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Temporary National Ecomomic Committee
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THE
Temperary National Economic Comm.
Box186
lettem
30
Subject File
Box 186
MEMO FOR R. F.
Will you please watch for Senator
O'Mahoney's reply and put with the
attached to go into the President?
G.
PSF
THE WHITE HOUSE
WASHINGTON
May 19, 1939
Temporary N.E.
MEMORANDUM FOR LEON HENDERSON:
On May 17, I sent a question
to Joe O'Mahoney, asking him to let me know
his plans with regard to the insurance phase
of T.N.E.C. Today I have received the en-
closed. Please read and return.
F. D. R.
Letter from Senator Joseph O'Mahoney enclosing
copy of summary which he had issued on Feb. 27
in connection with insurance hearings with
regard to T.N.E.C.
THE WHITE HOUSE
WASHINGTON
May 17, 1939.
MEMORANDUM FOR
SENATOR O'MAHONEY
Could you let me know your
plans in regard to the taking of
testimony on the insurance phase
of THEC? I have a hunch that the
public is very much interested in
this and there are a good many
facts, circumstances and activities
in relation to insurance which tie
in very closely with other major
parts of your work.
F. D. R.
SECURITIES AND EXCHANGE COMMISSION
Lave 22 Hindrown
WASHINGTON
OFFICE OF THE CHAIRMAN
April 12, 1939.
Than
for 1 Wnhanry
Memorandum to: The President
The White House
From: William 0. Douglas
Re: Insurance Investigation
Before leaving the Commission, I wanted to bring
to your attention an agenda of an extremely interesting and
significant program on which the staff of the Securities and
Exchange Commission is prepared for public hearings. I wanted
you to have this agenda in view of your great interest in the
subject matter of the inquiry and in view of my strong feeling
that the topics which we have developed justify continuous
hearings.
In the latter connection, it has seemed to me that
the appropriate procedure would be to set up a sub-committee
with authority to designate a trial examiner to hear testimony
on the insurance phase of the monopoly study. The subject
matter is so voluminous and extensive that I feel certain the
Temporary National Economic Committee would not have the time
to hear it. Furthermore, if the TNEC undertakes to hear it,
it must do so intermittently between other hearings on other
subjects. The nature and extent of the insurance testimony
are such that only by rather continuous hearings throughout
the next year can it be hoped adequately to develop the subject.
I also attach hereto a confidential memorandum,
dated March 10, 1939, written on a private and confidential
survey conducted by J. Walter Thompson Company to determine
the way the great mass of the population is thinking about
life insurance. A poll and sampling interview procedure,
similar to that followed by the Institute of Public Opinion,
was undertaken. The results are enormously significant
as indicating the public attitude towards life insurance
companies in their relation to government, as well as towards
their other problems.
lun 0 wangles
Attachments
1. Facts and circumstances surrounding the resignation of John C. McCall
as Vice-President of the New York Life Insurance Company and subsequent
payment to McCall of a retirement pension. We are prepared to establish
that McCall stole securities valued at approximately $160,000 from a
private club of which he was treasurer; that this fact was known to at
least two directors of the New York Life who in their capacities as
bankers loaned to him funds sufficient to enable him to conceal his crime.
These loans were partially secured by an assignment of McCalls' pension
from the New York Life after arrangements had been made to qualify McCall
for a pension for which he was not otherwise entitled and to provide for
assignment of the same.
2. Relationship between the Metropolitan Life Insurance Company and the
Chase National Bank. The Chase Bank has been the principal depositary
for the Metropolitan for many years and an extremely close relationship
between the two institutions exists. We will be in a position to
establish that the bank, through the influence of its inter-locking
directors and otherwise, practically dictated to the Metropolitan many
of its important banking decisions.
3. The election machinery of the Prudential Insurance Company of America.
This is a Company which operates under New Jersey Law. It is our
purpose to fill out our previous election testimony by examining the
operations of the New Jersey election law in comparison with the operations
of the New York Law. In the course of the testimony, it will be established
that the agents of the Prudential forge ballots in a manner similar to that
followed by the agents of the Metropolitan. This fact will be established
through a statement from an officer of the Company without implicating any
agents.
4. Carroll B. Merriam's conflicting position as a director of the Metropolitan
Life Insurance Company and officer or stockholder of two firms acting as
farm mortgage correspondents and bankers for the Metropolitan.
