day a conflict of en- 
 gineering opinions. It has been made clear by the refer- 
 ence to the report of the Board of Consulting Engineers and 
 by the testimony of the engineers before the Senate committee 
 that the opinion of eminent experts is so widely at variance 
 that there is little, if any, hope of an ultimate reconciliation. 
 It is a choice of one plan or the other — of a sea-level or a 
 lock canal. In respect to either plan a mass of testimony 
 and data exists, which has been brought forward to sustain 
 one view or the other. In respect to either plan there are 
 advantages and disadvantages. The majority of the Senate 
 Committee on Interoceanic Canals have reported favorably 
 a bill providing for the construction of a canal at sea-level. 
 From this majority opinion the minority of the committee 
 emphatically and unequivocally dissent, and in their report 
 they express themselves in favor of the lock canal. 
 
 2^6 
 
The American Type of Isthmian Canal 
 
 The minority report calls attention to the changed con- 
 ditions and requirements, which now demand a canal of much 
 larger dimensions than originally proposed. Even as late as 
 1901 the depth of the canal prism was to be only 35 feet, 
 against 40 to 45 feet in the project of only five years later. 
 The bottom width has been increased from 150 to 200 feet 
 and over. The length of the locks has been changed from 
 740 to 900 feet, and the width from 84 to go feet. These 
 facts must be kept in mind, for they bear upon the ques- 
 tions of time and cost, and a sea-level or lock canal, as 
 proposed to-day, is in all respects a very much larger 
 affair, demanding very superior facilities for traffic, than any 
 previous canal project ever suggested or proposed. This 
 change in plans was made necessary by the Spooner act, 
 which provides for a canal of such dimensions that the 
 largest ship now building, or likely to be built within a 
 reasonable period of time, can be accommodated. 
 
 Now, the estimated saving in money alone by adopting 
 the lock plan — that is, on the original investment, to say 
 nothing of accumulating interest charges — ^would be at least 
 IS 1 00,000,000. Granting all that is said in favor of a sea- 
 level canal, it is not apparent by any evidence produced that 
 such a canal would prove a material advantage over a lock 
 canal. All its assumed advantages are entirely offset by the 
 vastly greater cost and longer period of time necessary for 
 construction, and I am confident that they would not be con- 
 sidered for a moment if the canal were built as a commercial 
 enterprise. I do not think that they should hold good where 
 the canal is the work of the nation, because a vast sum of 
 money otherwise needed will be eventually sunk if the 
 sea-level project is adopted, and entirely upon the theory 
 that if certain conditions should arise then it would be 
 better to have a sea-level than a lock canal. We have 
 never before proceeded in national undertakings upon such 
 an assumption; we have never before, as far as I know, 
 
 H7 
 
Life Insurance and Other Subjects 
 
 deliberately disregarded every principle of economy in money 
 and time; we have never before in national projects attempted 
 to conform to merely theoretical ideas, but we have always 
 adhered to practical, hard common-sense notions of what 
 IS best under the circumstances. 
 
 The majority of the committee attack the proposition 
 that the proposed lock canal will have "locks with dimen- 
 sions far exceeding any that have ever been made." If this 
 principle were adopted in every other line of human effort all 
 advancement would come to an end — even the canal enter- 
 prise itself — for, as it stands to-day, it far exceeds in magni- 
 tude any corresponding effort ever made by this or any other 
 nation. They say that the proposed flight of three locks at 
 Gatun would be objectionable and unsafe, but we have the 
 evidence of American engineers of the highest standing, 
 whose reputations are at stake, who are absolutely confident 
 that these locks can be constructed and operated with entire 
 safety. The committee say that "the entry through and 
 exit from these contiguous locks is attended with very great 
 danger to the lock gates and to the ships as well"; but if mere 
 inherent danger of possible accidents were an objection 
 there would be no great steamships, no great battleships, no 
 great bridges and tunnels, no great undertakings of any kind. 
 
 The committee point out that accidents have occurred 
 in the "Soo" Canal and in the Manchester Ship Canal; but 
 the conditions, in the first place, were decidedly different, 
 and, in the second place, they proved of no serious conse- 
 quence as a hindrance to traffic and did no material injury to 
 the canal. The "Soo" Canal has been in operation as a lock 
 canal for some fifty years; it has been enlarged from time 
 to time, and to-day accommodates a larger trafiic than passes 
 through all other ship canals of the world combined. It is a 
 sufficient answer to the objections to say that this experience 
 should have a determining influence in arriving at a con- 
 clusion, for the inherent problems of lock-canal construction 
 
 24B 
 
The American Type of Isthmtan Canal 
 
 are as well understood by American engineers as any 
 other problems or questions in engineering science. The 
 proposed deep waterway with a 30-foot channel from Chicago 
 to tide-water, which has been surveyed by direction of Con- 
 gress, proposes an expenditure of $303,000,000, and several 
 locks with a lift of 40 feet or more. The enlargement of 
 the Erie Canal by the State of New York, at an expenditure 
 of $101,000,000, involves engineering problems, including 
 lock construction, not essentially different from those inherent 
 in the lock-canal project at Panama; and if these problems 
 can be solved by our engineers at home, it stands to reason 
 that we may rely upon their judgment that they can be solved 
 at Panama. 
 
 The majority of the Senate committee object to the pro- 
 posed dam at Gatun, and say that — 
 
 Earth dams founded on the drift and silt of ages, through which water 
 habitually percolates, to be increased by the pressure of the 8S-foot lock when 
 made, have been referred to by many of our technical advisers as another element 
 of danger. The vast masses of earth piled on this alluvial base to the height of 
 135 feet will certainly settle, and as the drift material of this base or foundation 
 has varying depth, to 250 feet or more, the settlement of the new mass, as well 
 as its base, will be unequal, and it is predicted that cracks and fissures in the 
 dam will be formed, which will be reached and used by the water under the 
 pressure above mentioned, and will cause the destruction of the dam and the 
 draining off of the great lake upon which the integrity of the entire canal rests. 
 
 But all of this is mere conjecture. The evidence of 
 Engineer Stearns, a man of large experience, and of Engi- 
 neer Harrod, familiar with river hydraulics and levee con- 
 struction, and of many others, is emphatically to the contrary. 
 There is not an American engineer of ability, nor an Ameri- 
 can contractor of experience, who would not undertake to 
 build the proposed dam at Gatun and guarantee its safety 
 and permanency without any hesitation whatever. The 
 alternative proposal of a dam at Gamboa would be as objec- 
 tionable upon much the same ground, and the dam there, 
 which is indispensable to the sea-level project, has also been 
 considered unsafe by some of the engineers. In all ques- 
 tions of this kind the aggregate experience of mankind ought 
 
 24.g 
 
Life Insurance and Other Subjects 
 
 to have greater weight than the abstract theories of individ- 
 uals, and I am confident that our engineers, who have so 
 successfully solved problems of the greatest magnitude in 
 the reclamation projects of the far West and in the control 
 and regulation of the floods of the Mississippi River, will 
 solve with equal success similar problems at Panama. 
 
 The committee further says that the sea-level project 
 contemplates the removal of some 110,000,000 cubic yards 
 of material, while the lock canal would require the removal 
 of only about half that quantity, or, in other words, that 
 there is a difference of some 57,000,000 cubic yards, which, 
 "to omit to take out . . . is to confess our impotence, 
 which is not characteristic of the American people or their 
 engineers or contractors." By this method of reasoning a 
 nation which can build a battleship of 16,000 tons displace- 
 ment is impotent if it cannot build one of twice that tonnage, 
 and if this reason applies to quantity of material, why not say 
 that a nation which can dig a canal 150 feet wide through a 
 mountain some seven miles in length admits its impotence 
 if it cannot dig one 300 feet wide, or 600 feet, if it should 
 please to do so 1 But why should it be less difficult or a 
 declaration of impotency on the part of our engineers to build 
 a safe lock canal, including a satisfactory and safe controlling 
 dam at Gatun 1 As I conceive the problem, it is one of 
 reasonable compromise, and while I do not question the 
 ability of American engineers and contractors to build a 
 sea-level canal, I am convinced by the facts in evidence that 
 they cannot do it within the time and for the money assumed 
 by the advocates of the sea-level project. 
 
 This question of time is of supreme importance. Ten 
 years in a nation's life is often a long space in national his- 
 tory. Many times the map of the world has been changed 
 in less than a decade. No man in 1890 anticipated the war 
 with Spain in 1898, and no man in 1906 can say what import- 
 ant event may not happen before the next decade has passed. 
 
 250 
 
The American Type of Isthmian Canal 
 
 The progress during peace is far greater in its permanent 
 effect than the changes brought about by war. The world's 
 commerce, the social, commercial, and political development 
 of the South American republics and of Asiatic nations, all 
 depend, more or less, upon the completion of an Isthmian 
 waterway. It is the duty of this nation, since we have assumed 
 this task, to construct a waterway across the Isthmus within 
 the shortest reasonable period of time. Valuable years 
 have passed, valuable opportunities have gone by. In 1884 
 De Lesseps, with supreme confidence and upon the judgment 
 of his engineers, anticipated the opening of the Panama Canal 
 in 1888. That was nearly twenty years ago. Shall it be 
 twenty years more before that greatest event in the world's 
 commercial history takes place.'' Had De Lesseps in 1879 
 gone before the International Congress with a proposition for 
 a feasible canal at reasonable cost, free from prejudice or 
 bias, had he then adopted the American suggestion for a lock 
 canal, he would probably have lived to see its completion, 
 and the world for fifteen years would have had the use of a 
 practical waterway across the Isthmus. 
 
 As to safety in operation, which the committee discuss 
 in their report, there is one very important point to be kept 
 in mind, and that is that nine-tenths, or possibly a larger 
 proportion, of shipping will be of vessels of relatively small 
 size. If this should be the case, then the sea-level project 
 contemplates a canal chiefly designed to meet the possible 
 needs of a very small number of vessels of largest size, 
 while the lock canal provides primarily for the accommo- 
 dation of the class of steamships which of necessity would 
 make the largest practical use of the Isthmian waterway. 
 Now, it stands to reason that special precautions would 
 be employed during the passage of a very large vessel, 
 either merchantman or man-of-war, and even if necessity 
 should demand the rapid passage of a fleet of vessels, 
 say twenty or thirty, it is not conceivable that a condition 
 
Life Insurance and Other Subjects 
 
 would arise which could not be efficiently safeguarded 
 against by those in actual charge and responsible for 
 safety in the management of the canal. Considering the 
 immense tonnage passing through the "Soo" Canal, which 
 would not be equaled in the Panama Canal for a century to 
 come, the very few and relatively unimportant accidents which 
 have occurred during the fifty years of operation of that 
 waterway are in every respect the most suggestive indorse- 
 ment of the lock-canal project which could be advanced. 
 
 The time of transit, in the opinion of the majority com- 
 mittee of the Senate, would be somewhat longer in the 
 case of a lock canal. This may be so, though much de- 
 pends upon the class of ships passing through and their 
 number. To the practical navigator the loss of a few hours 
 would be a negligible quantity compared with the higher 
 tolls that will necessarily be charged if an additional ;^ioo,- 
 000,000 is expended in construction and an additional interest 
 burden of at least fc,ooo,ooo per annum has to be pro- 
 vided for. I understand that the actual value of an hour 
 or two in the case of commercial ships of average size would 
 be a matter of comparatively no importance in contrast with 
 the all-suggestive fact that the alternative project of a sea- 
 level canal would provide no navigation whatever across the 
 Isthmus for probably ten years more. If it is an advantage 
 to gain an hour or two in transit ten years hence by having 
 no transisthmian shipping facilities for the ten years in 
 the meantime, then it might as well be argued that it would 
 be better to project a sea-level canal 300 feet wide at every 
 point, so that the commerce of the year 2000 may be properly 
 provided for. But to the practical navigator of the year 1916, 
 who leaves the port of New York for San Francisco by way 
 of Cape Horn, a possible loss of two or three hours or more 
 would be many times preferable, if the Isthmus were open 
 for trafiic, to a certain loss of from forty to fifty days to make 
 the voyage all around South America. 
 
 252 
 
The American Type of Isthmian Canal 
 
 Upon the question of cost of maintenance the majority 
 committee in their report point out that the Board of 
 Consulting Engineers did not submit the details of any 
 estimate of cost of maintenance, repairs, etc., but they 
 say that this factor was properly taken into account by 
 the minority favoring a lock canal. Now, there is prob- 
 ably no more important question connected with the 
 whole canal problem than this, for if the annual expense 
 of maintenance, to be provided for by Congressional 
 appropriations, should attain such an exorbitant figure as 
 to make any fair return upon the investment impossible, 
 it is conceivable that the most serious political and fi- 
 nancial consequences might arise and the success of the 
 enterprise itself might be placed in jeopardy. Upon a 
 maximum cost, in round figures, of $200,000,000 for a 
 lock canal, and of $300,000,000 as a minimum for a sea- 
 level canal, the additional annual interest charge would be 
 at least $2,000,000. 
 
 But Mr. Stearns estimates that under certain condi- 
 tions a sea-level canal might cost as much as ;^4 10,000,000, 
 which would add millions of dollars more per annum to 
 the fixed charges which must be included in the cost of 
 maintenance, to say nothing of a possibly much higher cost 
 of operation. Nor can I agree to the statement that the 
 cost of operation of a sea-level canal would be $800,000 
 per annum less than in the case of a lock canal; but, on 
 the contrary, I am fully satisfied that the expense would be 
 very much greater in the sea-level project, if proper allow- 
 ance is made for interest charges upon the additional 
 outlay, which cannot be rightfully ignored. Upon this 
 important point the evidence of the engineers and of the 
 minority members of the Board is strongly in favor of the 
 lock-canal project. 
 
 As regards ultimate cost, the estimates of the majority 
 are very much more indefinite and conjectural than the more 
 
 253 
 
Life Insurance and Other Subjects 
 
 carefully prepared estimates of the minority of the Board 
 of Consulting Engineers. Upon this point the majority 
 of the Senate committee say : 
 
 There are two estimates now before the Senate, both originating with the Board 
 of Consulting Engineers. The basis of computation of cost at certain unit prices 
 was adopted unanimously by the Board, and we are told that the cost, with the 
 20 per cent, allowance for contingencies, will be, for the sea-level canal, the sum 
 of $247,021,200. Your committee has adopted the figures stated by the majority 
 on page 64 of its report of a total of $250,000,000 for the ultimate final cost of the 
 sea-level canal. 
 
 The estimate of the minority for a lock canal at a level 
 of 85 feet is, in round figures, ;? 140,000,000, or about i^iio,- 
 000,000 less than for a sea-level canal, which would represent 
 a difference of ;^2,200,ooo per annum in interest charges at 
 the lowest possible rate of 2 per cent. The majority of the 
 Senate committee attempt to meet this difference by capitaliz- 
 ing the estimated higher maintenance charge, which they fix 
 at ^800,000 per annum, and they thus increase the total cost 
 of a lock canal by ^40,000,000; but this, I hold, involves 
 a serious financial error, unless a corresponding allowance 
 is made for the ultimate cost of the sea-level project. There 
 is, however, no serious disagreement upon the point that a 
 sea-level canal in any event would cost a very much larger 
 sum as an original outlay, certainly not less than ^120,000,- 
 000 more, and, in all probability, in the opinion of qualified 
 engineers, including Mr. Stevens, the chief engineer, twice 
 that sum. 
 
 Reference is made in the report to the probable value of 
 the land which will be inundated under the lock-canal proj- 
 ect with a dam at Gatun, the value of which has been 
 placed at approximately ^300,000. The majority of the 
 Senate committee estimate that this amount might reach 
 ^10,000,000, or as much as was paid for the entire Canal 
 Zone. The estimate is based upon the price of certain lands 
 required by the government near the city of Panama, but 
 one might as well estimate the worth of land in the Adiron- 
 dacks by the prices paid for real estate in lower New York. 
 
 254 
 
The American Type of Isthmian Canal 
 
 The item, no doubt, requires to be properly taken into 
 account, but two independent estimates fix the probable 
 sum at $300,000 for lands which are otherwise practically 
 valueless and which would only acquire value the moment 
 the United States should need them. In my opinion, the 
 value of these lands will not form a serious item in the 
 total cost of the canal, and I have every reason to believe 
 that independent estimates of the minority engineers of the 
 Consulting Board, and of Mr. Stevens, may be relied upon 
 as conservative. 
 
 The majority of the Senate committee further say that — 
 
 It is not necessary to dwell upon the fact that all naval commanders and com- 
 mercial masters of the great national and private vessels of the world are almost to 
 a man opposed unalterably to the introduction of any lock to lift vessels over the 
 low summit that nature has left for us to remove. 
 
 I am not aware that any material evidence of this charac- 
 ter has come before the Senate Committee on Isthmian 
 Affairs, investigating conditions at Panama. I do know 
 this, however, that until very recently it has been the Ameri- 
 can project to construct a lock canal. All the former advo- 
 cates of an American canal by way of Panama or Nicaragua, 
 or by any other route, contemplated a lock canal of a much 
 more complex character than the present Panama project. 
 All the advocates of a canal across the Isthmus, including 
 many distinguished engineers in the army and navy, have 
 been in favor of a lock canal, and almost without exception 
 have reported upon the feasibility of a lock canal across the 
 Isthmus and upon its advantages to commerce and naviga- 
 tion, and in military and naval operations in case of war. 
 The Nicaragua Canal, as recommended to Congress and as 
 favored by the first Walker Commission, provided for a 
 lock project far more complex than the proposition now 
 under consideration. 
 
 Colonel Totten, who built the Panama railroad, recom- 
 mended as early as 1857 the construction of a lock canal; 
 Naval Commissioner Lull, who made a careful survey of 
 
 255 
 
Life Insurance and Other Subjects 
 
 the Isthmus in 1874, recommended a lock canal with a sum- 
 mit level of 124 feet and with 24 locks. Admiral Ammen, 
 who, by authority of the Secretary of War, attended the 
 Isthmian Congress of 1879, favored a lock project, in strong 
 opposition to the visionary plan of De Lesseps. Admiral 
 Selfridge and many other naval officers who have been 
 connected with Isthmian surveying and exploration have, 
 never, to my knowledge, by as much as a word expressed 
 their apprehensions regarding the feasibility or practica- 
 bility of a lock canal. 
 
 As a matter of fact and canal history, the lock project 
 has very 'properly been considered "an American concep- 
 tion of the proper treatment of the Panama canal problem." 
 Mr. C. D. Ward, an American engineer of great ability, as 
 early as 1879, suggested a plan almost identical with the one 
 now recommended by the minority of the Consulting Board, 
 including a dam at Gatun, instead of Bohio or Gamboa; 
 and, in the words of a former president of the American 
 Society of Civil Engineers, Mr. Welsh, "The first thought of 
 an American engineer on looking at M. De Lesseps' raised 
 map is to convert the valley of the lower Chagres into an 
 artificial lake some twenty miles long by a dam across the 
 valley at or near a point where the proposed canal strikes 
 it, a few miles from Colon, such as was advocated by C. D. 
 Ward in 1879." The site referred to was Gatun, and this 
 was written in 1880, when the sea-level project had full sway. 
 
 So that it is going entirely too far to say that all naval 
 commanders and commercial masters are in favor of the 
 sea-level project. Admiral Walker himself, as president 
 of the former Isthmian Commission, and as president of 
 the Nicaraguan Board, favored a lock canal. Eminent 
 army engineers, like Abbot, Hains, Ernst, and others, favor 
 the lock project. It requires no very extensive knowledge of 
 navigation to make it clear that passing through a waterway 
 which for 35 miles, or 71 per cent, of its distance, will have 
 
 256 
 
The American Type of Isthmian Canal 
 
 a. width of 500 feet or more, compared with one which, for 
 the larger part, or for some forty-one miles, will have a width 
 of only 200 feet or less, must appeal to the sense of security 
 of the skipper while taking his vessel through the canal. 
 
 But it is a question of general principles, and not of per- 
 sonal preference. Our concern is with a matter of fact, and 
 not with a theory. No ship-owner on the Great Lakes con- 
 siders it a serious hindrance to navigation for vessels to pass 
 through the lock of the "Soo" Canal; no shipper running 
 1,000-ton barges through the future Erie Canal will have the 
 least apprehension of danger or destruction; no captain navi- 
 gating a vessel or boat through the proposed deep waterway 
 from the ocean to the Lakes will hesitate to pass through locks 
 with a proposed lift of over forty feet. These apprehensions 
 are imaginary and not real. They are not derived from 
 experience or from a summary statement of shipmasters 
 and naval officers, but from the individual expressions and 
 prejudice of a few who are opposed to the lock project. I am 
 confident that if the matter is left to the practical navigator, 
 to the ship-owner, and to the self-reliant naval officer, there 
 will be no serious disagreement with the opinion that a lock 
 canal, which can be built within a reasonable period of 
 time, is preferable to any sea-level canal which may be built 
 and opened to navigation twent}' years hence or later. 
 
 There are two objections made by the majority of the 
 Senate committee against a lock canal which require more 
 extended consideration. These are, the protection of the 
 canal in case of war and the danger of serious injury or total 
 destruction by possible earth movements or so-called "earth- 
 quakes." Regarding the military aspects of the canal prob- 
 lem, the majority of the Senate committee say: 
 
 The Spooner act and the Hay-Varilla treaty contemplated the fortification 
 and military protection of the canal route. No proposition affecting this policy 
 is now before the Senate. In so far as the type of canal to be adopted has a bear- 
 ing upon the jeopardy to or immunity of the canal from risk of malicious injury, the 
 subject of safety and protection is pertinent and most important. If a canal of one 
 
Life Insurance and Other Subjects 
 
 type would be more liable to injury than another, this liability should under no 
 circumstances be neglected in determining the type or plan. It does not require 
 argument that the use of the canal by the United States will cease if the control 
 passes to a hostile power between which and the United States a state of war 
 exists, but this is true whatever the type may be. 
 
