USA > Connecticut > Tercentenary pamphlet series, v. 3 The Beginnings of Roman Catholicism in Connecticut > Part 7
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In about ten years, it was found that total abstainers were not numerous enough to support the company. The name was then changed to the Phoenix Mutual Life In- surance Company and thereafter its policies were not conditioned on total abstinence. About thirty years later an interesting comparison was made. The mortality then experienced among the teetotalers proved to be nearly ten per cent lower than that among the more recent policyholders of the company. It cannot be held, how- ever, that this lower mortality was due entirely to total abstinence. Men selected because they had high ideals of life and principles they were not ashamed to observe,
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might easily show a mortality more favorable than that of a group not so selected.
In 1889, the officers of the company secured legislation that gave the policyholders (through the company) the right to purchase the stock and make the organization purely mutual. This change was effected in December, 1889, and the plan of mutualizing was so carefully and equitably devised that it was followed by many New York companies after the Hughes investigation in 1905-06.
The Phoenix Mutual has made many important con- tributions to the institution of life insurance. Notable among them is the fact that it was the first company to insist that all its agents be carefully chosen, thoroughly trained, and then required to give their entire time to the service of the company and its policyholders.
By charter amendment in 1820, the Aetna [Fire] In- surance Company obtained authority to grant annuities provided additional capital were raised and set aside for the exclusive benefit of the annuitants. This privilege had not been used, however, when the company obtained authority, by a second amendment in 1850, to grant insurance upon lives. After a brief experience, it was considered best to organize a separate company. Thus the Aetna Life Insurance Company was formed in 1853 by still another amendment to the charter, and started on its own independent way.
Success has attended the Aetna Life from the begin- ning. In addition, it has gradually increased its various lines of activity until today it writes (under its own charter or that of subsidiary companies formed and owned by it) almost every form of insurance, including accident, fire, and liability. It has thus become a multiple line company, able to protect its policyholders and their property against almost any ordinary hazard. Connecti-
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cut has been the first state to incorporate such multiple lines companies as the Travelers and the Aetna Life.
The Travelers Insurance Company, as already men- tioned,4 began to write life insurance in 1865, offering so- called nonparticipating insurance, with premiums at low, guaranteed rates.
In 1866 a new life insurance company was formed for a new purpose. The original idea was to issue life insurance, at higher premium rates, to those applicants who, on account of physical impairments or occupation, were not acceptable to other companies. At that time, however, no facts or statistics were in existence which would make possible the proper rating of a so-called "substandard" risk. Furthermore it soon became evident that those who could not obtain standard policies were not at all anxious in those days to accept policies at advanced premium rates. The whole project was given up after two years and, ever since, the Connecticut General Life Insurance Company has provided standard insurance in the usual manner. Its insurance plans, practices, and rates are similar to those of the other Hartford companies having capital stock.
The Hartford Accident Company was organized in 1866 to write accident insurance. In 1868, however, the organization began to write life insurance and changed its name to the Hartford Life and Annuity Company. From 1880 to 1898, this company used a form of assess- ment or natural-premium insurance, known as the "Safety Fund" plan. In time, this plan proved to be impractical because of the increasing premiums required of those who survived to old age. The company resumed its "old line" or level-premium plan in 1899, but in 1912 it reinsured all such business in another company. It then
4 See above, p. 16.
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continued to care for its "Safety Fund" business until 1934 when the guaranty fund matured the remaining certificates.
In the middle of the nineteenth century this country was not what it is today, and life insurance policies re- flected the state of the country and society. A typical policy of that period provided forfeiture if the insured "shall die upon the seas, or by his own hand, or in a duel." It likewise forbade the insured, without the previous consent of the company in writing, to "pass beyond the settled limits of the United States, excepting into the settled limits of the British Provinces of the Two Canadas, Nova Scotia, or New Brunswick"; and finally, it was provided that without written consent, the insured was forbidden "to visit those parts of the United States which lie south of the thirty-sixth degree of North Lati- tude, between the first of June and the first of November, or to pass to, or west of, the Rocky Mountains." As the frontiers were pushed farther and farther west and the West became more and more settled with law-abiding folk, the restrictions of the original policies gave place to privileges undreamed of before.
