Insurance Era

Risk, Governance, and the Privatization of Security in Postwar America

Caley Horan

• Publisher: University of Chicago Press
• Year: 2021
• ISBN:
  9780226784410
• Topic: History
• Subtopic: World History
• Index: History

Charts the social and cultural life of private insurance in postwar America, showing how insurance institutions and actuarial practices played crucial roles in bringing social, political, and economic neoliberalism into everyday life. Actuarial thinking is everywhere in contemporary America, an often unnoticed byproduct of the postwar insurance industry's political and economic influence. Calculations of risk permeate our institutions, influencing how we understand and manage crime, education, medicine, finance, and other social issues. Caley Horan's remarkable book charts the social and economic power of private insurers since 1945, arguing that these institutions' actuarial practices played a crucial and unexplored role in insinuating the social, political, and economic frameworks of neoliberalism into everyday life.Analyzing insurance marketing, consumption, investment, and regulation, Horan asserts that postwar America's obsession with safety and security fueled the exponential expansion of the insurance industry and the growing importance of risk management in other fields. Horan shows that the rise and dissemination of neoliberal values did not happen on its own: they were the result of a project to unsocialize risk, shrinking the state's commitment to providing support, and heaping burdens upon the people often least capable of bearing them. Insurance Era is a sharply researched and fiercely written account of how and why private insurance and its actuarial market logic came to be so deeply lodged in American visions of social welfare.

PART I

Selling “Self-Made” Security

1

Insurance Marketing in the Wake of the New Deal

Looking back in 1967 at a lifetime of service as the chief spokesperson for the American life insurance industry, Holgar Johnson declared, “We have come a long way over a very rough road.”1 Johnson had seen his share of trouble as president for nearly three decades of the Institute of Life Insurance, one of the first institutional public relations organizations formed in the United States. The institute launched in 1939, three years after the passage of the Social Security Act, with two primary goals in mind: (1) to boost esteem for the industry by convincing Americans of the central role insurance companies played in the nation’s social and economic life, and (2) to protect the industry from nationalization and other incursions by government. As Johnson knew all too well, this last threat was very real during the New Deal era and the years the followed. “The life insurance business here could have readily been nationalized,” Johnson recalled darkly in his history of the institute.2 During his first decade as president, “socialism hovered in the air. Voices of discontent with capitalism were still loud in the land.”3 By the end of his career, however, Johnson could boast that the institute had helped secure a central place in American life for commercial insurance and the privatized vision of security it endorsed. The Institute of Life Insurance had also done much to stave off nationalization—not only at home, but also abroad. Johnson proudly reported upon his retirement in the mid-1960s that, by sharing lessons and expertise from America, his institute had helped counteract movements to nationalize life insurance in countries around the world.4 The secret to preventing government expansion and intrusion into the insurance business in the United States, Johnson explained to his colleagues at home and overseas, lay in convincing individual companies to set aside competition, “speak with one voice,” and “sell ideas instead of products.”5

The ideas Johnson and other leaders of the insurance industry sought to sell Americans are the subject of this chapter. The birth of the American welfare state via the introduction of Social Security, unemployment insurance, and a host of other government programs presented the greatest threat ever encountered by the insurance business in the United States. If left unchecked, the newly empowered state threatened to dismantle the industry—directly through nationalization, or indirectly by feeding public demand for universal forms of coverage. Insurance leaders like Wallace Stevens and Holgar Johnson immediately recognized the ideological components of the coming fight. In the new insurance era, Americans would be faced with a choice: risk could be spread and security achieved through either public or private means. Public insurance promised universal security based in solidarity, collective affiliation, and trust in the state to provide for its citizens. Private insurance offered individual protection based on faith in the market and on the willingness of Americans to secure themselves by investing voluntarily in their own fates. The future of the insurance era, and the nation’s system of social security provision, hung in the balance.

