tion, a fixed annual contribution, and, from the sum so raised, to pay to the representatives of each member dying a proportionate part of such sum. In 1734 the society made a guaranty that the amount paid to the representative of each member deceased should not be less than £100. But, even with this latter guaranty, the constitution of this society was not such as to make its operation successful. The first society formed for insuring against loss of life, upon the principles underlying modern life insurance, was the Equitable Assurance Society of London, which was established in 1762. This company first recognized the necessity for varying the amount of premiums paid in accordance with the age and condition of the insurer. Since the establishment of the Equitable, life insurance has been steadily developed along modern lines, and numerous other influential companies have been established in England that carry on an extensive business both at home and abroad. Accident Insurance. The first company formed for the purpose of granting indemnity against accidental injury was the Railway Passengers' Assurance Company, established in London in 1849. As its name implies, its business was confined to insurance against railway accidents. But in 1856 it extended the scope of its business so as to include insurance against accidents of all kinds. The contracts of the company, insuring against accidental injury, provided for paying certain sums during disability of the insured on account of accident, or to indemnify him for the accidental loss of any limb or member, or to pay a certain sum to a beneficiary named in case of death by accident. This species of insurance is directly derived from life insurance, and the principles that apply to contracts of the latter kind of insurance in most cases govern the rights of parties under contracts of accident insurance. THE DEVELOPMENT OF INSURANCE IN THE UNITED STATES. 11. In general, the development of the several kinds of insurance has followed the same lines in the United States as in England, save that marine insurance does not occupy a position of such great importance as compared with fire and life insurance. 12. The peculiar circumstances entering into the making of contracts of insurance, and the early tendency on the part of insurers to make use of the common-law rules governing insurance contracts, in order to take an unfair advantage of the insured, have caused the legislatures of the several states of the Union to enact numerous statutes for the regulation of insurance. These statutory restrictions have greatly complicated the legal principles that are now to be applied to the determining of in surance causes. Marine Insurance in the United States. On account of the fact that the foreign commerce of the United States has always been of less importance than its domestic trade, and its shipping relatively insignificant in volume, marine insurance has never attained the great importance in this country that it has always occupied in England. While this is true, yet the volume of business done by marine insurance companies in the United States is by no means inconsiderable. One company, the Atlantic Mutual of New York, carries, perhaps, as great an amount of insurance upon shipping as even the British Lloyd's.22 There is every reason to believe that under the present commercial policy of the United States government, and the rapid growth of American foreign commerce during the last decade, the marine insurance business may in time assume the position of relative importance that it occupies in Great Britain. Fire Insurance in the United States. The first fire insurance company to be established in the United States was in Philadelphia, in 1752. This company, known as the "Philadelphia Contributionship for Insuring Houses from Loss by Fire," was incorporated on the mutual plan, Benjamin Franklin being one of its directors. The business of fire insurance has always been favored in the United States, and it has experienced a steady growth, until at the present time it is regarded as thoroughly unwise for any property owner to allow his property to be uninsured. The volume of fire insurance business in this country has become immense, the total amount of risks written by the several joint-stock companies doing business in this country being, during the year 1901, $20,629,226,087, and the premiums paid, $157,599,206, while losses were paid amounting to $93,139,517.23 The methods of carrying on the business of insurance against fire have been reduced to the greatest precision and nicety. Boards of underwriters are established in the great cities, whose functions are to obtain and classify all items of information, with reference to risks to be assumed, that may be of value to the various constituent 22 This great company during 1891 wrote insurance to the amount of $718,746,817. During its life of sixty years it has paid losses amounting to $211,954,046. 23 Statistics of the business of mutual fire companies are not very reliable. Reports of 179 companies give the premiums received as aggregating $20,742,603; the losses paid, $7,324,779. The average dividend earned by the American joint-stock companies during the period 1860-1901, inclusive, was 11.12 per cent. The total amount of fire and marine insurance transactions in the United States for the year 1901 is imposing. The total capital invested was $69,930,423; the total assets of all companies, $450,566,078; the premiums received were $199,800,505; and the losses paid, $112,007,219. companies. Charts are made of all the buildings in every considerable city, and the underwriter may now, by a mere reference to the chart to be found in his office, determine the quality and character of any risk that may be brought before him. The insurance companies doing business in the cities also maintain salvage corps, who possess every appliance for promptly and efficiently protecting the property of the insured against injury by fire or water, and act on behalf of the insurance companies in conjunction with the fire department of the city in which they are found. Life Insurance in the United States. The first effort made to establish life insurance in the United States was a mutual benefit association of Presbyterian ministers which was chartered in 1769 in the colony of Pennsylvania. There seem to have risen numerous small mutual companies of a similar kind during the latter part of the eighteenth and the first part of the nineteenth centuries, but that life insurance was of little importance, and the business of small volume, is evidenced by the fact that the earliest case 24 on the subject in a court of last resort was decided in 1809 in the state of Massachusetts. At as late a date as this the court went gravely into the question of whether a contract of life insurance was valid under the law of Massachusetts, it being contended that the common law of England was not in this respect in force in that state, because such a contract was repugnant to sound morals and contrary to public policy. In referring