It would be impossible in a survey like this to describe a modern life insurance policy. It is sufficient to say that the modern policy cannot be vitiated by travel, resi- dence, or occupation, and has stated values, increasing annually, which are available at the option of the insured, for surrender for cash, for loan on security of the policy, or for conversion of the policy into a full-paid contract of term or life insurance.
The foregoing is a very brief history of the life insur- ance companies that have been chartered by the state of Connecticut. Five of them came safely and proudly through the trials and dangers incident to the early years
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of existence, and are now firmly established. Two are purely mutual: the Connecticut Mutual and the Phoenix Mutual. Three are stock companies: the Travelers, the Aetna Life, and the Connecticut General. All have been brought to their present strength by groups of men who, through financial and business ability and integrity, have left the impress of their characters upon the corporations which they governed. The standing of these companies on December 31, 1934, appears in the following table:
Assets
Capital and Surplus* $26,470,477
Insurance in Force
Aetna
$465,572,083
$ 3,400,504,967
Connecticut General
171,310,376
7,346,113
985,861,704
Connecticut Mutual
245,464,300
9,187,732
892,630,938 583,611,12I
Phoenix Mutual
179,480,906
5,818,450
Travelers
723,999,274
37,004,961
4,195,582,368
$1,785,826,939
$85,827,733
$10,058,191,098
*Surplus only, in the case of mutual companies.
X
IN 1905 and 1906 occurred the investigation into the affairs of life insurance companies, conducted by the state of New York through the Armstrong committee guided by Charles Evans Hughes (now chief justice of the United States) as its legal adviser. The effects of this investigation were far-reaching, and the restrictions and requirements of the resultant legislation have since proven a boon not only to the public but to the life in- surance business itself.
One practice severely condemned and thereafter for- bidden was the issuing of so-called tontine policies. Such a policy provided for the distribution of its share of surplus only at the end of a definite period, such as ten or twenty years, and then only if the policy was still in
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force. If a policyholder allowed his policy to lapse or surrendered it, or died, before the end of the tontine period, his policy lost all right to share in the surplus or dividend funds then being accumulated by the company. On the other hand, those policyholders who survived the period received not only their own shares but also the shares forfeited by those who withdrew too soon.
The tontine policy was a good contract. Its particular method of apportioning dividends ironed out many in- equalities. It was just to pay a larger dividend to policy- holders who persevered and paid the greater number of premiums. But in actual operation, the tontine policy brought many evils in its train. First and foremost was the tendency of agents to be too optimistic in their esti- mates of future dividends when soliciting insurance. Even conservative agents found it almost impossible to make correct estimates. As a result, the prospectus of a tontine policy became in its day what the prospectus of a get- rich-quick concern was during the boom period in 1928 and 1929. A further evil was the extravagance which the plan fostered among the companies themselves. Since dividends were not declared annually, they did not be- come liabilities and, as surplus, could be very easily used to pay exorbitant commissions.
The existence of tontine insurance in New York com- panies had raised annoying problems for Connecticut companies. Their agents could write only annual-dividend policies and they found it difficult to sell their poli- cies in competition with tontine plans. For years they besieged their home offices asking for similar policies, and it is to the credit of Connecticut companies that they were able to withstand such incessant demands. Old habits of thought and old traditions strengthened their judgment so that, when the Connecticut companies ap-
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peared before the New York committee, they were found guiltless.
The Armstrong investigating committee finally drew up an insurance code to regulate New York companies and out-of-state companies desiring to do business in the state of New York. It was a drastic code, judged by the common practices of the time, but it has since proven to be a blessing to the whole industry of life insurance. Among other things, the new code required companies severely to curtail their expenses. Many, unwilling to subject themselves to the restrictions the code imposed, refused to reënter the state to do business. All five Con- necticut companies, however, voluntarily accepted the conditions and have continued to write insurance in New York state ever since.