By the mid-1930s, the government held a distinct advantage in the battle to define the insurance era. The Great Depression marked a turning point in the relationships between security, insurance, and the American state. The economic disaster left millions of Americans without jobs, and even those lucky enough to maintain income faced rising prices and falling wages. The federal government responded to the crisis with an ambitious reworking of the role of the state in American social and economic life. The architects of the New Deal designed its diverse package of social programs to jumpstart the economy and provide for the welfare of the population, but they also sought to transform the way Americans understood the meanings and sources of security. Security, perhaps more than any other concept, became the central component of New Deal ideology. In his 1935 State of the Union address, President Franklin Roosevelt underscored this notion, with a promise that providing for the “security of the men, women and children of the nation” would be his “first and continuing task.”6 Increasingly framed as a basic right, economic security came to be seen as an entitlement of citizenship during the New Deal years. This vision of a providential state found an eager audience in a nation devastated by the Great Depression, a crisis many attributed to the excesses and failures of private enterprise.

Turning the tide of public sentiment away from universal insurance programs and toward private security would be a massive challenge. Private insurers met that challenge with determination and a willingness to draw on the industry’s substantial resources in its bid to compete with government. Attempts to understand the stunted development of the American welfare state—its limited provisions in comparison to those of peer nations in the liberal West—have tended to emphasize “cultural” factors: a frontier ethos rooted in self-reliance, an exceptional American allegiance to individualism.7 Little attention has been paid to the efforts made by private insurers to limit the growth of the American state and contain its commitment to collective risk spreading.8 Those efforts, however, were significant. The pages that follow examine the strategies pursued by the midcentury insurance industry as it confronted the state and worked to produce social, political, and economic conditions that favored the privatization of security. Moving first to share risk in the face of adversity, leaders of one of the nation’s most powerful industries banded together to resist government encroachment and to craft an ideological response to the New Deal’s promise of universal security. That response imagined, and attempted to call into being, a new kind of American citizen and insurance consumer—one who took responsibility for their own security, rather than depending on the state to provide it for them. To sell this vision, insurance leaders turned to public relations and marketing.

“Speaking with One Voice”: Institutional Marketing and the Power of Public Relations

Before the twentieth century, few insurers advertised. A handful of the largest companies dipped their feet into advertising during the final decades of the nineteenth century, publishing calendars and postcards for limited distribution and printing statistics in public forums that alerted consumers to the strength of company assets. In comparison to other major industries, however, insurance came late to the advertising game.9 A long-standing reliance on the agent as a selling tool explains this delay. Insurers cited the personal nature of the insurance purchase, as well as its complexity, as the primary reason agents had been used to sell policies throughout the industry’s long history. Agents were thought to give a human face to the business, and their interaction with consumers was deemed essential to sales. As the insurance advertising expert A. H. Thiemann explained, “The very nature of insurance demands a personal approach. When the agent is face-to-face with the prospect he can answer objections immediately and he can try again and again to close until the sale is finally made.”10 The impersonal nature of advertising and the ease with which consumers could simply “turn the page or dial” led many insurers to see it as antithetical to the agent system. These concerns lingered well into the twentieth century. As one skeptical executive reasoned in the 1950s, “Advertising may sell soap but it can’t sell life insurance: agents sell life insurance.”11

Despite this enduring commitment to agents and a widespread skepticism concerning the virtues of marketing, most large life insurance companies had embraced advertising of some form by 1910s. The reasons for this shift were largely political. The much-publicized 1905 Armstrong investigation and hearings, which took place in New York and found the nation’s three leading life insurers guilty of extensive corruption and fraud, damaged the entire industry’s reputation as a faithful guardian of the nation’s savings. In a quest to regain the trust of the public, Equitable Life and Mutual Life, two of the companies targeted directly by the investigation, hired leading marketing firms to help craft and publicize their responses to the hearings. These responses, published as letters in leading newspapers, sought to assure Americans that “the extravagance has been stopped” and that new management had been installed at the firms.12 The historian of advertising Roland Marchand argues that Equitable and Mutual were the first American corporations to use the medium of advertising in this way, making the insurance industry a leader in the use of marketing to construct and maintain a desirable “corporate image.”13 Other life insurers—even those not involved in the investigation—also suffered from the suspicion and distrust generated by the Armstrong hearings. These firms followed the lead of Equitable and Mutual, turning to advertising in hopes of recapturing the goodwill of the public.

FIGURE 1.1.

