The Early History of the New England Mutual Life Insurance Company

Citation preview

Willard Phillips First President,

1843

to 1865

The Early History of the New England Mutual Life Insurance

By

Company

JACOB A. BARBEY Vice - President

87

MILK STREET

BOSTON, MASSACHUSETTS 1923

Printed in V. S.

A.

Bus. Admin.

Library

The Early History of the

New England Mutual Life

Insurance Company

By JACOB A. BARBEY, Vice-President

'HE birth of an idea that finally develops into

a very vital part of our economic life, is a matter of historical interest, not only to the curious student, but to those who are at all interested in the progress of mankind. However shrouded in mystery is the origin of Life Insurance, the beginning of the era that marks the greatest growth toward its present magnitude is so comparatively recent, that its different stages are easily identified and readily traceable. It seems scarcely credible that a business conducted in England on a profitable and, since the advent of the Equitable of London, a fairly scientific basis, should have been so timid in its early efforts in our own progressive country, particularly when it is realized that, once fairly started, it grew enormously, until it finally far outstripped its English prototype, and is now not only a power in the business world, but a recognized neces sity of our every-day life. There were a few early attempts to establish the business before the New England Mutual Life Insurance Company was incorporated, by companies organized for profit on the jointstock basis; but it was not until the mutual principle was made the essence of the plan that the present era of Life Insurance in the United States really began. The Presbyterian Ministers Fund was organized in Phila delphia in 1759, and while it is still in operation, its business is confined to insurance for clergymen of the Protestant churches. The Pennsylvania Company for Insurances on Lives and Granting Annuities commenced business in Philadelphia in 1809, and was incorporated under the laws of Pennsylvania on

263413

[

March and in

10, 1812.

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]

Its earliest life contracts were made in

1818,

Company was authorized to accept and execute trusts. This marked the beginning of what finally overwhelmed 1836 the

its insurance

business.

The Massachusetts Hospital Life Insurance Company was in 1818 with a capital of $500,000, and the New York Life Insurance and Trust Company, with a capital of $1,000,000, in 1830. These three latter companies gradually gave up the life insurance business, and, confining their efforts to banking and the care of trust estates, have become strong and honored institutions, operating under the banking laws of their respec tive states. incorporated

The Founder The first to conceive the idea that an insurance company could successfully operate under the mutual plan, in this coun It is quite possible that this same try, was Willard Phillips. faith may have been held by others at as early a date, but to Judge Phillips belongs the credit of being the first publicly to establish this belief by procuring a charter for a company that should be purely mutual in operation. Willard Phillips was born in Bridgewater, Massachusetts, on the nineteenth of December, 1784, and passed his youth in the town of Cummington.

With the mind and all the desires of

a scholar, but without means to his studies uninterruptedly, he adequate pursue supported himself by teaching while increasing his knowledge, principally under the tutelage of Mr. James Thomas of Bridgewater and the Rev. Mr. Niles of Abington, finally preparing for college at an Academy in Bridgewater. While attending the Academy, he lived with Dr. Noah Fearing, who held his young friend in such high regard that he advanced the means necessary, in addition to what Mr. Phillips could earn by teach ing, to enable him to complete his education.

He entered Harvard in 1806 and was graduated in 1810. Al though afflicted with such weak sight that he had to depend upon the courtesy of others who were willing to read aloud to him, he was able to attract friends who willingly aided him in this manner to complete his studies with distinction.

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After graduating, he became a tutor in college, giving up his spare time to the study of law. In December, 1814, an association was formed for the starting of

a

literary periodical

under the title of the " New England Magazine and Review," of which Mr. Phillips was to be the editor. It was learned

that a project was on foot to establish a similar publication by Mr. William Tudor, and the "New England Magazine"

was abandoned. The first number of the "North American Review and Miscellaneous Journal" was published in May, 1815, and after the lapse of one year, Mr. Tudor put the "Journal" at the disposal of Mr. Phillips. In 1817 Mr. Phillips gave up his active management of the paper, but for some time continued as an advisor and contributor. He was admitted to the bar in 1818, and in 1823 published the first edition of his "Treatise on Insurance," which, in its several editions, became a standard work of importance. In 1837 he published a " Treatise on Patents," which was, with his "Treatise on Insurance," a part of the course of reading in the Harvard Law School. In 1825-1826 Mr. Phillips was a member of the House of Representatives of Massachusetts from Boston, and in 1837 he was appointed one of a commission to codify the common law relating to crimes. In 1839 he was appointed Judge of the Probate Court for the County of Suffolk, which position he resigned in 1847, as his duties as President of the New England Mutual Life Insurance Company demanded his closer attention. He was honored with the degree of LL. D. by Harvard University in 1853, and died at the age of eighty-nine years on September 9, 1873.

The Charter On April 1, 1835, the General Court of Massachusetts to Ebenezer T. Andrews, George Bond, Willard Phillips, Charles P. Curtis and Samuel H. Walley, Jr., and the persons who may be insured under the act, a charter for the It provided that there purpose of making insurance upon lives. should be an original guaranty capital of One Hundred Thou sand Dollars ($100,000) subscribed, one-half to be paid in, in cash, before the Company should commence operations. It also provided that dividends, if earned, not exceeding seven granted

