The Report of the Superintendent of Insurance 
 
 OF THE STATE OF NEW YORK 
 
 On the Triennial Examination 
 
 OF THE 
 
 Metropolitan Life Insurance Company 
 
 Summary of the Report of the Examiners 
 The Superintendent’s Preface in Full 
 The Conclusions of the Chief Examiner 
 
 New York, May, 1914 
 
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 Summary of the Report. 
 
 To Our Own People: 
 
 We have received the most remarkable report ever made 
 upon a life insurance company by a supervising official. 
 
 We present a brief summary and we print in full the Intro- 
 duction by the Superintendent of Insurance, and the “ Con- 
 clusion’ ’ of the report by the Chief Examiner. 
 
 The occasion was the regular triennial examination required 
 by law. We were very proud of the report made three years 
 ago by the then Superintendent of Insurance, the Hon. William 
 H. Hotchkiss. That being the first examination made of the 
 Metropolitan Life subsequent to the passage of the Armstrong 
 laws, it went back practically to the formation of the Company. 
 You remember that it was very favourable; and we followed 
 its publication by a pamphlet describing in detail the work 
 and progress of the Company for the preceding twenty years, 
 which covered the management by the present executive. It 
 
 was a wonderful exhibit. 
 
 \ The present report, following an examination which occupied 
 
 a full year, covers the business down to the end of 1912, and 
 makes noteworthy comparisons with the figures of the preceding 
 report which ended with the business of 1909; and shows: 
 
 In the intervening three years the Company gained in 
 assets about 120 millions of dollars and in insurance 563 millions 
 of dollars, of which over 300 millions were in the Ordinary 
 Department. It added nearly two and a quarter millions of 
 policies in force. At the end of 1912 the assets were $397,913,- 
 442.71; the insurance in force, $2,604,966,102, of which $910,- 
 263,864 was Ordinary insurance and $1,694,702,238 Industrial 
 insurance; the number of policies in force, 12,837,042. (P. 3.) 
 
 The agency force was 11,834. (P. 61-2.) 
 
 Progress in other respects was no less remarkable. The 
 lapse ratio on new business of Industrial policies decreased six 
 points, or nearly 15 per cent. The examiners set forth the 
 percentages since 1906 yearly to the end of 1912, and they say: 
 “ The above comparisons show a constant and consistent improve - 
 
 
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 ) 
 
 > 
 
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ment in the business of the Company. This condition indicates , 
 first , an improved organization , and , second, better satisfied 
 policy-holders.” (P. 50.) 
 
 “The Company now issues automatic paid-up insurance for 
 life.” (P. 46.) 
 
 As to claims: “The Company receives on the average about 
 550 claims a day. They are given prompt attention, the 
 majority being paid the day proof of claim is received.” The 
 ratio of rejections in the Industrial Department is stated to 
 be only twenty-eight hundredths of one per cent.! (P. 52.) 
 
 As to bonuses — that is, cash grants to policy-holders over 
 and above the provision of the contracts — the declarations of 
 each year for 19 years, making the total to the end of 1912 
 $35,367,293.32. (P. 53.) 
 
 Targe decrease of cost of Industrial insurance, comparing 
 1912 with 1902. (P. 71.) 
 
 Tow net cost of Industrial insurance after long persistence 
 — after 25 years, age 20 at issue, $14.10 per $1,000; age 30 at 
 issue, $18.05; age 40 at issue, $24.67. Alter 30 years of per- 
 sistence, age 20 at issue, $11.72; age 30 at issue, $15.01 ; age 40 
 at issue, $20.51. (P. 70.) 
 
 Improvements in policy-contracts in all Departments. 
 These are set forth on pp. 55-6. 
 
 The progress and extent of our Welfare work. This is 
 described on pp. 57-61. As to free nursing of sick Industrial 
 policy-holders, it is shown that in April, 1913, there were 
 “637 nursing centers from which were covered adjacent towns 
 to the number of 792, a total of 1,429” ; that in 1912 the number 
 of visits was 962,133 on 131,090 cases, costing $440,678.79 
 in districts having 9,857,780 policies in force. The educational 
 work on the subject of health and hygiene is described; the 
 expenditures on the Sanatorium for employees set forth; the 
 assets of the Staff Savings Fund (for the benefit of employees 
 at the Home Office and in the Field, to which the Company 
 adds about 50 per cent, of the savings deposited) are shown 
 to have been doubled, rising from $900,000 in 1909 to $1,800,000 
 in 1912. 
 
 The full report covers over 80 printed pages, and is, of 
 course, too long for general circulation. We have sent a copy 
 to each of our Superintendents, to every Commissioner of 
 Insurance and to the various insurance newspapers. For the 
 purposes of general information the summary above will suffice. 
 