 As the majority of the committee point out, "no proposi- 
 tion affecting this project is now before the Senate." In 
 my opinion, none is necessary. The neutrality of the canal 
 is, by implication at least, assured, and we have pledged 
 our national good faith that the waterway will be open to 
 all the nations of the world. Some time in the future, when 
 the canal is completed and an accepted fact, it may be ad- 
 visable to adopt the course pursued in the case of the Suez 
 Canal. The original concession for that canal provided, by 
 section 3, for its subsequent fortification, but this was never 
 carried into effect. By a convention dated December 22, 
 1888, among Great Britain, Germany, and other nations, 
 the free navigation of the Suez Canal was made a matter of 
 international agreement, and the same has been reprinted 
 as Senate Document No. 151, Fifty-sixth Congress, first 
 session, under date of February 6, 1900. 
 
 This, in any event, is a problem of the future. The canal 
 is the property of the United States, and we shall always re- 
 tain control. In the event of war we shall rely with confi- 
 dence upon our navy to protect our interests on the Pacific 
 and in the Caribbean Sea, but even more may we rely upon 
 the all-important fact that it could never be to the interest 
 of any other nation sufficient in size to be at war with us to 
 destroy this international waterway, which will become an 
 important necessity to the commerce of each and all. No 
 neutral nation engaged in extensive commerce or trade 
 would for an instant allow another nation at war with the 
 United States to injure or destroy the canal or to seriously 
 interfere with the traffic passing through it. To destroy 
 as much as a single lock, to injure as much as a single 
 gate, would be considered equal to an act of war by every 
 
 258 
 
The American Type of Isthmian Canal 
 
 commercial nation of the earth. In this simple fact lies a 
 greater assurance of safety than in all the treaties which 
 might be made or in all the fortifications which might be 
 established to protect the canal. 
 
 The majority of the committee well say in their report, 
 that the power of mischief "is within easy reach of all." The 
 possibility of an assumed occurrence is very remote from its 
 reasonable probability. We have to rely upon our own good 
 faith and the watchful eyes of our officers. Against possible 
 contingencies, such as are implied in the assumed destruc- 
 tion of the locks by dynamite or other high explosives, we 
 can do no more than take the same precautions which we 
 take in all other matters of national importance. We have 
 to take our chances the same as any other nation would; 
 the same as commercial enterprise would. Certainly the 
 remote possibility of such an event, the still more remote 
 contingency that the injury would be serious or fatal to the 
 operation of the canal, should not govern in a decision to 
 construct a canal for the use of the present generation rather 
 than for the generations to come. No canal can be built free 
 from vulnerable points; no forts, no battleships, can be built 
 free from such a risk. It would be folly to delay the con- 
 struction of a canal; it would be folly to sink a hundred 
 million dollars or more upon so remote a contingency as 
 this, which belongs to the realm of fanciful or morbid imagi- 
 nation rather than to the domain of substantial fact and 
 actual experience. 
 
 As a last resort, the opposition to a lock canal brings for- 
 ward the earthquake argument. It is a curious reminder 
 of the early and bitter opposition to the building of the Suez 
 Canal; its enemies had to fall back upon the absurd theory 
 that the canal would prove a failure because the blowing 
 sands of the desert would soon fill the channel. It was seri- 
 ously proposed to erect a stone wall four feet high on each 
 side of the embankment to provide against this imaginary 
 
 259 
 
Life Insurance and Other Subjects 
 
 danger to the canal. Another early objection to the Suez 
 Canal was that the Red Sea level was 30 feet above the 
 level of the Mediterranean, only set at rest in 1847 by a 
 special commission, which included Mr. Robert Stephenson, 
 the great son of a great father, bitter to the last in his 
 opposition to the canal, which he considered an imprac- 
 ticable engineering scheme. There was much talk about 
 the assumed prevalence of strong westerly vvinds on the 
 southern Mediterranean coast, and the danger of constantly 
 increasing deposits of the Nile, it was said, would render 
 the establishment of a port impossible. It was necessary 
 to place a war-ship for a whole winter at anchor three 
 miles from the shore to prove the error of this assumption 
 and set at rest a foolish rumor which came near proving 
 fatal to the enterprise. 
 
 Earthquakes have occurred on the Isthmus, and there 
 is record of one shock of some consequence in 1882. The 
 matter has been inquired into in a general way by the various 
 Isthmian commissions, and assumed some prominence dur- 
 ing the discussions and debates regarding a choice of routes. 
 It was plain to even the least informed that the volcanic belt 
 of Nicaragua constituted a real menace to a canal in that 
 region; and one of the strongest arguments advanced in the 
 minority report of the Senate committee of 1902, submitted 
 by Senator Kittredge, now a leading advocate of the sea- 
 level project, in opposition to the Nicaragua Canal, was the 
 assertion of the practical freedom of the Panama Isthmus 
 from the danger of earth movements. 
 
 The minority of the Senate committee of 1902 in their 
 report, summing up the final reasons in favor of the Panama 
 route (section 12), said: 
 
 At Panama earthquakes are few and unimportant, while the Nicaraguan 
 route passes over a well-known coastal weakness. Only five disturbances of any 
 sort were recorded at Panama, all very slight, while similar official records at San 
 Jose de Costa Rica, near the route of the Nicaragua Canal, show for the same 
 period fifty shocks, a number of which were severe. (P. 11, S. Rep. 783, part 2, 
 57th Cong., 1st session, May 31, 1902.) 
 
 260 
 
The American Type of Isthmian Canal 
 In another part of their report the committee said : 
 
 With the dreadful lessons of Martinique and St. Vincent fresh in our minds, 
 we should be utterly inexcusable if we deliberately selected a route for an Isthmian 
 canal in a region so volcanic and dangerous, when a route is open to us which is 
 exposed to none of these dangers and is in every other respect more advantageous. 
 
 And they quote Professor Heilprin, an authority on the 
 subject, in part, as follows: 
 
 It has, however, been known for a full quarter of a century that the main 
 Andes do not traverse the Isthmus of Panama, and that there are no active or re- 
 cently decayed volcanoes in any part of the Isthmus. So far, however, as danger 
 from direct volcanic contacts is concerned, the Panama route is exempt. (Pp. 22- 
 23.) 
 
 And further: 
 
 This district represents the most stable portion of Central America. No vol- 
 canic eruptions have occurred there since the end of the Miocene epoch, and there 
 are no active volcanoes between Chiriqui and Tolima, a distance of about four 
 hundred miles. Such earthquakes as have occurred are chiefly those proceeding 
 from the disturbed districts on either hand, with intensity much diminished by the 
 distance traversed. The canal lies in a sort of dead angle of comparative safety. 
 
 The report continues : 
 
 The situation being, then, that the danger from volcanoes at Panama is noth- 
 ing, and that from earthquakes practically nothing, while at Nicaragua the canal 
 would be situated in one of the most dangerous regions of the world from both 
 these causes, the question should be considered settled. 
 
 This was the opinion of the committee of 1902; it was 
 emphatic and plain in its language; it had considered expert 
 views and the available data. It had before it the full report 
 of the Nicaragua Canal Commission, printed under date of 
 May 15th of the same year. Chapter VII of which considers 
 the subject at much greater length than has been done since 
 that time and with a full knowledge of the facts and free 
 from bias or prejudice. With the then recent occurrence 
 at Mount Pelee in mind, and with a full understanding of the 
 liability of the Isthmus to seismic shocks of minor import- 
 ance, the committee emphatically indorsed the lock-canal 
 project at Panama. 
 
 Much can be said with regard to this matter, and it is 
 one which should, and no doubt will, receive the most care- 
 ful consideration of the engineers in charge of the work. 
 
 261 
 
Life Insurance and Other Subjects 
 
 Seismic disturbances have occurred in all parts of the world, 
 and they have occurred at Panama. Where they are not 
 directly of volcanic origin they appear to be the result of 
 subsidence or contraction of the earth's crust, and they have 
 occurred and caused serious destruction far from centers of 
 volcanic activity, among other places, at Lisbon, Portugal, 
 and at Charleston, S. C. Some sections of the earth, as for 
 illustration Japan and the Philippines, are no doubt more 
 subject to these movements than others, and sections sub- 
 ject to such movements at one period of time may be ex- 
 empt for many years if not forever thereafter. 
 
 The fearful earthquake which affected Charleston, S. C, 
 in 1886 had no corresponding precedent in that section, nor 
 has it been followed by a similar disturbance. Regardless 
 of the terrible experience of 1886, the government has now 
 in course of construction at Charleston a navy-yard, and a 
 great dry-dock, costing many millions of dollars, which will be 
 operated by locks or gates, and, I presume, the question of 
 earthquakes or earth movements has not been raised in any 
 of the reports which have been made regarding this under- 
 taking. Earthquakes formerly were quite frequent in New 
 England, and they extended to New York during the early 
 years of our history, and for a time Boston and Newbury, 
 Mass., Deerfield, N. H., and particularly East Haddam, 
 Conn., were the centers of seismic activity, which by inference 
 might be used as an argument against our navy-yards at 
 Portsmouth, N. H., and Charlestown, Mass., our torpedo 
 station at Newport, or the fortifications at Willets Point. 
 The earthquake which destroyed Lisbon in 1755 might with 
 equal propriety be used as an argument against the build- 
 ing of the extensive docks and fortifications at Gibraltar, 
 but no one, I think, has ever questioned the solidity of 
 the Rock. 
 
 Seismology is a very complex branch of geologic inquiry 
 and it is a subject regarding which very httle of determining 
 
 262 
 
The American Type of Isthmian Canal 
 
 value is known. Theories have been advanced that under 
 certain geological conditions earth movements would be 
 comparatively infrequent, if not impossible. Wliether such 
 conditions exist at Panama would have to be determined 
 by the investigations of qualified experts. It would seem, 
 however, from such data as are available, that the local con- 
 ditions are decidedly favorable to a comparative immunity 
 of this region from serious seismic shocks, at least such as 
 would do great and general damage. Nor can it be argued 
 that the locks and dams would be exposed to special risk. The 
 earthquake of 1882 did more or less damage, but the reports 
 are of a very fragmentary character. Newspaper reports 
 in matters of this kind have very small value. Injury was 
 done to the railway, but not of very serious consequence. 
 
 If the risk exists, it would affect equally a sea-level canal, 
 in that it would threaten the tidal lock, the dam at Gamboa, 
 and the excavation through Culebra cut. Very little is 
 known regarding earthquake motions, and there are very 
 few seismic elements which are really calculable in conformity 
 to a mathematical theory of probability. It is a subject which 
 has not received the attention in this country of which it is 
 deserving, but enough of seismic motion is known to war- 
 rant the conclusion that the Senate committee of 1902 was, 
 in all human probability, entirely correct when it made light 
 of the danger of the probability of seismic shocks at Panama. 
 
 In fine, the earthquake argument has little or no force 
 against a lock-canal project, and it has never received serious 
 consideration as such or been used in arguments against a 
 lock canal until the recent San Francisco disaster brought 
 the subject prominently before the public. It is a danger 
 as remote as a possible destruction of the proposed terminal 
 plants at Colon and Panama by flood waves equal in magni- 
 tude to the one which destroyed Galveston in 1900, but such 
 dangers are inherent in all human undertakings. They 
 must be taken as a matter of chance and remote possibility, 
 
 263 
 
Life Insurance and Other Subjects 
 
 which for all present purposes may be left out of account, 
 except that the subject should receive the due consideration 
 of the engineers and perhaps be made a matter of special 
 and comprehensive inquiry by the Geological Survey. In 
 any serious consideration of the facts for or against a lock 
 canal, I am confident that the earthquake risk may safely 
 be ignored. The comprehensive report of the minority 
 members of the Senate Committee on Interoceanic Affairs 
 is a sufficient and conclusive answer to all the important 
 points which are in controversy, and it remains for Con- 
 gress to cut the "Gordian knot" and put an end to an 
 interminable discussion of much solid and substantial con- 
 viction on the one hand and of a vast amount of opinion and 
 guesswork on the other hand. All of the evidence, all of 
 the supplementary expert testimony which may be obtained 
 upon the merits of the two propositions, will not change the 
 position of those who rest their conclusions upon American 
 experience and upon the judgment of American engineers, 
 and who favor a lock canal. While there is no doubt that 
 such a canal can be constructed and can be made a prac- 
 ticable waterway, there is a very serious question whether a 
 sea-level canal can be constructed and made a safe and 
 practicable waterway, at least within the limits of the esti- 
 mated amount of cost and within the estimated time. 
 
 The view which I have tried to impress upon the Senate 
 is nothing more nor less than a business view of what is, for 
 all practical purposes, only a business proposition. If a 
 lock canal can be built, useful for all purposes, at half the 
 ^st and within half the time of a sea-level canal, then I can 
 come to no other conclusion than that a lock canal would be 
 decidedly to our political and commercial advantage. A 
 decision, however, should be arrived at. The canal project 
 has reached a stage where the final plan or type must be de- 
 termined, and it is the duty of Congress to act and to fix, for 
 once and for all time, the type of canal, with the same cour- 
 
 26^ 
 
The American Type of Isthmian Canal 
 
 age and freedom from prejudice or bias as was the case in 
 the decision which finally fixed the route by way of Panama. 
 
 Any amount of additional testimony and expert opinion 
 will only add to the confusion and tend to produce a more 
 hopeless state of affairs. Let Congress fix the t}'pe in broad 
 outlines and leave it to responsible engineers in actual 
 charge to solve problems in detail, and to adapt themselves 
 to local conditions and to new problems which in the course 
 of construction are certain to arise. Let us take counsel of 
 the past, most of all from the experience gained in the con- 
 struction of the Suez Canal, an engineering and commercial 
 success which challenges the admiration of the world. We 
 know how near it came to utter defeat by the conflict of 
 opinion, by the intrigue of conniving and jealous powers, 
 and last, but not least, by the ill-founded apprehensions 
 and fears of those who were searching the vast domain of 
 conjecture and remote possibilities for arguments to cause 
 a-temporary delay or ultimate abandonment. 
 
 It is not difficult to secure the opinion of eminent authority 
 for or against any project when the facts themselves are in dis- 
 pute, and when the objects and aims are not well defined. 
 The great Lord Palmerston, the most bitter opponent of the 
 Suez Canal scheme, in want of a more convincing argument, 
 seriously claimed that France would send soldiers disguised 
 as workmen to the Isthmus of Suez, later to take posses- 
 sion of Egypt and make it a French colony. By one method 
 or another Palmerston tried to defeat the scheme in its be- 
 ginning and to bring it to disaster during the period of con- 
 struction. It is a far from creditable story. History 
 always more or less repeats itself, whether it be in politics 
 or engineering enterprise, but in few affairs are there more 
 convincing parallels than in the canal projects of Panama 
 and Suez. Lord Palmerston and Sir Henry Bulwer, then 
 the ambassador at Constantinople, did all in their power 
 to destroy public confidence in the enterprise, and they were 
 
 265 
 
Life Insurance and Other Subjects 
 
 completely successful in preventing English investments 
 in the stock of the canal.* 
 
 It was the same Sir Henry Bulv^er v^ho, in 1850, suc- 
 ceeded by questionable diplomatic methods in foisting upon 
 the American people a treaty which was contrary to their best 
 interests and which for half a century was a hindrance and 
 barrier to an American Isthmian canal. We owe it chiefly to 
 the masterly and straightforward statesmanship of the late 
 John Hay that this obstacle to our progress was disposed of 
 to the entire satisfaction of both nations. I refer to these 
 matters, which are facts of history, only to point out how 
 an interminable discussion of matters of detail is certain to 
 delay and do great injury to projects which should only 
 receive Congressional consideration in broad outlines and 
 upon fundamental principles. If we are to enter into a dis- 
 cussion of engineering conflicts, if we are to deliberate upon 
 mere matters of structural detail, then an entire session of 
 Congress will not suffice to solve all the problems which 
 will arise in connection with that enterprise in the course of 
 time. I draw attention to the Suez experience solely to 
 point out the error of taking into serious account minor and 
 far-fetched objections which assume an undue magnitude in 
 the public mind when they are presented in lurid colors of 
 impending disasters to a national enterprise of vast extent 
 and importance. 
 
 So eminent an engineer as Mr. Robert Stephenson by his 
 expert opinion deluded the British people into the belief that 
 the Suez Canal would not be practicable; that, even if com- 
 pleted, it would be nothing but a stagnant ditch. Said Pal- 
 merston to De Lesseps: 
 
 AH the engineers of Europe might say what they pleased, he knew more than 
 they did, and his opinion would never change one iota, and he would oppose the 
 work to the end. 
 
 Stephenson confirmed this view and held that the canal 
 would never be completed except at an enormous expense, 
 
 * The Maritime Canal of Suez, from its inaagnratioo, November 17, 1869, to the year 1884, by 
 Prof. J. E. Nourse, U. S. N., Washington, 1884 (Senate Document 198, 48th Congress, 1st session). 
 
 266 
 
The American Type of Isthmian Canal 
 
 too great to warrant any expectation of return — a judg- 
 ment both ill advised and erroneous as was clearly proved 
 by subsequent events. I need only say that the Suez Canal is 
 to-day an extremely profitable waterway, and that although 
 the work was commenced and brought to completion without 
 a single English shilling, through French enterprise and upon 
 the judgment of French engineers, it was only a compar- 
 atively few years later when, as a matter of necessity and 
 logical sequence, the controlling interest in the canal was 
 purchased by the English government, which has since made 
 of that waterway the most extensive use for purposes of 
 peace and of war. 
 
 These are the facts of history, and they are not disputed. 
 Shall history repeat itself.? Shall we delay or miscarry in our 
 efforts to complete a canal across the Isthmus of Panama 
 upon similar pretensions of assumed dangers and possi- 
 bilities of disaster, all more or less the result of engineer- 
 ing guesswork .'' Shall we take fright at the talk about the 
 mischief-maker with his stick of dynamite, bent upon the 
 destruction of the locks and the vital parts of the machinery, 
 when history has its parallel during the Suez Canal agita- 
 tion in "the Arab shepherd, who, flushed with the opportu- 
 nity for mischief and with a few strokes of a pickax, could 
 empty the canal in a few minutes" ^. Shall we be swayed 
 by foolish fears and apprehensions of earthquakes or tidal 
 waves, and waste millions of money and years of time upon 
 a pure conjecture, a pure theory deduced from fragmentary 
 facts ^ Again the facts of canal history furnish the parallel 
 of Stephenson and other engineers, who successfully fright- 
 ened English investors out of the Suez enterprise by the state- 
 ment that the canal would soon fill up with the moving sands 
 of the desert, that one of the lakes through which the canal 
 would pass would soon fill up with salt, that navigation of 
 the Red Sea would be too dangerous and difficult, that ships 
 would fear to approach Port Said because of dangerous 
 
Life Insurance and Other Subjects 
 
 seas, and, finally, that in any event it would be impossible 
 to keep the passage open to the Mediterranean. 
 
 It was this kind of guesswork and conjecture which was 
 advanced as an argument by engineers of eminence and sus- 
 tained by one of the foremost statesmen of the century. How 
 absurd it all seems now in the sunlight of history! The Pan- 
 ama Canal is a business enterprise, even if carried on by the 
 nation, and with a thorough knowledge of the general facts 
 and principles we require no more expert evidence, so-called, 
 nor additional volumes of engineering testimony. The nation 
 is committed to the construction of a canal. The enterprise 
 is one of imperative necessity to commerce, navigation, and 
 national defense, and any further discussion, any needless 
 waste of time and money, is little short of indifference to 
 the national interests and objects which are at stake. 
 
 Of objections to either plan there is no end, and there 
 will be no end as long as the subject remains open for dis- 
 cussion. To answer such objections in detail, to search 
 the records for proof in support of, one theory or another, 
 is a mere waste of time which can lead to no possible useful 
 result. Among others, for illustration, there has been placed 
 before us a letter from the chief engineer of the Manchester 
 Ship Canal, who is emphatically in favor of a sea-level water- 
 way. It would have been much more interesting and much 
 more valuable to the members of Congress to have received 
 from Mr. Hunter a statement as to why he should have 
 changed his opinions; or why, in 1898, he should have signed 
 the unanimous report of the technical commission in favor 
 of a lock canal, while now he so emphatically sustains those 
 who favor the sea-level project. It is not going too far to say, 
 appealing to the facts of history, that Mr. Hunter may be 
 seriously in error in this matter and may have drawn upon 
 his imagination rather than upon his engineering experience, 
 the same as Mr. Robert Stephenson was in serious error in 
 his bitter opposition to the canal enterprise at Suez. 
 
 268 
 
The American Type of Isthmian Canal 
 
 Mr. Hunter, in his letter, argues, among other points, 
 that the lifts of the proposed locks would be without precedent. 
 Without precedent .? Why, of course, they would be without 
 precedent. Is not practically every large American engineering 
 enterprise without precedent .? Was not the Erie Canal, 
 completed in 1825, without precedent.'' Were not the first 
 steamboat and the first locomotive without precedent .? 
 Were not the Hoosac Tunnel and the Brooklyn Bridge feats 
 of American engineering enterprise without precedent .? 
 
 Without precedent is the great barge canal which the 
 State of New York is about to build, which will mean a com- 
 plete reconstruction of the existing waterway which connects 
 the ocean with the Great Lakes.* 
 
 All this is without precedent. But it is American. It 
 is progress, and takes the necessary risk to leave the world 
 better, at least in a material way, than we found it. In the 
 proposed deep waterway, which is certain some day to be 
 built to connect the uttermost ends of the Great Lakes with 
 tide-water on the Atlantic, able and competent engineers of 
 the largest experience have designed locks with a lift of 52 
 feet.f That will be without precedent. On the Oswego 
 Canal, proposed as a part of the new barge canal of the State 
 of New York, there will be six locks, two of which will each 
 have a lift of 28 feet, J and that will be without precedent, but 
 neither dangerous nor detrimental to navigation interests. 
 
 Need I further appeal to the facts of past canal history .? 
 Is it necessary to recite one of the best known and most honor- 
 able chapters in the history of inland waterways — I mean the 
 problems and difficulties inherent in the great project of con- 
 structing the canal of Languedoc, or "Canal du Midi," 
 which forms a water communication between the Mediter- 
 ranean and the Garonne and between the Garonne and the 
 
 * For a history of American canal bnilding enterprises see History of New York Canals, ch. 5. 
 
 t Report of the Board of Engineers on Deep Waterways, H. of R., Doc. No. 149, 56th Congress, 
 2d session. Atlas. 
 