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per cent per annum, might be paid on the capital, and a sum was to be set aside to redeem the outstanding capital whenever, after ten years, this fund should be sufficient for the purpose. There was one very unusual clause in the charter, arising from the following interesting circumstances: In 1811 the Massachusetts General Hospital was incor porated as a charitable or benevolent institution, and in 1814 an act was passed allowing the Trustees to grant annuities on lives, the intention probably being to assure the Hospital a much needed source of income. In order to take advantage of this provision, the Trustees of the Hospital organized the Massachusetts Hospital Life Insurance Company in 1818, and one-tenth of the capital stock was owned by the Hospital. The Life Insurance Company was empowered "to make insurances on lives by sea and on land, and to contract for reversionary payments, and generally make all kinds of contracts in which the casualties of life and The charter interest of money are principally involved." " provided that the Company should each year pay to the Trustees of the Massachusetts General Hospital one-third of the net profits which shall have arisen from the insurance on lives made during the preceding year;" and further, should any other person or corporation be empowered to make insur ance on lives within the Commonwealth, "the obligation of this corporation to pay to the Trustees of the Massachusetts General Hospital for use of said Hospital the third part of the profits which may thereafter arise on insurance on lives shall cease, unless the same obligation shall be imposed on such persons or corporation thus hereafter empowered." Evidently it was to save to the Hospital the profits it was receiving from the Insurance Company, or because the legis lators did not realize the difference between a company organ ized for profit and one organized for the mutual benefit of its members, that the same clause was inserted in the charter of the New England Mutual Life. Doubts arose as to what the profits of a mutual life insur ance company were. Judge Phillips maintained that there could be no profits in a purely mutual company, as the amounts paid to policyholders as so-called "dividends" were merely the return of excess premiums collected over the amount actually The matter was finally needed to pay for the insurance. settled by an Act of the Legislature, Chapter 82, passed in

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1846, in which it is declared that the only profit that can arise a mutual company is the amount of the dividend paid to holders of the guaranty capital in excess of six per cent, the legal rate of interest for money. As dividends on the capital stock were paid at the rate of seven per cent per annum, the difference would be one per cent, and the Hospital consequently was entitled to one-third of one per cent per annum on $50,000 — the paid-in capital. One-

in

third of one per cent amounted to $166.66 this was paid until the guaranty capital January,

$1,666.67.

per annum, and was cancelled in 1854, the total payments to the Hospital amounting to

The Massachusetts Hospital Life Insurance Company gradually gave up its life insurance business, confining its operations to the granting of annuities and the care of trust estates, until finally it became known as a highly honored and important banking institution, still in active operation.

The Guaranty Fund The charter secured, the next problem was to obtain sub A cash subscription of Fifty scribers to the guaranty capital. Thousand Dollars ($50,000), with an additional liability of the same amount, was no small matter in those days, particularly for an untried enterprise that offered no profit, save a small advance over the legal rate of interest. An attempt was made to raise this capital, but these were trying times for mer The country was just entering on that period of chants. business and financial depression lasting for six or eight years, during which gold went to a high premium, the currency of the country was variously quoted on exchange, mercantile failures were of constant occurrence, and which finally culminated in the suspension of specie payments by all the banks in the country, with but one exception. Judge Phillips, with, probably, many of his friends, suffered financial reverses, and the actual organization of the Company In 1837 he was appointed one was temporarily postponed. of a Commission, under an Act of the Legislature, to reduce the common law relating to crimes to a code. For four years, most of the time serving as Chairman, he applied himself with his well-known thoroughness to this arduous task, and had little leisure for other pursuits. Finally the horizon cleared, and the

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time seemed opportune for completing his long cherished plan of establishing the Insurance Company. Meanwhile, in April, 1842, a charter had been granted to the Mutual Life Insurance Company of New York, and this Company commenced business on February 1, 1843, with guaranteed applications amounting to $500,000, no capital being required. It is a tribute to the worth of Judge Phillips that he was able to persuade his friends to advance the necessary funds, and there is no doubt that it was due to the high estimate of his character and disinterested purpose, held by his associates,

that he was enabled to enlist their interest and obtain their assistance. Indeed it was thought, by some, that they were

subscribing to a charitable organization, and surprise was expressed when the money was paid back after a lapse of ten years. There were ninety-eight subscriptions in all, one for $4,000, one for $3,000, six for $2,000 each, seventy-two for $1,000, and The list of subscribers is interesting to eighteen for $500. those familiar with the names of the most influential of Boston's business and professional men of the day. Among them we find the name of Mr. James Savage, a potent factor and efficient aid to Judge Phillips in the starting of the Company, and one of its first Directors. Mr. Savage was a noted philanthropist of sound business judgment, and had been largely instrumental in founding the "Provident Institution for Savings in the Town of Boston," chartered in 1809, for the purpose of collecting and safeguarding the savings of the poor, an institution that stands today a monument, in size and worth, to its founders, and a pride of its city. It was indeed fortunate for Judge Phillips that he could count among his friends men of rare character to sustain him during the years of waiting, and cheer him on to ultimate success.

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Organization Notice having been sent to the subscribers to the guaranty

capita], the first meeting was held at the Merchants Exchange Coffee House on October 26, 1843. Mr. Charles P. Curtis called the meeting to order. Mr. James Savage was chosen Moderator, and Mr. Thomas A. Dexter, Clerk.

A Committee was appointed to examine the list of sub scribers, to ascertain if the full amount required was pledged. Upon their report that the list was correct, and there being $65,000 of the stock represented in person or by proxy, it was voted to accept the charter establishing the Company. The next procedure was the election of a Board of Directors, and the following gentlemen were unanimously chosen: James Savage

Willard Phillips John A. Lowell George Howe

Charles P. Curtis John L. Gardner

Samuel A.

Eliot

William Parsons William W. Stone Robert Hooper

Francis C. Lowell George H. Kuhn

The Directors were authorized to pfepare by-laws and perform the usual duties of such a Board. The first meeting of the Directors was held at the office of Mr. Thomas A. Dexter on October 31st, and, there not being a quorum present, was adjourned to November 3d, when a Committee, consisting of Messrs. Savage, Parsons and Stone, was appointed to draft by-laws; and Messrs. Phillips, Curtis and F. C. Lowell were appointed a Committee to prepare a form of policy, tariff of premiums and form of application. At an adjourned meeting of the subscribers, held on Novem ber 9th, Mr. Samuel A. Eliot and Mr. John L. Gardner having expressed their inability to serve as Directors, Mr. R. Bennett Forbes and Mr. Peter Wainwright were elected to fill the vacancies. The by-laws were adopted, and it was voted that the capital stock should be divided into two hundred shares of five hundred dollars each. At the next meeting of the Directors, held on November 20th, Judge Willard Phillips was elected President, and Mr. The President was requested Jonathan Amory, Secretary. to perform the duties of Actuary of the Company until otherwise ordered by the Directors.