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But the Examiners’ Report as printed by the Department is 
 preceded by a very remarkable Preface, written by the Hon. 
 William Temple Emmet, the Superintendent of Insurance 
 for the period covered by the report. It is brief and readable 
 not only for its matter but its form, the beautiful English style 
 of which Mr. Emmet is master. We cannot comment upon it, 
 for we could not do so without using extravagant language. 
 We can only say that we are very, very proud of being made 
 the subject of commendation in a paper so full of the wisdom 
 of a statesman. 
 
 We append to this Preface the “Conclusion” of the Chief 
 Examiner in his report to his Superintendent — an Examiner 
 who is always chary of praise, no doubt because he feels that 
 his official position is that of critic. His hearty approbation and 
 the absence of criticism are, we believe, almost unprecedented 
 and therefore the more grateful to us. 
 
 These two papers constitute an official view of the Metro- 
 politan Life Insurance Company which the administration 
 prints with an intense gratification which I am sure you will all 
 share. 
 
 Vice-President. 
 
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 https://archive.org/details/reportofsuperint00newy_8 
 
Preface to the Report 
 by the 
 
 Hon. William Temple Emmet, Superintendent of 
 Insurance. 
 
 1 
 
 State of New York. 
 
 Insurance Department. 
 Albany, N. Y., March 23, 1914. 
 
 When the Metropolitan Life Insurance Company was 
 last examined by this department, Mr. William H. Hotchkiss, 
 who was then the Superintendent of Insurance of New York 
 State, prefaced the publication of his report of examination with, 
 a memorandum in which laudatory references were made to the 
 company’s activities in several of its departments. Particular 
 stress was laid upon the desirability of encouraging and extend- 
 ing in this country the writing of so-called Industrial insurance, 
 for which the Metropolitan Life Insurance Company is 
 chiefly noted. This, I suspect, was a question which had been 
 puzzling Mr. Hotchkiss considerably, as it had the Armstrong 
 Committee a few years before — the question, I mean, of whether 
 private enterprise should be left much longer in control of the 
 business of supplying Industrial insurance to the masses on a 
 large scale. My predecessor’s memorandum shows that, what- 
 ever his original doubts may have been on this point, they were 
 dispelled by the showing which the Metropolitan made under 
 an examination which was searching in the extreme, and which 
 I surmise had in the first instance been undertaken in no spirit 
 of pre-conceived approval of the company’s methods and pur- 
 poses. 
 
 Upwards of three years have passed since that examination 
 was completed, and to-day, notwithstanding the fact that the 
 world is steadily growing more radical in its attitude toward 
 private enterprise as a suitable agency for the accomplishment 
 of quasi-public purposes, this question of permitting organisms 
 like the Metropolitan Life Insurance Company — stock 
 companies, in the management of which, however, policy-holders 
 have certain rights — to continue to supply the great social 
 service of providing Industrial insurance to the masses un- 
 challenged by interference or competition from the State 
 
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itself, is not being agitated to anything like the extent it was 
 three years ago. In other fields, the socialistic ideal of State 
 control has during this time been making large headway, while 
 in this field it has shown a distinct tendency to abate. If 
 this means anything, it means that in the field of Industrial 
 insurance, however it may be in other directions, private 
 enterprise has been splendidly justifying itself by its works. 
 Upon no other ground is it possible now for private enterprise in 
 any quasi-public field to escape the challenge of the new spirit 
 that is abroad in the land. 
 
 The fact is, the history and achievements during the last dec- 
 ade of the Metropolitan Life Insurance Company, and of 
 one or two other of our large life insurance companies, present 
 such shining examples of efficient and enlightened business 
 management — with in some cases a dash of statesmanship 
 thrown in — that it seems to me to be quite as much the duty 
 of a supervisory official, when an appropriate occasion arises, 
 to comment favorably upon such cases of successful public 
 service by business corporations under private control, as it 
 would be his duty under present conditions to administer sharp 
 criticism if the tendency had been in the other direction. In 
 the case of the Metropolitan Life, the responsibilities of the 
 company’s management are shared by its comparatively small 
 number of stockholders and its army of Ordinary policy- 
 holders — under charter provisions designed to bring about this 
 happy union in a practicable manner. Precisely what the basis 
 of this partnership between stockholders and policy-holders is 
 need not be gone into here. It is no part of the work of the 
 Insurance Department to settle questions which from time to 
 time arise over the legal meaning of charter provisions. That 
 is a function reserved, under our laws, to the courts. It is 
 with the results achieved under such a system as the Metro- 
 politan has, rather than with its exact legal character, that we 
 are now concerned. I simply call attention, therefore, to the 
 interesting fact that at each annual election of directors certain 
 of the Ordinary policy-holders and the stockholders of this 
 company have the right to vote, under charter provisions 
 which so far modify the procedure of strictly stock corporations 
 as to constitute at least a substantial recognition of the 
 theoretical advantages of the mutual idea, without at the same 
 time involving a complete abandonment of those fundamental 
 virtues which reside in the system of stock ownership. In the 
 
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evolution of modern business the potentialities of such a plan 
 of organization as the Metropolitan follows are deserving, I 
 think, of very serious consideration. 
 
