IN the decades since World War II, insurance companies have often seemed like dinosaurs—gigantic and impregnable, but slow-moving and ill-adapted to a swiftly changing environment. As a result, the insurance industry has been losing its relative importance in the business world. Inflation has made the fixed-dollar guarantees that insurance policies provide look less attractive year by year. The share of the savings dollar used to purchase life insurance has dwindled steadily from 51% in 1945 to less than 15% today. Conservative management and restrictive federal and state regulations have kept most of the insurers' $240 billion in assets tied up in longterm, low-return investments, such as top-quality mortgages and gilt-edge bonds.
Recently, a new generation of insurance-company leaders has grown impatient with such lethargic ways. The younger men are pushing the industry into more adventurous investments and diversification programs. Within the past year, INA Corp., the holding company for Insurance Co. of North America, has acquired World Airways, a charter carrier, and a manufacturer of fire-preventing sprinkler systems. Travellers Corp., owner of Hartford's Travellers Life Insurance Co., is dickering to buy Randolph Computer Corp., a major computer-leasing firm. This month, CNA Financial Corp., the Chicago-based owner of a group of life-and casualty-insurance firms, completed acquisition of The Larwin Group Companies, a California housebuilding combine that took in revenues of $50 million in 1968. Larwin President Lawrence Weinberg and CNA Chairman Howard Reeder began by discussing a $20 million CNA loan to Larwin but wound up negotiating a merger instead.
In order to move into new fields, insurance companies have been forced to alter their corporate structures. Some 400 investor-owned insurance companies, including nearly all the big ones, have turned themselves into subsidiaries of newly created holding companies during the past few years. These are free to invest and diversify in ways that insurers have been forbidden to do directly.
Lending Is Not Enough. To the policyholder, the most noticeable result has been that his insurance agent now frequently tries to sell him mutual-fund shares. About 150 of the insurance companies have bought mutual funds, started their own or concluded agreements to have their insurance subsidiaries help sell the shares of independent funds. Ten years ago, most life-insurance salesmen were discouraged from selling mutual-fund shares at all. Last year, the National Association of Securities Dealers has registered at least 15,000 life-insurance salesmen, about 7% of the total number in the U.S.
Life insurers have tied up with mutual funds largely in belated recognition that the two forms of investment compete directly for the consumer's money. Insurance firms are spreading into other businesses at least partly to avoid takeover by the conglomerates, which have lately been casting covetous eyes at the enormous cash reserves maintained by most insurers.