5. Inter-company agreements existing between the principal life insurance
companies. These agreements are substantial and in many material respects
control the day-to-day operations of the participating companies. It is
perhaps not too strong to state that the testimony in this respect may
serve as the basis for some appropriate anti-trust action and is clearly
monopolistic in character. Among the subjects to be developed are the
following:
a. The Replacement Agreement--This is an Agreement under which the
companies pledge themselves not to switch a policyholder from
another company until they have notified the policyholder's
company and given it an opportunity to conserve its business.
The Agreement has many non-competitive features.
b. Activities of the Association of Life Insurance Presidents--
This organization is the principal lobbying organization for
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the life insurance companies and the Commission is in a
position to show a concentrated effort to defeat state
legislation through many lobbying devices, both proper
and improper, including campaigns to stir up a policyholder
protest.
c. The Medical Information Bureau-This Bureau serves as a
central clearing house for information concerning all the
policyholders in the United States and through it the
companies exchange data on the insurability of individuals.
e. The Group Association--This is an Association of the principal
companies writing group insurance. It fixes rates, and by
rules enforced through a Complaint Section, has eliminated
practically all competitive features in the sale of this
important type of insurance.
f. The Agency Practice Agreement--This Agreement, as its name
implies, is designed to establish uniform agency practices
and contimue provisions concerning the employment of agents
from one company by another company.
g. The "Little Entente"--This organization is a semi-secret
organization of the presidents of the principal New England
companies. Through its meetings, uniform rate policies are
inaugurated and various competitive conditions between the
participating companies eliminated.
In addition, we will be in a position to establish that 25 major
companies have since 1932 entered into agreements fixing premium
rates for annuities, surrender values, commissions on annuities
and settlement options. We can also establish that the three of
the principal non-participating companies located at Hartord,
Connecticut, have entered into rigid rate agreements affecting the
sale of all types of insurance. Further proof of rate fixing
activities will be developed through an examination of the operations
of the Group Association mentioned above and of an organization known
as the "Little Entente".
6. A study of terminations reflecting the number and percentage of policies
terminated by lapse, surrender, death, replacement, etc. This study
will demonstrate that only a very small percentage of policies written
are ever maintained to the point contemplated by the insured at the
time the policy went into effect.
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COPY
MEMORANDUM
To:
Chairman William 0. Douglas
From:
Gerhard s. Gesell
In November1938, J. Walter Thompson Company issued
a report to the Committee on Informing the Public On Life In-
surance of the Association of Life Insurance Presidents. This
report was the result of a survey conducted by J. Walter Thompson
Company to determine the way the great mass of the population is
thinking about life insurance. A poll and sampling interview
procedure, similar to that followed by the Institute of Public
Opinion, was followed covering all types of geographical localities,
economic levels, occupational groups, ages, sex, etc. Some of
the results set forth in this report are extremely significant.
They are as follows:
1. "There is a strong feeling for federal regulation
of life insurance companies. Approximately 48%
of all those interviewed agree wholly or in part
that there should be strict federal regulation
in addition to the regulation now imposed by states.
This desire for federal regulation was prompted
almost wholly by the desire for additional safety
as revealed by reasons voluntarily given. The
preference for federal regulation was outstandingly
high among the two extremes of professional men and
laborers, as well as in the Mountain and Pacific
States."
2. 22% voted to do away with life insurance salesmen
altogether, and another 18% indicated they had
reservations about insurance salesmen. The report
states, "Thus we find a total of 40% bitterly or
slightly opposed to salesmen. This left approxi-
mately 55% saying they had no real objection to
this method of selling and 5% who have no opinion."
3. A large group said they had no opinion as to whether
life insurance companies attempted to influence the
policies of companies they invested in, while 21%
said they thought that insurance companies did engage
in this practice and that 1t was a necessary thing.
-2-
4. A substantial humber of people agree that life
insurance presidents are paid too much, that
insurance companies over charge small policy-
holders, that they are influenced by Wall Street,
tnat the companies try to force the sale of types
of policies which they benefit most by selling,
or that policies are written so as to be difficult
for the average person to understand. 37% believe
that the companies are run in the interest of
those in control rather than in the public interest.
The report states that a large group of people have
not made up their minds on these questions but
that from the group who have, the majority are
critical.
5. The cost of life insurance is considered high by
nearly a third of the people.
6. Social Security legislation has thus far made no
difference in the insurance plans of about 95% of
the people. Only 3% said it had made a difference.
7. Policyholders desire a policy with a savings feature.
8. 67% carry some form of insurance.
March 10, 1939