XI
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CONNECTICUT statutes governing insurance, as enacted from time to time by the general assembly, constitute a sound body of laws, well balanced between conservatism and progressiveness. The members of the general as- sembly, as well as the larger public, have been apparently impressed by the high character and sound methods of the management of Connecticut's insurance companies so that the laws mainly embody established practice and are remarkably free from petty and hampering restrictions.
The office of insurance commissioner was established in Connecticut in 1865 under statutes enacted in 1864 and 1865. The work of the office has steadily grown in amount and scope, and has resulted in increasingly valu- able services to the insurance interests of the state-to the patronizing public as well as to the companies.
Under the statutes, numerous insurance companies of the several types incorporated in other states are licensed
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by the insurance commissioner to do business in Con- necticut. Likewise various companies incorporated in other countries are licensed to transact business in the state. Some of these foreign companies, such as the Caledonian, the London and Lancashire, and the Scot- tish Union and National, have won well-established positions in the insurance business of the state.5
All Connecticut companies have assumed, from time to time, risks which were not even contemplated in earlier years. New needs in the nation's social and financial life have continually been met by new types of contract and new forms of insurance.
Important among such developments was the desire of many corporations to aid in providing insurance for the families of employees who died in their service. This desire was met by the insurance companies through the preparation of group insurance plans under which groups of individuals, usually employees of a corporation, could be insured under a single contract or agreement. Such group insurance is now being written by all three Hartford stock companies: the Aetna, the Travelers, and the Connecticut General. In like manner, group annuities are also being written to provide retirement pensions for groups of employees.
About twenty years ago all Connecticut companies (in common with many other companies throughout the country) began to include in their policies, when desired, a provision which insured against total and permanent disability. The plan was to provide a monthly income for life and to make the policy fully paid, whenever the in- sured became permanently and totally disabled.
At first, this provision seemed to be an ideal benefit. Many who were suffering from fatal diseases had their 5 The three preceding paragraphs have been inserted by the editor.
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insurance continued in force without further cost and also received monthly incomes to care for them and make their last days more comfortable. The companies, how- ever, had not made allowance for the operation of a psychophysical law, the effect of which Germany had experienced prior to the World War. When an insured public becomes thoroughly familiar with all the benefits provided in event of certain untoward happenings, that educated public becomes peculiarly susceptible to the very untoward happenings against which it is insured. "Pensionitis" was a well-defined epidemic that swept Germany before the World War and claimed many "victims" who were covered by the compulsory insurance provisions of the German law.
In this country, the same infection seemed to attack many holders of total disability contracts and so dulled their sensibilities as to make it impossible for them to differentiate between permanent and temporary disabili- ties, or between total and partial disabilities. As a result, the number of claims and the seriousness of the disabili- ties exceeded all calculations. Finally, many American companies found it necessary to refuse to issue any more policies with disability income benefits. Those that con- tinue to issue such benefits are imposing restrictions and requiring greatly increased premiums.
Another new provision quite generally adopted in recent years is known as the double-indemnity benefit. For a small additional premium, many companies under- take to double the ordinary benefits of their policies whenever the death of the insured results from accidental means.
When the United States entered the World War, the life insurance companies of the country offered their facilities to the government in carrying out the war-risk
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insurance that had been agreed upon, but the companies were told that their services were not needed. Again, when the war was over and the army disbanded, the services of the companies for such purposes as collecting premiums, paying losses, and changing policies, were offered-and again refused.
No extra premiums were charged by Connecticut com- panies for oversea or other active service on policies in force when the World War broke out, but such extra premiums were charged on policies issued after hostilities began.
Near the close of the war in 1918, an epidemic of in- fluenza swept the entire world and brought heavier losses to the companies than the war itself had entailed. Though the death rate doubled, all claims were promptly paid in full. To ease the load, policy dividends were temporarily decreased, but now no scar remains from that tragic period.
As Connecticut's fire insurance companies were judged, so must its life insurance companies be judged: by the way in which they have passed through the storms and met the crises of their existence. These tests have been not only wars and epidemics, but also financial panics or depressions which, especially during the past forty years, have disrupted the business of the country with sur- prising frequency. Some were of long, others of short, duration. Some greatly affected the public; others did not. Yet each, in proportion to the resources of the com- panies at the time, tested their stability and added to their experience.
