Life Insurance in Defense of Democracy


By O. J. ARNOLD, President, Northwestern National Life Insurance Company and Chairman, 35th Annual Convention of The Association of Life Insurance Presidents

Waldorf-Astoria, New York City, December 11, 1941

Vital Speeches of the Day, Vol. VIII, pp. 184-188.

WE meet as our nation gathers itself for the greatest effort in all its history. I am sure that I speak for everyone in this room when I say that this organization and each of us as individuals pledge our unstinting support to the President, to the armed forces of our nation, tothe American people, and to our Canadian allies who are represented with us here today, in order that treachery may be answered with unity and cowardice with crushing blows.

It seems to me, therefore, it would be appropriate as our first act to authorize that a message be drawn addressed tothe President of the United States in the hope that an expression of support from us will further assure him of the unity which he so needs to uphold his hand in the tasks ahead.

(At this point Mr. Leroy Lincoln, president of the Metropolitan Life Insurance Company, moved that the following telegram be dispatched to President Roosevelt:

December 11, 1941.
Hon. Franklin D. Roosevelt
White House
Washington, D. C.

As the first official act of its Thirty-fifth Annual Meeting, the Association of Life Insurance Presidents composed of sixty-five legal reserve life insurance companies unanimously pledges its utmost loyal and energetic support to every effort being made under your guidance as our Commander in Chief to defeat any challenge to the liberties of our peace-loving country.

The Association of Life Insurance Presidents.

The motion was unanimously adopted.)

The blow delivered in the dark a few nights ago, far from knocking this nation groggy as it was intended to do, has suddenly cleared our national consciousness of a multitude of petty quarrels, misgivings, and uncertainties. Far from being dismayed, our resolve is just now beginning to set into the hard lines of determined action. Treachery has wrought its own fatal consequences. We as a nation have come to realize at long last that without honor among men there can be no security. And so I count it a great privilege to be presiding here today at the Thirty-fifth Annual Meeting of this organization which has, from its inception, been devoted to security through honor and integrity in the discharge of our contracts.

The thought may have struck some of you, as I confess it has struck me several times in the last few days, that this is scarcely a time to gather together to hear a series of addresses. The attack on our United States outposts arouses one dominant desire in all of us—the desire individually and collectively to in some way strike back, at once and hard. Yet I am not so sure but that careful deliberation and calm discussion of our responsibilities and opportunities in defense of democracy are even more appropriate after the events of the last few days than when our theme was selected. And I am sure, also, that whatever was developed by our speakers on that subject in the comparative calm of a few days ago may be a more thoughtful picture of our true responsibilities in defense of democracy than the more impulsive thoughts which are prompted by the excitement and heat of the moment.

We do not want this meeting to be colored by hysteria. Rather, we want it to be marked by eagerness to help, by willingness to work, and by a thoughtful appraisal of the means by which we can support the efforts of the President and of the armed forces of the nation in the task ahead. To that task we can bring no inconsiderable force. While it is difficult to measure where and how our resources and our skill can be best applied in the weeks and months to come, we can get some measure of our potential power to help if we review the record of our business during the past year.

Normal Operations of Life Insurance Aid Defense Program

Suggestive of the vigor of our activities is the fact that in the past year—in spite of all its uncertainties and difficulties —we have established unusually favorable gains. Life insurance in force at the end of 1941 will reach an all-timehigh of approximately $124,000,000,000, an increase of 5 per cent over 1940. New business will approximate $12,600,000,000—a gain of more than 10 per cent over the year 1940.

This is good news. Few of us realize, I think, that new sales of life insurance reached the low point of the last 15 years only two years ago, in 1939, and improved only slightly in 1940. This year's substantial improvement is gratifying because it points the way up and out of what has been a decade of slump in new sales of life insurance.

On the out-going side of the ledger, payments to policyholders and their beneficiaries for this year approximate $2,550,000,000, some 61 per cent of which will have been paid to living policyholders.

Certainly these figures are gratifying evidence of the vigor of our current activities. Just what this vigor means when translated into terms of our defense of democracy is something that is little understood by the public Few people are aware, for example, that life insurance companies in their normal investment operations of this year alone will have purchased nearly a billion and a half dollars of government bonds—almost double the entire holdings of government securities by life insurance companies at the end of World War I. To put this fact in more concrete terms, we have in the past year—with the help of our field forces—channeled back to the government new and refunded savings adequate to buy approximately 4,000 heavy bombers, or 7,000 medium bombers, or 11,000 interceptor pursuit planes, or 18,000 90-millimeter anti-aircraft guns, or 12,000 heavy tanks, or 20,000 medium tanks, or 1,000 "ugly duckling" merchant ships, or 240 modern destroyers, or sufficient to build for our navy new battleships outnumbering those in our present powerful fleet.