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At this meeting, Mr. Thomas A. Dexter offered the use of part of his office in the Merchants Bank Building for the business of the Company, free of cost, which offer, it is need less to say, was gratefully accepted. Frequent meetings of the Directors followed, and forms of application and policies were adopted, premium rates, as reported by the Committee, accepted, and it was decided to call upon the stockholders to pay in fifty per cent of their subscriptions on January 6, 1844. a

The Mortality Table The schedule of premiums to be charged was a very impor tant matter, and the documents on file show how earnestly and It would have been easier, deeply the question was studied. and quite safe, to adopt the rates then being charged by other companies, based upon English tables, but this would not be at all in harmony with Judge Phillips' careful and painstaking methods. The report of the Committee shows as exhaustive a study of the law of mortality as was then possible with the limited data obtainable, and the following opening paragraphs plainly set forth what the members of the Committee conceived to be

their duty:

"In order to determine upon a table of the rates of premium to be charged by our Company, we wish to ascertain, as nearly as pos sible, what proportion of those persons living in New England, at each period of life, from ten years old to an hundred, die annually; that is to say, out of 100,000 individuals, each ten years of age, how many would die before they were eleven, how many before they were twelve, and so on. This is called the 'Law of Mortality for New

England.' "In making our calculations for the future, we can, of course, be influenced only by such facts as have been supplied by the past. In the first place, we will endeavor to show how far the law of mor tality has been ascertained for Europe, and, subsequently, how far the law, as ascertained for the Western part of Europe, "agrees with the known facts respecting New England."

They collected, and carefully reviewed, Nicander's Tables for Sweden and Finland; the Carlisle Tables, made from very accurate information collected in Carlisle, England; De Parcieux's Tables of annuitants living chiefly in Paris; Government Tables by Professor Peirce, taken from English

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annuitants ; the Northampton Tables, constructed by Dr. Price

from bills of mortality of Northampton, England; Simpson's from bills of London; Kersseboom of Holland; Wigglesworth from portions of Massachusetts, and Tables made from the experience of the London Equitable, the Amicable Society and the Friendly Society of England. The Committee concluded that a mutual life insurance company in Northern Europe might equitably adopt, as the

basis of its premiums, any of the first-class tables, adding percentage to the premiums

a

to make the members secure. Then, to determine whether the law of mortality for the northern part of Europe would correspond, or nearly so, with the law of mortality for New England, they collected data from the official returns of the Clerks of about two hundred and sixty towns in Massachusetts, of the deaths which occurred in these towns in 1841, and the result, compared with the Carlisle Tables, confirmed remarkably, considering the imper fect data, the supposition that the law of Mortality of New England was similar to that of Northern Europe. The Committee selected seven of the Tables they had examined and promulgated the following rule:

"Reduce the tables from their respective scales to a common Find in each scale in which ten thousand are alive at the age of ten. table the chance of dying during each period of five years from the Take for each period the arithmetical mean of age of ten upwards. the five highest chances, and the means thus obtained as the basis " of a new table of mortality.

The following example will show the method pursued: Northampton Carlisle Equitable Amicable

(+) (+)

Age 50

Age 75

.143

.437

.074 .084 .101

.431

(+)

.429

(+)

.429

.472

Sweden Kersseboom

.105

Total Mean

.569

2.305

.114

.461

.121

De Parcieux

.099

highest chances 5 highest chances

5

(+)

Two lowest chances eliminated.

.514

.451

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Rough work, as compared to present-day accurate prac tice; but how well it served, and how amply justified, is proven by the fact that, although it resulted in a lower scale of pre miums for ages up to forty-two years, and slightly higher in the advanced years, than was charged by any other domestic company at that time, these premiums remained in use by the Company until 1896, when the newer and more accurate "Actuaries," or "Combined Experience," tables were adopted, which were the legal standard at that time. Money was earning at this time six and seven per cent, but it was necessary to discount the future far in advance, as many of the contracts would undoubtedly run for long terms of years; and should the funds earn less than the assumed rate, it might eventually place the Company in jeopardy. It was, therefore, decided that four per cent would be amply safe, and as any surplus earnings would be returned to the members, no loss would result in a low assumption. Benjamin Peirce, Perkins Professor of Astronomy and Mathematics at Harvard University, was employed to arrange from these data a table of premiums for Whole Life, and Mr. James Hay ward tables for premiums for terms of years. To the premiums 20% was added for contingencies and expenses, and $1.00 was charged for making out a policy. Judge Phillips realized that the premiums to be charged the members should not be burdensome, but it was vital to the success of the Company that they should be sufficient to meet all contracts as they matured, and the carefully worded argu ment he has left in the archives of the Company, in support of the figures adopted, shows the deep thought he gave to the

subject.

Premium Note System On February 13, 1844, it was voted that three-quarters of an annual premium might be taken in equal notes due in three, six and nine months. This has remained the practice of the Company ever since, and is a more favorable method of settlement, for the members, than the usual quarterly premium

payments.

The premium was divided into two portions, ten per cent being described as "deposit," and it was provided that should a policy lapse for non-payment of premium, such portion of this

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deposit as had not been consumed in expenses, or used to make up any deficiency in income, should be returned to the insured, thus making the policies of the Company non-forf citable, without some return to the insured, from the very inception of the Company. While the Company had plenty of money, received from subscriptions to the guaranty capital, there was no thought of paying it out for expenses, and it was not until April 9, 1844,

that the Directors voted that the Secretary

be allowed $i?00 on account of his services for the first six months. On May 14th, it was voted that no policy be issued for more than $10,000, until the aggregate amount of insurance out standing should exceed $700,000. Business very soon, evidently, began to look prosperous, as on June 11th it was decided to take the rooms occupied by the Union Fire Insurance Company and the Pension Office in the Merchants Bank Building, with Mr. Dexter, he paying $700 and the Company $850 per annum. Nothing can express more fully the true understanding by the Directors of the purpose of the Company, or the unselfish character of Judge Phillips, than the following report of a Com mittee appointed to fix the compensation of the President for the first year, entered on the records September 10, 1844.