 The administrative officers of the company, whose directors 
 are chosen in the manner I have mentioned, seem to me not 
 to have approached their task with any bias in favor of stock- 
 holders as against policy-holders, or the reverse — as might very 
 well have been the case if one or the other of these elements 
 had been in complete control of the company. Rather they 
 have shown a desire to harmonize the interests of both elements 
 for the general good of the organization. In this they have 
 been very successful. They have so increased the assets of 
 the company as to make these equal the resources of many 
 States and even nations. They have at the same time steadily 
 cheapened the cost of insurance to policy-holders, both by 
 direct means and by the distribution of bonuses. They have 
 extended the company’s business to such an extent as to bring 
 it into contact now with approximately one-eighth of the 
 population of the entire United States. That this notable 
 growth has involved no sacrifice of efficiency in the handling 
 of administrative details, but on the contrary has been the 
 direct result of constantly increasing efficiency, is shown by the 
 comparatively small losses sustained by the company in pro- 
 portion to the large investments made, by the high earning 
 power of the company’s securities, and by the steady decrease 
 which has been taking place in the percentage of managerial 
 expenses to the company’s premium income. The fact that 
 the percentage of lapses due to the abandonment of their 
 insurance by policy-holders is constantly decreasing, speaks 
 eloquently to the same effect. This last-mentioned develop- 
 ment is perhaps the most convincing evidence which could be 
 offered that the company’s policy-holders are, broadly speaking, 
 very well satisfied indeed with what they get in return for the 
 premiums they pay. 
 
 A very remarkable showing, altogether. It is very largely 
 explained, it seems to me, by the fact that those in control of 
 these great companies realize to-day that such institutions 
 must shoulder responsibilities to the community at large of 
 a somewhat different order from those which confronted them 
 when they were engaged in business in only a small way, and 
 that the affairs of such companies simply cannot be administered 
 in a spirit which takes only the business side of things into 
 
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account. This fundamental change in attitude on the part 
 of great business institutions which have come up from small 
 beginnings need not, it seems, be accompanied by any actual 
 changes in the legal status or character of such organizations. In 
 the case of the Metropolitan there have been no vital changes 
 in the company’s corporate character for many years. Under 
 its system of joint control by stockholders and Ordinary policy- 
 holders, it has been able very effectively to rise to the occasion 
 and to bring about all the changes in its methods of doing 
 business which a continuous growth has from time to time 
 necessitated. It is difficult to see how, if the burden of the 
 administration of such institution as this had during the past 
 twenty years been upon the shoulders of the public, the insti- 
 tution could have been made a particle more responsive than 
 it is to the constantly changing requirements of our time. If 
 the men in charge of such a company grow reactionary in their 
 tendencies, or blind to the social progress of the age, the move- 
 ment toward an absorption of their powers by the State itself 
 will, as matters stand, proceed very rapidly. But in the case of 
 the company under consideration there has been such a frank 
 and fearless recognition of its new responsibilities that it is easy 
 enough, after all, to understand how it has happened that in the 
 field of Industrial insurance the movement toward State opera- 
 tion and ownership has experienced a set-back. Having very 
 promptly recognized what the public may rightfully require 
 from institutions engaged in the Industrial insurance business 
 — having in fact been largely instrumental in educating the 
 public to a full realization of what it might rightfully require — 
 this company waited for no changes in existing law before 
 striking out as a pioneer among insurance companies along the 
 pathway of social service on a huge scale. The report of the 
 examination which has just been completed shows the extent 
 and ramifications of these departures. The many admirable 
 things which have been accomplished for policy-holders and 
 employees during the past decade are set forth in considerable 
 detail in the following pages. Leaving out of consideration 
 the mere numbers of those who have been directly benefited 
 by these activities, I think that the example which the Metro- 
 politan has set to other great business organizations by its 
 early recognition of the new responsibilities attaching to all 
 business enterprises which have attained a certain size, is 
 one of the most beneficial of recent occurrences in the field of 
 