to the holding of the French courts, deciding that such contracts were illegal because they "set a price upon the life of a freeman, which is above all price," Chief Justice Parker naïvely observed that such reasoning was hardly sufficient, coming from France, where freedom had never been known. Notwithstanding Chief Justice Parker's decided opinion on the subject, the contract of life insurance was long regarded with suspicion, many moralists holding that it was in fact speculating in life, and therefore immoral. In consequence, the growth of the business of life insurance was not rapid until about 1850, when the increasing prosperity of the people of the United States enabled them to give effect to their desire to make a suitable provision after death for the support of those depending upon them. This, with the prevalence of sounder views with regard to the ethics of life insurance, resulted in a very considerable increase in the volume of life insurance prior to the Civil War. After the close of the Civil War, in 1865, life insurance began to grow with marvelous rapidity. Numerous companies were established in all sections of the United States, many of them on very insufficient capital, and their administration was conducted upon very reckless and unsound methods. 24 LORD v. DALL, 12 Mass. 115, 7 Am. Dec. 38. Many different kinds of policies that were expected to prove attractive to the people were offered, and by the end of the third quarter of the century life insurance had suddenly become one of the most important financial institutions of the country. During the last 25 years the growth of life insurance, while not so marvelous, relatively, as that of the period immediately preceding, has yet been most wonderful, and the volume of business done by life insurance companies at the present time is so great as almost to stagger the intelligence. The total amount of outstanding insurance of all life companies doing business in the United States was on the 1st day of January, 1902, $15,574,514,784, and the premiums paid by the people for this insurance $453,682,070, while the losses paid to policy holders during the year 1901 reached the enormous sum of $265,231,939.25 In considering the causes of this phenomenal growth of life insurance, it is well to observe that this business is not now confined to mere insurance against the risks and accidents of life, but also includes, as perhaps its most important element, the feature of investment. All life insurance companies now issue policies embodying this feature of investment of money by the insured, with the double purpose of securing protection for those dependent upon him in case of death, and of obtaining a safe investment for his surplus earnings that will yield him a reasonable interest return. These investment policies are of almost infinite variety, and are known variously as "endowment policies" or "endowment bonds." So popular is this investment feature of insurance, that it is now added to the ordinary life policy in nearly all modern companies. Thus the enormous sum total of invested assets of the insurance companies in the United States represents not only the reserve value of the 25 These figures include the business done by assessment associations and fraternal orders, the statistics of which are probably incomplete. It is stated that the total receipts of all the various fraternal orders in the United States during 1901 were $81.628,597, and the losses paid $68,412,804, with outstanding insurance of $5,656,453,465. From these figures it is apparent that the insurance given by the fraternal orders is much less costly than that of the old-line companies; in the former the losses paid being more than 80 per cent. of premiums received, and in the latter less than 60 per cent. The volume of life insurance business in the United States may be well illustrated by figures showing the condition of the three greatest life companies on January 1, 1902: New York Life: Total income, $71,274,150; total assets, $290,743,386; outstanding insurance, $1,365,369,299. Mutual of New York: Total income, $65,624,306; total assets, $352,838,972; outstanding insurance, $1,241,688,430. Egritable Life: Total income, $64,374,606; total assets, $330,473,309; out standing insurance, $1,179,276,725. outstanding policies accumulated to enable the company to meet losses when occurring, but also represents the savings of great numbers of people who have adopted this form of investment. The favor with which this kind of investment has been met in the United States is probably due to the large proportion of salaried workers in this country, which in turn is due to the fact that nearly all of the industrial enterprises are in the hands of corporations, which necessarily employ agents and servants and pay salaries. These employés, having no business of their own in which their savings can be invested, and, on account of the nature of their business, being usually not in a position to secure for themselves safe and satisfactory modes of investment, are almost perforce led to look to the insurance companies to invest their money for them. In the subsequent examination that is to be made of the principles which determine the rights of the several parties to such contracts, the student should bear in mind this double nature of the modern life insurance contract: That it is a contract (1) of indemnity to dependents in case of loss of life, and (2) of investment of savings. Another important factor that has aided in the great increase and popularity of life insurance is to be found in the establishment and growth of the various mutual aid and benefit associations among the laboring classes, these organizations being partly social in their character, and beneficial in purpose. Accident Insurance. As was seen above, accident insurance is but a modified form of life insurance, and it might be expected that its importance would increase in much the same proportion as that of life insurance. There are numerous companies insuring against the consequences of accident in all its forms and phases, and the amount of business done by these companies is such as to justify, in a later chapter, a careful examination of any peculiar rules of law that apply in the construction of their contracts. Statutory Regulations of Insurance Business. On account of the peculiar characteristics of the insurance contract, and of the extensive use into which it has come, it has afforded a favorite subject for legislation in all of the states of the Union. Notwithstanding the frequency with which such contracts are made by nearly all the members of society, it is safe to say that the principles of no other contract are so little known to even the more intelligent members of the business community as are those of insurance. This unfortunate ignorance of the fundamental principles upon which the conduct of insurance is based has manifested itself. in a great mass of legislation, much of which is undiscriminating. Certain hardships bearing upon the insured in the enforcement of VANCE INS.-2 |