The Committee reported

:

"That for the services of the first year performed by the Presi dent in executing the duties of Actuary, we feel compelled rather to regard the means of the Company than the value or success of those exertions; and inasmuch as the President would not consent to receive a larger allowance than two hundred and fifty dollars in full for the same, we recommend that this sum be paid to him for his attention to the concerns of the Company from the beginning to the end of the year, on the first Monday of December next." The compensation

annum.

of the Secretary was fixed at $1,000 per

On October 8th, the Directors authorized a policy for $15,000 on the event of Edward Payson and John Welsh, or either of them, surviving Sarah Welsh, another stride forward.

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Agencies The report of the Committee on Agencies, made November 12, 1844, showed that the Company had agents located in a number of the cities of Massachusetts and Maine, also in New Hampshire, Connecticut, and the cities of Albany, New York, and Mobile, Alabama. The Alabama representative was Mr. T. C. A. Dexter, probably a relative of director T. A. Dexter, representing Boston business interests in Mobile. The results of the first year of business, or the experimental stage of the Company, must have been eagerly anticipated by the men responsible for its organization, and certainly, modest as the figures appear in comparison to the vast sums of the present day, they had every reason to congratulate themselves upon the report they were able to make to the members. First Annual Meeting The first Annual Meeting of the Company was held on December 2, 1844, and the modest note of congratulation, with which the report of the Directors to the members ends, is well deserved.

The year closed with 340 policies in force, representing $946,110 of insurance, and assets of $72,162.20. The premiums collected amounted to $23,499.22, and the total paid for ex penses, including the cost of procuring books and data, and paying for the services of the mathematicians in determining the law of mortality and calculating the tables of premiums, as well as salaries, rent, and all other expenses of the office for the entire year, was $3,535.47. A remarkable illustration of economy and good management, and an example in promotion that has been rarely equaled! This report, for the year ending November 30, 1844, bears illuminating witness to the ignorance of the general public, at that time, of the vital need of life insurance protection, and shows how keenly the Directors felt the importance of the work and the responsibilities they had assumed. The report says :— "Much information has been diffused in the communitjs on the subject of life insurance, by means of our Company and other similar ones, and the editors of newspapers and other periodical journals have been very liberal and active in spreading a knowledge of the subject; and people begin to perceive that life insurance is, in very

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many cases, quite as important as that against fire or perils of the it will soon be quite as well understood and as familiar in Indeed, the general principles and the advantage of life practice. insurance need only to be plainly stated, to be understood by every sensible man. It has been the endeavor of every one concerned in the management of the affairs of the Company, to represent the sub ject in its true light, and not to excite overweening expectations, or encourage the notion that such an institution offers to its members the means of extraordinary speculation. The object is equality among the members, and a participation of the advantages of the Company, whatever they may be, in the proportion of the amounts contributed; and it is no part of the plan that some shall be benefited There is every reason to anticipate that at the expense of others. the holders of policies for life, who survive just the period of their expectation of life at the time of being insured, will have made a good It has been represented to those investment of their premiums. who have made inquiries on the subject, that there seems to be good ground to expect that a policy on such a life, besides being a guaranty to the extent of the amount insured against embarrassment to the family of the person insured, arising from his premature decease, will be a better investment of the amount paid in than the average This is the answer which of investments in real and personal estate. has been most usually given to inquiries on the subject, and nothing beyond this; whether such shall be the result will depend, of course, in part upon the management of the business of the Company. . . . "On the whole, the Directors consider that the condition of the Company is a subject of congratulation; and that its prospects are full of promise of success and usefulness. This is in part owing to This is an the fact that hitherto all the members have survived. auspicious beginning, though it can hardly be expected that any subsequent period of the same length will pass, during the existence of the Company, without presenting some items of loss in the accounts. But at whatever rate the lives may terminate, if the decrement is not too rapid to admit of the losses being provided for by the receipts from premiums and deposits (and such excessive decrement can hardly be expected), then the important object in establishing the institution will be answered, viz: the raising of a common fund by just proportional contributions by the members of the Company, subject to be distributed among their families in certain amounts, without regard to the fact of any particular insured having lived a long or short period. "The founding of such an institution was the main motive for subscribing to the guaranty stock, for the inconsiderable excess to which the subscribers will be entitled over the ordinary rate of interest in case of the success of the Company, in consideration of their hav ing risked their capital, was, as is well known, but a slight inducement, if any, for subscribing to that stock." seas, and

At this meeting, an amendment to the charter was accepted,

which

allowed

the

Company to make

insurance

on

lives

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otherwise than on the mutual plan. There was a demand for insurance for very short terms, presumably for protection during some business venture, the Company having issued, in 1844, twenty-four policies for the term of one year, and it is probable that the object of the amendment to the charter was to allow the Company to make such short terms upon some basis that would not contemplate a return of surplus, which was to be only once in five years. On December 19th, a first dividend of five per cent was declared on the guaranty capital, although the amount allowed by the charter was seven per cent. The difference was made up in 1847. There was no disposition to take unfair advantage of a member who might be delinquent in the settlement of his premiums, although such delinquency was then generally a source of profit, and on May 13, 1845, the Directors voted that the forfeiture of a policy by non-payment of premium at the time of its becoming due, through inadvertence, mistake or accident, might be waived at the discretion of the President, by subsequent receipt of the premium.