 X History of New Yoric Canals, Appendix L, Annual Report of the State Engineer and Surveyor, 
 TOl. 11, Albany, N. Y., 1905. 
 
 26g 
 
Life Insurance and Other Subjects 
 
 Atlantic Ocean, one of the best known canals in France and 
 in the world ? Need I refer to that pathetic story of its chief 
 engineer, Riquet, one of the greatest of French patriots, who, 
 in his abiding faith in this great engineering feat, stood practi- 
 cally alone ? Need I recall that he met with scant assistance 
 from the government, with the most strenuous opposition 
 from his countrymen; that he was treated even as a madman, 
 and that he died of a broken heart before the great work 
 was finished ? 
 
 That canal stands to-day as an engineering masterwork 
 and as a most suggestive illustration of man's ingenuity and 
 power to overcome apparently insuperable natural obstacles. 
 It has been in existence and successful operation, I think, 
 since 1681. For a sixth part of its distance it is carried over 
 mountains deeply excavated. It has, I think, ninety-nine 
 locks and viaducts, and as one of its most wonderful features 
 it has an octuple lock, or eight locks in flight, like a ladder 
 from the top of a clifi^ to the valley below. If in 1681 a 
 French engineer had the ability and the daring to conceive 
 and construct an octuple lock, will any one maintain that 
 more than two hundred years later, with all the enormous 
 advance in engineering, with a better knowledge of hydrau- 
 lics and a more perfect method of transportation and hand- 
 ling of materials — ^will any one maintain that we are not 
 to-day competent to construct successfully a lock canal such 
 as is proposed to be built at Panama upon the judgment 
 of American engineers \ 
 
 Mr. President, the overshadowing importance of the sub- 
 ject has led me to extend my remarks far beyond my original 
 intention. I express my strong convictions in favor of a 
 lock canal and of the necessity for an early and specific dec- 
 laration of Congress regarding the final plan or type of 
 canal which the nation wants to have built at Panama. I am 
 confident that it lies entirely within our power and means to 
 build either type of waterway; that our engineering skill can 
 
 2yo 
 
The American Type of Isthmian Canal 
 
 successfully solve the technical problems involved in either 
 the lock or the sea-level plan ; but there is one all-important 
 factor which controls, and vs^hich, in my opinion, should 
 have more vs^eight than any other, and that is the element of 
 time. If I could advance no other reasons, if I knevsr of no 
 better argument in favor of a lock canal, my convictions would 
 sustain the project which can be completed within a meas- 
 urable distance of years and for the benefit and to the ad- 
 vantage of the present generation. Time flies, and the years 
 pass rapidly. Shall this project languish and linger and 
 become the spoil of political controversy and a subject of 
 political attack I Can we conceive of anything more likely 
 to prove disastrous to the canal project than political strife, 
 which proved the undoing of the French canal enterprise 
 at Panama .? 
 
 Shall the success of this great project be imperiled by the 
 possible changes in the fortunes of parties .? Shall we incur 
 the risk that changes in economic conditions, hard times, 
 or panic and industrial depressions may bring about .? 
 Time flies, and in the progress of industry and commerce, 
 in international competition and the growth of modern 
 nations, no factor is of more supreme importance than the 
 years, with new opportunities for political and commercial 
 development. Shall we, then, neglect our chances .'' Shall 
 we fail to make the most of this the greatest opportunity 
 for the extension of our commerce and navigation into the 
 most distant seas which will ever come to us in our history, 
 because of the demands of idealists, who, with theoretical 
 notions of the ultimately desirable, would deprive the nation 
 and the world of what is necessary and indispensable to 
 those who are living now .? 
 
 Vast commercial and political consequences will follow 
 the opening of the transisthmian waterway. In the annals of 
 commerce and navigation it is not conceivable that there will 
 ever be a greater event or one fraught with more momentous 
 
 271 
 
Life Insurance and Other Subjects 
 
 consequences than uninterrupted navigation between the 
 Atlantic and the Pacific. Little enough can we comprehend 
 or anticipate what the far-distant future will bring forth, 
 but this much we know — that it is our duty to solve the 
 problems of to-day and not to indulge in dreams and fancies 
 in a vain effort to solve the problems of a far-distant future. 
 
 But money also counts. Can we defend an expenditure 
 of an additional ^100,000,000 or more for objects so remote, 
 and upon a basis of theory and fact so slender and so 
 open to question, when a plan and a project feasible and 
 practicable is before us which will meet all of our needs and 
 the needs of generations to come ^. Shall we disregard in 
 the building of this canal every principle of a sound national 
 economy and commit ourselves to an enormous waste of 
 funds and to the imposition of needless burdens upon the 
 taxpayers of this nation and upon the commerce of the 
 world .? At least ^2,000,000 more per annum will be required 
 in additional interest charges, at least ;$ioo,ooo,ooo more will 
 be necessary as an original investment. Do we fully realize 
 what that amount of money would do if applied to other 
 national purposes and projects .? 
 
 I want to place on record my convictions and the reasons 
 governing my vote in favor of the minority report for a lock 
 canal across the Isthmus at Panama. I entered upon an 
 investigation of the subject without prejudice or bias and 
 have examined the facts as they have been presented and as 
 they are a matter of record and of history. I have heard or 
 read with care the evidence as it has been presented by the 
 Board of Consulting Engineers and the vast amount of oral 
 testimony before the Senate Committee on Interoceanic 
 Affairs. I am confident that the minority judgment is the 
 better and that it can be more relied upon, because it is 
 strictly in conformity with the entire history of the Isthmian 
 canal project. I am confident that the objections which have 
 been raised against the lock plan are an undue exaggeration 
 
 272 
 
The American Type of Isthmian Canal 
 
 of difficulties such as are inherent in every great engineering 
 project, and which, I have not the slightest doubt, will be 
 successfully solved by American engineers, in the light of 
 American experience, exactly as similar difficulties have 
 been solved in many other enterprises of great magnitude. 
 
 I am not impressed with the reasons and arguments ad- 
 vanced by those who favor the sea-level project, for they do 
 not appeal to me as being sound, and in some instances 
 they come perilously near to being engineering guesswork 
 characteristic of the earlier enterprises of De Lesseps. I can- 
 not but think that bias and prejudice are largely responsible 
 for the judgment of foreign engineeers so pronounced in 
 favor of a sea-level project. Furthermore, I am entirely 
 convinced that the judgment and experience of American 
 engineers in favor of a lock canal may be relied upon with 
 entire confidence, and that such an enterprise will be brought 
 to a successful termination. I believe that in a national 
 undertaking of this kind, fraught with the gravest possible 
 political and commercial consequences, only the judgment 
 of our own people should govern, for the protection of our 
 own interests, which are primarily at stake. I also prefer to 
 accept the view and convictions of the members of the 
 Isthmian Commission, and of its chief engineer, a man of 
 extraordinary ability and large experience. 
 
 It is a subject upon which opinions will differ and upon 
 which honest convictions may be widely at variance, but in 
 a question of such surpassing importance to the nation, I, 
 for one, shall side with those who take the American point 
 of view, place their reliance upon American experience, and 
 show their faith in American engineers. 
 
 273 
 
Chapter XII 
 
 ABRAHAM LINCOLN 
 
 AND 
 
 ALEXANDER HAMILTON 
 
 AN ADDRESS 
 
 DELIVERED BEFORE THE 
 
 EAST ORAXGE, N. J., REPUBLICAN CLUB 
 
 FEBRUARY 12, 1904 
 
ABRAHAM 
 
 LINCOLN AND ALEXANDER 
 HAMILTON 
 
 )ew occasions teach new duties, and man's 
 \thoughts widen with the progress of the sun. 
 (While problems of our national life demand 
 ?for their satisfactory solution a rigid ad- 
 iherence to the fundamental principles of the 
 I constitution, in the light of new occasions, 
 .discoveries, and experiences they demand 
 also a broad interpretation of the powers it confers in matters 
 not within the range of thought and action a century ago. 
 No conceivable position in public life can be thought of as 
 more trying, no test of character and human energy more 
 severe, than the stress and strain of the great questions 
 which in his administration, from the day of his inaugu- 
 ration to the hour of his untimely death, confronted the 
 heroic man whose memory we celebrate to-night. 
 
 Lincoln will always stand as the supreme type of human 
 courage — of faith in God and in himself. Long before he 
 became President he had fought the battle of conscience and 
 made his choice of right principles against political sophistry 
 and the seductive views of the doctrine of selfish expediency. 
 Little did it matter to him that he lost the senatorship in his 
 contest with Douglas; his thought was upon the final result 
 — the mighty issues upon which hung the destiny of the re- 
 public. He was sure of himself, of his position, of his prin- 
 ciples. To him there was but one nation, and no casuistry 
 could move him, no expediency could swerve him, no self- 
 interest could divert him from the course which, taking coun- 
 sel alone of God and his own conscience, he had determined 
 to follow. "Let us have faith," he said, in ending his debates 
 with Douglas, "that right makes might, and in that faith 
 let us to the end dare to do our duty as we understand it." 
 Lincoln never looked backward. His faith was of the 
 
 277 
 
Life Insurance and Other Subjects 
 
 future and his concern was the duty of the hour. He had 
 the almost superhuman faculty of putting disaster behind 
 him and of applying his whole force to the needs of the 
 moment. During all the trying days of the Rebellion, his 
 faith and hope in ultimate victory and his trust in God's 
 providence never for once deserted him. 
 
 Let us on this anniversary of his birth take to heart the 
 three fundamental laws of his life — sincerity of thought, 
 courage in action, and a firm faith in the future. The Re- 
 publican party was formed primarily for the purpose of pre- 
 venting the extension of slavery into the territories, but, in 
 the words of Senator Hoar, "the providence of God imposed 
 upon it far larger duties." It has done for the people what 
 in the judgment of wise and trusted men was best for our 
 welfare, what was necessary to maintain the strength and 
 the dignity of the United States at home and abroad, and 
 what experience has proven most efficacious in advancing 
 the moral and material well-being of every element of our 
 population. New conditions have demanded new functions 
 for the effective conduct of the nation's business and new 
 laws to regulate the predestined expansion of American in- 
 fluence and diplomacy. Development in all that is most 
 beneficent, with unfaltering courage, has been the policy of 
 the Republican party from its birth down to this day; de- 
 velopment not in one direction only, but in all directions; not 
 in a limited way, making for the advantage of some particular 
 class or section, but in the widest possible sense, making for 
 a more general distribution of wealth and a higher standard 
 of life and living among all. This conception of national 
 betterment, in the words of the late President McKinley, 
 "is the real question in its comprehensive view. It touches 
 the health and progress of the republic, for it touches the con- 
 dition — moral, physical, and intellectual — of the citizen, from 
 which it must draw its force and character and strength." 
 It is to the glory of the Republican party that while it made 
 
 278 
 
Abraham Lincoln and Alexander Hamilton 
 
 possible the preservation of the Union, it has made equally 
 possible the highest development of the Union in its internal 
 affairs and external relations. It has made the United States 
 the foremost manufacturing and agricultural nation, it has 
 developed upon a sound and honest basis a system of national 
 finance and banking; it has adjusted its fiscal policy to 
 economic lavs^s and social conditions, promoting the indi- 
 vidual welfare, increasing the individual earnings and possi- 
 bihties on the part of every one enjoying the privilege of 
 citizenship and life in this great republic. To-day our flag 
 is a most potential emblem of the power that makes for 
 peace and progress in every corner of the earth. 
 
 We may take a pardonable pride in our recent national 
 achievements. Our progress in population, in wealth, in 
 industry, challenges the admiration of the world. We are 
 now a nation of eighty millions of people, widely different 
 in their origin, many of whom have come from distant shores 
 to find an asylum and better possibilities in this land of politi- 
 cal and economic freedom, but all imbued with the spirit of 
 being integral factors in its further growth and development. 
 No one, I am sure, doubts for a moment that if another 
 national call to arms were issued, in full proportion to their 
 numbers, the young, the middle-aged, and even the old 
 would respond to the call of duty to preserve the republic and 
 to maintain the laws. However great our satisfaction may be 
 with the material progress which has been made within recent 
 years, we have more reason to be proud of the advancement in 
 knowledge and understanding, in the mode of life and morals 
 of the people, never so contented, never so temperate, never 
 so sound in health and mind as they are to-day. It needs 
 only a glance at the state of our farms and factories, at the 
 condition of the poor and at the returns of pauperism and de- 
 pendency, to convince even the most skeptical that the prog- 
 ress of this nation has been real and not apparent, has, in 
 fact, been profound and of benefit to all. Never in all the 
 
 279 
 
Life Insurance and Other Subjects 
 
 world's history has there been a nation like ours, as well 
 governed as ours, as thoroughly developed as ours in the 
 arts of peace and yet fully prepared to sustain the victories 
 of peace in the field of war. For much of this we are in- 
 debted to the spirit of Lincoln, ever dominant in the Repub- 
 lican party, which in its measures and its men may safely 
 claim to be representative of what is best, what is highest 
 and what is truest in the people of this land. 
 
 We are not to-day confronted by the serious questions 
 of Lincoln's time; there is no danger to-day of national dis- 
 integration, and there is no cloud on the horizon which 
 threatens our national peace. More than ever we are a 
 people united in thought and action, following the arts and 
 industries which make possible a more complete realization 
 of the purposes of life. Great questions indeed confront 
 us, which, for their happy solution, will demand the exercise 
 of the soundest judgment and the highest regard for the 
 interests of all the people; and there is undoubtedly much 
 apprehension as to the rapid growth of capital and the accu- 
 mulation of great fortunes, yet there never was a greater 
 fallacy uttered, nor a more deliberate untruth told, than 
 that in this land of ours "the rich are growing richer and the 
 poor are growing poorer." Deep down in his heart the 
 agitator who would arouse the lower passions of the people 
 knows that what he thus proclaims as a fact, or as a new 
 discovery, is untrue. Full well he knows, or could know 
 if he would and were fair in mind and sound in judgment, 
 that not since the dawn of history has a people been so free 
 in every sense, political, social and economic, as are the peo- 
 ple of this nation at the present time. Never in history has 
 a people been so well housed, so well provided with good 
 food and clothing, so easily able to educate their children 
 and to provide for the future of both themselves and their chil- 
 dren. Not in all the records of human experience has a race 
 or people been so intelligent, so industrious, so healthy, and 
 
 280 
 
Abraham Lincoln and Alexander Hamilton 
 
 so well-to-do in material things as these people of the United 
 States one hundred and fifteen years after the adoption of the 
 constitution. Political pessimists seek industriously for occa- 
 sional instances of abuse in power, or corruption in office, or 
 the betrayal of some sacred private trust; but the man with 
 his eyes open and his mind free from the taint of unfair po- 
 litical bias, can see, can hear, can realize, that our people, our 
 masses, our wage-earners, in a large and all-predominating 
 majority, are making progress and are advancing more 
 rapidly toward a higher standard of life than has ever before 
 been possible among the people of any nation or of any age. 
 Millions come to us from other lands, not only because of 
 higher wages or more ready opportunity for labor, but also, 
 and perhaps largely, because of our political institutions, 
 our beautiful country, our highly developed industries, our 
 growth at home and abroad, and our fiscal policy of pro- 
 tection to American labor and American genius. 
 
 Our government rests upon a constitution which was 
 framed after the most intelligent and deliberate considera- 
 tion ever given to the fundamental law of any land. There 
 can be no narrow construction put upon that great instru- 
 ment, which forms the foundation-stone of this republic, 
 for in the course of human events it is impossible to foresee 
 or anticipate all that may develop anew or result from 
 changes in what is old. Little can we anticipate questions 
 and problems arising from the combination of events entirely 
 outside of the domain of human prophecy. Many of our 
 social institutions and most of the inventions of modern 
 times, such as the railway, the telegraph, the telephone, 
 the practical uses of electricity, and the thousand and one 
 other results of human ingenuity and specialization, were 
 far beyond the scope of the mind confronted with the 
 different conditions aflFecting the welfare and future of 
 the nation one hundred and fifteen years ago. But the all- 
 predominant genius which framed that immortal instrument 
 
 281 
 
Life Insurance and Other Subjects 
 
 — which we trust will endure the ravages of time as the best 
 form of government yet devised for the benefit of man — left 
 to be employed when needed wisely implied powers with 
 which the representatives of the people could be trusted, and 
 which in not a single instance have been seriously abused. 
 It is not the problem of war and its stress and strife, but 
 the successful solution of great social and economic ques- 
 tions which confront us at the present time. Predominant 
 in the mind of many most seriously concerned with the trend 
 of our national affairs is the thought, and perhaps the con- 
 viction, that so-called trusts or combinations of capital and 
 large business corporations generally should be brought 
 under the direct control of the people by an act of Congress. 
 Opinions differ not so much as to the necessity and advan- 
 tage of such control, as upon the question whether this 
 should be brought about by an act of Congress or, if neces- 
 sary, by an amendment to the constitution. Generally the 
 first thought in the mind of the political reformer, such 
 amendments are usually found to be needless after more 
 mature consideration. During the first hundred years of our 
 constitutional history not less than one thousand propo- 
 sitions were made at different times to amend that instrument, 
 but of these only fifteen have been adopted and found actually 
 necessary to meet the permanent needs of the nation. The 
 tendency in our national legislature from the very outset 
 has been in the direction of more and more reliance upon 
 the doctrine of the implied powers in the constitution. While 
 there is, undoubtedly, danger in a too liberal interpretation 
 of the constitution, experience, including the tremendous 
 struggle and perplexing problems of the great Civil War, 
 has shown that as a general rule the constitutional provisions 
 covering the powers of the executive, legislative and judi- 
 cial departments are fully adequate and sufficiently elastic 
 to adapt themselves to changing conditions and the progress 
 of the times. There has often been a disposition to make 
 
 282 
 
Abraham Lincoln and Alexander Hamilton 
 
 the constitution a code of laws, but, fortunately, the safe- 
 guards thrown about the instrument and the difficulties in 
 the way of making amendments by the method provided 
 for in the constitution itself are such that only fundamental 
 changes, having their origin in inherent necessities of new 
 situations and resulting from new conditions, are ever likely 
 to become incorporated into the original and enduring law 
 of this land. Attempts to amend the constitution show to a 
 large degree the waves of popular feeling and reflect the 
 political theories of the time. 
 
 In no direction, perhaps, is the constitution more ex- 
 plicit than in the provisions for the control by Congress of 
 interstate commerce and the implied power to create and 
 control corporations engaged in such commerce. Many ef- 
 forts have been made to limit or define the implied powers 
 in this direction, and not a few to increase the expressed 
 powers; but while amendments have been suggested it has 
 not been found necessary to modify the constitution in this 
 respect. Out of this question grew the great controversy over 
 the power of Congress to charter corporations, so ably ex- 
 pounded in the opinions of Alexander Hamilton. Hamilton, 
 with rare insight, controverted the contentions of Jefferson 
 and Randolph, and even of Madison, by far the best trained 
 of his antagonists in constitutional debates. His opinion 
 on the constitutionality of the United States bank must always 
 rank as one of the most brilliant elucidations of the constitu- 
 tion and its implied powers. Marshall, in the later case of 
 the United States vs. Maryland, adopted much of Hamilton's 
 reasoning, and, in an opinion of enduring fame, declared that 
 "the act incorporating the bank of the United States is a law 
 made in pursuance with the constitution." The main conten- 
 tion of Hamilton was "that all government is a delegation of 
 power. But how much is delegated in each case is a question 
 of fact, to be made out by fair reasoning and construction, 
 upon the particular provisions of the constitution, taking as 
 
 283 
 
Life Insurance and Other Subjects 
 
 guides the general principles and general ends of govern- 
 ments," and he concludes that "it is not denied that there 
 are implied as well as express powers and that the former 
 are as effectually delegated as the latter." 
 
 He also brought out a most important point, which seems 
 to have escaped the attention of many of those who have 
 since written on the constitution, its growth, history, and in- 
 terpretation, namely, that "there is another class of powers 
 which may be properly denominated 'resulting powers.' " 
 With almost prophetic foresight he reasons "it will not be 
 doubted that if the United States should make a conquest of 
 any of the territories of its neighbors they would possess 
 sovereign jurisdiction over the conquered territory," but this, 
 he argues, "would be rather a result from the whole mass of 
 the powers of the government, and from the nature of politi- 
 cal society, than a consequence of either of the powers specif- 
 ically enumerated." Hamilton realized the impossibility of 
 framing express constitutional provisions for all the varieties 
 of governmental functions, exigencies, and problems likely 
 to arise in the course of time, and he therefore relied upon 
 a conscientious interpretation of the doctrine of implied 
 powers. "The means by which national exigencies are to be 
 provided for, national inconveniences obviated, national 
 prosperity promoted, are of such infinite variety, extent and 
 complexity that there must of necessity be great latitude of 
 discretion in the selection and application of those means. 
 Hence, consequently, the necessity and propriety of exercising 
 the authorities entrusted to a government on principles of 
 liberal construction." And, finally, he concluded that "in 
 all questions of this nature, the practice of mankind ought 
 to have great weight against the theories of individuals." 
 And looking over the history of our government from that 
 time to this, we should indeed have great difficulty in 
 finding exceptions to the general rule that it has been well 
 administered and primarily for the benefit of all the people, 
 
 284 
 
Abraham Lincoln and Alexander Hamilton 
 
 with wisdom, with courage, and with honesty, and an earnest 
 endeavor to conscientiously live up to the oath of office im- 
 posed upon the servants of the people to obey the constitu- 
 tion as the fundamental law of the land. 
 
