AACS Proceedings of the 39th Annual Convention
It is indeed a peculiar pleasure to me and deep appreciation on the part of the Metropolitan Life Insurance Company that we, as one insurance Company, are given this opportunity of appearing before your association. We feel somewhat a kinship, rather a co-partnership, with you, for both of us, you and I; enter into the sublime inner circle of the family life.
Your business is a large business. We have watched it; you may not have known about it, but we have watched you for several years in the constructive growth, in the way that you are taking care of your park systems. And your dean, as I understand, from Cincinnati, is still with you, the man who originated the idea of taking away the fences and making one great vista, one great landscape. And now you have stabilized the care and perpetuity of lots and I take it that today and in your sessions, you are here for some constructive thought and constructive criticism.
My talk will be mostly extemporaneous, but at the end, if it is entirely proper, Mr. Chairman, if there are any questions that might be asked, I will endeavor to answer them in a few moments, because there may be some question in your mind when you go back to your Board of Directors, because I assume that you desire to take back some good things, as you all will, from this convention.
While your business and my business is big business, still as I sat here, I thought to myself, "What is the biggest thing in life? What is the biggest business in life?"
We think, possibly, of the banks, with their thousands upon thousands of stockholders and depositors and their millions of assets. We think, possibly, of the great railroads, with their many lines ramifying the continent, with their thousands of cars and how we travel in luxury from one point to another. That is a big business.
But those businesses only serve humanity and mankind. You are serving mankind, I am serving mankind, and it is all in the matter of service. Possibly a greater thing than a big business might be the state or the government, the church and charity. But anyone of these things, ladies and gentlemen, there could be anyone of them taken away and we would exist. So possibly the greatest thing and the biggest thing in life is that, which if taken away from us, all would be chaos and darkness.
At one time on this earth there was chaos and although we have had some little enlightenment from our lamented Bryan in controversy with the intellectual Darrow, still we have never been able to find out just when light appeared on this earth from darkness; but we do know that human life came into existence. So that the greatest thing in life, the biggest thing in the entire world is what? Human life.
Now, next to human life is the family and next to the family, of course, is the protection of the family and that is where we, as insurance people, endeavor to give service, the protection of the home protection to the individual and for the love of his family.
The growth of these great insurance companies has been phenomenal in the past 25 years. Someone asked the other day, "What is a phenomenon?"
"Why, a phenomenon is something extraordinary, it is something that is unusual."
"Well, that doesn't explain a phenomenon."
"Well, for example, if you saw a cow contentedly chewing her cud, that is not a phenomenon. Nor if you saw a thistle lying on the grass, that is not a phenomenon. Nor if you saw a little bird flitting from branch to branch and singing to itself, that is not a phenomenon. But if that particular cow was sitting on the thistle singing like a bird that would be a phenomenon."
Now, it may seem strange that the life insurance business might be termed something phenomenal or a phenomenon and it is strange and I am only going to give you just a little background, so that you will understand somewhat of what insurance is and what we are trying to do in group insurance.
It is rather strange that almost to a mathematical certainty, ladies and gentlemen; we are able to tell the expectation of life of every individual in this room. We have been able way back in England, from the time of the actuaries over there and you know those people over there are great people for statistics and those things and they have been handed down until some sixty or seventy years ago we established the American Table of Mortality, and now with certain exposures of some millions upon millions of people from the age of 10 until they die, we are able to take them in groups of 100,000 each and we can tell how long a child ten years old will live and we can tell how long a man sixty years old will live and we can tell how long a man 50 years of age will live. They are all supposed to be dead at 96. We come to you people; the insurance people can come to your own office and talk about a certain kind of a policy to you and they will say, "Mr. Jones, your rate is so and so" because it is based on absolute mathematics.
So it is rather phenomenal that we are able to do all these things. I want to give you just one thought, also, to take back to your Directors and to take to yourselves, and that is the matter of your own life value, not only your life value, but the life value of the employee working for you. Now, you, with your cemeteries and your institutions and your corporations have certain capital accounts. I assume that you are charging off a certain ratio every year to depreciation. Otherwise, in a period of years you will find that you are up against it. A certain amount of depreciation is charged up against every business. But have you ever thought, ladies and gentlemen, about the depreciation of your own life value? Have you ever figured that some times there is always a time, there isn't any "if" it is always "When" when we are going to die, It is not a question, as with fire insurance, "if" that house is going to burn. It may stand for 100 years. But there is a "when" we are going to die, and that "when" is the something that you should consider always, and you should consider that in the case of your employees as well.