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American business. In carrying out some of its remarkable 
 projects of social betterment, like the establishment of its 
 tuberculosis sanatorium for the Home Office and Field employees 
 of the company, it has had to overcome many obstacles, even 
 to the extent of invoking court aid to enable it to proceed. 
 Fortunately our court of last resort in New York was progressive 
 minded enough not to withhold its assistance in this worthy 
 enterprise. The tuberculosis sanatorium is now an accomplished 
 fact. But for years before this happened, the company had, by 
 means of educational literature distributed on a gigantic scale, 
 been waging effective warfare against the dread evil of tuber- 
 culosis. For years it has through its publications upon the 
 question of health conservation been serving multitudes of 
 people as a sort of University of beneficial instruction upon this 
 most important subject. For years it has maintained for its 
 policy-holders a nursing service upon a great scale; this has 
 latterly become a veritable marvel of efficiency and practical 
 helpfulness. I have mentioned only a few of the things the 
 company has been doing in the field of social service, but I 
 think that these will sufficiently show the extent to which this 
 institution has recognized the modern truth that organized 
 wealth under private management must, if it is going to be 
 allowed to exist at all, assume certain public responsibilities 
 which were not dreamed of under any of the old philosophies. 
 
 Now as to my purpose in dwelling upon these matters in a 
 memorandum like this. It is not, let me hasten to say, primarily 
 for the purpose of praising the Metropolitan Life Insurance 
 Company or its present management that I mention them. It 
 simply happens that this great institution — having so very 
 recently been under our critical scrutiny, and presenting so 
 many admirable illustrations of what an efficient and en- 
 lightened modern business organization on a large scale can do 
 in the way of keeping abreast of modern thought — seems to 
 be in a position where I may properly use it as an illustration 
 of the particular point I had in mind when I decided to prepare 
 this Preface to the Report of my Examiners. My point is, of 
 course, that private initiative and enterprise are at their best 
 still capable of doing the finest possible work in fields from 
 which, latterly, all the talk has been that these agencies should 
 be compelled to retire. Those of us who have been more or 
 less closely connected during the past few years with the work 
 of the State are in a position to realize better perhaps than 
 
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many others are, the strength of the tide that is setting nowa- 
 days in the direction of what is commonly called Socialism — 
 by which I mean, of course, the taking over by the State at 
 the earliest possible moment of nearly every form of productive 
 activity. We have been in a position, too, where we could 
 plainly see some of the evils which creep very insidiously into 
 all public administration of large and complicated affairs. 
 Upon me the effect of the experience has been to make me 
 disinclined to see the movement toward v State omnipotence 
 proceed a bit faster than it has to. Rather would I see the 
 people pause every now and then before such an example of 
 private enterprise as we are here considering, and consider 
 soberly whether, in the long run, good is going to come from 
 substituting political administration in place of the kind of 
 private administration which can apparently be secured for 
 such companies nowadays — and which can be safeguarded, of 
 course, to any extent the State may desire by a system of 
 efficient governmental supervision. The Metropolitan Life 
 Insurance Company is only one of several great insurance 
 organisms of which substantially the same things which I have 
 said with particular reference to this one company might be said 
 generally. The Metropolitan Life Insurance Company is 
 by no means a unique example among business institutions, or 
 even among insurance companies, of modern and enlightened 
 business management. Institutions like this constitute the 
 most effective barriers we have to-day against the too rapid 
 spread of socialistic ideas; and that is why, with so shining an 
 example at hand, I — who believe in making haste slowly in 
 the field of political evolution, even to the extent of putting 
 on the brakes occasionally — have not been able to resist the 
 temptation of pointing specifically to it in proof of what private 
 enterprise is capable of accomplishing for the public good in 
 
 the insurance field. 
 
 Superintendent of Insurance. 
 
 “Conclusion. 
 
 “This examination shows that this Company is efficiently 
 managed, that its financial condition is good and that its 
 reserves are ample. It promptly carries out its obligations to 
 
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its policy-holders in a liberal manner. The Company has a 
 first-class organization. The management and agency force 
 are devoted to the welfare of the Company and its policy- 
 holders. ^ 
 
 “The treatment by this Company of its policy-holders in the 
 prompt payment of their claims, in the voluntary payment 
 of millions of dollars in bonuses, and its social welfare work — 
 both in education and in the free nursing service— are features 
 of the Company’s business which deserve commendation. 'The 
 Tuberculosis Sanatorium for the benefit of thousands of em- 
 ployees of the Company, the Staff Savings Fund, whereby it 
 encourages thrift among its employees, and other ways in which 
 it cares for its employees, all impressed your examiners with 
 the advanced position this Company has taken in this class of 
 work. These facts, together with the further fact that all 
 policy-holders of the Company whose policies have been in 
 force for one full year are entitled to vote for members of the 
 board of directors, safeguard the future welfare of the organiza- 
 tion. 
 
 “Respectfully submitted, 
 
 “Nelson B. Hadley, 
 
 “ Chief Examiner 
 
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