 ^Ss 
 
APPENDIX 
 
APPENDIX A 
 
 Under date of September ii, 1905, I addressed the fol- 
 lowing letter of inquiry to some eight thousand associations 
 and individuals throughout the United States : 
 
 My dear Sir: 
 
 In his last annual message* President Roosevelt called the atten- 
 tion of Congress to the necessity for Federal legislation providing for 
 the regulation and control of insurance companies transacting inter- 
 state and international business. In compliance with an increasing 
 demand from insurance policyholders and others interested in the 
 public welfare, I introduced into the last Congress a bill to this effect, 
 providing that there should be established within the Bureau of Cor- 
 porations a Division of Insurance, and that policies of insurance were 
 deemed to be articles of commerce and instrumentalities thereof. 
 The bill was introduced too late to secure final consideration, but 
 the demand for such a measure has become even more apparent in 
 the meantime, and I expect to reintroduce the same, possibly with 
 slight modifications, into the Congress which is to meet in December. 
 
 The bill will be introduced on behalf of the policyholders of all 
 American insurance companies, in the firm belief that their present 
 and future interests demand the protection of a Federal statute 
 regulating insurance transactions between the States, in addition, 
 of course, to such supervision and regulation as constitutionally 
 belong to the States from which the companies derive their charters; 
 furthermore, that by eliminating a considerable amount of need- 
 less State supervision the following important benefits are expected 
 to result: 
 
 1. An increase in the security of the policyholders. 
 
 2. A decrease in the expense rate and the cost of insurance. 
 
 3. A decrease in the burden of needless taxation. 
 
 4. A decrease in the amount of clerical labor now indispensable to meet 
 the requirements of some fifty States and Territories. 
 
 5. The stamping out of fraudulent insurance enterprises. 
 
 6. Adequate national protection for American companies transacting 
 business in foreign countries. 
 
 * "The basiness of insurance vitally affects the great mass of the people of the United States and is 
 national and not local in its application. It involves a multitude of transactions among the people of the 
 different States and between American companies and foreign governments. I urge that the Congress care- 
 fully consider whether the power of the Bureau of Corporations cannot constitutionally be extended to 
 cover interstate transactions in insurance." [December 6, 1904.] 
 
 28g 
 
Life Insurance and Other Subjects 
 
 Since thus far interstate insurance transactions have not been 
 brought within the scope of Congressional action, I desire to secure 
 an expression of views from the interests affected by such a measure, 
 and, therefore, take the liberty of troubling you with a few ques- 
 tions to which I would like to have you reply either YES or NO, as 
 the case may be, together with any additional comments of your own 
 which you may wish to make upon the matter. 
 
 If entirely convenient, kindly fill in and return to me the attached 
 blank in the enclosed stamped envelope and accept in advance my 
 sincere thanks for your courtesy and co-operation in my effort to 
 secure a comprehensive expression of qualified public opinion upon 
 a matter vitally affecting the welfare of the American people. 
 I am, very truly yours, 
 
 John F. Dryden. 
 
 Federal Regulation of Insurance Companies 
 
 Question i. Do you endorse the suggestion of President Roose- 
 velt, that insurance companies engaged in interstate insurance busi- 
 ness should be regulated by and brought under the control of the 
 Federal government ? 
 
 Question 2. Do you hold the insurance business to be a national 
 rather than a local interest, and properly entitled to the solicitude 
 and care of the national government t 
 
 Question 3. As a matter of personal opinion, do you hold the 
 business of insurance to be commerce, or an integral and indispensa- 
 ble element of commerce, in the sense in which this term is used in 
 everyday language ? 
 
 Question 4. Are you in any way apprehensive that it would be 
 inexpedient or inadvisable to increase the power of the Federal 
 government to the extent implied in the regulation of insurance by 
 Congress ? 
 
 In reply to Question i — "Do you endorse the sugges- 
 tion of President Roosevelt, that insurance companies en- 
 gaged in interstate insurance business should be regulated 
 by and brought under the control of the Federal govern- 
 ment V — out of 7,454 ansv^ers, 6,581 were favorable, or 88.3 
 
 2go 
 
Appendix A 
 
 per cent, of all the letters received. By principal States or 
 geographical divisions, the results were as follows: 
 
 Summary of Replies to Question i 
 
 Total Answers Not Per Cent. 
 
 Replies Yes No Specified Yes 
 
 New England States .... 741 575 163 3 77.6 
 
 New York, New Jersey, and Pennsylvania 2,491 2,213 266 12 88.8 
 
 Southern States . 1,108 92S 172 8 83.8 
 
 North Central States . . . . 2,624 2,402 206 l6 91.5 
 
 Rocky Mountain and Pacific Coast States 490 463 26 i 94.5 
 
 Totals 7,454 6,581 833 40 88.3 
 
 The returns by individual States and Territories were 
 as follows: 
 
 Replies to Question i by States and Territories 
 
 Alabama 
 
 Arizona . . 
 
 Arkansas 
 
 California . 
 
 Colorado . 
 
 Connecticut 
 
 Delaware ... 
 
 District of Columbia . . 
 
 Florida 
 
 Georgia 
 
 Hawaii 
 
 Idaho 
 
 Illinois 
 
 Indiana . . 
 
 Indian Territory 
 
 Iowa 
 
 Kansas 
 
 Kentucky . 
 
 Louisiana ... . . 
 
 Maine 
 
 Maryland 
 
 Massachusetts 
 
 Michigan . . 
 
 Minnesota . 
 
 Mississippi 
 
 Missouri 
 
 Montana . 
 
 Nebraska 
 
 2gi 
 
 Total 
 
 Answers 
 
 Not 
 
 Per Cent, 
 
 Replies 
 
 Yes 
 
 No 
 
 Specifiet 
 
 i Yes 
 
 65 
 
 61 
 
 4 
 
 
 93-8 
 
 8 
 
 7 
 
 I 
 
 
 87-5 
 
 27 
 
 24 
 
 3 
 
 
 88.9 
 
 193 
 
 189 
 
 4 
 
 
 97-9 
 
 113 
 
 106 
 
 7 
 
 
 93-8 
 
 122 
 
 90 
 
 31 
 
 I 
 
 73-8 
 
 23 
 
 17 
 
 6 
 
 
 73-9 
 
 133 
 
 118 
 
 15 
 
 
 88.7 
 
 31 
 
 27 
 
 4 
 
 
 87.1 
 
 116 
 
 102 
 
 14 
 
 
 87.9 
 
 2 
 
 I 
 
 
 I 
 
 5O.0 
 
 12 
 
 12 
 
 
 
 lOO.O 
 
 429 
 
 392 
 
 37 
 
 
 91.4 
 
 177 
 
 156 
 
 21 
 
 
 88.1 
 
 6 
 
 6 
 
 
 
 lOO.O 
 
 287 
 
 269 
 
 17 
 
 I 
 
 93-7 
 
 180 
 
 170 
 
 9 
 
 I 
 
 94.5 
 
 82 
 
 61 
 
 20 
 
 I 
 
 74-4 
 
 63 
 
 51 
 
 II 
 
 I 
 
 81.0 
 
 53 
 
 45 
 
 8 
 
 
 84.9 
 
 "3 
 
 95 
 
 17 
 
 I 
 
 84.1 
 
 460 
 
 352 
 
 106 
 
 2 
 
 76.5 
 
 249 
 
 232 
 
 15 
 
 2 
 
 93-2 
 
 146 
 
 135 
 
 9 
 
 2 
 
 92.5 
 
 35 
 
 31 
 
 4 
 
 
 88.6 
 
 220 
 
 192 
 
 26 
 
 2 
 
 87.3 
 
 18 
 
 16 
 
 2 
 
 
 88.9 
 
 195 
 
 180 
 
 14 
 
 1 
 
 923 
 
Life Insurance and Other Subjects 
 
 Replies to Question i by States and Territories 
 
 (Continued) 
 
 Nevada .... 
 New Hampshire 
 New Jersey 
 New Mexico . . 
 New York . 
 North Carolina . 
 North Dakota . 
 Ohio 
 
 Oklahoma . . . 
 Oregon 
 Pennsylvania 
 Rhode Island . . 
 South Carolina 
 South Dakota 
 Tennessee 
 Texas .... 
 Utah 
 Vermont 
 Virginia 
 Washington 
 West Virginia . 
 Wisconsin . . 
 Wyoming . . . 
 
 Totals 
 
 In reply to Question 2 — "Do you hold the insurance 
 business to be a national rather than a local interest, and 
 properly entitled to the solicitude and care of the national 
 government .?" — out of 7,454 answers, 6,543 were favorable, 
 or 87.8 per cent, of all the letters received. By principal 
 States or geographical divisions, the results were as follows: 
 
 Summary of Replies to Question 2 
 
 New England States 
 
 New York, New Jersey, and Pennsylvania 
 
 Southern States . . 
 
 North Central States 
 
 Rocky Mountain and Pacific Coast States 
 
 Totals 
 
 Total 
 
 Answers 
 
 Not 
 
 Per Cent 
 
 Replies 
 
 Yes 
 
 No 
 
 Specified 
 
 Yes 
 
 I 
 
 I 
 
 
 
 lOO.O 
 
 33 
 
 26 
 
 7 
 
 
 78.8 
 
 203 
 
 182 
 
 20 
 
 I 
 
 89.7 
 
 8 
 
 6 
 
 2 
 
 
 75-0 
 
 I.32I 
 
 1,156 
 
 161 
 
 4 
 
 87.5 
 
 52 
 
 43 
 
 8 
 
 1 
 
 82.7 
 
 21 
 
 18 
 
 3 
 
 
 85-7 
 
 488 
 
 446 
 
 38 
 
 4 
 
 91.4 
 
 10 
 
 9 
 
 I 
 
 
 90.0 
 
 52 
 
 49 
 
 3 
 
 
 94.2 
 
 967 
 
 875 
 
 85 
 
 7 
 
 90-5 
 
 38 
 
 34 
 
 4 
 
 
 89.5 
 
 35 
 
 23 
 
 12 
 
 
 65.7 
 
 24 
 
 20 
 
 3 
 
 I 
 
 83.3 
 
 76 
 
 66 
 
 8 
 
 2 
 
 86.8 
 
 no 
 
 93 
 
 16 
 
 I 
 
 84.5 
 
 13 
 
 10 
 
 3 
 
 
 76.9 
 
 35 
 
 28 
 
 7 
 
 
 80.0 
 
 93 
 
 65 
 
 27 
 
 I 
 
 69.9 
 
 53 
 
 51 
 
 2 
 
 
 96.2 
 
 38 
 
 36 
 
 2 
 
 
 94-7 
 
 208 
 
 192 
 
 14 
 
 2 
 
 92-3 
 
 17 
 
 15 
 
 2 
 
 
 88.2 
 
 7.454 
 
 6,581 
 
 833 
 
 40 
 
 88.3 
 
 Total 
 
 Answers 
 
 Not 
 
 Per Cent 
 
 Replies 
 
 Yes 
 
 No 
 
 Specified 
 
 Yes 
 
 741 
 
 570 
 
 139 
 
 32 
 
 75-7 
 
 2,491 
 
 2,197 
 
 229 
 
 65 
 
 88.2 
 
 1,108 
 
 922 
 
 163 
 
 23 
 
 83.2 
 
 2,624 
 
 2,394 
 
 189 
 
 41 
 
 91.2 
 
 490 
 
 460 
 
 24 
 
 6 
 
 93-9 
 
 7,454 6,543 744 167 87.8 
 
 2g2 
 
Total 
 
 Answers 
 
 Not 
 
 Per Cent. 
 
 Replieg 
 
 Yes 
 
 No 
 
 Specified 
 
 Yes 
 
 741 
 
 425 
 
 213 
 
 103 
 
 57-4 
 
 2,491 
 
 1,795 
 
 437 
 
 259 
 
 72.0 
 
 1,108 
 
 788 
 
 231 
 
 89 
 
 66.7 
 
 2,624 
 
 1,955 
 
 429 
 
 240 
 
 74-5 
 
 490 
 
 337 
 
 93 
 
 60 
 
 68.8 
 
 7,454 
 
 5,300 
 
 1,403 
 
 751 
 
 71.1 
 
 Appendix A 
 
 In reply to Question 3 — "As a matter of personal opin- 
 ion, do you hold the business of insurance to be commerce, 
 or an integral and indispensable element of commerce, in 
 the sense in which this term is used in everyday language ?" 
 —out of 7,454 answers, 5,300 were favorable, or 71.1 per 
 cent, of all the letters received. By principal States or geo- 
 graphical divisions, the results were as follows : 
 
 Summary of Replies to Question 3 
 
 New England States ... 
 
 New York, New Jersey, and Pennsylvania 
 
 Southern States . 
 
 North Central States 
 
 Rocky Mountain and Pacific Coast States 
 
 Totals 
 
 In reply to Question 4 — "Are you in any way appre- 
 hensive that it would be inexpedient or inadvisable to in- 
 crease the power of the Federal government to the extent 
 implied in the regulation of insurance by Congress .?" — out 
 of 7,454 answers, 6,047, o'^ ^^-^ P^'^ cent., were in the nega- 
 tive, or, in other words, favorable to the theory of Federal 
 supervision of insurance. This question was apparently 
 misunderstood in quite a number of cases, and the reply made 
 in the affirmative where the negative was intended. I, 
 however, leave the results as they were received, without 
 correction : 
 
 Summary of Replies to Question 4 
 
 New England States . . 
 
 New York, New Jersey, and Pennsylvania 
 
 Southern States ... 
 
 North Central States . 
 
 Rocky Mountain and Pacific Coast States 
 
 Totals 
 
 Total 
 
 Answers 
 
 Not 
 
 Per Cent. 
 
 Replies 
 
 Yes No 
 
 Specified 
 
 No 
 
 741 
 
 179 528 
 
 34 
 
 71.3 
 
 2,491 
 
 400 2,007 
 
 84 
 
 80.6 
 
 1,108 
 
 222 846 
 
 40 
 
 76.4 
 
 2,624 
 
 344 2,232 
 
 48 
 
 85.1 
 
 490 
 
 49 434 
 
 7 
 213 
 
 88.6 
 
 7,454 
 
 1,194 6,047 
 
 81. 1 
 
APPENDIX B 
 
 Synopsis of Senate Bill 3026 
 
 Organization of Bureau of Insurance 
 Sec, 14 — Article of Enactment. 
 
 Bureau of Insurance Established in Department 
 
 of Commerce and Labor. 
 Comptroller of Insurance in Charge. 
 Oath of OiEce and Bond. 
 Deputy Comptroller. 
 Actuary. 
 
 Clerks and Employees. 
 
 Appointments by Secretary of Commerce and Labor. 
 Supervision by Secretary of Commerce and Labor. 
 Interest in Insurance Companies Prohibited. 
 
 Sec. 15 — Offices, etc. 
 Seal. 
 Fees to go to Treasury. Expenses to be paid from 
 
 Appropriation for Department of Commerce 
 
 and Labor. 
 Reports to be made to Congress. 
 
 Scope of Act and Definition of Terms 
 
 Sec. 16 — Scope of Act. 
 
 Corporations Defined. 
 
 Interstate Insurance Declared to be Interstate Com- 
 merce. 
 
 Single State Companies Excepted. 
 Sec. 17 — Fraternal Organizations Excepted. 
 
 Interinsurance Exchange Excepted. 
 
 Administration and Regulation 
 
 Sec. 18 — Rules, Regulations, and Fees. 
 
 Reports Required from Insurance Corporations. 
 
 294- 
 
Appendix B 
 
 Penalty for Failure to Make Reports. 
 Valuation and Reinsurance Reserve. 
 Sec. 19 — Authority and Power to Make Examinations. 
 Authority to Employ Special Examiners. 
 Aid of United States Courts. 
 Examinations upon Request of State Insurance 
 
 Officials. 
 Companies to Pay Expenses of Examinations. 
 Fees and Charges to be Paid into the Treasury. 
 Limitation of Visitorial Powers. 
 
 Requirements of Corporations Transacting Interstate 
 Insurance 
 
 Sec. 20 — Filing of Charter and other Documents. 
 
 List of Stockholders or Trustees Required. 
 
 Deposit Required to be Made. 
 
 Certificate of Authority to Transact Interstate 
 
 Insurance. 
 Local Attorneys to be Appointed. 
 
 Sec. 21 — When Certificates of Authority shall be Revoked. 
 Proceedings in case of Receiverships. 
 Hearing to be Granted. 
 American Insurance Companies in Foreign 
 Countries. 
 
 Crimes, Penalties, Etc. 
 
 Sec. 22 — ^Assistance of Attorney-General. 
 Proceedings by Attorney-General. 
 Penalty for Perjury. 
 Penalty for Accepting Bribes, etc. 
 Unauthorized Insurance. 
 Repeal of Inconsistent Laws. 
 Transfer of Records. 
 When Act Goes into Effect. 
 
 295 
 
APPENDIX C 
 
 Analysis of Senate Bill 3026, Fifty-ninth Congress, 
 First Session 
 
 The bill contains some fifty separate provisions, of which 
 the first thirteen relate to the organization of the proposed 
 bureau of insurance in the Department of Commerce and 
 Labor. The bureau is to be in charge of a Comptroller of 
 Insurance, who is required to furnish a bond of $100,000. 
 
 In nearly all essentials, the bill, as far as possible, con- 
 forms to the organic acts establishing other departments of 
 the Federal government, but in particular to the national 
 bank act. There is to be a Deputy Comptroller, who is also 
 to be a bonded officer, and an actuary, who is required to 
 be a person of recognized professional ability and experience. 
 The general supervision and control of the bureau is under 
 the direction of the Secretary of Commerce and Labor, and 
 all fees or other moneys collected are required to be paid into 
 the Treasury. 
 
 The Comptroller must make an annual report to Con- 
 gress, including the details of all examinations made of com- 
 panies during the year, together with a complete statement 
 of the receipts and disbursements of the bureau. 
 
 The provisions of the act apply to all corporations, asso- 
 ciations, or partnerships engaged in interstate insurance 
 business who make and deliver insurance contracts outside 
 the State of incorporation or origin or authority, but have no 
 application to fraternal insurance societies, or organizations 
 having a lodge system and carried on for the sole benefit of 
 members and not for profit. Such associations or societies, 
 however, may voluntarily take advantage of the act, and, 
 after complyiftg with all its provisions, become duly author- 
 ized by the Comptroller to transact interstate insurance. 
 
 The Comptroller is required to establish rules and regu- 
 lations and reasonable fees for conducting the business of 
 
 2g6 
 
Appendix C 
 
 insurance, including annual and other reports to be made 
 by companies. The penalty for failure to make or transmit 
 any report or statement of fact required is $ioo for each day 
 of delay. 
 
 The Comptroller is also required to have a conservative 
 valuation made of the business of life companies, or deter- 
 mine the reinsurance reserve of other companies, upon 
 approved methods and tables and by such a standard of 
 interest as may, in his judgment and discretion, best serve 
 the purpose to determine and establish the true financial 
 condition of companies. 
 
 Authority and power to inquire into the details and facts 
 of the management of all corporations engaged in interstate 
 insurance is given to the Comptroller, and he may have the 
 companies examined by special examiners whenever neces- 
 sary or expedient. To this end he may invoke the aid of 
 any court of the United States to require the attendance 
 and testimony of witnesses, and the production of books, 
 papers and documents. 
 
 Failure to obey such order of the court may be punished 
 as a contempt thereof. It is also provided that companies 
 may be investigated by the Comptroller upon the complaint 
 of any State Commissioner of Insurance. 
 
 The actual and reasonable expense of every examination 
 or special investigation of the affairs of an insurance corpora- 
 tion engaged in interstate insurance must be paid by the 
 corporation so examined. All charges and fees for making 
 such examinations, however, must be presented in the form 
 of an itemized bill, approved by the Comptroller of Insur- 
 ance, and the amount thereof must be paid into the Treasury 
 of the United States. 
 
 Corporations transacting interstate or foreign insurance 
 are specifically exempted from making any other or separate 
 statements or reports, and are not to be subject to any visi- 
 torial powers or examinations of their business and accounts 
 
 297 
 
Life Insurance and Other Subjects 
 
 other than by the Comptroller of Insurance, or by the proper 
 authorities of the State of incorporation or origin. 
 
 Corporations engaged in the business of insurance in more 
 than one State must file a copy of their charter or other docu- 
 ments of local authority, and annually publish a list of their 
 stockholders or trustees. They are required to make a de- 
 posit of ;S 1 00,000, either with the Commissioner of Insur- 
 ance or with the proper official of the State of incorporation 
 or origin. 
 
 After these requirements have been met to the satisfac- 
 tion of the Comptroller, a certificate of authority and power 
 to transact interstate insurance shall be issued, whereby such 
 corporations are authorized to transact business in any State, 
 Territory, or district of the United States, without further 
 supervision or regulation than by the Comptroller of Insur- 
 ance or the duly authorized official of the State of incorpora- 
 tion or origin. Provision is made for conditions under 
 which the certificates of authority shall be revoked and for 
 proceedings in case of receivership. 
 
 2g8 
 
APPENDIX D 
 
 s. 3026 
 
 S9th Congress, 1st Session 
 
 In the Senate of the United States 
 
 January IS, 1906 
 
 Mr. Dryden introduced the following bill, which was read twice and referred to 
 
 the Committee on the Judiciary 
 
 A BILL 
 To amend an Act entitled "An Act to establish the Depart- 
 ment of Commerce and Labor," approved February 
 fourteenth, nineteen hundred and three, being chap- 
 ter five hundred and fifty-two of the United States 
 Statutes, enacted by the Fifty-seventh Congress. 
 
