1939: Insurance

Public Relations.

Public relations held center stage in insurance in 1939. In life insurance widespread interest in this subject resulted in the formation of the Institute of Life Insurance, of which Holgar J. Johnson, a Pittsburgh general agent, was elected president. In casualty insurance it took the form of added emphasis on all safety movements; and in fire insurance, of further broadening of contracts. In the two last-named divisions of insurance the tendency of rates was downward.

Emphasis on public relations in life insurance in part grew out of the insurance study being made in Washington by the Temporary National Economic Committee, popularly known as the monopoly committee. At hearings before the committee numerous chief executives and actuaries of life insurance companies were witnesses. TNEC began its hearings by examination of witnesses with respect to company administration methods by which directors were chosen, and explanations of the functions performed by directors. Next, it directed its inquiry into the cooperative conferences which company actuaries and other representatives hold in their inter-company relationships. This led up to examination of meetings which were concerned with consideration of annuity and group life insurance rates and practices, optional settlements, large risk acceptance regulations, policy replacement agreements and other subjects relating to the policy. At other meetings industrial insurance and insurance production methods were reviewed in great detail.

Insurance Studies.

In connection with the scientific end of life insurance the most important happening of the year was the presentation of the long awaited report on mortality by a committee consisting of representatives of the state insurance departments, the nominees of the Actuarial Society of America and the American Institute of Actuaries. The committee was the outgrowth of a suggestion made by George A. Bowles, Virginia commissioner, when he was president of the National Association of Insurance Commissioners, that there be a study of new mortality tables.

The committee made a study of all valuation standards for both ordinary and industrial insurance, for standardization or uniformity of nonforfeiture benefits, expense limitations, contingency reserves and miscellaneous forms of insurance and annuities. It also recommended legislative approval to provide for the use of any table of mortality approved by a state department and which meets suitable requirements laid down in the bill recommended by the commissioners. A model bill for presentation to legislatures, prepared by the committee, was subject of a hearing at the convention of the National Association of Insurance Commissioners early in December.

Special Clauses.

The outbreak of the European War brought to the fore the subject of special clauses in life insurance policies. Companies were slow to act in any way because of the neutrality battle which was fought in Congress. A special meeting of commissioners and companies was convened in Chicago in the fall, the objective being to consider whether there should be a uniform practice as to war clauses. As a result the topic was put on the agenda of the insurance commissioners and was considered by them at their convention in Biloxi in December. In the meantime, some companies adopted special war clauses to be used where there is an additional hazard, such as would apply to persons going to the war zone. Other companies handled the situation by charging extra premiums in special cases where the insured would be subject to a war hazard.

Industrial Insurance.

After a tentative revision of the insurance code of New York had been prepared, following reports made by the Department of Industrial insurance, hearings were held at the Department by the Piper Committee of the New York Legislature at which representatives of companies, the public, and labor organizations were present. All were encouraged to give their views about the proposed code and proposed amendments concerning Industrial insurance will be presented at the next session of the legislature. One set of hearings, covering the subject of Industrial insurance, paved the way for some amendments to the New York code. Among other hearings of the committee were those with respect to surrender value of policies, growing out of a measure to shorten the date when full reserve is available to policyholders. See also UNEMPLOYMENT INSURANCE; WORKMEN'S COMPENSATION.

Casualty Insurance; Surety Bonds.

In casualty insurance one of the most significant developments in 1939 was general recognition of the no-accident records of careful motorists by reduction in the cost of their automobile liability insurance. Both stock and mutual companies are now convinced that drivers of private passenger pleasure cars, 25 years old and over, whose annual mileage is not more than 7,500 miles, should enjoy a preferential rate. Automobile insurance, especially among heretofore uninsured drivers, is expected to increase as a result of this new program. A new $1,000 policy at low cost recently prepared for those who cannot afford $5,000/10,000 limits of auto liability insurance is another development. Another trend has been the broadening of casualty insurance coverage in such lines as owners', landlords' and tenants', various types of burglary and robbery insurance, plate glass and accident and health — without increasing the premium cost to the buyer. The sale of accident and health coverage has been stimulated by the non-profit hospital association plans and the non-profit medical indemnity coverage, neither of which is sufficiently comprehensive to replace the income protection afforded by insurance carriers.

