—An outstanding fea ture of the life insurance business in the United States has been the growth and character of State (as distinguished from Federal) legislation and the degree of supervision implied thereby. Each State has power to prescribe the terms and conditions upon which the insurance business may be conducted in the State and as a re sult insurance departments and codes of laws have evolved. The administration of the insurance department and the execution of the State law are in the hands of an insurance commissioner or superintendent of insurance whose powers and duties are defined by law. The general objectives are safety and equity to policy holders and economy of operation.
The New York Law (see leading article for salient features) is of special significance because about 9o% of the insurance in force in the United States companies and 85% of their assets are in companies authorized to operate in New York. The limitations on amounts of new business and of contingency reserve are peculiar to New York. Wisconsin also has an expense limitation and some other distinctive provisions. Colorado and Oregon permit the full preliminary term method of valuation which allows a large margin for initial expenses and reduces the reserve. Illinois and several other States recognize a modified preliminary term method which produces smaller margins and larger reserves on the higher-priced policies. Texas requires companies doing business therein to invest in Texas at least 75% of the reserves on Texas business. Minnesota policies must pro vide that the company may defer a policy loan not more than six months from the time application is made therefor. These speci men provisions will illustrate the diversity of State laws.
The growth of life insurance in America is largely due to the development and effectiveness of the agency systems, of which there are two types, (I) general agency, under which the total field agency expense is paid to a general agent for a specified territory—city, county, State or group of States— who pays all expenses including sub-agents' compensation, the margin being his profit and (2) branch office or managerial, where under the compensation of sub-agents and all other organization expenses are paid by the company through a salaried manager.
Investments, being governed by State laws, differ widely but in general are limited to (I) real estate, (2) mortgage loans, (3) collateral loans, (4) Government, State, county and municipal bonds, (5) mortgage bonds of railway and other commercial and industrial enterprises, (6) to a limited extent, preferred stocks and, to a still more limited extent, com mon stocks of the corporations referred to in (5) and (7) policy loans.
State taxes, aside from licence fees, usually con sist of a tax on premiums collected in the State of from 1% to 3% (2% is used by about half the States) with varying inter pretations as to what constitutes "premiums." Reciprocity usually affects the application of such laws as between States. Massachu
setts is unique in levying a tax (4%) on reserves. The Federal tax is an income tax, now (1928) 12% of the total income from inter est, dividends and rents after deducting tax-exempt interest, 4% of mean reserve fund for year, dividends on stocks, investment ex penses paid, taxes and other real estate expenses and minor items.
War mortality was not serious even for the few companies with extensive foreign business. For the latter the depreciation of foreign currencies more than offset extra losses. The influenza mortality of 1918-19 was ex tremely severe, amounting to about $110,000,000 in the com panies doing business in New York State. Post-War develop ments have included an enormous expansion in volume of busi ness, the lowest mortality ever experienced, and a progressive decline (since about 1920) in the interest rate with corresponding appreciation of security values.
Fraternal Congress Table, based on experi ence of some of the largest and oldest fraternals and largely used in valuing liabilities of fraternal societies (1898) ; Standard Industrial Table, based on industrial experience of Metropolitan Life, 1896–i go5, recognized by. New York as the valuation standard for industrial policies (1907) ; American-Canadian Mortality Investigation, com piled by a joint committee of Actuarial Society of America, American Institute of Actuaries and National Convention of Insurance Com missioners in response to a request of the latter for a table exhibiting recent mortality among American insured lives and based on experi ence, 1900-15, of new and old standard business of about 6o American and Canadian companies (1918-19). Many tables were derived. (See the mortality tables listed in the article on p. 52.) Chief repositories of both technical and general articles of current and permanent interest are: Transactions, Actuarial Soc. of Amer.; Record, Amer. Inst. of Actuaries; Proceedings, Ass. of Life Insurance Presidents; Proceedings, Association of Life Insurance Medical Direc tors; Proceedings, American Life Convention. For statistical sum maries:—Reports of the insurance departments of New York, Massachusetts and Connecticut ; Life Insurance Year Book, Spectator Company of New York. For information regarding policy forms and other details of company operations, including current dividend scales: Handy Guide, Spectator Company ; Unique Manual-Digest, National Underwriter Company. For critical review of company operations: Life Insurance Reports, Alfred M. Best Company. For actuarial text books and reports: H. Moir, Life Insurance Primer; J. B. Maclean, Life Insurance; Actuarial Studies, reports of specialized, medico actuarial and American-Canadian mortality investigations, Actuarial Society of America. For investments: L. W. Zartman, Investments of Life Insurance Companies. For insurance law: A. J. Parker, Insurance Law of New York; Corpus-Juris and Cyclopedia of Law and Proce dure, American Law Book Company. ( J. S. T.)