Prudential “loss after lapsation” advertisement from the mid-1920s. Companies like Prudential portrayed life insurance as a social good that preserved status and decreased demand for public aid and charity programs. (Prudential Insurance Company of America, “They Said Father Didn’t Keep His Life Insurance Paid Up!,” Saturday Evening Post, c. 1925, private possession of author.)

Life insurance advertisements from the first decades of the twentieth century reflected this goal by emphasizing the social value of insurance and the work insurance companies performed in the service of the public. Metropolitan’s decades-long public health campaign, discussed in chapter 2, offers one example of this kind of advertising. Prudential’s disturbing “loss after lapsation” series, launched in the 1920s, offers another. The Prudential campaign, which focused on the plight of widows and orphans, is representative of much life insurance advertising from the era. One example from the series, titled “Two Widows: The Husband of One Let His Life Insurance Lapse,” depicts a happy mother surrounded by her children in her home, and her maid, who wears a sorrowful expression. Unsupported by a breadwinner’s life insurance policy, the maid (presumably a social equal to her employer before her husband’s untimely death) has been forced to work for a wage outside her home.14 Another Prudential ad from the same series, titled “They Said Father Didn’t Keep His Life Insurance Paid Up!,” pictures a young boy speaking with a concerned woman, framed by the gates of an orphan asylum (see fig. 1.1). This advertising approach, which sold life insurance as a necessity for breadwinners charged with the care of dependents, remained popular among insurance advertisers well into the 1930s. These ads trafficked in fear, but they also depicted life insurance as a valuable social good capable of preserving status and the class system while also reducing demand for public aid and charity.

By the end of the 1920s, advertising campaigns depicting insurance companies as beneficent public servants had done much to mitigate the damage wrought by the Armstrong hearings. One industry analyst even claimed that, by 1930, the industry had successfully demonstrated its “moral superiority,” striking deep “at the problem of protecting the virtues of the home.”15 Still, skepticism toward advertising continued to linger among insurance industry leaders. Most large insurers advertised, though not to the extent of other major industries; medium and small insurers tended to avoid advertising altogether.16 Cost was one barrier for smaller companies, but there were others as well. More than anything, insurance was notoriously difficult to sell. A. H. Thiemann called life insurance “one of the most difficult sales imaginable, one that entails persuading people to forgo the pleasure of spending their money today in exchange for a promise which will be made good under circumstances almost impossible to imagine: one’s own death.”17

This, again, was one of the reasons the industry had relied so long on agents. Their physical presence was seen as a necessary obstacle to consumers for whom “the rules of common courtesy prevent from peremptorily terminating an interview” and who might otherwise refuse to think of a potentially disastrous future.18 Insurance was also expensive, even when payments were spread out over time through annual or semiannual premiums. As the advertising expert Colin Simkin argued, life insurance cost more than most consumer goods, including cars, and “even the accumulated equity in a home.”19 Still, the high cost might not be such a problem if insurance weren’t also so abstract. “In spite of the number of dollars involved” in an insurance contract, Simkin reasoned, “it is for a long period, and intangible. There is nothing to display in one’s home. Unlike other products, it is not visible daily on shelves or in showrooms. It is even something from which the purchaser may never secure direct benefits.”20

Life insurers were particularly prolific producers of literature on the difficulty of selling their products, but the same problems faced companies specializing in other insurance lines, all of which could be associated with danger and disaster—or worse, the notion that insurers profited off of fear and misfortune.21 For this reason, and because many of the strict divisions between insurance fields had begun to crumble by midcentury with the advent of “multiline” firms selling numerous forms of coverage, industry leaders began moving toward “institutional marketing” in the 1940s. Institutional marketing differed from traditional advertising in the sense that it entailed selling the industry itself and the “idea” of private insurance, rather than specific companies or policies.22 “The concept of insurance protection must be sold,” explained one institutional marketing advocate. “Every advertisement placed by an individual company benefits the industry as a whole by improving consumer acceptance of the basic idea.”23 Institutional marketing encouraged individual companies to set aside competition and imagine their industry as a singular entity with shared goals. Under this system, insurers of all stripes could work together to sell their business, and, more than anything, the idea of private insurance.

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No organization made greater strides in the field of institutional advertising—or in unifying the insurance business—than...