Total Abstainers The question of issuing policies on the lives of those who would agree to abstain from the use of intoxicating liquors, at a lower rate of premium than was charged to ordinary mem bers, was presented by Mr. Elizur Wright, in a letter to the Company, dated May 3, 1845, in which he proposed that he should take charge of a department of the Company devoted to this class of members. This proposal was given serious thought, and on August 12, 1845, the Directors voted to issue policies on the lives of total abstainers, upon the understanding that whenever a majority of the persons insured under this condition should, within four years from September 1, 1845, elect to withdraw as a separate company, the Company would allow the policies to be surren dered, and would pay back the excess of premiums on each policy, over what would have been paid on a policy issued for the period during which such policy had existed. Professor Wright was not only a mathematician of note and a believer in sound insurance, but he was also a strong advocate of temperance, and it was doubtless a disappointment

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to him that not enough members could be found to make the required promise, and thus establish a company on this

principle. Whatever disappointment Professor Wright felt in the early failure of his project of forming a company composed entirely of total abstainers, he must have been amply com pensated by the success of his persistent campaign for the better protection of holders of life insurance policies, that re sulted in the passage of his non-forfeiture bill by the Legislature This act forever established a legal of Massachusetts in 1861. to a just proportion of his funds in right in the policyholder possession of a company, in the event of his withdrawal before Hardly less noteworthy was his his policy should mature. able conduct of the Massachusetts Insurance Department, the first created in this country, and the model aspired to by those that were thereafter organized in other states.

Non-Forfeiture While this law went into effect in 1861, the New England Mutual did not wait for compulsory measures to treat its members in a spirit of fairness and equity. It is stated in the first report of the Directors as heretofore noted — "it is no part of the plan that some shall be benefited at the expense of others," and in the report for the year 1850, in a concise statement of the constitution and principles of manage ment of the Company, the members were told that in case of a policy becoming forfeited for non-payment of premium, it would be reinstated if the risk had not changed, and that sur render of a policy could be made and three-fourths of the net value returned to the party insured. As an added emphasis on the principle of equality, the Directors voted in 1867 to place all the policies of the Company under the statutory requirements of the law of 1861, thus bind ing the Company to give the same legal benefits to all the older members, as to those entering after the law was enacted. If any further evidence is needed of the fair treatment accorded to members, it may be found in the report of the Directors for the year 1862, where it is stated that during the period of twenty years, and the issuing of fourteen thousand five hundred contracts for insurance, the name of the Company had appeared upon court records but three times under a

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claim for loss ; not one case had been carried before a jury, and only a single case had been adjudicated upon by a court of law, and that was settled in favor of the Company.

Distributions of Surplus The plan of the Company contemplated that the premiums charged would be somewhat higher than what would be just necessary to provide for the payment of claims as they became due; the overcharge or surplus to be returned to the members The when it was found that this could be done with safety. charter provided that distributions of surplus should be made every five years, and accordingly at the end of each five-year period, including the year 1863, distributions were regularly declared and paid to the members, or credited to their policies, as they preferred. As the time approached, at the end of five years, for the first distribution of surplus, a Committee was appointed to devise a method of distribution that would be fair to all the members, and it is interesting to follow their reasoning as detailed in their report:

Net Assets

besides guaranty capital Allow for Reserve for reinsur $138,792.98 ance at tabular rate . . Allow for estimated deteriora 13,879.29 tion of lives Allow for contingencies of in risks not vestments and 10,135.85 heard from Allow for reservation required by charter for redemption of 15,296.95 the guaranty capital . . .

Amount of Surplus for distribution, being 20% on $229,454.25 of premiums paid by members

$223,995.92

178,105.07

$45,890.85

As the business grew and its principles became more clearly understood, it was felt that more frequent periods of distri bution were desirable, and it was, therefore, at the instance

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of the companies then organized in the state, that the Legisla ture passed an Act on February 16, 1866, which allowed the companies to make these distributions annually, or once in two, three, four or five years, as the Directors might determine; and it was also provided that such distribution should be on the basis of the amount each policy had contributed to the surplus, which was acknowledged to be more equitable than a percent age of the premium, as had been the previous custom. Taking advantage of this Act, the Directors voted to dis tribute the surplus annually, beginning with the year ending November 30, 1866, which was then the date of the closing of the fiscal year, and which so continued until 1868, when the business year was made concurrent with the calendar year.

Policy Contract The policy contract has undergone many changes since the first issue. As the early mortality tables were based largely upon lives in rural, or fairly healthy, districts, it was thought necessary to restrict the places of residence and travel to wellAn extra charge was known healthy and safe localities. exacted if the insured chose to live for more than one year in the City of Washington, or in any city of more than 50,000 inhabitants. He could not, without invalidating his contract, pass beyond the limits of the United States, except to the British Provinces of New Brunswick and Nova Scotia, and those Between parts of Canada south of 48 degrees North Latitude. May first and October thirty -first he was not permitted to reside south of the southern boundaries of Virginia and Kentucky, Should he die on the high or west of the Mississippi River. seas, or at the hands of justice or in violation of the law, his policy became void.

Civil War Problems

The outbreak of the Civil War presented a new problem to From the Directors, and, as they say, of some complexity. the beginning the Company had taken military and naval risks at an extra premium, but the data for calculating the risk in the new state of things were quite imperfect, and yet it seemed incumbent to make an estimate, and not drive old members, whose services were needed by the country, out of the Company. The matter was given very deliberate consideration, and it was

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decided to admit the risks, subject to limitations and restric tions as to the amount of such insurance and descriptions of risks. It was believed that the utmost extent of an unfavor able turn of the risks could not be more than to diminish the next distribution. Happily, the Directors were able to report at the end of 1863 that the experiment was successful; the rate charged was sufficient to indemnify the Company without excessively bur dening the members. During this trying period, many members lived in the South, and communication, of course, being stopped, they were unable to remit premiums as they became due, and consequently, The under the terms of the policies, their insurance lapsed. Directors, however, felt that it was an unwarranted hardship to deprive these members of insurance protection, when the lapse was due to circumstances so beyond their possible control, and such policies were promptly reinstated at the termination of the war, upon payment of the unpaid premiums. It often happens that actual practice reveals errors or limi tations in theory; so, as the business grew, as travel became safer and conditions of life more healthy, these restrictions were modified or removed, until at the present day the policy has become little more than a simple promise to pay. It has numerous options and rights reserved to the insured, whereunder he may travel or reside wherever he wishes; die when and where he chooses or fate ordains; or surrender his policy for all the money he has paid in, less the actual cost of the insurance protection he has enjoyed. The early form of application furnishes evidence that more dependence was placed upon the judgment and personal recom mendation of the agent than upon a medical examination by a physician, which today is so thorough that it is the real basis There upon which an application is accepted or declined. were no lengthy and searching questions to be asked by a physician trained in this particular branch of his profession, no delving deeply into family history and carefully weighing its possible effect upon the life offered for insurance, but rather a fair guess that an applicant, who looked robust and reported no serious illnesses, should make a good average risk.

