Life Insurance in the Depression

May 19, 1933

Report Outline
Stablity of Life Insurance under Depression Strain
Growth of Life Insurance in the United States
Investments of the Life Insurance Companies
Fiscal Status of Companies in the Depression
Savings Bank Life Insurance in Massachusetts
Special Focus

Stablity of Life Insurance under Depression Strain

Administration's Appeal to Farm Mortgage Holders

Growth of hoarding early this year and the closing of banks in successive states late in February, culminating in the nationwide bank holiday in March, confronted the country's life insurance companies with unusual demands for surrender values and policy loans and resulted in. application of wide restrictions on cash disbursements to policyholders as a measure of protection for company assets. Until faced by this extraordinary situation, the life insurance companies, with few exceptions, had been able to make increasing payments and loans to their policyholders without difficulty, in spite of declining income from investments and premiums. This record and the present strong position of most companies have been cited as a demonstration of the soundness of the life insurance business as now conducted.

Sales of life insurance policies in the United States increased with remarkable rapidity after the war. The momentum attained in the decade preceding 1929 carried over into the depression, so that the total amount of insurance in force did not reach its peak until 1931. On December 31 of that year life policies were outstanding with American companies for an aggregate insurance total of $108,886,000,000. A year later, on December 31, 1932, this total had declined to $103,700,000,000. A further decline during the current year is indicated by the recent large increase in number of policies surrendered for cash and by a continued slowing down of new sales.

While there have been several notable failures of insurance companies during the depression, the only relatively large life company in difficulty is the $150,000,000 Illinois Life of Chicago, whose failure was followed by indictment of several of its officers on charges of conspiracy and embezzlement of funds of the company to support hotel properties in which they were interested. Most life insurance companies have been so strong financially that they have not been obliged to seek loans from the Reconstruction Finance Corporation. At the same time, they have been indirectly aided by R. F. C. loans to the railroads. Although the insurance companies hold railroad bonds in large amounts, they are mostly high-grade, first-lien obligations. No complete compilation has yet been made of the amount of defaulted bonds held by life insurance companies, but a recent estimate placed the proportion at less than 2 per cent of the bond portfolio, or less than 1 per cent of total assets.

ISSUE TRACKER for Related Reports
Life Insurance
Jan. 17, 1945  Regulation of Insurance
Oct. 29, 1935  Life Insurance for Workers
May 19, 1933  Life Insurance in the Depression
Economic Crises
Insurance Industry