On the home front of defense against inflation, we hear constant warnings about the need for added savings and for the necessity of curtailing ordinary purchases in order to prevent material shortages. Yet, few people stop to think that the army of life insurance men is the best trained and most skillful army of men in the world in the business of encouraging saving, and no private institution daily contributes more to the prevention of inflation than life insurance.

Few people recognize, moreover, that because of the nature of life insurance savings they perhaps do more than any other type to protect our government against ill consequences of a vast emergency financing program. Life insurance purchases of government securities neither act to inflate the credit structure as do purchases by banks, nor do they carry the threat of demoralization of the government's credit by dumping after the emergency, as do individual holdings. While this latter point—the long-time nature of life insurance investments—may at present seem relatively unimportant, I feel certain that it may prove to be a most valuable aid to the government in meeting distressing post-war problems. And in weighing the various means of financing the present emergency program, it seems to me the Treasury Department would be wise to give serious consideration to some form of security designed to be especially attractive to institutions such as our own, which are accustomed to hold sound investments until maturity.

I think few people are aware even of the tremendous part being unselfishly played by life insurance salesmen in helping along the defense bond drive. In my own city of Minneapolis, for example, largely through the efforts of life insurance salesmen, approximately $150,000 a month in payroll deductions is flowing into defense bonds—with hundreds of firms yet to be contacted. With life insurance men in each of the48 states and also in most cities of any size now organized to carry on this job, I have no doubt this type of effort will be multiplied in weeks to come all over the land.

These direct contributions to our war economy, arising largely from our normal operations, are little known or understood by the public. Yet they typify, it seems to me, exactly what Woodrow Wilson meant when he said that no power on earth is as great as the voluntary efforts of free men and free institutions working together in a common cause. That is "all-out" defense at its best, and no so-called "New Orders" which relies upon force or compulsion can ever cope with it in the long run.

Democracy Must Be Defended from Within

So much for the direct part we are already playing in this emergency. It is safe to say that in no other country on earth could that part be duplicated by any private institution. And yet what we have accomplished in the comparative calm of the past year is only symbolic of what we have the strength and resources to accomplish in carrying this war through to its inevitable conclusion.

Perhaps even more important, however, than these direct contributions of which we are capable, will be the contribution we shall make in keeping and sustaining the morale of our people and their faith in the honesty, the humaneness and the worth of democratic institutions. Events have forced us into a shooting war. No one here doubts for a moment the outcome of that war. But whether or not that war will mean—as President Roosevelt phrased it—that this form of treachery can never endanger us again, will depend as I see it on our ability to restore to the peoples of the world some measure of faith in democratic ideals and processes. The whims and ambitions and purposes of wilful men will always remain as an explosive force in international relations so long as men are forced to turn to dictators or to ruling cliques for solution of their national problems. Yet people will turn to such leaders, unless and until faith in representative democratic processes is restored.

Unfortunately, however, you cannot impose such faith on any people through the instrumentality of war.

If the last war taught us anything, it should have taught us that winning or losing a war does not of itself make democracy safe—here or elsewhere. In this war, it was not the physical defeat of France but the inner decay of her democratic institutions, and of faith in them, that destroyed her democracy. Hitler merely became the receiver—as he had in Germany—for a bankrupt faith in democratic processes that had abandoned democratic ideals. The desire to escape the receivership of Nazism or of Japanese Imperialism is reason enough for us to take up the gage of battle and fight this war to its bitter conclusion. But make no mistake. In this war, as in the last war, the ultimate test of whether democracy survives will not be a test of arms but will be a test of the power of free democratic institutions themselves to meet the social, spiritual, and economic aspirations of the people. If democracy meets those aspirations, no physical force can destroy it; if democracy fails to meet those aspirations, no physical force can defend or save it.

Here, then, is a front in the defense of democracy which will in the long run determine whether this war which has been thrust upon us will actually bring an end to treachery and international dishonor and lead to a just and lasting peace. It is a front no government, no matter how wise or powerful, can defend alone. It can be defended only when free men and their institutions so believe in freedom that they accept wholeheartedly the responsibilities of freedom and discharge them with exacting fidelity. On this front, itseems to me, the institution of life insurance, by its very nature and its place in our social and economic life, has the opportunity to make itself felt powerfully in the ultimate task of defending democracy.

