Nearly three years ago TNEC ("Monopoly Committee") asked SEC to investigate insurance. To make the investigation (which they limited to legal reserve life insurance), SEC appointed Ernest J. Howe and Gerhard A. Gesell. For weeks their report has been ready, emitting occasional hisses like a buried bomb, waiting for TNEC Chairman Joseph O'Mahoney to make up his mind to release it. Last week he did so. The explosion was loud. But very few people got hurt.
The report was a 466-page going-over of insurance practices in general, the Big Five life companies (Metropolitan, Prudential, New York, Equitable, Mutual of New York) in particular. Its starting point: that insurance constitutes a huge and powerful sector of the U. S. economy. Some 365 legal reserve life insurance companies in the U. S. have assets totaling over $28,000,000,000. Their annual income exceeds $5,000,000,000, about 8% of 1938's national income. Their market is nearly half the population: the $111,000,000,000 of insurance in force is held by over 64,000,000 U. S. policyholders. The largest 26 companies, through their investments, in 1937 held 11.6% of all Federal bonds, 17.4% of railroad bonds, 18.2% of utility and 11.7% of U. S. industrial bonds, 13% of urban mortgages.
The report charged that:
> The 135 directors of the Big Five life insurance companies are directors of 100 other insurance companies, 145 banks, and 534 other companies. So busy are they that they frequently miss board meetings.
> The annual company reports sent to policyholders are too condensed, often cannot be understood even by experts. Furthermore, only 39% of the companies regularly send any reports to their policyholders.
> The biggest companies have frequently colluded on rate setting. Two to four times a year Dr. Arthur Hunter of New York Life acts as host to representatives of some 20 large insurance companies. In Dr. Hunter's office, where no minutes are kept, they discuss annuity rates, policy provisions, etc., generally come to a single course of action for all. Since 1933 annuity rates have been hiked four times. But at the end of each year Host Hunter destroys the records of the conferences.
> The Association of Life Insurance Presidents spent $181,246 (almost half its income) in 1937 on lobbying.
> Only a small percentage of policies remains in force until their purpose is served. Out of $126,675,000,000 of insurance which terminated from 1928-37, over 51% lapsed, over 26% was surrendered, only 6.59% was paid at death. An important cause: high-pressure selling.
> The cheapest place to buy insurance is at a savings bank. But only two States (New York and Massachusetts) allow banks to sell insurance and they limit the amount. The average annual net cost of an ordinary $1,000 straight life policy at savings banks in 1938 was $2.72. Other cost figures: New York Life $8.77, Aetna $10.32, Mutual Life of N. Y. $8.56, Travelers $10.29, Home Life of N. Y. $8.15, etc.
> Sorest point of all: highest-cost insurance (largely because of the necessarily high cost of selling it) is industrial ("burial"), sold to the lowest income groups, mainly by Prudential and Metropolitan. Out of 193,714,000 "burial" policies sold from 1928-37, 187,761,000 (97%) were surrendered or lapsed.