Early to be stimulated by the European War was surety bond writing, particularly with the issuance of contract bonds covering aircraft concerns in connection with their production of large airplane orders for the governments of the United States and foreign countries. Federal construction has also given an impetus to contract bond premium volume. In the fidelity bond line protection has increased in desirability to employers due to the broadening of coverage.

Educational work in the casualty-surety field — particularly among agents — has been encouragingly intensified this year both by Insurance Societies (local members of the Insurance Institute of America) and by colleges and universities which in increasing numbers are adding insurance courses to their curriculums. Notable progress in fostering public good will has been made in 1939 by the casualty and surety business — the objective being to give the insuring public a clearer idea of the scope and usefulness of these major lines of business. Local insurance agents are the pivotal point in this program. Organized safety activity and tracking down of claim frauds are two outstanding examples of casualty insurance benefits enjoyed by policyholders. And the engineering facilities maintained by many of the larger multiple line companies which enable a systematic check-up of the physical condition of large industrial and manufacturing plants are regarded today as indispensable.

Fire Insurance.

The 1939 fire insurance trend toward wider protection for policyholders at generally lower rates was evidenced in several directions. With most new building — mercantile, office and residential — of high grade construction and with public fire protection maintained at a satisfactory standard, fire hazards have been further reduced and these changes are being reflected in lower premium charges for insurance. In many cities slum clearance programs are eliminating the dangers of conflagration. Fire insurance company and organization research departments are constantly at work devising ways to improve contracts offered to the public. Within the last twelve months there have been three notable examples of this. Just before the close of 1938 a new gross earnings insurance policy, for mercantile risks only, was put on the market. This type of coverage is also spoken of as business interruption and use and occupancy insurance. The new contribution form is more easily understood than older forms and this year has received a favorable public reception. For over two years fire insurance interests have sought to produce a satisfactory revision of the New York standard fire insurance policy. In June the National Association of Insurance Commissioners accepted the draft of the proposed modernized and simplified standard form and recommended its adoption by the individual states. The New York Insurance Department was a leader in the movement to amend the existing fire form in order to bring it up-to-date.

For several months the National Automobile Under-writers Association has been engaged in revision and modernization of the automobile policy written by fire companies, covering the hazards of fire, theft, collision and those listed under the comprehensive coverage endorsement. As with the new proposed fire policy it aims at simplification and clarification of terms and also contains clearer definitions of insured perils.

Further improvement of insurance educational facilities has been another development of the current year. Believing that those most adequately insured are those having a clear understanding of the fire insurance business, the companies, through the National Board of Fire Underwriters, and the producers, through the National Association of Insurance Agents and brokers' organizations, are broadening public relations programs. In Hartford, Conn., the Hartford College of Insurance began sessions. In numerous other states educational institutions have launched insurance courses, sponsored by units in the insurance business.

War Risk Insurance.

With the outbreak of the European War on September 1 American fire and marine insurance acted quickly to provide such additional insurance protection as then became necessary or may be required if this country should be drawn into the conflict. Even before September 1 the marine insurance companies in this country united to form the American Cargo War Risk Reinsurance Exchange, which accepts and divides among member companies war risk insurance on cargoes aboard vessels. As a result of this move individual underwriters are able to accept larger lines of insurance than was possible heretofore. For war risk insurance on hulls, insurance facilities have been broadened. At the present time there are being built in American shipyards vessels for the merchant marine and for the U. S. Navy with a total value in excess of $500,000,000. Most of these risks are insured with marine writing companies in the American market.

Insurance against land war risks is now available. Early in September the Explosion Conference, a fire insurance organization, made available policies protecting fixed property within the borders of the country against war hazards including bombardment. In addition the companies are offering a new vandalism and malicious mischief endorsement to existing riot and civil commotion policies. This latter protection is designed chiefly as insurance against enemy acts classified as sabotage.

To protect American policyholders, Lloyd's of London in September announced transfer to this country of $40,000,000 which is on deposit here as a fund to meet losses arising under existing contracts. Lloyd's is not admitted legally to write insurance in New York State or in many other states and the New York Insurance Department closely studied all questions raised by the making of this deposit. Finally Insurance Superintendent Louis H. Pink reached the conclusion that this move is a banking transaction only, a benefit to assureds while the war lasts, and does not violate New York insurance laws.