Our business is one which exists in order that certain deep aspirations of men may be fulfilled. It is our daily task to help men who are spiritually and politically free to become economically free. In so doing, we protect and fortify the family and thus defend the moral foundations of the nation. Our activities daily pay tribute to the dignity of the individual, which is the spiritual foundation of democracy. And above all, we daily recognize the supreme worth of human values in the business of living.

The very fact that insurance has been cradled and has very notably flourished best only in the atmosphere and surroundings of democratic governments attests to this affinity between the purposes of insurance and the principles of democracy. But even if that were not true, can anyone deny that the needs of the world today are very nearly summed up in these phrases so closely identified with life insurance: Individual economic freedom, protection for the home, respect for the dignity of the individual, recognition of the supreme worth of human values, and the right of men to fulfill in a greater measure their aspirations for a better life.

Emphasis Turning to Human Tasks of Life Insurance

To put it another way, we are a human business—first and above all. And if I sense any underlying trend in the year 1941 and any worthy goal for 1942, I believe it lies in the direction of giving greater recognition to this fact in our management policies and thinking. It is extremely difficult for us who deal in billions of insurance in force, in billions of assets, and in millions of daily sales to avoid slipping into the habit of assuming these vast figures symbolise our business. For example, it is only natural for us to take pride in our financial strength; but let us not make the fundamental error of thinking that even the wisest and most skillful handling of one function of our internal management—such as investments—means we are wholly fulfilling the human aims and purposes of our business. Indicative of the true meaning of our business is the fact that even dollar-wise our human obligations—in terms of our insurance in force—are almost four times our assets. And when we weigh our responsibilities in terms of the hopes and sacrifices bound up in our millions of contracts, no dollar value can be placed on them and no dollar description can adequately portray them In terms of the particular persons affected, is an impairment of assets any more disastrous than a lapsed policy which might have been saved?

All business, large and small, exists for only one reason-to meet the needs and aspirations and demands of human beings. And in times of human distress and upheaval such as we have seen in 1941, these fundamental purposes of business are likely to be brought home to us with new force and meaning.

If I interpret properly the major events and trends of 1941, this is the underlying significance of what has been happening in the life insurance business. The TNEC., for example, were able to praise but at the same time to toss off rather lightly our strength as financial institutions, while they focused on some real and some fancied weaknesses of our conduct as human institutions responsive to the needs of the people we serve. We were pictured as great financial giants—in the latest instance as a vast cartel—with the inference that we were ruthless to the buyer, gave inequitable treatment as between buyers, and tolerated within our ownhouse a serious social problem in the economic status of the agent. These accusations were ably and thoroughly answered by our companies, and our financial record spoke volumes which no amount of innuendo could overcome; but it seems to me there has been food for thought in the fact that the men prosecuting the investigation before the TNEC—seeking grounds on which they hoped to win public support—chose to focus their most critical attack on questions other than our financial record.

During 1941 marked progress has been made on a problem which arises from the agitation for statutory recognition of modern mortality tables. In 1937 the President of the National Association of Insurance Commissioners appointed a committee of very able men to study this question. Subsequently they were asked to continue their study into questions of non-forfeiture benefits and related matters. The reports of this committee have received careful attention by special committees from our business, and during the past year progress has been made toward agreement on a course of action. While this study will have many useful results in our operations, I think most of us will agree that its most useful immediate purpose is to remove in so far as possible any misconception that the present cost of insurance is not in accord with modern mortality experience. For years the companies have actually been using either their own mortality experience or recognized modern tables in calculating premium rates and dividends, thereby assuring fair and equitable cost to all policyholders. But that fact has not been easy to demonstrate to the insuring public because existing laws specify that policy valuations must be based on mortality tables which reflect obsolete experience. In recognizing the need for clarifying this situation, it seems to me we take a noteworthy step toward more exacting discharge of our responsibilities to the public.

Two years ago the Institute of Life Insurance got under way, after a period of preliminary exploration and organization. Very naturally, I believe, the Institute's Board and officers during its first year of operation were largely feeling their way toward the heart of their problem. A year of experience changed that picture substantially and I believe the Institute today looks upon their task not merely as one of telling the public what fine people we are, but as one of helping us to be more conscious and more considerate of our public responsibilities. In this effort they recently have pointed out to us the necessity of recognizing our real function of dealing with human values and have warned us against the assumption that our true nature and contribution to the public can be expressed in sterile figures—no matter how large or impressive they may be. Thus, the influence of the Institute again is an immediate cause of the change in viewpoint taking place in our business.