In other words, you should figure that there is a certain depreciation of your own life value. Did you know that in marine insurance there is 100 percent of insurable value insured? One hundred percent. In fire insurance 85 percent of the replacement value and only 7½ percent of the life value of the individual. And while we have some seventy billions of insurance in force at this time, we ought to have a trillion. You know when we talk of billions, it doesn't mean much to us, but during the Liberty Loan Campaign some years ago our great cartoonist, Mr. McCutcheon, gave a very good illustration of what a billion minutes and a billion dollars meant. We took from the time that Christ was born until December 25, 1920, I think it was and figured out that from the time that Christ was born until that date there had not been one billion minutes. In other words, figuring every minute as a dollar, there had not been one billion dollars. I have been talking for five minutes. That is five dollars. Think of it! So, when we commence to think about billions and insurance in force of seventy billions, it is beyond our conception.
At the same time your life value, your own life value today, I will endeavor to say only reaches possibly 7½ percent of your replacement value and that is something for you to think about.
In industry, I suppose in your own, I don't know how many employees you have in your cemeteries, but there as usually three items considered when we make up a man or a woman. One is the brain power, one is the muscle power, and the third is the good will. Most of us consider when we employ a man or a woman that we have the brain power and the muscle power and the other is rather forgotten; we sort of take it for granted. But there is an asset, there is a very great value today of good will. Not long ago one of the great railroads in the South presented the matter to the interstate Commerce Commission in Washington and was able to put in as an asset the good will that they had established for seventy-five years. So good will, while it is an intangible something, has an asset value. So, in your employees, always regard that, not only that you have the brain power and the muscle power, but also the good will.
If it is possible, ladies and gentlemen, to tie up that particular good will to you the same as a man or a woman would have for his family, then we really have achieved something in industrial life, and there is a possible way to do it.
The group insurance that we have at this time is not the panacea for all ills. It doesn't remedy everything, but it does help. There are some fifty millions of people in this country today who are obtaining their livelihood by labor. It happens that the company that I represent—you will pardon me for referring to them—we have some 22,000,000 people at this time insured in the United States and Canada. In fact, one out of every five of the population of the United States and Canada we happen to cover in industrial insurance and ordinary insurance. At this time we have something like six or seven hundred thousand people who are covered by group insurance.
With reference to the ,group plan, I want to give you just in a short way, Mr. Chairman, the foundation of group insurance as it might apply to any of your particular cemeteries and institutions. This is a general plan. I have an outline here for a model cemetery employee plan. We give you, as the proprietor or the president of your cemetery or your corporation, a blanket policy, a master policy. Then, out of that master policy we issue certificates to every individual working for you, from the boy or girl who may be 16 years old up to the oldest age, maybe 80 or 85, it doesn't make any difference, they all come in on one group and we average up their ages and place a rate on them. We take in everybody, the lame, the halt and the blind, without a medical examination. And in the past few years with the great insurance companies, including our own, that are writing group insurance, the mortality has been very, very favorable, because when we take a group together, we get the average. We couldn't possibly arrange with anyone of you or any other insurance company, for that matter, for a selected list, because we would have what is known as an adverse selection against us. In other words, the oldest fellows, from sixty on, would be tickled to death to have it and we would have too many claims in. But if we could take them all from 16 on from 20 on, to the oldest age, we will have an average age, possibly for around 35 or 40 and we can establish a rate there that is very, very low.
So, first of all, we give you a master policy and each employee has his own certificate that calls for $1,000 or $500 or $2,000 or $3,000, depending upon how you want to arrange it. If you have some foreman that you want to give $2,000 to or you have some under executive that you want to give $3,000, that is perfectly all right; but the average that we have for the common rank and file employee is $1,000.
That is payable in a lump sum incase of his death from any cause, it doesn't make any difference what. If the employee becomes disabled, gets T. B., gets hurt, becomes incapacitated from work, becomes debilitated from any cause, we have a disability clause and we give him $51.04 per month for twenty months. That is a mighty good thing. You would be surprised at the number of disability claims that we are paying.
So the employee gets an insurance policy for $1,000, on which he designates his own beneficiary, anybody except his employer; the disability clause is in there, so that if anything happens to him, he draws down a matter of $51.04 per month for twenty months.
In addition to that, we have round that it is a mighty good thing to have a sick and accident benefit. That sickness and accident benefit calls for ten dollars a week sick benefit and ten dollars a week non-occupation. Now, I assume that you people in all these states have the Workmen's Compensation. That has nothing whatever to do with group insurance nor with health and accident insurance. So he gets ten dollars a week or the woman gets ten dollars a week of sick benefits, or ten dollars a week of accident benefits, after the fourth or the eighth day. And that is good for 26 weeks. And the employee can be sick any number of times, he can be sick for ten weeks or he can be sick for fifteen weeks and come back to work again at the end of that time, but the continuous period of sickness must be limited to 26 weeks.
Those eligible are only those employees actively at work, irrespective of age, physical condition or anything else; they must, however, be actively at work. All of your employees would be entitled under a group policy to service benefits. We have some of the cemeteries covered; I don't happen to have a list of them here with me. But these cemeteries that have this service at the present time think very well of it and some of them have had it for four or five years.
