Insurance industry (of which life insurance is a major type) is a global industry in modern times and the developed economies like the United States account for the bulk of global insurance. Today there are a large number of American life insurance companies conducting business on world wide scale, for example, Aetna, AIG, the Hartford, Banner Life, and others. However, the life insurance industry currently flourishing in the US has not sprung overnight and rather there is a long evolutionary history behind the US life insurance companies .
History :
The earliest life insurance enterprises in the US can be traced back to the late 18th Century when the Presbyterian Synods in Philadelphia and New York set up the Corporation for Relief of Poor and Distressed Widows and Children of Presbyterian Ministers in 1759. From 1787-1837, 26 life insurance companies began functioning in the US though with little success. The earliest life insurance companies which tasted success were the Pennsylvania Company for Insurances on Lives and Granting Annuities (started in1812), the Massachusetts Hospital Life Insurance Company (chartered in1818), the Baltimore Life Insurance Company (chartered in 1830), and some others.
The business of life insurance in the US began to make a significant progress since the 1830s as the total money value of life insurance in force grew from about $600,000 in 1830 to almost $5 million in 1940. By 1945, the figure reached $14.5 million. The top three companies then were – the Mutual Life Insurance Company of New York, the Mutual Benefit Life Insurance Company of New Jersey, and the Connecticut Mutual Life Insurance Company. The sudden success of life insurance in the US during the 1840s can be attributed to: changes in legislation affecting life insurance and a shift in the corporate structure of companies towards mutualization. Slowly, the life insurance companies began targeting women and children as the main beneficiaries of insurance.
International Expansion of US Life Insurance Companies :
The major US life insurance companies began expanding into the global market as early as 1860s and 1870s. The most rapid growth occurred between 1885-1905.
Multiplication in number of US Life Insurance Companies :
Following the Armstrong Committee's investigation (in early 1905)on the nature of functioning of the US life insurance companies, the government gave a clean chit ensuring that life insurance is a safely-run business and consequently there was a surge in the industry with a number of new companies joining in the fray. Whereas only 106 companies existed in 1904, by 1914 the number was added to by another 288.
Group Life Insurance :
There was the evolution of the concept of group insurance. In 1911 the Equitable Life Assurance Society issued a policy covering 125 employees of the Pantasote Leather Company. By 1919, such companies issuing group insurance rose to 29.
War Risk Insurance :
The US government also issued insurance policies to all the US war personnel during World War I (1914-18) and also later during World War II (1939-45). This proved to be extremely popular. As was the case after the Civil War, life insurance sales rose dramatically after World War I, reaching at $117 billion of insurance in force in 1930.
After 1944, regulation of insurance companies became subject to Congress under the interstate commerce clause of the U.S. Constitution. Until the 1950s, most US life insurance companies could provide only one type of insurance, but legislation was passed to undo that and allow fire and casualty companies to underwrite several classes of insurance. This had a thumping affect on the US life insurance industry as this led to expansion of many firms and mergers. Multiple-line life insurance companies now dominate the field in the US. In 1999, the US Congress nullified banking laws that had barred commercial banks to enter the insurance business, thus opening the floodgate for major banks to move into the insurance arena.
On the Flip Side :
However, in recent years insurance premiums have increased rapidly, leaving a large numbers of Americans uninsured. While many complain that the US citizens are paying for bad risks made by the life insurance companies, the companies pass the buck on law firms and their clients. Besides frequent catastrophic earthquakes, hurricanes, and wildfires since late 1980s have also ruined many insurance company's reserves.
Nevertheless, whatever be the case, life insurance has become a very essential component for almost all individuals (more so the rich who have a lot to loose!) and in the US there are currently existing myriad of companies which are competing with each other to insure lives of Americans as well as those of foreign nationals.
For more information, please explore the following links:
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USA Life Insurance Companies
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