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Medical Organization The Company retained the services of Dr. George Hay ward Consulting Physician, but it is doubtful if these services were, at first, very much in demand, as it was only in cases that aroused a doubt in the minds of the management that he was called upon to express an opinion, at the moderate fee of one dollar, of the medical fitness of the individuals in question. Dr. Hayward was a well-known physician at the time. He was for twenty-five years a visiting surgeon of the Massachu setts General Hospital, and had the distinction of performing the first capital operation rendered painless by the influence of as

ether.

It

was not until 1859 that there was included, as a part of the application, a few modest inquiries to be certified to by a regular examining physician. Dr. John Homans succeeded Dr. Hayward as Consulting Physician in 1847, serving until his death in 1860, when he, in turn, was succeeded by Dr. William W. Moreland, who had been his associate in this work. The importance of scientific application of the study of medicine to lives offered for insurance was becoming more evident each year, and Dr. Moreland, as his reports to the Directors, and the introduction he wrote to an American reprint of the lectures of Dr. William Brinton, the then famous English authority on the subject, fully prove, was keenly alive to this phase of the business. At his death in 1876, Dr. Moreland was succeeded by another John Homans, son of the former Consulting Physician Dr. Homans was also a well-known sur of the same name. geon, serving for many years with distinction on the staff of the Massachusetts General Hospital, and was probably first in Boston to perform those major abdominal operations that were His made possible by the development of antiseptic methods. death occurred in 1903. It was during Dr. Moreland's incumbency that the Con sulting Physician became Medical Examiner, and during the second Dr. Homan's term, Medical Director, the mass and importance of the work obliging the chief executive of this department to supervise a large staff of physicians and clerks. An era of progress, and refinement of method, in the medical selection of risks was rapidly approaching, and was ably met by

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our next Medical Director, eminently fitted by thorough re

search and knowledge of his subject, and who, with untiring and patient energy, has collated the past experience of the Company, drawn from innumerable data, into a compact and workable basis, which gives the Company a most accurate viewpoint from which to measure the risks offered for insur ance, in many cases proving conclusively that risks formerly considered beyond the pale, are perfectly admissible, within certain limitations.

The Actuary In

the early days, the duties of an Actuary were performed No valuation of policies was then required President, law, with the skilled assistance of Director but the by Francis C. Lowell, who was Actuary of the Massachusetts Hospital Life Insurance Company, determined the reinsurance value of all policies in force at the end of every five years, in order to calculate how much of the accumulated funds, after providing for all other liabilities, could be safely distributed to the policyholders. By a statute, passed February 16, 1866, the state of Massachusetts provided that "the surplus funds are to be distributed among the members in proportion to the sums of money which each member has contributed to the entire sur plus funds to be distributed among all the members, and including in such contribution a just and equitable allowance " for interest. An Actuarial Department was then created, and Mr. Walter C. Wright, a son of Elizur Wright, was appointed Actuary on December 18, 1866, and remained in this position until Febru ary, 1900, when the present Actuary was appointed. The duties of the present-day Actuary far exceed anything that could have been conceived by the founders of the insti tution, and from such small beginnings has been built up one of the most important departments of the business. The varied forms of policies, the valuations for surrenders, loans and changes in forms, involve innumerable calculations, and the large force now required is directed with unusual ability and skill. In addition to his other duties, the Actuary has undertaken the chief directorship of the school the Company has recently

by Judge Phillips.

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established, to train, as Agents, young men drawn from the ranks of the field force, in order that the principles of life insurance shall be fully understood, the best practice strictly adhered to, and the standards set by the founders steadily followed by those who solicit the public to become members of the Company.

General Agents Instead of the present army of Special Agents, working under the guidance of highly trained General Agents, and devoting their entire time to the work, the early Agent was sought for among clergymen, lawyers and other professional men, who were supposed to have some time they could spare from their other duties to devote to a business that required no capital on their part, and which would add to the often meager incomes received from their professions. As the business grew, it became apparent that there was an increasing and far-spreading demand for the protection it furnished, and this led to the appointment of a Committee of Directors in May, 1847, to which was referred the subject of This extending the business of the Company to distant risks. Committee made a long and exhaustive report, recommending the acceptance of acclimated lives and those who visited the South, at an extra charge of one per cent per annum on the

amount insured. This expansion and increase in business led to the appoint ment, as Agents, of men engaged in business life; and finally, in 1865, the first general agency system of the Company was established in Massachusetts, New Hampshire, Vermont,

Connecticut, New York, Ohio, Indiana, Illinois, Iowa and Wisconsin, which eventually broadened into nearly every state in the Union. Under this system, Sub-Agents are appointed by, and report to, a trained General Agent, responsible for a certain territory, and the organization grew so rapidly that in 1869 a Convention of the General Agents was held in New York. This meeting was attended by some of the Directors, and included in the report to members for that year is the follow ing well-earned testimonial: "The Directors take pleasure in bearing testimony to the exer tions of a class connected with the Company, to whom, perhaps as The General much as to any, its present position is to be attributed.

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Agents

of the Company met in convention in New York, some weeks since, to interchange views upon matters connected with its welfare, and of Life Insurance in general. A committee of the Directors were in conference with them, and it is their opinion that the members of

the Company

of so intelligent

are especially favored in having secured the services a body of men."