XII
PERHAPS the greatest strain that has ever been placed upon the life insurance business has been experienced during the depression which began in 1929. When the
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Wall Street bubble burst, a great demand for policy loans and cash values came almost immediately from those policyholders who needed more and more money to meet the rapidly increasing margins called for by their brokerage houses and banks from which they had made loans. Banks, hard pressed to meet their own obligations, advised their borrowers to repay their loans by borrow- ing the necessary money from the life insurance com- panies as provided in their policies. In 1933, when the bank holiday was declared, frenzied men all over the country turned to their life insurance companies to get the cash their banks were unable to provide.
During the three darkest years of the depression, 1930, 1931, and 1932, the life insurance companies of the country met a greater demand for cash than was ever anticipated. Through policy loans, cash values, maturing endowments, annuities, and death claims, they paid in cash more than six billion dollars!
For a short period following the closing of all banks in the country in 1933, regulations were adopted in many states to protect the interests of all policyholders until confidence could be restored. These regulations permitted death claims, annuities, and endowments to be paid in full, but limited the amounts of other cash withdrawals from life insurance companies. The emergency soon passed and full payments were resumed. It is significant that every Connecticut company-except when not per- mitted to do so-met all demands for cash promptly and in full, and was able to make such heavy payments without sacrificing securities and without borrowing.
In addition to all these exceptional conditions that tested their ability to meet unusual demands, the in- surance companies had to face other problems arising from the depression. Security prices fell. Real estate
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values declined. Delinquent mortgages increased. Never before in modern times have trust-fund investments been subjected to a greater strain. The way in which Con- necticut companies have met that strain clearly reveals the underlying strength of their investment structure. Their stability and their reputations are a priceless en- dowment from the insurance leaders of the past, who established traditions of fair dealing and conservative management that are being ably administered by the insurance leaders of the present.
Connecticut life insurance companies have more than kept pace with the general growth of life insurance during the past twenty years. In 1914 their outstanding policies provided more than $1,200,000,000 of protection. Twenty years later, this total had grown to over $10,000,000,000. Today their annual issue of new insur- ance is more than the entire amount in force in Connecti- cut companies twenty years ago. During the same period, the total yearly income of Connecticut life insurance companies increased from $53,000,000 to more than $375,000,000, while their assets grew from $322,000,000 to $1,650,000,000. In the meantime, step by step with these gains, the sums paid to policyholders and their beneficiaries increased. During the year 1914, the total of such payments (not including policy loans) was about $30,000,000. By 1934, these payments had grown almost sevenfold to a total exceeding $200,000,000 for the year.
Bruce Barton, well-known author and publicist, has said:
I like to think of Hartford as a city that has been built upon faith. It impresses me to think of the faith of those millions of people all over the land who, day by day, send millions of dollars into a city they may never see and to insurance companies they may never visit. Hartford receives millions of dollars of savings, but it does not stop there. It
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returns, every day, countless marvelous streams of blessings to those in need. On both sides the faith is kept, though most of the transactions are between utter strangers.
Mr. Barton happened to be speaking about Hartford and its life insurance companies, but his words can be applied with equal justification to the state of Connecti- cut and all the great insurance institutions within its borders. In fact, Hartford's life insurance companies will never forget that, in those early days when they began to spread their agency activities over a rapidly develop- ing country, Connecticut fire insurance companies had preceded them and had already established such a repu- tation for sound insurance and prompt payment of claims that the way was made much smoother for their own development. Side by side, for nearly three quarters of a century, Connecticut's life, fire, and casualty com- panies have "kept the faith" and have made the name of this state synonymous with good, sound insurance, whatever the form.
Bibliographical Note
THE author acknowledges with gratitude the privilege of quoting liberally from P. Henry Woodward, Insurance in Connecticut (in W. T. Davis, New England states, vol. 2, pp. 499-516), which was also published separately (Boston, 1897). Other accounts appeared in Charles W. Burpee, Hartford county (3 vols., Indianapolis, 1929), Norris G. Osborn, History of Connecticut (6 vols., New York, 1925-1928), and George L. Clark, History of Con- necticut (New York, 1914). Several companies, including Aetna Insurance Company, Hartford Fire Insurance Com- pany, Hartford County Mutual Fire Insurance Company, and Travelers Insurance Company, have published their own histories.
