44 university of colorado studies 



§ 8. The Regulation of Life Insurance Companies 



The desirability of federal regulation of life-insurance companies 

 is so generally recognized that it is unnecessarj'- to advance arguments 

 in its favor. But the decision of the Supreme Court that msurance is 

 not commerce^ seems to have taken the matter out of the reach of Con- 

 gress. There are some optimistic insurance men who beheve ihat the 

 Supreme Court would, in view of developments since 1868. rule that 

 the interstate insurance business is interstate commerce,^ bui for the present 

 this decision constitutes a serious obstacle in the way of national legis- 

 lation. Direct methods bemg thus impractical, the folio v/ing indirec. 

 method has recently been proposed : 



Congress, having jurisdiction in the District of Columbia and in the 

 territories of the United States, could appoint a competent commission 

 to investigate the conditions and methods of the various companies, and 

 authorize or forbid them to do business in the District of Columbia and 

 in the territories. Of course, such investigation would have to be vol- 

 untary on the part of the companies; any company, so desiring, would 

 be at liberty to refuse to permit such an examination. Suppose, however, 

 that the agents of three companies, A, B, and C, are trying to get your 

 business. Company A has been investigated by the government and 

 pronounced satisfactory; B has been investigated and pronounced 

 unsatisfactory ; while C has declined to allow the government to examine 

 its affairs. Clearly, you would not trust B with your money, and you 

 would be exceedingly suspicious of C, wondering why it is afraid to 

 allow its books to be examined. You would undoubtedly select A as 

 the safest company to insure with, and thus, A getting all the business, 

 B and C would soon have to wind up their affairs. 



Most of the insurance companies are organized on the mutual plan, 

 wherein every poUcy-holder has a voice and vote in its government. 

 In practice this suffrage is a farce. No one from afar ever goes to the 

 annual meeting to cast his vote, and those living in the city where the 

 meeting is held have not the time to attend it. When policies are taken 

 out, the purchasers give their proxies to someone suggested by the 



■ This decision was handed down in December, 1868, in the case of Paul vs. Virginia. 

 ' J. F. Dryden, Address on the regulation of insurance by Congress. 