 Be it enacted by the Senate and House of Representatives 
 of the United States of America in Congress assembled. 
 That the Act entitled "An Act to establish the Department 
 of Commerce and Labor," approved February fourteenth, 
 nineteen hundred and three, be amended by adding thereto 
 the following: 
 
 "Sec 14. That there shall be in the Department of Commerce 
 and Labor a division to be called the Bureau of Insurance, which 
 shall be charged with the execution of this and all other laws that 
 may be passed by Congress for the supervision and regulation of the 
 business of insurance among the several States. The Bureau of 
 Insurance shall be in charge of an officer to be called the Comptroller 
 of Insurance, who shall be appointed by the President, by and with 
 the advice and consent of the Senate. He shall hold his office for 
 the term of four years, unless sooner removed by the President. He 
 shall receive an annual salary of dollars, to be paid in monthly 
 
 instalments. The Comptroller of Insurance shall, within fifteen 
 days from the time of notice of his appointment, take and subscribe 
 the oath of office; and he shall give to the United States a bond in 
 the penalty of one hundred thousand dollars, to be approved by the 
 Secretary of Commerce and Labor, conditioned for the faithful 
 
 299 
 
Life Insurance and Other Subjects 
 
 discharge of the duties of his office. There shall also be in the 
 Bureau of Insurance a Deputy Comptroller of Insurance, who shall 
 be entitled to an annual salary of dollars, to be paid in monthly 
 
 instalments, and he shall possess the power and perform the duties 
 attached by law to the office of the Comptroller during a vacancy 
 in the office or during the absence or inability of the Comptroller. 
 The Deputy Comptroller shall also take the oath of office prescribed 
 by the Constitution and laws of the United States, and shall give a 
 like bond in the penalty of fifty thousand dollars. There shall also 
 be in said Bureau of Insurance an actuary, who shall be selected 
 for his knowledge, skill, and practical experience in actuarial duties, 
 and who shall be a person of established reputation and qualifica- 
 tion, and who shall aid and assist the Comptroller of Insurance, in 
 the capacity of an actuary, and perform the usual duties appertain- 
 ing to his office. There shall also be a chief clerk to the Comptroller 
 of Insurance, and such special agents, examiners, clerks, and other 
 employees as may be authorized by law and may be necessary for 
 the work of said Bureau. All officers and employees of the Bureau 
 of Insurance other than the Comptroller shall be appointed by the 
 Secretary of Commerce and Labor. The work of the Comptroller 
 of Insurance and his subordinates shall, in all respects, be subject 
 to the supervision of the Secretary of Commerce and Labor, and it 
 shall not be lawful for the Comptroller of Insurance or the Deputy 
 Comptroller, or any official or employee of the Bureau of Insurance, 
 either directly or indirectly, except as a policyholder, to be interested 
 in any insurance corporation, association, or partnership. 
 
 "Sec. 15. That there shall be assigned to the Comptroller 
 of Insurance, by the Secretary of Commerce and Labor, suitable 
 office rooms, and he shall supply said Bureau with the necessary 
 furniture, stationery, fuel, light, and other proper conveniences for 
 the transaction of the business of said Bureau. The Comptroller 
 of Insurance, with the approval of the Secretary of Commerce and 
 Labor, shall devise a seal with suitable inscription, a description of 
 which, wfth the certificate of approval of the Secretary of Commerce 
 and Labor, shall be filed in the office of the Secretary of State, with 
 the impression thereof, which shall thereupon become the seal 
 of the office of said Comptroller of Insurance. Every certificate 
 and all other papers issued by him in pursuance of any authority 
 
 300 
 
Appendix D 
 
 conferred on him by law, and sealed with his seal of office, shall be 
 received in evidence in all courts of law and equity and other places. 
 All fees or other moneys collected or recovered under the rules and 
 regulations of the Comptroller of Insurance, as approved by the 
 Secretary of Commerce and Labor, shall be paid monthly into the 
 Treasury of the United States, and all the salaries and expenses of 
 administering this law shall be paid by the Treasurer of the United 
 States from the appropriation for the Department of Commerce 
 and Labor. The Comptroller of Insurance shall annually prepare 
 for the Secretary of Commerce and Labor, to be transmitted by him 
 to Congress, a report containing, in reasonable detail, an abstract 
 of the statistical and other reports made to him by corporations, 
 associations, and partnerships, subject to the provisions of this Act, 
 together with a summar}' statement of the insurance business in the 
 United States, properly classified, and such other statements, in- 
 formation, facts, or comments relating to insurance as he may deem 
 to be of public interest. The annual report of the Comptroller of 
 Insurance shall also include and contain the rules and regulations 
 established by him, and approved by the Secretary of Commerce 
 and Labor, to carry out the intent and purposes of this Act, and the 
 facts and results of all examinations of insurance companies which 
 he may have made or may have caused to be made during the pre- 
 ceding year, together with a complete and detailed statement of 
 the receipts and expenses of the Bureau of Insurance during the 
 year from any source whatever. 
 
 "Sec. i6. That the provisions of this Act shall apply to all cor- 
 porations, associations, and partnerships, including individual under- 
 writers known as Lloyd's, engaged in interstate insurance business, 
 or who make and deliver insurance contracts outside of the limits of 
 the State of incorporation or organization or authority, and their 
 attorneys in fact, and all such are hereby declared and held to be en- 
 gaged in interstate or foreign commerce, as the case may be. The 
 term corporation, wherever used in this Act, shall include companies, 
 associations, societies, partnerships, and individual underwriters 
 engaged in the business of insurance, or in any of its branches, and 
 duly incorporated or authorized under the laws of the United States, 
 or of any State, Territory, District, or foreign nation. Policies or 
 any other contracts of insurance are hereby deemed and declared 
 
 SOI 
 
Life Insurance and Other Subjects 
 
 to be articles of commerce and instrumentalities thereof. The de- 
 livery by said corporations of said policies or contracts of insurance 
 from the State, Territoiy, District, or country of incorporation or 
 origin to corporations or persons resident of or located in other States, 
 Territories, Districts, or foreign nations; the transmission by the 
 insured from such other States, Territories, Districts, or foreign na- 
 tions of the premiums or other valuable consideration for said policies 
 to the home office of the company in another State, Territory, Dis- 
 trict, or foreign nation, are hereby declared and deemed to be trans- 
 actions in interstate or foreign commerce, as the case may be; but 
 the provisions of this Act shall not apply to any corporation transact- 
 ing the business of insurance exclusively v^ithin the State, Territory, 
 or District of its creation. 
 
 "Sec. 17. That this Act shall have no application to any cor- 
 poration, society, order, or voluntary association formed or organized 
 and carried on for the sole benefit of its members and their benefi- 
 ciaries, and not for profit, having a lodge system and representative 
 form of government, making insurance provision for the payment 
 of benefits in case of death, sickness, disability, accident, or old age. 
 But the Comptroller of Insurance shall be authorized and have power 
 to determine upon the facts whether the corporation or association 
 or organization is in fact of a purely religious, charitable, or benevo- 
 lent character: Provided, That any such corporation, association, 
 society, or order transacting fraternal or mutual benefit insurance in 
 more than one State may voluntarily take advantage of this Act, and 
 after complying with all its provisions, and with the rules and regu- 
 lations of the Bureau of Insurance, be duly authorized by the Comp- 
 troller to transact interstate insurance : And provided further, That 
 the provisions of this Act shall not apply to associations known as 
 interinsurance exchanges, the members whereof indemnify one 
 another against loss by fire, organized for the purpose of saving ex- 
 penses and diminishing losses, and not for personal profit or gain or 
 as commercial undertakings. 
 
 "Sec. 18. That the Comptroller of Insurance, subject to the 
 approval of the Secretary of Commerce and Labor, shall from time 
 to time fix and establish such rules, regulations, and reasonable fees 
 for conducting the business of the Bureau and for carrying out 
 the provisions of this Act as he may deem necessary and proper for 
 
 302 
 
Appendix D 
 
 securing an effective, uniform, and economical administration of the 
 Bureau. Said rules and regulations shall provide methods and forms 
 for annual or other reports to the Comptroller of Insurance by cor- 
 porations transacting interstate or foreign insurance, which annual 
 or other reports shall be duly attested under seal by such corpora- 
 tions and sworn to by the president, vice president, secretary, or some 
 other officer thereof before an official duly authorized to administer 
 oaths who is not an officer or employee of the corporation reporting. 
 And the said Comptroller shall forward, in December of each year, 
 to every corporation authorized under this Act to transact interstate 
 insurance, or its agent or attorney, the necessary blank forms for the 
 annual statements of such company, which shall be returned to the 
 Comptroller on or before the first day in March of each year, signed 
 and sworn to by the president, vice president, or secretary, or, if a 
 foreign company, by its manager or proper representative within 
 the United States, showing its true financial condition as of the next 
 preceding thirty-first day of December, which shall include a correct 
 and detailed statement of the assets and liabilities of that date, the 
 amount and character of business transacted, losses sustained, and 
 money received and expended during the year, and such other in- 
 formation as the said Comptroller may deem necessary. Every cor- 
 poration transacting interstate or foreign insurance which fails to 
 make and transmit any report or information or statement of fact 
 required by this Act shall be subject to a penalty of one hundred 
 dollars for each day after the periods therein respectively mentioned 
 that it delays to make and transmit its report. And whenever any 
 corporation refuses to pay the penalty herein imposed, after it has 
 been assessed by the Comptroller of Insurance, the Comptroller shall 
 have authority to recover the penalties imposed by due process of law, 
 but he may, in his discretion, extend the time for making such report 
 for a period not exceeding thirty days. All sums of money collected 
 for penalties under this section shall be paid monthly into the Treas- 
 ury of the United States. It shall be the duty of the Comptroller 
 of Insurance to require of each corporation transacting interstate 
 insurance, preliminary to the granting of a certificate of authority 
 to engage thereafter in such insurance among the States, a true and 
 complete statement as of the thirty-first day of December next pre- 
 ceding of all policies or other contracts of insurance in force, together 
 
Life Insurance and Other Subjects 
 
 with their valuation or reinsurance reserve, made or determined 
 according to the laws of the State, Territory, District, or foreign 
 nation of its incorporation, origin, or authority, and annually there- 
 after the Comptroller shall cause to be made, by and under the direc- 
 tion of the actuary of the Bureau, a true and complete valuation or 
 determination of the reinsurance reserve of all policies or contracts 
 of insurance in force with any corporation subject to the provisions 
 of this Act, upon such approved tables and methods and by such 
 a standard of interest as may in his judgment and discretion best 
 serve the purpose to determine and establish the true financial condi- 
 tion and outstanding liabilities of the same. 
 
 "Sec. 19. That the Comptroller shall have authority and power 
 to inquire into the details and facts of the management of all cor- 
 porations subject to the provisions of this Act, and he shall keep 
 himself informed as to all business matters of said corporations, 
 and he shall have authority and power to obtain from them true 
 and complete information and facts necessary to enable him to 
 properly perform the duties and carry out the objects for which this 
 Bureau of Insurance was established. And he shall have authority 
 and power to examine, or have examined by the Deputy Comptroller 
 or any other qualified employee or special examiner designated for 
 the purpose, all books, papers, and everything pertaining to the 
 business or management of said corporation at any or all times 
 when he may deem this necessary or expedient; and he shall have 
 the power to require the attendance and testimony of witnesses and 
 the production of books, papers, and documents relating to any 
 matter under investigation. And to that end he may invoke the 
 aid of any court of the United States to require the attendance and 
 testimony of witnesses and the production of books, papers, and 
 documents. And any circuit court of the United States within the 
 jurisdiction of which such inquiry is carried on may, in case of con- 
 tumacy or refusal to obey subpoena issued to any corporation or 
 person subject to the provisions of this Act, issue an order requiring 
 such corporation or person to appear before said Comptroller and 
 produce books, papers, and documents, if so ordered, and give 
 evidence touching the matter of inquiry; and any failure to obey 
 such order of the court may be punished by such court as a contempt 
 thereof. The Comptroller of Insurance shall also investigate any 
 
 304- 
 
Appendix D 
 
 complaint, made in his own behalf, or forwarded by the commis- 
 sioner, superintendent, or other official charged with the execution 
 of the insurance laws of any State, Territory, or District, at the 
 request of such commissioner, superintendent, or other oflScials, 
 and may institute any inquiry on his own motion in the same manner 
 and to the same effect as though complaint had been made; and the 
 result and findings of such examination or investigation, upon having 
 been approved by the Secretary of Commerce and Labor, shall be 
 communicated without undue delay to the commissioner, superin- 
 tendent, or other State official making the complaint or requesting 
 the investigation to be made: Provide J, That the actual and 
 reasonable expense of every examination or special investigation 
 of the affairs of an insurance corporation authorized to transact 
 interstate insurance under the provisions of this Act shall be borne 
 and paid by the corporation so examined : And provided further, 
 That no charge shall be made for any examination of an insurance 
 corporation by the Comptroller or his deputy personally, or by one 
 or more of the regular clerks or employees of the Bureau, except for 
 necessary traveling and other expenses. All charges and fees for 
 making any examination, and all charges and fees against an in- 
 surance corporation by an attorney or appraiser of the Bureau of 
 Insurance, shall be presented in the form of an itemized bill approved 
 by the Comptroller of Insurance; and the corporation examined, on 
 receiving a certified copy of such bill, so approved and properly 
 audited, shall pay the amount thereof to the Comptroller of Insur- 
 ance, to be paid by him into the Treasury of the United States. No 
 corporation examined shall, either directly or indirectly, pay, by 
 way of gift, credit, or otherwise, any other or further sum to the 
 Comptroller or Deputy, or any clerk or employee of the Bureau of 
 Insurance, or any examiner, for extra services, or for purposes of 
 legislation, or on any other pretense whatsoever: Provided, That 
 no corporation transacting interstate or foreign insurance shall be 
 required by any other than the State, Territory, or District of its 
 incorporation or origin to make other or separate statements or 
 reports, or held to be subject to any visitorial powers or examination 
 of its business and accounts other than such as are authorized by 
 this Act or as are within the constitutional rights and powers of the 
 State, Territory, or District of incorporation or origin. 
 
Life Insurance and Other Subjects 
 
 "Sec. 20. That every corporation transacting interstate or 
 foreign insurance shall, within sixty days after the passage of this 
 Act, and every corporation hereafter formed shall, before engaging 
 in interstate or foreign insurance, comply with this provision by 
 filing with the said Comptroller a certified copy of its charter and by- 
 laws or deed of settlement, or other certificate of local authority to law- 
 fully transact insurance business, together with an officially certified 
 copy of the last complete statement of its condition and affairs, as 
 filed in the office of the superintendent, commissioner of insurance, 
 or other authorized official of the State, Territory, District, or nation 
 of its incorporation or origin, and a certificate under the seal of the 
 proper officer of its government, certifying that the said corporation 
 is duly authorized, by local authority, to engage in or transact the 
 business of insurance. Every insurance corporation transacting 
 business on the stock or share plan shall cause to be kept at all 
 times a full and correct list of the names and residences of all the 
 stockholders or shareholders in the company and the number of 
 shares or certificates of stock held by each in the office where its 
 business is transacted; and every insurance corporation doing busi- 
 ness on the mutual plan shall cause to be kept at all times a full and 
 complete list of the names, occupations, and residences of all the 
 trustees duly elected and responsible for the management of said 
 corporation. A copy of such list, as of the thirty-first day of De- 
 cember of each year, after December thirty-first, nineteen hundred 
 and five, verified by oath of the president, vice president, or secretary 
 of the corporation, shall be transmitted to the Comptroller of In- 
 surance : Provided, That such list of stockholders or shareholders 
 or trustees shall only be for the lawful use and information of the 
 Bureau of Insurance, and not for the public inspection, or for the 
 information of other stockholders or shareholders or trustees of the 
 company, corporation, or association, as the case may be. Every 
 corporation, at the time of filing the copy of its statement as afore- 
 said, must deposit with the Treasurer of the United States, as a 
 guaranty for the faithful performance of its contracts of insurance. 
 United States bonds or other securities satisfactory to said Comp- 
 troller, or as subsequently to be defined by law, to the amount of 
 one hundred thousand dollars: Provided, however. That the Comp- 
 troller of Insurance may accept, in his discretion, in lieu of such 
 
 306 
 
Appendix D 
 
 deposit, a certificate issued under the seal of the insurance department 
 of the State, Territor}-, or District of incorporation or origin, certify- 
 ing that said insurance corporation has deposited, under the laws 
 of the State, Territory, or District of its incorporation or origin, 
 with the authorities of said State, Territory, or District, cash or 
 securities to the amount of one hundred thousand dollars for the 
 protection of its policyholders. If, upon a careful and thorough 
 examination of the facts, as required b;- law, and of any other facts 
 which may come to the notice of the Comptroller of Insurance, it 
 appears to his satisfaction that such corporation or association is 
 thereafter lawfully entitled to transact the business of interstate and 
 foreign insurance, the Comptroller shall issue to such corporation a 
 certificate, under his hand and oflScial seal, that such corporation 
 has complied with all the provisions required to be complied with, 
 and that such corporation is authorized to transact such business 
 in any State, Territory, or District of the United States. And every 
 corporation, before transacting interstate or foreign insurance, 
 shall appoint in each State, Territory, or District in which it proposes 
 to carry on business, other than the State, Territory, or District of 
 incorporation or origin, a person on whom process of law may be 
 served, and a certified list of such appointees shall be filed with the 
 Comptroller of Insurance. 
 
 "Sec. 21. That whenever, from the statements and reports 
 herein required, or from any other information, it shall appear to the 
 Comptroller of Insurance that the financial condition of such cor- 
 poration, doing business under this Act, is impaired or unsafe, it 
 shall be the duty of the said Comptroller of Insurance to order such 
 corporation to make good its financial condition, and if this be not 
 done within sixty days after such order is given, the Comptroller of 
 Insurance shall revoke the certificate of authority to such corpora- 
 tion to transact interstate business under this Act, and public notice 
 thereof shall be given in such manner as may be prescribed in the 
 rules and regulations herein provided for, which information shall 
 also be transmitted to the oflScial charged with the execution of the 
 insurance laws of the State, Territory, District, or foreign nation 
 where such corporation was organized. The securities transferred to 
 and deposited by any insurance corporation, subject to the provisions 
 of this Act, with the Treasurer of the United States, as hereinbefore 
 
Life Insurance and Other Subjects 
 
 provided, shall remain in the custody of the Treasurer of the 
 United States until all the obligations of such corporation that have 
 arisen out of interstate or foreign insurance shall have been dis- 
 charged or otherwise terminated; and the corporation maintaining 
 such deposit unimpaired shall be entitled to receive the interest 
 thereon as it accrues. Whenever a receiver shall be appointed in 
 a court of the United States, of competent authority, and shall pre- 
 sent to the Comptroller of Insurance a duly certified copy of such 
 appointment, together with an order of said court for the delivery 
 to said receiver of the bonds or securities held by the Treasurer of 
 the United States as a guaranty for the contracts of such corporation, 
 in order that they may be distributed among the beneficiaries in 
 accordance with the principles of equity said Comptroller shall 
 apply to the Treasurer for said securities and the Treasurer shall 
 deliver them to the receiver appointed by the court. If such depos- 
 itor shall appear and desire to be heard, the Comptroller shall grant 
 a hearing to the parties, at such time and place as he may limit and 
 appoint, and upon such hearing shall determine the question upon 
 which the parties shall have taken issue, and from this decision either 
 party may, within ten days, appeal to the Secretary of Commerce 
 and Labor, whose determination shall be final and conclusive. It 
 shall also be the duty of the Comptroller of Insurance to keep him- 
 self advised of the legislation and executive action of foreign nations 
 affecting the business of corporations transacting insurance under 
 this Act in foreign countries, and whenever he shall consider such 
 legislation or executive action to be injurious to the business in such 
 foreign nations of corporations transacting insurance under this Act, 
 he shall lay all the facts before the Secretary of Commerce and Labor 
 for transmission to the Department of State for such action thereon 
 as will extend over corporations under this Act all the rights, pro- 
 tections, and facilities as are within the power of the Government 
 of the United States. 
 
 "Sec. 22. That the Comptroller of Insurance may, whenever 
 he deems it necessary, call upon the Attorney-General for legal coun- 
 sel and such assistance as may be required to enforce the provisions 
 of this Act. If, upon examination or other evidence exhibited or 
 made known to him, he shall be satisfied that any corporation trans- 
 acting interstate insurance, as defined by this Act, shall have violated 
 
 308 
 
Appendix D 
 
 any provision of this Act, he shall report the facts to the Attorney- 
 General, who shall institute proceedings against the same. Any 
 wilful false swearing in regard to any report or statement of fact 
 required by the provisions of this Act shall be perjury, and shall be 
 punished as such, according to the laws of the State, Territory, or 
 District in which the corporation is incorporated or organized; and 
 every oflScer, employee, or examiner of the Bureau of Insurance who, 
 upon any pretence whatever, receives any fee or reward for his ser- 
 vices, except what is allowed to him by law or by the rules and regula- 
 tions of the Bureau, shall forfeit his office and be otherwise punished 
 by the imposing of a fine of not more than five hundred dollars or by 
 imprisonment for not more than six months, or by both. It shall 
 not be lawful for any corporation or party which has not complied 
 with the provisions of this Act to insure any risk or issue any policy 
 on property of any kind located beyond the limits of the State, Terri- 
 tory, or District under whose laws said corporation or party was 
 incorporated or organized, or upon the life or lives of any person or 
 persons, or upon contingencies happening in future to person, Hfe, 
 property, or estate, where the insured is not a resident of the State, 
 Territory, or District in which said corporation or party was incor- 
 porated or organized; and it shall not be lawful for any person to 
 act as agent or solicitor, or in any other manner, for any corporation 
 transacting business under this Act until all the provisions of this law 
 shall have been complied with and evidenced by the Comptroller's 
 certificate of authority. Any person or persons violating this or any 
 other provision of this Act shall be deemed guilty of a misdemeanor, 
 and shall, upon conviction thereof in any district court in the 
 United States within the jurisdiction of which such offense was 
 committed, be subject to a fine not exceeding one thousand dollars 
 for each offense. 
 
 "Sec. 23. That all duties and powers, authority and jurisdic- 
 tion now imposed and conferred upon the Commissioner of Corpora- 
 tions by the Act of Congress of February fourteenth, nineteen hun- 
 dred and three, relating to insurance companies, shall not thereafter 
 be imposed upon or exercised by the Commissioner of Corporations. 
 And all Acts or parts of Acts inconsistent with this Act, and so far 
 as inconsistent, are hereby repealed; and all books, papers, and 
 documents and correspondence whatsoever, now in the office 
 
 309 
 
Life Insurance and Other Subjects 
 
 of the Commissioner of Corporations, relating to the business of 
 insurance, shall, on demand, be delivered and transferred to the 
 Comptroller of Insurance, and be and remain in his charge and 
 custody. 
 
 "Sec. 24. That this Act shall be in force from and after its 
 passage." 
 