All insured employees are entitled without extra charge to the service of the Metropolitan Life visiting nurses, wherever that service is maintained. We have something like four thousand nursing centers in the United States, so when an employee gets sick, immediately you can call the home office in the city here, or wherever you are and within an hour or an hour and a half the visiting nurse is at the bedside. It may be just a little fever; it may be not anything serious, it might be not necessary to call a doctor. In any event, the nurse is there to do all she can do take care of the patient.
We also give health booklets. This health literature service is one that really is worth while. We distribute these health literature booklets from time to time and we go from the child in the cradle through all the maternity troubles and finally end with diphtheria or whatever it may be. We have booklets pertaining particularly to that subject written by eminent specialists. Where we have 22,000 people, of course, it is incumbent upon us to do something for those people. Why? We are in the life insurance business and every one of our people are stockholders with us. This is not a participating company, this is a mutual company. If we can increase the longevity, if we can increase the man's span of life, if we can keep him alive longer, that is our business; and it is a fact that we have been able to increase the span of life so that the mortality record of the Metropolitan Life in its contact with its own people has been able to reduce mortality to an appreciable extent.
In regard to the terms of a group policy, they are practically all the same in any insurance company. There are two plans. One is where you pay it all, that is called the non-contributory; and the other is the contributory plan, whereby the employee pays the larger portion and that is the better plan, because he feels then, or she feels, "Well, it is not something that is being thrust upon us; but it is something that I have something to say about, it is my insurance."
In the event that the employee leaves your employ, he or she, then has the opportunity or the right to take out $1,000 of insurance or $2,000 or $3,000, whatever the policy she has or he has states, take out a new policy without medical examination at her then or his present age.
Now, for the plan that is installed upon the cooperative basis, or contributory, about thirty-five cents a week is about the average of what the employer pays for the life insurance in the amount of $1,000, with a disability clause allowing him $51.04 a month, $10.00 a week sick benefit, $10.00 a week accident benefit, nursing service, health literature and all that, thirty-five cents a week. The balance is paid by the employer. That, say, averages from ten to fifteen cents a week.
Now, at the end of the year supposing that you have invested ten to fifteen cents a week in your employee. That is then reduced by the dividends, because the dividend comes from the whole amount that is contributed by the employer and the employee. Our dividends at the present time are averaging about thirteen percent. In some cases we go very, very high, but thirteen percent, up to fourteen or fifteen percent, of the gross amount brings down your contribution to the employee to a negligible amount, it doesn't amount to very much, possibly a cent a day for the employee, which is nothing.
As to the reaction, ladies and gentlemen, on this group insurance plan. There are some six thousand concerns in the United States at this time that is carrying group insurance. Pardon my reference again to our own company, but we are carrying, for instance, with one railroad, I think, 75,000 employees, and we have another railroad with something like 40,000. In every case we are giving back dividends, and you would be surprised at the letters we get back from the employer. Here is just one from Mr. Kruttschnitt, Chairman of the Southern Pacific Railroad Company, where he acknowledges receipt of a dividend check for $29,870, being the dividend upon the Southern Pacific group that we have. That is quite a bit of money, and he says, "This result is very gratifying and fully meets all expectations at the time the insurance was placed” and he has arranged for a pro rata distribution of the dividend to the employees in proportion to the premium paid by them and those paid by the company.
It happened the other day up on the Great Northern Railroad, there is no secret about it, we gave them a check the other day for $76,000, which was their dividend and it was more than they had contributed and they in turn, sent back dividend checks to the employees. Now, it is all right to accept a little payment, but when a man gets a dividend check, he says to himself, "By golly! That is pretty good stuff." You know how it is yourself to get a dividend check, even if it only amounts to two or three dollars.
Now, in practically every case we give dividends back, because we are a participating company.
With reference just to one other matter and then I am through, our policyholders' service bureau. Our policyholders' service bureau, by reason of the magnitude of its business operations, naturally acquires a large body of business and industrial information and this is passed on to the group policy holders in the form of reports and bulletins.
In addition to this, our company maintains a staff of expert engineers and industrial engineers who make studies and investigations of our policyholders along the following lines: Production engineering, cost in management, industrial relations, budgeting, personnel management, safety engineering, health and hygiene, advertising.
In addition to that, we have the Executive Service Bureau, from which bulletins are sent out to you free every little while and you would be surprised, the good things you get out of that.
Now, with reference to our health bulletins, I have explained to you the service that we give. About every eight weeks we give something to each employee, and also, in your offices or wherever it may be, in the grounds, where the employee may see where checks are given in payment of claims or disability claims or whatever it may be, we have the poster service.
Now, I don't want to take too much time, Mr. Chairman, but I have tried to cover this ground as much as I could in a few moments, and if there is any particular question that comes to your mind, Mr. Chairman, is that your custom here?
From the publication:
AACS - Proceedings of the 39th Annual Convention
August 24, 25, 26 and 27, 1925