State Versus National Control

Life-insurance officials are almost a unit in believing that it is impossible to overcome the difficulties of unifying the action of half a hundred legislative bodies and the same number of supervising officials, and therefore favor a system of national control which will eliminate state supervision of interstate insurance. They point to the fact that the proportion of life insurance written by American companies in the states where they were organized is surprisingly small. A compilation made a few years ago by the writer shows that in the case of twenty leading companies, transacting nearly nine-tenths of the total ordinary life insurance in the United States, only 15.5 percent, of the total amount of their outstanding policies was obtained in the home state and only 12.6 percent, of the total premium income was derived from that business. Even in the case of the four largest companies domiciled in the wealthy and thickly populated state of New York less than one-fifth of their total business is intrastate and over four-fifths is interstate and international.

The advocates of national control wish to have the federal government assume exclusive regulatory power over all insurance transactions between the states, but do not intend to interfere with the constitutional right of each state to supervise its own home companies and purely intrastate transactions. As previously stated, national supervision cannot be established unless the Supreme Court of the United States reverses its former rulings and holds insurance to be commerce, or, as an alternative, the federal constitution is amended. Aside from the present legal obstacles to the plan, the advocates of national control believe that it would bring about the following desirable results:

1. Centralized supervision by experts would provide for a much greater degree of publicity and would protect the business against sectional and retaliatory legislation. Not only would the reports to and the examinations of the federal supervising department entitle a company to admission in any state, but such reports and examinations would carry greater weight in both this and foreign countries. The present lack of uniform insurance legislation, it is believed, would largely be obviated, and relief would be afforded to the companies against the evils resulting from variations in the rulings of numerous insurance commissioners. It is also argued in this connection that centralized control would be more effective than state control in eliminating fraudulent insurance concerns.

2. The large expense connected with supervision by half a hundred separate departments would greatly be avoided. Duplication of reports and examinations, as well as the publication of voluminous reports all of which contain about the same information, would be obviated. Several million dollars of wasteful expense, it is asserted, might be saved annually in this way.

3. A more equitable, uniform and less burdensome policy of taxation than now exists, it is hoped, would also result. As one supporter of national supervision recently remarked concerning the present system of taxing life-insurance business:

Under the system of state taxation, the man who pays his premiums into a life-insurance company is frequently taxed twice, and in some cases three times. That such burdens should be placed upon men, because having to provide for their families they must needs have recourse to life insurance, is a national disgrace, excused only on the ground of ignorance of the real nature of the business. Since much of this taxation is the result of jealous fear of the states that the others are profiting through the insurance business at their expense, national supervision would bring at least partial relief from this burden.