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TERCENTENARY COMMISSION OF THE STATE OF CONNECTICUT
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SUSTINET
TRANSTULIT
COMMITTEE ON
HISTORICAL PUBLICATIONS
XLIV The Rise of Manufacturing in Connecticut, 1820-1850 CLIVE DAY
PUBLISHED FOR THE TERCENTENARY COMMISSION BY THE YALE UNIVERSITY PRESS 1935
TERCENTENARY COMMISSION OF THE STATE OF CONNECTICUT
COMMITTEE ON HISTORICAL PUBLICATIONS
XLIV The Rise of Manufacturing in Connecticut, 1820-1850
CLIVE DAY
I
T HE enterprise of the people of Connecticut has disclosed itself through various channels; but more conspicuously by a spirit of traffic and emigration." Such was the summary writ- ten by Pease and Niles in their Gazetteer of the state published in 1819. In the last thirty years, the authors said, "the current of emigration of this State has swelled to a torrent." They estimated the emigrants and their descendants to number over seven hundred thousand, while at the time they wrote, the number of inhabitants remaining in the state was under three hundred thousand. Connecticut was a good place to get away from. And so it continued to be for years to come. While the United States as a whole showed in every decade an increase in population of some thirty-five per hundred, Connecticut had to be content with a puny four or five per hundred. Birth control was still below the horizon. Babies swarmed,
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as they had in colonial times, but when they grew up they left home to make a living.
These conditions lasted down to the decade ending in 1850. In that decade the population of Connecticut took a sudden jump. The rate of increase rose from four per cent to nineteen. Thereafter the population grew at a rate sometimes approaching the national average, and, in one decade at the very close of the century, actually exceeded it. About 1840, with an abruptness rare in economic history, the state entered a new period of de- velopment. To describe and explain this transformation is the object of this paper.
"Traffic and emigration" were the forms of enterprise in which Connecticut was conspicuous before 1840. The reasons for the emigration will become apparent when the nature of the traffic in which the people of the state were engaged in this earlier period is considered.
II
IT is a commonplace of economics that any district will export those wares in the production of which it has the greatest comparative advantage, which will bring the largest return with the least effort expended. It is possi- ble, therefore, to gauge the productive capacity of Con- necticut in the first part of the nineteenth century by analyzing the list of its exports, for these must represent the best offerings which it could make in the outside market.
Again one must turn to Pease and Niles, the best source of information on the time at which they wrote. Connecti- cut took, in the economic life of the period, a position much like that taken at the present day by some Middle Western state like Iowa or Minnesota. It specialized in the provision of foodstuffs to other states and other coun-
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tries. To the eastward Connecticut sent Indian corn, rye, and oats in large quantities. It sent southward some cider, butter, and cheese, and some manufactures which will be the subject of discussion later. It shipped to the West Indies and other foreign ports horses, beef, pork, and lumber; and it provided the New York market with shad, beef, potatoes, and other table supplies. The de- scription could be pretty well matched by similar ac- counts dating from the eighteenth century-one is temp- ted to say, even from the seventeenth. Most of the exports were the raw products of the soil. A town was fortunate if it could establish a reputation for some agricultural specialty. The Gazetteer described the "novel and inter- esting" sight of the farms at Wethersfield from which over a million bunches of onions were exported every year: "The growing vegetable exhales its strong savour. The atmosphere becomes impregnated, and the luscious qualities of the onion are wafted far and wide, upon every passing breeze." Some products of agriculture had passed through the first and simplest processes of manufacture. Windham county was a dairy region from which large quantities of cheese, butter, and pork were sent abroad every year. Grain grown in the state was made into flour at the local gristmill, or along the shore of the Sound at towns which had become noted as milling centers. The largest mills in the state were at Stamford and processed flour exclusively for export.
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