The Home Office The first office of the Company, as has been stated, was located in the Merchants Bank Building, at No. 28 State Street, an historic site, opposite the Old State House of colonial days, still preserved, and wherein the active spirits of the prerevolutionary period harassed the royal governors and pro tested, most roundly, against the unjust laws of the parent government. The street, or square, in front of the building witnessed many of the stirring events of the early troublesome times, chief of which was the shedding of the first blood of the Revolutionary War, known as the Boston Massacre. The building that occupied the site during the tenancy of Company was, for those days, an imposing structure. It adjoined the building erected by Nicholas Biddle, the bank ing meteor of his time, as a home for a branch of his United States Bank, of unhappy fame.

the

The suite occupied by the Company consisted of two rooms, for the President, and a general business room housing the rest of the staff, consisting solely of the Secretary, who boasted a high desk and stool, and one of whose daily cares, when through his labors, was to put the books carefully away, with the securities, in a hole in the wall, called a safe. The lock on "safe," the door of this so-called had a key so large that it could not be conveniently carried away, and, consequently, it was securely hidden under the door-mat at the close of each day. one

These offices were gradually increased and outgrown, until 1857, it was decided that the Company was so firmly established that it could support the dignity of a building of A site at No. 39 State Street, on the corner of Congress its own. Street, almost opposite the old quarters, and still facing the historic square, was purchased, and a building erected, which Of this building, Judge Phillips said in was finished in 1858. in

April,

First

Home

Office Building, 1858 to 1875

39

State Street

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his report, after relating the advantages of possessing a com modious fireproof structure, with safes of the strongest con struction and the most effectual fastenings and defenses against burglary : "We accordingly have reasonable ground to expect that our Company will continue in a prosperous perpetuity in an office also constructed for perpetuity." Thanks, largely, to his foresight and ability, the Company still has the same grounds to hope for a "prosperous perpetuity," but the business has far outstripped in growth anything he could possibly have anticipated, and the commodious quarters, of which the Directors were then so complacent, would be adequate to meet only a fraction of the present requirements. However, this building would have sufficed for some time after the Company was obliged to seek new quarters, had it not been for the great Boston fire in November, 1872, which swept down Congress Street almost to the very walls of the building; so nearly, in fact, did the fire menace the Company's property that Mr. Stevens, then President, and Judge Foster, hastily loaded the assets and principal books of the Company into a cab, and with Mr. Alfred D. Foster as armed guard on the box, safely transported these essentials to the home of Judge Foster for safekeeping. Fortunately the fire was arrested before it reached the building, but in relocating streets, after the fire, a great many were widened, Congress Street among others.

The Company's building being condemned for this purpose, the Directors were obliged to seek new quarters. A site was Street, Milk number eighty-seven, and at finally chosen on Work was immediately com the corner of Congress Street. menced, and a building that, like the first, was thought adequate for all future needs was finished in 1875.

The site of this second office building, while it has not the historic setting of the earlier structure, has an interesting history. It was occupied in the early days, when the water of the harbor was but a short distance away, by ropewalks, so

It was owned by adher necessary to the early seaport towns. ents to the Crown at the time of the Revolution, and as the owners took refuge in England, the property was promptly confiscated by the Commonwealth.

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When this site was selected, it was on the outskirts of the business district, and so far removed from the bustle of business that Mr. Stevens relates that, looking out of a window one day at high noon, he remarked to Judge Foster that there were only two people in view on Milk Street all the way to Wash The crowds that are always in evidence on ington Street. this busy thoroughfare today testify to the judgment of the Directors as to the direction of the growth of the business of the city. Again business outstripped expectations, and the Company overflowed into adjacent property, acquired for its use. The Directors were considering the advisability of tearing down some of the old buildings and erecting a modern fireproof structure to house the ever-growing records, when the World War intervened and all unnecessary building was prohibited. When peace was declared, an opportunity arose to purchase the building adjoining on Milk Street, erected by the Mutual Life Insurance Company of New York at the same time as the Company's building. The acquisition of this building, substantial, absolutely fireproof, and easily adapted to the needs of the Company, furnishes safe and convenient offices in an imposing group of edifices, fronting on Post Office Square, the most important square in Boston's financial district.

President Stevens The connection of Mr. Stevens with the Company, almost from its inception, proved of important significance to the future

destinies of the organization. Mr. Stevens became Secretary in 1847, when just past twenty-three years of age, and, although not very well equipped with business experience, possessed a clear mind, naturally fitted to absorb impressions of all that was best of his surroundings. Benjamin Franklin Stevens was born in Boston on March 6, 1824, of old New England stock of English ancestry. His education, received in the Boston public schools, was sup plemented by a thorough religious training, under the watch ful supervision of a careful, painstaking New England mother. Upon leaving school, he engaged in business for a few years, when an unusual opportunity offered to visit foreign lands, then so comparatively inaccessible.

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Captain, afterwards Commodore, Percival, a veteran of the Navy, was sent on a diplomatic cruise around the world, in 1844, in the Frigate "Constitution," fondly called by the sailors "Old Ironsides," the most illustrious vessel ever built for our Navy, and whose hull, preserved as a national relic of our fame upon the seas, now gently floats on the waters of her birth, at the Charlestown Navy Yard. Mr. Stevens was then but twenty years old, and served as Captain's Clerk, his duties being to keep the records of the voyage, and, incidentally, to read the Captain to sleep at night This part of his duties was from Chambers' Encyclopedia. very attractive to the Clerk, and while the Captain slumbered comfortably in his chair, the young man, being of studious mind, would continue his reading for his own personal satis faction, thus storing in a retentive memory much valuable information that he was able to draw upon in after life. The story of the cruise is an interesting part of our Nation's history, and while the young man had but an humble place in the making of this history, it was, doubtless, of incalculable value in broadening the vision of an alert mind and a sound intellect.

Returning to Boston, he learned that the position of Secre tary of the New England Mutual Life Insurance Company was Judge Phillips open, and promptly presented his credentials. fell under the spell of his attractive personality, and engaged him at once. Taking office on April 6, 1847, he became VicePresident on June 14, 1864, and succeeded Judge Phillips as President on November 14, 1865, and only his death, April 10, 1908, terminated his connection with the Company. Mr. Stevens was of the highest type of working executive, and his devotion to the interests of the Company during the sixty-one years of his service, carried the institution through many trials, and placed it in the front rank of the great pioneers of

Life Insurance.

