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. A Chicago study about 1920 located 313 lo-cal mutual benefit societies, and an analysis of 161 of them found that78% provided death benefits, 60% funeral benefits, and 58% sickness andaccident benefits.Dues for these types of organizations varied from 35¢ to75¢ per month, with death benefits varying from $15 to $250 and sicknessbenefits of $2.50 or more per week.The societies often failed due to mis-management, competition from other societies, and the movement of mem-bers to other neighborhoods.23Many immigrants turned to industrial life insurance as alternativesor supplements to burial societies.The companies in turn recognized thatLife Insurance and the Risk Factor 59the immigrants, who lived in densely populated urban neighborhoods, wereideal candidates for industrial life insurance.The companies emphasizedtheir size and security: Prudential used the Rock of Gibraltar as its symboland Metropolitan s motto was the light that never fails. They issued pub-lications in numerous languages and employed agents who were immi-grants or spoke languages in addition to English.In the 1890s two-thirdsof all Metropolitan agents were born outside the United States.24Industrial insurance was so successful that by 1909, just three de-cades after its introduction, Metropolitan had a larger amount of life insur-ance in force than any other life insurance company in America and Pru-dential was third.Metropolitan and Prudential were so large that they usedmultiple life tables based on the experiences of their own policyholders,which greatly improved the accuracy of their mortality predictions.25Several other factors were also responsible for the success of industrialinsurance.According to Louis Dublin, a Metropolitan statistician, Metro-politan, Prudential, and John Hancock were managed with high integrityand skill, which prevented a repetition of the duplicitous early history ofmany ordinary life insurance companies.As evidence of the quality of man-agement, when the Metropolitan decided to sell industrial insurance, itspresident visited England and recruited several hundred experienced En-glish industrial insurance agents to emigrate to the United States at thecompany s expense.These agents became the managers of district offices,set up company operations and procedures, and trained local agents.Un-der their leadership, the agency force grew from 130 agents in three officesin 1879 to 8,000 agents in 146 offices in 1893.Turnover was high in theearly years; the average Metropolitan agent survived for only four monthsin the 1880s.26The Metropolitan and other companies recruited their industrial in-surance agents from the same social classes and nationality groups as theirpolicyholders.This gave them a reputation of being sympathetic to theimmigrant communities, in sharp contrast to most other major industries.Foreign-born agents had opportunities for advancement in their compa-nies at a time when many industries discriminated against immigrants fromeastern and southern Europe.Annual earnings for agents were about $600 in1905 and $950 in 1909, somewhat above manufacturing workers, who earnedan average of about $600 per year in 1909, but below all workers in finance,insurance, and real estate, who earned an average of $1,260 in that year.27The companies greatly simplified their underwriting and claims pro-cedures to meet the needs of poorly educated families with immediate fi-nancial needs and no savings.At first the Metropolitan required medical60 The Invention of the Risk Factorexaminations for applicants, but soon based its decision on a recommenda-tion from the agent and an application form used by their underwriters toevaluate the health of applicants.The companies paid all death claimspromptly and contested extremely few.In 1912 the Metropolitan rejectedonly 441 of 147,000 claims, and some of those were later paid.28 Althoughindustrial insurance was designed for low income groups, it was also usedby higher income persons who had been denied ordinary policies for occu-pational and other reasons.Policy provisions were gradually liberalized.In 1891 Metropolitanindustrial policies combined high expenses with narrow and rigid policyprovisions.In the next year Metropolitan began giving paid-up life insur-ance to policyholders who lapsed (discontinued payments) their policiesafter five years, and in 1897 both Metropolitan and Prudential began pay-ing dividends on policies in the form of reduced premiums.Improvementscontinued at a steady rate thereafter.The major barrier to more liberalprovisions was the expenses of selling industrial insurance: in 1905 Metro-politan agents had to make 7,000 sales to produce one million dollars worthof industrial life insurance compared to 400 sales to produce an equivalentamount of ordinary insurance.29Critics of industrial insurance pointed to the enormous waste thatoccurred because so many policyholders lapsed their policies.In 1891, abouttwo-thirds of policyholders of the three leading industrial companies lapsedtheir policies in the first three years, most of which occurred in the first sixmonths at a financial loss to the company.The Metropolitan lapse ratedeclined to 58% in 1904, 46% in 1914, and 30% in 1919, but lapse ratesin some companies were as much as 20% higher than for ordinary policies.The critics claimed that the federal government could provide equivalentdeath benefits at a small fraction of the overall cost using tax revenues, butthis proposal was not put into effect until Social Security provided deathbenefits for covered workers in 1935.The Metropolitan tried to lower pre-miums by using an intermediary, such as a labor union or mutual benefitsociety, to collect the premiums.The reduced expenses to the companywere passed on as lower premiums to the policyholders.The plans, whichwere instituted in 1909, almost all failed.30Among the most important aspects of industrial life insurance wasthe role of the agent.Industrial insurance agents had a frequency and inti-macy of contact with tens of millions of Americans that was unique amongbusiness organizations.They entered the homes of policyholders every weekand learned about deaths, births, marriages, job changes, and family achieve-ments.They were often taken into the confidence of families in matters ofLife Insurance and the Risk Factor 61unemployment, serious illness, and other family misfortunes.As will beshown subsequently, these relationships enabled agents to educate policy-holders in new ways of thinking about health and illness.31The Invention of the Risk FactorIndustrial life insurance proved to be both a challenge and an opportunityfor the ordinary life insurance companies
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