Government Supervision of Life Insurance
Few business institutions, if any, have been subjected to such strict and
detailed government supervision as life insurance. The reasons for this
become clear when we consider the vital relation which life insurance bears
to the family and the community. We have seen that its mission is a sacred
one, that the trust funds it holds run into the billions, and that millions
of people rely upon it as the principal means of protecting the home against
the deprivations occasioned by premature death. The great majority of contracts,
as already noted, run for many years before maturing and frequently involve
an obligation on the part of the company extending over fifty or seventy-five
Yet despite the almost universal use of life insurance and its vital importance
to those who purchase it, very few persons, as we have noted, take a direct
interest in acquainting themselves with the management and business policy
of the companies in which they are insured. In practically all cases the
companies are controlled by a limited number of persons who have little
or no difficulty in securing the necessary proxies to perpetuate their control.
Even assuming that any considerable portion of the vast number of policyholders
could be induced to take an interest in the condition of the company in
which they are insured, it is clear that very few are sufficiently posted
in life-insurance matters to ascertain intelligently the true state of affairs.
Life insurance is necessarily a technical and complicated subject and the
real condition of a company can only be determined by laborious and expert
examination. In view of conditions like those just recounted, it will readily
be admitted that life insurance is a fit subject for some sort of government
regulation designed to protect the public adequately against mismanagement
and unjust practices.
Sections in Chapter 27.