 310 
 
APPENDIX E 
 
 Industrial Insurance in Force 
 IN THE United States 
 
 ALL INDUSTRIAL COMPANIES 
 
 THE PRUDENTIAL INSURANCE COMPANY 
 
 Years 
 Ending 
 Dec. 31st 
 
 1S76 
 1877 
 1878 
 
 1879 
 1880 
 1881 
 1882 
 1883 
 18S4 
 1885 
 1886 
 1887 
 1888 
 1889 
 1890 
 1891 
 1892 
 
 1893 
 1894 
 
 1895 
 1896 
 1897 
 1898 
 1899 
 1900 
 1901 
 1902 
 
 ^903 
 1904 
 
 1905 
 1906 
 1907 
 1908 
 
 Number of 
 Policies 
 
 4,816 
 
 11,226 
 
 22,808 
 
 60,371 
 
 236,674 
 
 367,453 
 
 590,053 
 
 877,334 
 
 1,092,529 
 
 1,377,150 
 1,780,372 
 2,310,003 
 2,797,521 
 3,365,461 
 3,883,529 
 4,319,817 
 5,200,777 
 
 5,751,514 
 
 6,833,439 
 
 6,952,757 
 
 7,388,119 
 
 8,005,384 
 
 8,798,480 
 
 10,050,847 
 
 11,219,296 
 
 12,337,022 
 
 13,448,124 
 
 14,625,000 
 
 15,674,384 
 16,872,583 
 
 17,841,396 
 18,849,357 
 19,687,675 
 
 I 443,072 
 
 1,030,655 
 
 2,027,888 
 
 5.651,589 
 
 20,533,469 
 
 33,501,740 
 
 56,564,682 
 
 87,793,650 
 
 111,115,252 
 
 145,938,241 
 
 198,431,170 
 
 255,533,472 
 
 305,155,182 
 
 365,841,518 
 
 429,521,128 
 
 481,919,116 
 
 583,527,016 
 
 662,050,129 
 
 800,946,170 
 
 820,740,641 
 
 888,266,586 
 
 996,139,424 
 
 1,110,073,519 
 
 1,293,125,522 
 
 1,468,986,366 
 
 1,640,857,553 
 
 1,806,890,864 
 
 1,965,600,000 
 
 2,135,859,103 
 
 2,309,754,235 
 
 2,453,616,207 
 
 2,577,896,941 
 2,668,919,696 
 
 Years 
 
 Ending 
 
 Dec. 31st 
 
 1876 
 1877 
 1878 
 1879 
 1880 
 1S81 
 1882 
 1883 
 1884 
 1885 
 1886 
 1887 
 1888 
 1889 
 1890 
 1891 
 1892 
 
 1893 
 1894 
 
 1895 
 1896 
 1897 
 1898 
 1899 
 1900 
 I90I 
 1902 
 1903 
 1904 
 
 1905 
 1906 
 1907 
 1908 
 
 Number of 
 Policies 
 
 4,816 
 11,226 
 22,So8 
 
 43.715 
 87,462 
 133,582 
 196,007 
 273,917 
 324,794 
 422,671 
 
 548,433 
 736,909 
 850,064 
 1,099,312 
 1,228,332 
 1,360,383 
 1,653,465 
 1,941,533 
 2,256,014 
 
 2,330,741 
 2,437,251 
 2,658,700 
 2,924,526 
 3,406,189 
 3,908,622 
 
 4,290,539 
 4,692,182 
 5,176,456 
 5,642,335 
 6,117,575 
 6,474,689 
 6,852,793 
 7,258,704 
 
 : 443,072 
 
 1,030,655 
 
 2,027,888 
 
 3,866,913 
 
 7,347,892 
 
 10,959,948 
 
 15,738,973 
 
 23,053,935 
 
 28,545,189 
 
 40,266,445 
 
 59,328,627 
 
 81,694,088 
 
 92,418,854 
 
 117,357,415 
 
 135,084,498 
 
 150,758,907 
 
 184,306,206 
 
 218,199,566 
 
 259,840,927 
 
 268,414,100 
 
 279,030,638 
 
 303,770,952 
 
 333,992,200 
 
 389,039,257 
 
 448,596,996 
 
 498,127,133 
 
 550,464,265 
 
 613,935,910 
 
 675,992,239 
 
 738,502,100 
 
 788,261,730 
 
 840,291,172 
 
 891,057,438 
 
 311 
 
APPENDIX F 
 
 The following table shows the present financial status of 
 the Industrial insurance companies of the United States. 
 Nearly all of the Industrial companies transact Ordinary 
 insurance also, and the summary statistics of the two 
 branches are therefore separately stated. 
 
 Statistics* of Industrial Insurance Companies in the 
 United States December JJ, igo8 
 
 Indc^rid Ordinary ,]^,'^^^ty 
 
 Policies in force . . . . 19,659,868! 1,295,942 20,955, 2iot 
 Amount of insurance in force . $2,668,595,294! $1,317,887,524 $3,986,482,818! 
 
 Premium Income 95,373,691 50,363.260 145,736,951 
 
 Payments to Policyholders . . 36,691,216 17,131,338 53,822,554 
 
 Assets . . . . . . 481,545,768 
 
 Liabilities . . 431,845,111 
 
 Surplus . . 49,700,657 
 
 * These returns are not quite complete, but they are approximately so. 
 
 t In addition there were 27,807 Industrial policies in force, for $324,402, with five companies 
 which DO longer transact Industrial insurance. 
 
 APPENDIX G 
 
 In the following table is presented a brief summary of 
 the Industrial insurance in force in the principal countries 
 of the world on December 31, 1906. It is conservatively 
 estimated that at the present time (1909) there are about 
 58,000,000 Industrial policies in force in the world. 
 
 Industrial Insurance in Force in the Principal Countries 
 of the World December 3J, igo6 
 
 Country Number of Policies* Amounts* 
 
 Lompanies 
 
 Australia 8 351,249 $ 35,485,683 
 
 Austria-Hungary 10 429,753 27,588,951 
 
 Canada 4 399,36o 43,557,746 
 
 Germany . . . .28 6,244,554 281,263,306 
 
 United Kingdom ... 18 26,858,618 1,299,902,319 
 
 United States ... 19 17,841,396 2,453,616,207 
 
 Totals . . . . 86t 52,096,414 $4,143,314,412 
 
 * These do not include the Industrial business of companies in Denmark, Belgium, Sweden, 
 Switzerland, and a number of other European countries. There is also some Industrial business in force 
 in New Zealand and in South Africa, among other countries and sections of the world in which the 
 business is now transacted. 
 
 t One company operated in both the United States and Canada. 
 
 3x2 
 
INDEX 
 
INDEX 
 
 Abbott, Gen. Henry L., in favor of lock 
 canal project, 543 
 
 Abstinence, economic importance of, 72 
 
 Accident insurance, commercial aspects 
 of, 204; companies and Federal su- 
 pervision, 182 
 
 Accounting system, life insurance, 175 ; 
 necessit)' of thorough, in Industrial 
 insurance, 40 
 
 Accounts, life insurance, complicated 
 methods of , required by various States, 
 164 
 
 Actuarial basis of Industrial insurance, 
 20, 39, 40 
 
 Actuarial department of a life insurance 
 company, 152-3 
 
 Additional benefits. Industrial, 69 
 
 Administration, perfection of details of 
 oflBce and agency. Industrial, 107. 108 
 
 Age 75 and age 80 concessions. Pru- 
 dential Insurance Co., 114 
 
 Agency and non-agency companies con- 
 trasted, 106, 107 
 
 Agency force, difficulty of organizing 
 the Industrial, 41 
 
 Agency instruction, lite insurance, 154, 
 155 
 
 Agency organization. Industrial com- 
 panies, 148 
 
 Agency system. Industrial, 69 
 
 Agents, Industrial, character of, 148; In- 
 dustrial, definition of, 151 ; Industrial, 
 educational efforts of, 137 ; Indus- 
 trial, necessity for, 66, 69, 101, 106 ; in- 
 surance, and Federal supervision, 178 ; 
 life insm'ance, advantages of, 148; life 
 insiu'ance, higher standard of, 149; 
 Ordinary life, requisites for, 148, 149 ; 
 prospects for, in life insurance, 146 
 
 Alexander, James W., and State super- 
 vision, 191 
 
 American and foreign engineers, relative 
 ability of, 273 
 
 American experience and the Panama 
 Canal, 273 
 
 American Society of Civil Engineers, 
 reference to, 246 
 
 Ammen, Admiral, and the Panama 
 Canal, 222 ; in favor of lock canal, 266 
 
 Amount, average, of Industrial insur- 
 ance, 65, 66, 147; average, of Ordi- 
 nary insurance, 147 
 
 Annuities, deferred. Industrial plan, un- 
 popularity of, 100 
 
 Ansell, Charles, treatise on friendly 
 societies, 30 
 
 Application, first, received by The Pru- 
 dential Friendly Society, 1875, 39 
 
 Arkansas, method of insurance taxa- 
 tion, 164 
 
 Assets, of Industrial insurance compan- 
 ies, 76, 77; of legal-reserve hfe insur- 
 ance companies, 145 
 
 Assistant superintendent. Industrial, 
 definition of, 71, 151 
 
 Association of Life Insurance Presi- 
 dents, in favor of uniform taxation, 
 164; should resist efforts to increase 
 insurance taxation, 167 
 
 Assiu'ance associations, report of se- 
 lect parliamentary committee on, 
 1853, 19 
 
 Audit system, life insurance, 175, 176 
 
 Australia, discussion of insurance of 
 children in, 96, 97; Industrial insur- 
 ance m, 68, 90, 312 
 
 Austria, compulsory state pensions in. 
 139 ; Industrial insurance in, 90, 312 ; 
 state-pension schemes in, 121 
 
 Bagehot, Walter, essay on Lombard 
 Street, 38 
 
 Bank charter, constitutionaUty of, 210 
 
 Banking system, congressional control 
 of, 212 
 
 Bank presidents, opinion on Federal 
 supervision of insurance, 207, 208 
 
 Bankruptcy, congressional control of, 
 212 
 
 Banks for Savings, History of, by 
 Lewins, 86 
 
 Barge canal. New York State, a prece- 
 dent for Panama Canal, 269 
 
 Bastable, C. F., on taxation, 169 
 
 Batterson, James G., on State super- 
 vision, 184 
 
 Becher, Rev. John Thomas, and South- 
 well Society tables, 30 
 
 Beawes, Wyndham, The Merchant's 
 Directory, 213 
 
 Belgium, Industrial insurance in, 312 
 
 Benefits of Industrial insurance, 60, 61 
 
 Benton, Abridgement of the Debates of 
 Congress, 205 
 
 Blanchard, Noah F., first President of 
 The Prudential Insurance Company 
 of America, 1879, 38 
 
 3^ 
 
Indt 
 
 ex 
 
 Board of Consulting Engineers, differ- 
 ence of opinion of, regarding type of 
 canal, 245, 246; on the cost of main- 
 tenance of different types of canal, 
 253-255; testimony before, 272 
 
 Board of Engineers on Deep Water- 
 ways, report of, 269 
 
 Bohio dam, reference to, 256 
 
 Books and periodicals on life insurance, 
 155 
 
 Booth, General, reference to child mur- 
 der for insurance, 97, 98 
 
 Boston, earthquakes in, 262; medical 
 charities of, in the 70's, 33; pauper 
 burials in, 36; Provident Institution, 
 55 
 
 Brooklyn Bridge as a precedent for 
 Panama Canal, 269 
 
 Building and loan associations and In- 
 dustrial insurance, 73, 162 
 
 Bulletin of U. S. Department of Labor 
 on Industrial Insurance, 96 
 
 Bulwer, Sir Henry, opposition to Suez 
 Canal, 265, 266 
 
 Bund system in insurance, 28 
 
 Bureau of Corporations and control of 
 insurance, 289; of Corporations and 
 Federal supervision, 189 
 
 Bureau of Insurance, recommendation 
 for, 189, 190, 299 
 
 Burial Clubs, England, 19 
 
 Burial expenses, average, for children 
 under ten, 96; and Industrial insur- 
 ance, 65, 75 
 
 Burial fund, adult and infant, provided 
 by the Prudential Friendly Society, 
 37 
 
 Burr, Prof. Wm. H., testimony in favor 
 of lock canal, 228; in favor of sea- 
 level project, 242 
 
 Canada, Industrial insurance in, 90, 312; 
 
 The Prudential in, 115 
 Canal, Isthmian, consideration of, 219- 
 
 273; Panama, importance of fbdng 
 
 type of, 265 
 Canal Zone, civil government of, 228; 
 
 Geo. W. Davis governor of, 243; 
 
 prices of land in, 254, 255 ; sanitation 
 
 of, 228 
 Canals, development of, in U. S., 203 
 Carlyle, Thomas, Past and Present; 
 
 unsustained charge of murder of 
 
 children for insurance money, 95 
 Central American isthmus, exploration 
 
 of, 220; various canal routes of, 221 
 
 Chagres River, exploration of, 220; and 
 the Panama Canal, 223, 228, 256 
 
 Charity and Industrial insurance, 51, 
 74, 75, 91 
 
 Charleston, S. C, earthquake at, 262 
 
 Chesapeake & Ohio Canal, experience 
 of, 240 
 
 Chicago Deep Waterway, project for, 
 249 
 
 Children, comparatively low death-rate 
 of insured, 78; insurance of, through 
 the post-office, 88; insurance of, by 
 Salvation Army, 97, 98 ; insurance of, 
 recommended by Parliamentaiy Com- 
 mittee, 97; insured, no positive evi- 
 dence of murder of, for insurance 
 money, 96; life insurance of, 95; mor- 
 tality of, in the 70's, 33; murder of, 
 for insurance, no proved case of, in 
 the U. S., 98, 99 
 
 Cholera in the United States in the 70's, 
 33 
 
 Claim payments, average size of, for 
 children under ten, 96; Industrial, 59; 
 Industrial, promptness of, 21, 70, 105; 
 Ufe insurance, 123 
 
 Claims, infrequent contests of, 105 
 
 Clark, J. E., actuarial work of, for The 
 Prudential Friendly Society, 39, 40 
 
 Coast survey, congressional control of, 
 212 
 
 Collectors, necessity for. in Industrial 
 insurance, 66, 108 
 
 Colon, Isthmus of Panama, and pos- 
 sible flood waves, 263 
 
 Commerce, growth of, in U. S., 202 
 
 Commercial aspects of insurance, 179, 
 180, 188, 190, 193-196, 201-215, 289- 
 293, 302; Alexander Hamilton on, 
 194-5; public opmion of, 207, 208- 
 293; specific instances of the recog- 
 nition of insurance as an element of 
 commerce, 213 
 
 Constitution of U. S., 281 ; amendments 
 to, 282; and State supervision, 187; 
 and Federal supervision, 194, 195; 
 broad interpretation of, 277; and cor- 
 porations, 283; and the commerce 
 clause, 212 
 
 Contract, Industrial policy, description 
 of, 69; improvement in, 79 
 
 Co-operative insurance societies, in 
 U.S., 25; failure of, 88, 89 
 
 Compulsory insurance impracticable in 
 the U. S., 106 
 
 Concessions to Indastrial policyholders, 
 voluntary, by The Prudential, 105 
 
 318 
 
Index 
 
 Congress, appeal to, by life insurance 
 companies, 1865, for relief from over- 
 super\'ision, 177 
 
 Congressional acts seldom declared un- 
 constitutional, 183, 184 
 
 Conscription scheme, constitutionality 
 of, 210 
 
 Corporations, and the Constitution, 283; 
 business, development of, in U. S., 203 
 
 Cost, of Industrial insurance, reasons 
 for high, 66, 108, 109; of insurance, 
 and Federal supervision, 189; of life 
 insurance, increased by taxation, 163, 
 170, 171; of State supervision, 181; 
 of different types of canals, 236, 237, 
 238, 239, 246, 247, 253-255, 264, 272 
 
 Credit insurance, commercial aspects of. 
 204 
 
 Culebra Gut and earthquakes, 263 
 
 Davis, Gen. George W., in favor of .sea- 
 level project, 243 
 
 Death-rates, decline in. New Jersey, 
 98, 99; Newark, N. J., 99 
 
 Debit, Industrial, defined, 71 
 
 Definition of Industrial insurance, 52, 
 53, 65, 85, 147; of life insurance, 145 
 
 De Lesseps, Ferdinand, and the Panama 
 Canal, 222, 223, 224; and the Suez 
 Canal, 266; fatal error of, 246, 251, 
 273; \isionary plan of, 256 
 
 DeMorgan, definition of life insurance, 
 145 
 
 Denmark, Industrial insurance in, 312 
 
 Department of Commerce and Labor, 
 and Federal supervision, 189; estab- 
 lishment of, 190 
 
 Department of Manufacturers and Min- 
 ing, suggestions for establishment of, 
 190 
 
 Deposit laws, passage of, by various 
 States, 185 
 
 Dillon, John M., editor of Marshall's 
 Complete Constitutional Decisions, 
 214 
 
 Dependence, problem of, in old age, 121 
 
 District of Columbia, method of insur- 
 ance taxation, 164 
 
 Dividends, Industrial, 69; life insur- 
 ance, affected by taxation, 170 
 
 Douglas-Lincoln contest, 277 
 
 Dymond, Jonathan, Essays on Morality, 
 203 
 
 Earthquakes and the Panama Canal, 
 257, 259-264 
 
 Economic aspects of life insurance, 139 
 
 Economic conditions of the masses in 
 the 70's, 35 
 
 Economic hLstory of the United States, 
 1870-'79, 32 
 
 Economic importance of life insurance, 
 123 
 
 Economic questions, importance of, in 
 U. S.,_2S2 
 
 Economic value of Industrial insurance, 
 91, 92; of insiu'ance, 194 
 
 Economics of Industrial insurance, 71 
 
 Education, Industrial insm'ance as a 
 means of, 42; public, in life insur- 
 ance, 155 
 
 Egypt and the Suez Canal, 265 
 
 Embargo act, constitutionality of, 210 
 
 Employers' liability insm'ance, com- 
 mercial aspects of, 204 
 
 Enforcement Act, constitutionality of, 
 210 
 
 England, state-pension schemes in, 121 
 
 Epidemics in the United States in the 
 70's, 33 
 
 Equitable of London, slow progress of, 
 106 
 
 Erie Canal, as a precedent for Panama 
 Canal, 269; favorable experience of, 
 240, 249, 257 
 
 Ernst, Col. Oswald H., in favor of lock 
 canal, 243, 256 
 
 Essex County, N. J., Industrial insur- 
 ance in, 94, 95 
 
 E.xamination of insurance companies, 
 provision for, lq Senate bill, 304-5 
 
 Exchange and Review, early reference 
 to need of Indiistrial insurance in the 
 United States, 24 ; reference to Bund 
 system, 28 
 
 Expense of State supervision, 175 
 
 Expenses, agency, necessary and legiti- 
 mate, 107 
 
 Expense-rate, and securitj', 27; reduc- 
 tion of Industrial, 107 
 
 Experience the basis of improvements 
 in the methods and practices of In- 
 dustrial insurance, 103 
 
 Express companies, congressional con- 
 Uol of, 212 
 
 Extent of Industrial insurance in U. S., 
 78, 94, 95 
 
 Failures of life insurance companies a 
 check to life insm'ance progress, 36; 
 chargeable in part to over-supervision, 
 182; in the 70's, 29; in U. S., 48, 49_ 
 
 Falkner, Prof. Roland P., review of his- 
 tory of The Prudential, 57 
 
 319 
 
Inde 
 
 Family expenditures, and life insurance, 
 133; necessity for education in, 122; 
 no reference to life insurance pay- 
 ments in, 34 
 
 Family insurance, benefits of, 95 
 
 Farmers and Mechanics, failm-e of, 48 
 
 Federal income tax, Civil War, 168 
 
 Federal insurance law, constitutionality 
 of, 211 
 
 Federal regulation of interstate insur- 
 ance, desirability of, 176 
 
 Federal supervision, analysis of Senate 
 bill for, 296-8; and States' rights, 
 187, 192; benefits of, 189, 196-7; 
 considered by U. S. Senate, 1868, 
 178; limits of, 193; Uterature of, 
 177 
 
 Federalist, The, and Federal supervision, 
 179, 180 
 
 Fidelity and surety insurance, commer- 
 cial aspects of, 204 
 
 Fields, Stephen Dudley, and Federal 
 supervision, 194 
 
 Finance and taxation, speeches and re- 
 ports on, by Sherman, 32 
 
 Finance department, life insurance 
 company, 152 
 
 Finlaison, John Gleim, analysis of sick- 
 ness experience of friendly societies, 
 30, 31 
 
 Fire insurance, commercial aspects of, 
 203-4; companies and Federal super- 
 vision, 182; development of 203-4; 
 taxation, 168, 169 
 
 Fiske, John, quotations from, 25 
 
 Fletcher vs. Peck, case of, 211 
 
 Foraker, Senator, 233, 234 
 
 Fraternal insurance, weakness of, 27; 
 contrasted with Industrial insurance, 
 56; insittance societies, failure of, 
 88, 89; societies in the United States. 
 25 
 
 French commission for survey of Isth- 
 mus of Panama, 222; project for sea- 
 level isthmian canal, 223 
 
 Fricke, Wm. A., in favor of Federal 
 supervision, 186, 187 
 
 Friendly societies, England, 1850, 19; 
 amount of insurance with, 138 ; early 
 efiforts to improve, 25, 26; insurance 
 methods of, 85; rate of mortality 
 and sickness among, by Ratcliffe, 30; 
 reference to, 67; reference to history 
 of, 27; suggestions for establishing, 
 30; theory and practice of, 29-31 
 
 Funeral expenses, provisions for, 35 
 
 Galveston, Texas, flood wave at, 263 
 
 Gamboa Dam, consideration of, 2.50, 
 256, and earthquakes, 263 
 
 Gatun Dam, consideration of, 239, 243, 
 256; cost of, 254; locks, 248-250 
 
 German benefit societies and the Bund 
 system, 28 
 
 Germany, compulsory system of state 
 pensions in, 139; contrasted with the 
 United States in the matter of insur- 
 ance taxation, 165-6; imperial super- 
 vision of insurance in, 206; Indus- 
 trial insurance in, 68, 90, 312; state- 
 pension schemes in, 121; taxation 
 methods of, contrasted widi those of 
 the U. S., 170 
 