The field of agency organization the past year has seen more change than it has seen in perhaps two or three decades, particularly in such matters as compensation of agents, pensions for agents, and stabilization of the agency organization. These are subjects which have heretofore been only the occasional concern of the management of isolated companies. Aided by the cooperation and initiative of the Association of Life Underwriters—the Life Agency Officers Association, and the Life Insurance Sales Research Bureau, through their excellent committees on compensation, on persistency, and on agency practices, have labored faithfully in these matters this past year and have made great forward strides in understanding and meeting the very human problems of the life insurance agent.

Even the pressing problem of interest earnings confronting our investment departments, it seems to me, takes a verymajor part in the pattern I have been piecing together here of a more human institution. Over the period of the twenties the companies welcomed high premium business and promoted it vigorously because of the excess interest earnings available. In the thirties the companies slowly came to recognize that such business was not to be so desirable in the future, but the flight of money to safety in those distressed times poured into our doors millions of dollars of savings seeking refuge. So, for a period of twenty years or more, a growing number of people came to look upon life insurance as an investment institution in contrast to its traditional role as the protector of the family and the refuge of the man who sought to spread a risk far too great for him to bear alone. Both because of the downward course of current rates of interest and because the so-called investing public face severe tax increases, life insurance finds itself becoming more than ever devoted to its traditional task of providing life-long protection for the average man.

I could go on filling out this pattern of 1941 with other details, but the outline by this time should be clear. The year 1941 for a great variety of immediate reasons has marked an unusual period of change in our business. Each change, either directly or as a by-product, seems to be bringing us closer to our prime responsibilities as a human institution, and away from what I believe has been a mistaken and unfortunate period of emphasis on our ability merely to accumulate large dollars-and-cents figures.

And if we as the managers of life insurance sincerely feel our responsibility to array life insurance in defense of democracy—as our theme for this meeting implies—it seems to me we can do no better than consciously and vigorously encourage in 1942 this trend toward emphasis on the human side of our tasks. For unless I am mistaken, the survival of democracy will ultimately rest on the response of its institutions to the problems and anxieties and hopes of people.

Life Insurance Answers Basic Needs for Human Welfare

In recent years, these hopes have been sadly betrayed by governments and institutions. Impatient with the seemingly slow processes of democratic government, men have sought more rapid progress by entrusting their welfare to dictators, only to find they have invited the forces of extreme reaction into the saddle to ride savagely over a large part of the world with slavery, terror and summary law offered up as the "New Order."

In recent years, we have seen governments, institutions and men default on their written and spoken promises until order has been turned into chaos and good faith replaced by hatred.

In recent years, men have seen even in the democracies the growth of license under the guise of freedom, the demand for special privilege under a plea for equal treatment, and the literal choking to death of entire nations and peoples under the assumed rights of sovereignty.

Overwhelmed by a sense of betrayal, men despair of finding human institutions which are bound by common rules of honesty, fair dealing and consideration of others. Such was the frame of mind of the French people when democracy fell in France. And unless democratic institutions which survive the present upheaval can by their words and deeds dispel such despair, democracy cannot be defended for long.

In this respect, the hour may be later than we think. It is no time now for any institution to hang back and shirk its own part or, even under the stress of emergency, put to one side their fundamental democratic tasks. And life insurance, with its incomparable record of good faith, with its inherent lessons of the value of cooperation, with its central principle of making each individual responsible for the welfare of others—surely life insurance by its very nature must take a leading part in this defense of our free way of life.

Life Insurance in Defense of Democracy

As I see it, this is the armament we must build for the ultimate defense of democracy if the fight we now wage is not to have been in vain. In such an armament program, as in the current defense program, each individual and each institution in our democracy must respond according to its abilities and its opportunities. As for life insurance, I feel sure the proper response consists of consciously encouraging the very trends which, for a variety of immediate reasons, have marked the past year—namely, improving the welfare of the agent, strengthening our service to our policyholders, removing causes of public misunderstanding of our operations, studying more closely our public relations, and in general devoting ourselves to a closer examination of our responsibilities as a human institution as well as a financial institution. Indeed, I believe it is only through vigorous attention to these human phases of our business that we will ever capitalize fully the magnificent financial record we have made in recent years. Perhaps the very proper preoccupation of our management with our serious investment problems of recent years has produced some neglect of our other activities which directly bear upon the public attitude toward us. Be that as it may, surely this is a time for us to renew and strengthen each and every phase of our activity in which our human relationships come into play.

This is no maudlin or sentimental view of our business. It is the only sound view; and it in no way lessens the demand for continued skillful and effective financial management. But in it, also, lies a viewpoint of deeper import today than ever before in the history of our business. For if democracy is to be defended and preserved in the years ahead, it will be because democracy above all other forms of government gives rise to institutions like our own, which meet unfailingly the human needs of men.