While his intuitions were of the best, he absorbed from the teachings and example of Judge Phillips all that is finest in business life, and his sole aim was the honest and efficient Of sound judgment, care of the great trust imposed on him. with an open mind and a warm heart, his modest demeanor and courtly manners endeared him to a host of friends and his The wiles of personal gain did not many business associates. of unsound him to admit practice in his business, and tempt

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the interests of the members of the Company were ever upper most in his thoughts, and their rights were rigidly respected. Only those who have studied the early history of Life Insurance can know of the many pitfalls that lay in the path of the unwary executive, or the glowing visions of opulence that too often blinded him to his duties in administering a sacred trust. The strict uprightness of Mr. Stevens would tolerate among the representatives of the Company in the field only those who were willing to follow his precepts, and it is undoubtedly due, in a large measure, to his wise selection of agents that the Company has reached its present standing and reputation. To those who knew Mr. Stevens no eulogy is necessary, but his memory deserves a bright and lasting page in the history of the New England Mutual Life Insurance Company. In this selection, Judge Phillips showed the same unerring judgment that surrounded him with friends of high ideals, and he so moulded the character of his young assistant that when it was time, owing to ill health, to lay aside the cares of business, he unhesitatingly accepted the relief, well knowing that his successor was imbued with the same spirit and the same hon esty of purpose that had been his watchword during his own The love Mr. Stevens bore for Judge Phillips incumbency. is rare between men, and the veneration with which he always mentioned his name, and the admiration he expressed for his ability, spoke volumes for this profound influence in his life. This influence was reflected in the unswerving adherence of Mr. Stevens to the principles laid down by his honored prede cessor. These principles carried the Company through the trying period of experiment and later hysteria that wrecked so many similar institutions. It was a wise counsellor that Mr. Stevens succeeded on November 14, 1865, and a dear friend that he mourned when, at the ripe age of eighty-nine years, Judge Phillips passed away

on September 9, 1873. Mr. Stevens was equally happy in the choice of his closest Mr. Joseph M. Gibbens, who was Assistant associates. Secretary in 1849, and Vice-President from 1888 until his death in January, 1893, was a man of rare character, even temper and rigid uprightness.

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Judge Foster

Mr. Stevens suffered, with the Company, a severe loss in the death, in 1884, of his friend and counsellor, Hon. Dwight Foster. In his reminiscences, Mr. Stevens pays a high tribute to Judge Foster, and gratefully acknowledges the debt he owed to the wisdom and judgment of one whom he calls "the soundest It was in connection with the pay adviser of the Company." ment of the amount due on a policy on the life of the father of Judge Foster that these two gentlemen first met, in 1857. The hope then entertained by Mr. Stevens, that he might at some future time secure the services, as Counsel of the Com pany, of the man who so strongly attracted him, was eventually gratified.

The policy that was the occasion of this meeting, so for tunate for the Company, was numbered thirteen, and dated February 3, 1844. Among the many thousands issued since

are policies on the lives of the son, grandsons and great-grand sons of this early member, four generations testifying, by their loyalty, to their belief in the soundness and the aims of the

New England Mutual. Judge Foster had been Attorney General and an Associate Justice of the Supreme Court of Massachusetts, and it was upon his retirement from the bench that he was appointed Chief Counsel of the Company. The Hon. William C. Endicott, a member of President Cleveland's Cabinet, succeeded Judge Foster as Counsel, he in turn being succeeded by the Assistant Counsel, Mr. Alfred Dwight Foster, a son of Judge Dwight Foster, who was elected President at Mr. Stevens' death in 1908.

The Directors

That all-important cabinet, the Board of Directors, to whom all matters other than minor details have invariably been referred, has always been an efficient body of earnest men, high minded, able and deeply concerned in the affairs of the Company. During the life of the guaranty capital, one-half of the members were chosen by the shareholders and one-half by the policyholders; and since the retirement of the capital in 1854, all have been elected by the policyholders. As there was little precedent upon which to base the prac tice of a business so different from any before established, it

263413

Milk,

Present Home Office Buildings Congress

and Pearl Streets,

Post Office Square

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was the part of wisdom to limit the Board to such a number that each would be a worker and feel a personal responsibility in the matters, of weighty importance to an infant institution, that they would be called upon to decide. The many reports of committees appointed from their number, upon every phase of the business, prove that the members, serving without emolu ment of any kind, fully appreciated their responsibilities, and gave to the affairs of the Company the best that it was in their To enumerate the gentlemen who have served power to give. on the Board at various times would be to call a roster familiar to any Bostonian, and stamp at once an institution so eminently served with the seal of respect. The Board, originally twelve in number, was reduced to ten in 1854, and has so remained up to the present time.

The Agency Force The agency force has contributed no small part to the growth and success of the Company. Those composing this important branch have always been selected with the utmost care, the Directors realizing that the Company is best known to the public through the service rendered by the men with whom they come most frequently into personal contact. Long ser vice is a sure test of efficiency, and the Directors are proud of the fact that so many men, of high type, have proved by loyal service, for terms of twenty, thirty and forty years, their faith in their business and associates. From the germ of the mutual idea, Life Insurance protection has grown and expanded into every city and hamlet in our land. It has become an important necessity of our well-being; a promoter of good citizenship; a destroyer of the ills arising from poverty; a comfort to the busy mind, harassed by many cares and worried over the future of dear dependents; and a staff to lean upon in old age. In the ever-expanding growth of Life Insurance, there have been in the past, and there will be in the future, many experi ments, and some mistakes; but at no time in the history of the New England Mutual Life Insurance Company has there been the slightest deviation from the original object of the Company. The purpose of the founders is a pledge to be redeemed by their successors :

" Equality among members, insuring a prosperous

perpetuity."