 Gibraltar and earthquakes, 262 
 
 Gilds, reference to, 67; dissolution of 
 by Henry Vm, 85 
 
 Gladstone, Wm. Ewart, opposition of, 
 to London Prudential, 21, 22; in- 
 fluence of, in establishment of post- 
 office insurance, 22, 47, 86, 87, 97 
 
 Gold medal awarded The Prudential 
 Insurance Company of America, 57, 
 114 
 
 Good roads and their relation to life 
 insurance, 188, 202-3 
 
 Government insurance, England, 22, 
 86, 87; Germany, definition of, 102; 
 New Zealand, 101; premium rates 
 compared with private companies' 
 rates, 102 
 
 Grand prize awarded The Prudential, 
 114 
 
 Great Lakes canals, successful experi- 
 ence of, 240 
 
 Great Western Ins. Co., failure of, 29 
 
 Gregson, Henry, suggestions for estab- 
 lishing friendly societies and savings 
 banks, 30 
 
 Hadley, Arthur T., quotation from, 71 ; 
 quotation from Colbert, 167 
 
 Hauls, Gen. Peter C, in favor of lock 
 canal, 243, 256 
 
 Hale, Rev. Edward Everett, on old- 
 age pensions, 122 
 
 Hamilton, Alexander, and Federal 
 supervision, 179, 180; reference to, 
 283-4; and the commerce clause of 
 the Constitution, 194-5 
 
 Hanna, Senator, and the Panama Canal, 
 226 
 
 Harben, Henry, on the necessity for an 
 accounting system in Industrial in- 
 
 320 
 
Ind, 
 
 ex 
 
 surance, 40; witness before Royal 
 Commission, 26 
 
 Hardwick, Charles, history of friendly 
 societies, 27, 31 
 
 Harrod, B. M.; experience of, in levee 
 construction, 245; in favor of lock 
 canal project, 244, 249 
 
 Harvard University, presentation of 
 charts to, by The Prudential, 115 
 
 Hawkshaw, Sir John, opposed to sea- 
 level canal, 223 
 
 Hay, John, and the Panama Canal, 266 
 
 Haves, President, and the Panama 
 Canal, 222 
 
 Hay-Varilla treaty, 257 
 
 Hazard of Inexperience, The, by Alex- 
 ander, 191 
 
 Health, of the people of the United 
 States in the 70's, 33; measures and 
 Industrial insurance, 59 
 
 Heilprin, Prof., on earthquake danger 
 on Isthmus of Panama, 261 
 
 Hendriks, Frederick, financial statistics 
 of government life aimuities, 22 
 
 Higher education and life insurance, 
 154 
 
 Hine, C. C, in support of Federal su- 
 pervision, 178 
 
 History, early, of Industrial insurance 
 in U. S., 74, 85; of Industrial insur- 
 ance, first quarter century of, in U. S., 
 47-61; of The Prudential Insurance 
 Company of America, reference to, 
 89, 115 
 
 Hoar, Senator, reference to, 278 
 
 Hoffman, Frederick L., history of The 
 Prudential Insurance Company of 
 America, 42, 89; The Life Insiu-ance 
 of Children, 95 
 
 Holden, Dr. Edgar, on mortality of 
 Newark, N. J., 33 
 
 Home ownership and Industrial insur- 
 ance, 78 
 
 Hoosac Tunnel a precedent for Panama 
 Canal, 269 
 
 Housing conditions in the U. S., 280 
 
 Hunter, Chief Engineer of the Manches- 
 ter Ship Canal, opposed to lock canal, 
 269; in favor of lock canal, 235; 
 in favor of sea-level canal, 268; his 
 request for special committee to pre- 
 pare sea-level canal project, 232 
 
 Idleness, involuntary, prevalence of, in 
 the United States, 41 
 
 Illinois, consideration of State insur- 
 ance in, 101 
 
 Immigration, and life insurance, 139; 
 and sanitation in the United States, 
 33; of EnglLsh to the United States, 
 and life insurance, 25 
 
 Instalment plan compared with Indus- 
 trial insurance, 109 
 
 Income, life insurance, United States, 
 145, 175 
 
 Income tax. Civil War, 168 
 
 Independent, on State supervision and 
 insurance, 182 
 
 Industrial insurance agents, teachers of 
 thrift, 92 
 
 Industrial Insurance, and building-and- 
 loan associations, 73; and burial ex- 
 penses, 75: and charity, 51, 74, 75, 91; 
 and economic progress, 51; and eco- 
 nomics, 71 ; and home ownership, 78 ; 
 and General and Industrial insurance 
 company, 67; and Ordinary insurance 
 compared, 49, 50, 55, 56, 79, 147; and 
 pauperism, 90; and penny provident 
 funds, 73; and private wealth, 80; 
 and public welfare, 69; and school 
 savings banks, 73; and social better- 
 ment, 80; and the instalment plan 
 compared, 109; and thrift habits, 72, 
 91; and tuberculosis prevention, 59, 
 60; an education in other forms of 
 insurance, 54, 55, 74 ; an effective form 
 of thrift, 60; beginning of, in United 
 States, 47, 65, 74, 93, 94; birth of, in 
 England, 1853, 19, 66; by government, 
 101 ; companies, organization and ad- 
 ministration of, 147-8;compamesinthe 
 United States, ordinary insurance of, 
 138; comparative growth of, 55; 
 contrasted with fraternal, 56; con- 
 trasted with post-office insurance, 
 England, 23; definition of, 52, 53, 65, 
 85, 147; early history of, in England, 
 67; early success of, in England, 
 20-23, 89; economic benefits of, 76; 
 evolution of, 79; extension of, in the 
 United States in 1880, 49; extent of, 
 in United States, 89, 90, 134, 136; field 
 organization of 151; first issue of, in 
 England, 20; progress of, 92; in Aus- 
 tralia, 68, 90; in Austria, 90; in 
 Canada, 90; in Denmark, 90; in force 
 in the United States, 66, 68, 133, 145, 
 311 ; in the world, 68, 312; in Germany, 
 68, 90; in Norway, 90; in South Africa, 
 90; in Switzerland, 90; in the United 
 States, early reference to need of, 24 ; 
 
 321 
 
Index 
 
 in the United States, future prospects 
 of, 60, 61, 80, 136; intensive develop- 
 ment of, 57, 58, 78, 94, 95; in the 
 United States, progress of, since 1879, 
 42, 43, 51, 52, 94, S5, 136; is public 
 wealth, 71, 80; limitation of, 32; ore;an- 
 ization, 151-154; origin of, in Eng- 
 land, 85 ; policies and persons insured, 
 134; policies in UnitM Kingdom, 68; 
 policies written by The Prudential in 
 1877, 42; in 1878, 42; poUcy contract, 
 evolution of, 58; contract, evolution 
 of, in United States, 103; policy, first 
 in United States, 47; popularity of, 
 in United States, 103: progress of, in 
 civilized countries, 67-8; proposal for 
 establishing in United States, 26; re- 
 sults of, 104-5; results of, direct and 
 indirect, 76, 77; simphcity of, 104; 
 statistics. United States, 312; times 
 ready for, in the United States in the 
 70's, 37; world-wide, 68, 90 
 
 Industrial-Ordinary insurance, 53, 68, 
 93, 147; importance of, 42; policies, 
 average size of, 93; popularity of, in 
 United States, 103; rapid growth of, 
 137 
 
 Inspector, Ufe insurance, definition of, 
 151 
 
 Insurance, a National interest, 205-6; 
 and conditions in the United States 
 following the Civil War, 29; and con- 
 ditions m the United States, in the 
 70's, 48; development of, in the 
 United States, 203; first reference to, 
 in congressional debates, 205; inter- 
 state, definition of, 301-2; need of 
 family, 87; of children, objections to, 
 95; early references to Industrial, 26; 
 progress of, in United States, 175; 
 the handmaid of commerce, 179 (see 
 also life insurance) 
 
 Insurance commissioners and Federal 
 supervision, 186; and uniform State 
 supervision, 181, 187; and uniform 
 taxation, 164 
 
 Insurance Monitor and Federal super- 
 vision, 177-9; reference to need of 
 Industrial insurance, 21; semi-cen- 
 tenary of, 19 
 
 Insurance protection, TniniTnnm require- 
 ments for, 125 
 
 Insurance taxes, contrasted with colonial 
 stamp taxes, 169 (see also taxation) 
 
 Insurance Times on State supervision, 
 181 ; on Federal supervision, 178 
 
 Insured and uninsured populations 
 
 contrasted, 78, 79; children, com- 
 paratively low death-rate of, 78; 
 population, estimate of, in United 
 States, 134 
 
 Intemperance, prevalence of, in New- 
 ark in the 70's, 34; in the United 
 States in the 70's, 34 
 
 Intermediate insurance, 53 
 
 Internal improvements. United States, 
 203; constitutionality of, 210 
 
 International aspects of insurance, 206 
 
 International Assurance Co., T>ondon, 
 controversy with Eliziu- Wright, 21 
 
 International Board of Consmting En- 
 gineers, final report of, 219; lack of 
 thorough consideration of the canal 
 project, 231-236, 244; report on choice 
 of type of canal, 229, 230 
 
 International Technical Commission, 
 New Panama Canal Co., 243 
 
 International Tuberculosis Congress, 
 The Prudential an exhibitor at, 60, 
 115 
 
 Interstate commerce act, and Federal 
 supervision, 180-1 ; and the Constitu- 
 tion, 283 
 
 Interstate insurance and interstate com- 
 merce, 180-1 
 
 Interstate warfare, its effect on insur- 
 ance, 184 
 
 Investment, security of, and monthly 
 incomepohcies, 124 
 
 Iroquois Theatre disaster, 104 
 
 Isthmian Canal, consideration of, 219- 
 273; the quick construction of, and 
 American data, 251 
 
 Isthmus of Panama and earthquakes, 
 260-64 ; first railway on, 221 ; physi- 
 cal difficulties of, 221 ; route, 223 
 
 Isthmus of Tehuantepec, 221 
 
 Isthmian Comniis.sion, consideration of 
 sea-level and lock-canal projects, 236; 
 of 1899-1901, in favor of lock canal, 
 228 
 
 James, James Henry, Guide to the 
 
 Formation and Management of 
 
 Friendly Societies, 30 
 Jamestown Tercentennial Exposition, 
 
 The Prudential at, 115 
 Jay, John, and constitutionality of the 
 
 treaty with England, 210 
 Jefferson, Thomas, reference to, 283 
 
 Kays, Social Condition of the People 
 in England, 95 
 
 322 
 
Index 
 
 Keyes, E. W., History of Savings Banks, 
 
 60 
 Kittredge, Senator, and the Panama 
 
 Canal, HQ, 233-4 
 Koren, John, report on pauperism in 
 
 ahnhouses, 91 
 
 Labor Bureau of New Jersey, investi- 
 gation of health conditions, 33 
 
 Lake Erie to the Ohio River Canal, 
 project for, 240 
 
 Lake Michii;an to the Illinois and Mis- 
 sissippi Rivers Canal, project for, '240 
 
 Lalor, J. J., 146 
 
 Languedoc, Canal of, a precedent for 
 Panama Canal, 269, 270 
 
 Lapses, Industrial, 70, 11]-113 
 
 Laws, uniform, for insurance, 201 
 
 L^al department, of life insurance 
 company, 152 
 
 Legal Masterpieces, by Veeder, 195 
 
 L^al reserve life insurance in U. S., 
 145 
 
 Legislation, should be governed by 
 economic and moral principles, 165 
 
 Les Mercatoria Rediviva, reference to, 
 213 
 
 Levee construction in Louisiana, 245 
 
 Lewins, Wm., History of Banks for 
 Savings, 86 
 
 Liens, Industrial pohcy, 58, 70 
 
 License fees, insurance, not objection- 
 able, 161 
 
 Life insinrance, a class institution in the 
 70's, 36; and character, 155; and 
 economics, 123; and family expend- 
 itures, 133; and social economy, 
 123; an institution developed sub- 
 sequent to the U. S. Constitution, 
 196; a public b)enefit, 162; a volun- 
 tary tax, 169; development, 146; for 
 wage-earners, imperative need of, 
 in the 70's, 37; future prospects of, 
 in U. S., 140, 156; growth of, com- 
 pared with other financial institutions 
 and statistics, 135, 136; in the U. S., 
 1875, 48; legal-reserve, compared 
 with other forms, 134, 135; hterature, 
 155; management, 150; origin of, 
 145; over-taxation of, 170; periodicals, 
 152, 155; and panics, 133; progress 
 of, in New Zealand, 137 ; progress of, 
 in U. S., 133, 135, 175, 192; should 
 be exempted from excessive taxation, 
 162; taxation of, 161-171; theory of, 
 145, 146 (see also Insurance) 
 
 Light-house service, development of, 
 203 
 
 Limon Bay, 222 
 
 Lincoln, Abraham, quotation from, 78; 
 supreme type of human courage, 277 
 
 Lisbon, earthquake at, 262 
 
 Lock canal, advantages of, over sea- 
 level canal, 231-2, 237, 238, 241, 242, 
 244, 247, 250-2; and the earthquake 
 risk, 264; consideration of, 224-5; 
 consideration of, by Senate Com- 
 mittee on Interoceanic Canals, 233; 
 cost of, 238 ; evidence in favor of, and 
 against, 219; favored by a minority 
 of International Board of Consult- 
 ing Engineers, 230; favored by 
 American engineers, 239; minority 
 report on, by Senate Committee on 
 Interoceanic Canals. 247; more thor- 
 ough consideration of, by Inter- 
 national Board of Consulting En- 
 gineers, 232; otyjections to, 248; ob- 
 jections to, by Hunter, 269; recom- 
 mended by technical committee, 225; 
 thorough understanding of, by Amer- 
 can engineers, 249; time required for 
 building, 238; weight of evidence and 
 opinion in favor of, 241-245, 255, 257, 
 270-273 
 
 London Congress on Tuberculosis, The 
 Prudential at, 59, 60 
 
 London Life, slow progress of, 106 
 
 Lottery tickets, power of Congress 
 over, 212 
 
 LuU, Naval Commissioner, in favor of 
 lock canal, 256 
 
 McCall, John A., and State super- 
 vision, 191 
 
 McCardle, Wm., case of, and Federal 
 supervision, 194 
 
 McCulloch, J. R., on taxation, 168 
 
 McKinley, President, reference to, 278 
 
 Madison, James, and the declaration 
 of neutrality, 209; reference to, 283 
 
 Maine, loss or the battleship, 104 
 
 Management of a life insurance com- 
 pany, 150; should not be by insur- 
 ance commissioners, 191-2 
 
 Manchester Ship Canal, accidents in, 
 248; experience of, 240 
 
 Manchester Unitv of the Independent 
 Order of Odd t'ellows, mortality and 
 sickness experience of, 30; history 
 of, 31 
 
 Marine insurance, development of, 203 
 
 323 
 
Index 
 
 Maishall, Chief Justice, and commer- 
 cial aspects of insurance, 196; and the 
 Constitution, 283; and the declaration 
 of neutrality, constitutionality of, 209; 
 Constitutional Decisions, quotation 
 from, 214; judicial opinion of, 211; 
 on taxation 165; quotations from, 211, 
 213 
 
 Martinique, earthquake at, 261 
 
 Massachusetts, Labor Commissioner of. 
 comments on savings banks deposi- 
 tors, 35 ; Labor Commissioner of, on 
 the importance of life insurance. 36; 
 method of, insurance taxation, 163; 
 Metropolitan Water and Sewerage 
 Board 244; non-contxibutory state- 
 pension schemes in, 121; require- 
 ments for life insurance taxation state- 
 ments, 164 
 
 Matachin and the Chagres River, 223 
 
 Medical charities, demand on, in Bos- 
 ton in the 70's, 33 
 
 Medical departments of Ufe insurance 
 companies, 153 
 
 Menocal, A. C, and the Panama Canal, 
 222 
 
 Merchant Marine Commission, report 
 of, 204 
 
 Metropolitan, of London, slow progress 
 of, 106 
 
 Meyer, Prof. B. H., reference to, 66 
 
 Miami and Erie Canal, experience of, 
 240 
 
 Militia question, constitutionality of, 
 210 
 
 Millard, Senator, and the Panama 
 Canal, 226 
 
 Mississippi River flood problem, 243-4 
 
 Missouri Compromise, constitutionality 
 of, 210 
 
 Monitor, The, comments on Gladstone's 
 government insurance measure, 23 
 
 Montana, requirements for annual life 
 insurance taxation statements, 164 
 
 Monthly contributions, tables of, by 
 Finlaison, 30 
 
 Monthly income policy, of The Pru- 
 dential Insm-ance Co. of America, 
 123; advantages of, 124; premium- 
 rates, 126-128 
 
 Monthly instalment plan of claim pay- 
 ments, 123 
 
 Morris. Corbyn, on commercial aspects 
 of insurance, 195 
 
 Mortality, of Newark, N. J., 33; in the 
 U. S. in the 70's, SO; rate, Industrial 
 
 compared with Ordinary, 110; rates, 
 reduction in, 51 
 Mutual assurance societies for work- 
 ingmen, 29; vs. slock companies, 89 
 
 National Banking Act, 1864, 192 
 
 National banks, cost of supervision, 
 192 
 
 National Bureau of Insurance, bill for, 
 introduced in Congress, 1892, 185 
 
 National Convention of Insurance Com- 
 missioners, consideration of insurance 
 taxation, 167-8 
 
 National Debt Office, reference to. 31 
 
 National supervision — see Federal .su- 
 pervision 
 
 Neison, F. G. P., contributions to vital 
 statistics, 30 
 
 NeutraHty, the declaration of, constitu- 
 tionality of, 209, 210 
 
 Newark, N. J., economic conditions of, 
 in 1875, 39; high death-rate of, in the 
 70's, 60; Industrial insurance in, 68. 
 78, 98; mortaUty of, in the 70's, 33; 
 organization of Widows' and Orphans' 
 Benefit Society in, 1873, 37; pauper 
 burials in, 36; intemperance m, 34; 
 the birthplace of Industrial insurance 
 in America, 39 
 
 Newark Savings Institution, failure of, 
 39 
 
 New insurance companies, organization 
 of, in the 70's, 20 
 
 New England, earthquakes in, 262 
 
 New Hampshire, method of uisurance 
 taxation, 164 
 
 New Jersey, extent of Industrial insur- 
 ance in,' 57, 58, 78, 136; Prudential 
 policies in, 95; introduction of In- 
 dustrial insurance in, 93, 94; investi- 
 gations of health conditions in, 33; 
 savings banks deposits, in the 70's, 34 
 
 New Jersey Mutual Life Insiu-ance 
 Company, fraud and mismanagement 
 in connection with, 39, 48, 94; 
 
 New Panama Canal Company, 243; 
 approval of lock plan, 227; of France, 
 report of, 225; rights of, piurchased 
 by United States, 226; technical com- 
 mission of, 236 
 
 New York City, Industrial insurance in, 
 78; pauper burials in, 36 
 
 New York State, earthquakes in, 262; 
 fair method of iasurance taxation in, 
 170; extent of Industrial insurance 
 in, 78, 136; Legislative Committee, 
 
 3H 
 
Inde 
 
 investigation of The Prudential by, 116 
 
 New York State Canals, history of j 269 
 
 New Zealand, extent and progress of life 
 insurance in, 137; government insur- 
 ance in, 101; Industrial insittance in, 
 312; state-pension schemes in, 131 
 
 Nicaragua, lock project for, 255; route 
 survey of, 221-2 ; and earthquakes, 260 
 
 Nicaragua!! Canal Commission and the 
 earthquake danger, 261 
 
 Noble, William, in favor of lock project, 
 243 
 
 Non-contributory state-pension schemes. 
 United States, 121 
 
 North Carolina, insurance taxation, in 
 193 
 
 North German Lloyd docks fire, Hobo- 
 ken, 104 
 
 Norway, Industrial insurance in, 90 
 
 Nourse, Prof. J. E., on The Maritime 
 Canal of Suez, 226, 266 
 
 Ohio, extent of Industrial insurance in, 
 136; method of insurance taxation 
 in, 163 
 
 Ohio Canal, experience of, 240 
 
 Old age, insurance against dependence 
 in, early efforts in United States, 29, 
 30; problem of, 121 
 
 Old Guard orga!!ization of The 
 Prudential l!!surance Company of 
 America, 41 
 
 Opposition to Indi!s trial i!isurance, 
 early, 20 
 
 Ordinary ii!surance and Industrial in- 
 surance compared, 147; and Indus- 
 trial insurance, relation of, 55, 56, 79; 
 companies, class of risks, 28; estab- 
 lishment of, by The Prudential In- 
 surance Company of America, 54, 93; 
 field administration, 150: in force in 
 United States, 133, 134, 145; in force 
 with Industrial compa!!ies, United 
 States, 138; of The Prudential Insur- 
 ance Company of America, growth of, 
 93; oflBce organization, 151; policies 
 written in New Jersey in 1876, 41 
 
 Oregon, voyage of the, aroimd Cape 
 Horn, 225 
 
 Osw^o Canal, a precedent for Panama 
 Canal 269 
 
 Over-le^lation, 176, 177-8, 181, 183, 
 185, 186, 191, 193, 196, 206 
 
 Over-supervision, 183, 185, 186, 191, 
 
 193, 196 
 Over-taxation, 196 
 
 Palmerston, Lord, opposed to Suez 
 Canal, 265 
 
 Pa!!ic of 1873, effect of, on insurance, 
 28, 29, 32 
 
 Panics and life insurance progress, 133 
 
 Panama and possible flood waves, 263; 
 earthquakes few at, 260-1 
 
 Panama Canal, a business enterprise, 
 268 ; choice of tvpe of, 227 ; early his- 
 tory of, 220-222; neutrality of, 258; 
 prehminary work on, 228-9 ; protection 
 of, in case of war, 257-9 
 
 Panama Canal Company, organization 
 of, 224-5 
 
 Panama Railroad 222; built by Col. 
 Totten, 256; route favored by Senate 
 Committee, 226-7 
 
 Paris Exposition, 1900, The Prudential 
 at, 57, 114 
 
 Park, on Commercial Aspects of Ii!sur- 
 ance, 195; on insurance law, 195 
 
 Parliamentary Committee, reference of, 
 to the need of Industrial insurance. 
 19, 20, 67, 85; report on post-office 
 insurance, 88; report on Assurance 
 Associations, 1853, 19 
 
 Parsons, Wm. Barclay, in favor of sea- 
 level project, 242 
 
 Patents, congressional control of, 212 
 
 PattLson, John M.. in favor of Federal 
 si!pervLsion, 185-6, 188 
 
 Paul vs. Virginia case and Federal super- 
 vision, 180, 183, 190 
 
 Pauper burials, abhorrence of, by the 
 poor, 35, 75; and Industrial insur- 
 ance, 90, 91; increase of, in the 
 United States in the 70's, 35; fre- 
 quency of, in U. S., 34, 50; reduction 
 in, 51, 59, 76, 278 
 
 Pauperism and Industrial i!!surance, 90 
 
 Paupers in almshouses, cei!sus report 
 on, 91 
 
 Payments to Industi-ial and Ordinary 
 pohcyholders, 145, 312 
 
 Pennsylvania, extension of The Pru- 
 dential Insurance Co.'s operations to, 
 42; Industrial insurance in, 78 
 
 Penny provident funds and Industrial 
 ii!suTance, England, 73 
 
 Pensioi!s, old age, sold by The Pru- 
 dential Friencfly Society, 37; govern- 
 ment, maximum amount of, 127; 
 State, 121; State, definition of, 122; 
 state, unnecessary in U. S., 139, 140 
 Periodicals of life insurance companies, 
 
 152 
 Philadelphia, Industrial insurance in, 78 
 
 325 
 
Index 
 
 Pilotage, development of, 203 
 
 Plate-glass insurance, commercial as- 
 pects of, 204 
 
 Piatt Bill and Federal supervision, 188 
 
 Policyholders, direct personal interest 
 of, in tax problem, 168; Industrial 
 and Ordinary, payments to, 312; in 
 favor of Federal supervision, 183; in- 
 terests of, menacecl by over-taxation, 
 165; opinion of, respecting Federal 
 supervision of insurance, 208; pay life 
 insurance taxes, 161 ; securih- of, in- 
 creased by Federal supervision, 214, 
 215 
 
 Poor, the, standard of life and customs 
 of, 75 
 
 Poor relief, reduction of, by Industrial 
 insurance, 76 
 
 Population, growth of, in U. S., 202; 
 mcrease of, in U. S., and life insur- 
 ance, 139 
 
 Post-offices, congressional control of, 
 212; increase of, in U. S., 203 
 
 Post-office insurance, England, 22, 47, 
 86; contrasted with Industrial insur- 
 ance, 23; failure of, 87; recommen- 
 dation for insurance of children, 97; 
 slow progress of, 88, 101 
 
 Post-office savings banks, establishment 
 of, in England, 22, 86 
 
 Post roads, congressional control of 212, 
 
 Poverty and pauperism in the 70's, 32; 
 problem of, in old age, 121 
 
 Powers, implied, of tne Constitution, 
 282, 284; resulting, of the Constitu- 
 tion, 284 
 
 Pratt, John Tidd, chief registrar of 
 friendly societies, 30; return of sick- 
 ness experience of friendly societies, 
 31 
 
 Premium income. Industrial and Ordi- 
 nary, 312 
 
 PremiiuD payments. Industrial, at office, 
 impracticability of, 100; weekly, 147 
 
 Premium rates, specimen of monthly- 
 income policies, 127 
 
 Premium receipt book. Industrial, de- 
 scription of, 53, 69 
 
 Premium tables for Industrial insur- 
 ance, early, 20 
 
 Premiums, Industrial, actuarial basis 
 of, 69; Industrial, average size of, 100; 
 Industrial, method of collecting, 69; 
 monthly, unpopularity of, 99; taxa- 
 tion of, excessive, 162 
 
 Pritchard, Senator, and the Panama 
 Canal, 226 
 
 Profit-sharing methods of Industrial 
 insurance companies, 106 
 
 Progress of Industrial insurance, 79; 
 of life insurance after the Civil War, 
 36 
 
 Proofs of death. Industrial, 70 
 
 Prospectus of the Prudential Friendly 
 Society, 37 
 
 Provident or thrift habits imperfectly 
 developed in the United States in the 
 70's, 34 
 
 Prudential Assurance Co. of London, 
 47; and Industrial insurance, 67; 
 contrasted with Post-office, 88; con- 
 troversy with Gladstone, 22; early 
 history of, 20; early references to, 
 in American insurance periodicals, 
 21; history of, 85, 87, 100; Industrial 
 policies in force, 1908, 23; pioneer 
 Industrial insurance company, 85; 
 pubhcity methods of, 24; progress of, 
 24; reinsurance of the International, 
 21 
 
 Prudential Friendly Society, The, 1875, 
 37; its early difficulties, 39; nimiber 
 of policies written in 1876, 41 ; organi- 
 zation of, 89 
 
 Prudential Insurance Company of 
 America, The, 1877, 37; an exhibitor 
 at the tuberculosis congress, London, 
 59, 60; a stock company, 89; date of 
 organization, 66; early history of, 
 38-42; generous in its dealings with 
 its policyholders, 105; growth of, 113; 
 History of, 42, 56, 57; Industrial in- 
 surance in force with, 1876-1908, 311; 
 investigation of, by New York State 
 Legislative Committee in 1905, 116; 
 management of, 117; method of 
 organizing agency force, 41 ; monthly- 
 income policy of, 123; the pioneer of 
 Industrial insurance in the U. S., 48; 
 policies, extent of, in New Jersey, 95 ; 
 publicity its watchword, 115, 116 
 
 Prudential Mutual Assurance Invest- 
 ment and Loan Association, organi- 
 zation of, 20 
 
 Prussian government and state super- 
 vision, 192 
 
 Railways, congressional control of, 212; 
 development of, in U. S., 203; exten- 
 sion of, and life insurance, 138 
 
 Randolph, Isham, chief engineer Sani- 
 taiT District of Chicago, 245 
 
 Randolph, John, reference to, 283 
 
 326 
 
Index 
 
 Ratcliffe, Henry, observations on tiie 
 rate of mortality and sickness existing 
 among friendly societies, 30, 31 
 
 Real property, taxation of, not objection- 
 able, 161 ' 
 
 Reclamation projects of the far west, 
 reference to, '2,50 
 
 Relative cost of different types of canals. 
 
 Resumption of specie payment act, 32 
 
 Republican Party, reference to, 278 
 
 Revivals. Industrial policies, 70 
 
 Rich and poor, 280 
 
 Ripley, Joseph, Superintendent of "Soo' ' 
 Canal, 245 
 
 Riquet and the " Canal du Midi," 270 
 
 Risk, necessity for insuring against, 205 
 
 Rivers and harbors surveys, congres- 
 sional control of, 212 
 
 Rogers, Jas. S., and the power of Con- 
 gress over interstate and foreign com- 
 merce, 212 
 
 Roosevelt, President, on Federal reg- 
 ulation of insurance, 289 
 
 Roscher, Wm., Principles of PoUtical 
 Economy, 146 
 
 Royal Conmiission on friendly societies, 
 evidence of Harben before, 40: in- 
 vestigations and reports of, 25, 26, 
 89; third report of, reference to, 40 
 
 Rural free defivery and life insurance, 
 138 
 
 St. Lawrence River to Lake Huron 
 Canal, project for, 240 
 
 St. Louis Exposition, 1904, The Pru- 
 dential at, 114 
 
 St. Vincent, danger of earthquake at, 261 
 
 Salvation Army in England and the 
 insurance of children, 97, 98 
 
 Sanitary Institute of Great Britain, gift 
 of Prudential charts to, 60 
 
 San Jose, Costa Rica, earthquakes at, 
 260-1 
 
 Santiago, naval battle, 104 
 
 Savannah, conflagration in, 204 
 
 Saving habits, importance of develop- 
 ing, 72; and Industrial insurance, 55; 
 and life insm-ance, 28, 162 
 
 Savings banks, number of depositors in 
 U. S., 68; amount of deposits in U. 
 S., 34; growth of, m U. S., 135; his- 
 tory of, by Keyes, 60; need of supple- 
 menting by insurance, 37; slow prog- 
 ress of, in the 70's, 49; suggestions 
 for establishing, 30 
 
 Savings institutions and their position 
 
 in the 70's, 49 
 School savings banks and Industrial 
 insurance, England, 73 
 
 Scientific training, value of, in life in- 
 surance adminstration, 154 
 
 Scratchley, treatise on friendly societies, 
 31 
 
 Sea-level canal, cost of, 239; difficulties 
 in navigation of, 237; disadvantages 
 of, 247; evidence in favor of and 
 againsti 219; favored by a majority 
 of the International Board of Con- 
 sulting Engineers, 230; favored by 
 foreigners, 239, 241; inadequate rea- 
 sons and arguments in favor of, 273; 
 inconclusive evidence in favor of, 
 236; majority report on, by Senate 
 Commission on Interoceanic Canals, 
 247; opinions in favor of and against, 
 242-244; time required for, 239 
 
 Security and expense-rate, 27; of policy- 
 holders increased by Federal super- 
 vision, 189, 196 
 
 Seismology, a complex branch of geo- 
 logic inquiry, 263 
 
 Select committee. House of Commons, 
 report on sickness insurance, 1825, 
 30; on assurance associations, report 
 of, 1853, 19 
 
 Selfridge, A dmir al, in favor of lock 
 canal, 256 
 
 Seligman, E. R. A., on taxation, 164, 165 
 
 Senate Canal Committee of 1902 and 
 earthquake danger, 260-61 
 
 Senate Committee on Interoceanic 
 CanaLs, division of opinion of, 219; 
 evidence submitted to, 239; majority 
 and minority reports on type of 
 canal, 247; report of, 226-7; testi- 
 mony before, 242 
 
 Sherman, Senator, on financial history 
 of U. S., 32; on taxation, 168 
 
 Shipwrecks, decrease in number of, 203 
 
 Slocum disaster, 105 
 
 Smallpox in the United States in the 
 70's, 33 
 
 Smith, Adam, on taxation, 169 
 
 Sickness among wage-earners in New 
 Jersey in the 70"s, 33; an exposition 
 of the true law of, by Scratchley, 31 ; 
 experience of registered friendly soci- 
 eties, 31 
 
 Sickness insurance by the Prudential 
 Friendly Society, 37; by the Pru- 
 dential Friendly Society, discontin- 
 uance of, 40; early, in the United 
 
 327 
 
Indt 
 
 ex 
 
 States, 29, 30; Industrial, failure 
 of, in United States, 99; possible to 
 a limited extent through fraternal 
 organizations, 32; extent of, in the 
 United States in the 70's, 33 
 
 Single premium payment insurance, un- 
 popularity of, 99 
 
 Social aspects of life insurance, 139 
 
 Social betterment and Industrial insur- 
 ance, 80 
 
 Social economy and life insurance, 72, 
 123 
 
 Social Museimi, Paris, presentation of 
 Prudential charts to, 115 
 
 Social, etc., questions, importance of, 
 in U. S., 282 
 
 Society for the Diffusion of Useful 
 Knowledge, reference to, 30 
 
 "Soo" Canal, accidents in, 248; ex- 
 perience of, 240, 248, 249, 252, 257 
 
 South Africa, Industrial insurance in, 
 90, 312 
 
 South Carolina, requirements for annual 
 life insurance taxation statements, 164 
 
 Southwell Society, reports on sickness 
 insurance, 30 
 
 Spanish-American War and life insur- 
 ance taxation, 167; and the Panama 
 Canal, 225 
 
 Spectator, The, reference to Federal 
 supervision, 188 
 
 Spencer, Herbert, quotation from, 43 
 
 Spinner, Treasurer of U. S., on Federal 
 supervision, 182 
 
 Spooner Act and Panama Canal, 226, 
 257 
 
 Spry, James, historv of the Odd Fel- 
 lows Manchester tJnity, 31 
 
 Stamp taxes contrasted with insm-ance 
 taxes, 169 
 
 Standard of life, and Industrial insur- 
 ance, 92; in U. S., 280 
 
 State debts, assumption of, constitution- 
 ality of, 210 
 
 State insurance uimecessary in United 
 States, 139, 140 
 
 State pensions, non-contributory, in 
 Massachusetts, 121 ; no necessity for 
 in U. S., 122; objections to, 122; 
 schemes, for, 121 
 
 State supervision, abuse of, 191; and 
 insurance coimnissioners, 187; an 
 impediment to the progress of in- 
 surance, 180; complexities of, 181; 
 cost of, 193; cost of, fully met 
 by one per cent, of premium mcome 
 taxation, 167; criticism of, 179, 180, 
 
 181, 182, 184, 186, 187, 191; Insur- 
 ance Times on, 181; lack of imi- 
 formity in, 184; origin of, 175; 
 should be limited as far as possible 
 to home State of company, 187-8 
 
 States, new, organization of, constitu- 
 tionality of, 210 
 
 States' rights and Federal supervision, 
 179, 187, 192, 214 
 
 Statistical department, life insurance 
 company, 153 
 
 Steam navigation, development of, 203 
 
 Stearns, Frederick P., evidence of, in 
 favor of lock canal, 243, 249; on the 
 cost of maintenance of different types 
 of canal, 253-5 
 
 Stephenson, Robert, opposition to Suez 
 Canal, 260, 266-7, 269 
 
 Stevens, John F., chief engineer, in 
 favor of lock canal, 238, 241, 242; on 
 price of land in canal zone, 255 
 
 Story and the constitutionality of the 
 Declaration of Neutrahty, 209, 210 
 
 Subsistence, minimum requirements of, 
 in America, 125 
 
 Suez Canal and the Red Sea level, 260; 
 compared with Panama Canal, 223; 
 conditions of, different from those at 
 Panama, 239; early opposition to, 259; 
 foolish opposition to, 267-8; free navi- 
 gation of, by international agreement, 
 258; opposition to, by Lord Palmers- 
 ton, Su- Henry Bulwer, and Robert 
 Stephenson, 265-267; successful ex- 
 perience of, 265, 267 
 
 Superintendent, Industrial, definition 
 of, 71, 151 
 
 Supervision, Federal, of iasurance, and 
 Sufireme Court, 180, 183, 194, 212; a 
 national problem, 201, 215; advan- 
 tages of, 214, 215, 289; and States' 
 rights, 179, 187, 192, 214; constitu- 
 tionality of, 209; necessity for, 206; 
 public opinion on, 291-293; public 
 opinion respecting in U. S., 207-8; 
 recommended by Roosevelt, 289; 
 Senate bill for, 202; synopsis of Senate 
 bill for, 294-5; text of Senate bill for, 
 299-310 
 
 Supreme court and Federal super- 
 vision, 180, 183, 194; seldom a unit 
 in decisions on constitutional inter- 
 pretations of the commerce clause, 
 212 
 
 Surplus to legal-reserve policyholders, 
 145 
 
 Surrender value. Industrial, 69 
 
 328 
 
Inde 
 
 Sweden, Industrial insurance in, 312 
 Switzerland, Industrial insurance in, 
 90, 312; federal supervision of insur- 
 ance in, 206 
 
 Taft, William H., Secretary of War, on 
 the type of Panama Canal, 238 
 
 Tarbox, Insurance Commissioner of 
 Massachusetts, on Federal super- 
 vision, 184 
 
 Tariff laws, constitutionality of, 210 
 
 Taxation and iinance, speeches and re- 
 ports on, bv Senator John Sherman 
 33 
 
 Taxation, canons of, 169; different 
 methods of, in various states, 163; ex- 
 cessive, 166, 176; insurance, and Fed- 
 eral supervision, 189; of insiuance, 
 recommendation by National Conven- 
 tion of Insurance Commissioners, 168; 
 of life insurance, menace of further 
 increase in, 167; recommendation for 
 uniform premiumi tax, 170; should 
 be limited to one per cent, of pre- 
 mium income, 166; should be more 
 uniform and simple. 164; of life in- 
 surance, 161-170; of life insurance, 
 increase of, to be resisted, 167; of life 
 insurance in Germany, 165, 166; seri- 
 ous consequences of, 165 
 
 Tax burden of insurance companies, 
 193 
 
 Tax rate, life insurance, increase of, 
 167: life insurance, should be re- 
 duced, 163 
 
 Taxes, amount paid bv life insurance 
 companies (1908), 163 176 
 
 Taxing methods, continual changes in, 
 164 
 
 Technical committee for study of 
 Panama Canal, 1896, 225; commis- 
 mission, New Panama Canal Co., 235 
 
 Tel^T'aph, congressional control of, 
 212; development of, in United 
 States, 203 
 
 Telephone, development of, in United 
 States, 203 
 
 Teller, Senator, 235 
 
 Tenement house fire, Newark, N. J., 
 104 
 
 Territorial extensions, constitutionality 
 of, 210 
 
 Texas, requirements for annual life in- 
 surance taxation statements, 164 
 
 Three-cent Industrial premium. The 
 Prudential, 65 
 
 Thrift habits and Industrial insurance. 
 60. 91 ; general lack of, among wage- 
 earners, 36; in the United States, 
 statistics relating to, 34; necessity for 
 development of, 123; undeveloped 
 in the United States, 28 
 
 Totten, Col., in favor of lock canal, 255 
 
 Trade-unions and early life insurance 
 undertakings, 28 
 
 Travelers' Insurance Company, Presi- 
 dent of, in favor of. Federal super- 
 vision, 182 
 
 Tj'ler, Nat, on Federal supervision, 183 
 
 Underwriters and Federal supervision, 
 178 
 
 Underwriters' associations and uniform 
 taxation, 165 
 
 Uninsured population in United States. 
 134 
 
 United Kingdom, Industrial insurance 
 in, 68, 90, 138-9, 312 
 
 United States Bank, constitutionahty 
 of, 213, 283 
 
 United States, contrasted with Ger- 
 many in the matter of insurance 
 taxation, 165-6; Deep Waterway 
 Commission, 244; economic con- 
 ditioiLs of, in the 70's, 74; Industrial 
 insurance in, 312; Industrial policies 
 in, 68; life insurance conditions in, 
 1868-1872, 26, 27, 74; progress of, and 
 Republican Party, 278-280 
 
 Universal old-age pension system. New 
 Zealand, 121 
 
 University instruction in life insurance, 
 154 
 
 Valuations, insurance, provisions for, in 
 Senate bill, 304 
 
 Vance, William R., Handbook of the 
 Law of Insurance, 105 
 
 Veeder, L^al Masterpieces, 195 
 
 Views, a supporter of Federal super- 
 vision, 185, 188 
 
 Vital statistics, contributions to, by 
 Neison, 30; Hardwick on the develop- 
 ment of, 31 
 
 Voluntarv concessions, cost of, to The 
 Prudential, 105 
 
 Wage-earners in United States, condi- 
 tions of, 280, 281 ; seldom soUcited for 
 insurance in the early 70's, 36 
 
 329 
 
Index 
 
 Wages, average annual, in New Jersey, 
 35; classified, 126 
 
 Wagon-roads, improvement of, in United 
 States, 202, 203 
 
 Walford, article on gilds and friendly 
 societies, 67 
 
 Walker, Admiral, in favor of lock canal, 
 256 
 
 Walker Commission and type of canal, 
 255 
 
 Wallace, John F., in favor of sea-level 
 type of canal, 243 
 
 War provisions, none in Industrial 
 policy of The Prudential, 59 
 
 Ward, C. D., in favor of lock canal, 256 
 
 Ward, Edgar B., Counsel (1884) and 
 Second Vice President of The Pru- 
 dential Insurance Company of Amer- 
 ica (1893), 38 
 
 Ward, Dr. Leslie D., Vice President of 
 The Prudential Insurance Company 
 of America (1884), 38 
 
 Washington and the declaration of neu- 
 trality, constitutionality of, 209 
 
 Wealth, distribution of, and Industrial 
 insurance, 72, 77; public, and Indus- 
 trial insurance, 80; private, and In- 
 dustrial insurance, 80 
 
 Weekly contributions, tables for, 30 
 
 Weekly premium payment plan, value 
 of, recognized by Parliamentary Com- 
 mittee, 101; an education in thrift, 
 53, 54, 73 
 
 Weekly premiums. Industrial, average 
 size of, 65 
 
 Welsh, in favor of lock canal, 256 
 
 Widows' and Orphans' Benefit Society, 
 organization of, in 1873, 37 
 
 Willett's Point, reference to, 262 
 
 Windsor Hotel fire. New York, 104 
 
 Wisconsin and insurance taxation, 193; 
 and State supervision, 184-5 
 
 Workingmen, United States and Eng- 
 land, attempts to provide insurance 
 for themselves, 27 
 
 Workingmen's insurance, associations 
 for, in United States, 25; England, 
 unsoundness of, early, 19, 20; mutual 
 assurance societies for, 29 
 
 Wright, Carroll D., on savings institu- 
 tions, 72, 73 
 
 Wright, Elizur, controversy with the 
 International Assurance Company, 
 I/Ondon, 21; criticism of British life 
 assurance methods, 21; in favor of 
 Federal supervision, 178; in favor of 
 government insurance, 22 
 
 Wyse concession, purchase of, 223, 224 
 
 Yale Alumni Weekly Supplement, refer- 
 ence to, 191 
 
 Yale College, J. E. Clark, professor of 
 mathematics in, 40 
 
 Yale University, course on insurance, 
 reference to, 191 
 
 Yellow fever in the United States in the 
 70's, 33 
 
 330 
 

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 Library Bureai 
 
 uCat. No. 1137 
 
 
KF Il61<- A2 D79 
 
 Author Vol. 
 
 Dryden^ John Fairfield 
 "ritii Addresses and papers on copy 
 
 life insurance and other subjects 
 
 
 
 Date 
 
 Borrower's Name