"Such a wholesale house-cleaning could not fail to be good for any human institution, could not fail to give it a might impulse along the road of improvement…"

—Charles W. Scovel

NINETEEN HUNDRED FIVE WAS THE YEAR the life insurance industry in America underwent its initial shock treatment at the hands of Charles Evans Hughes, who conducted the "Armstrong Investigation" in New York City. Concern that all was not as it should be in the life insurance business had been mounting for some time. The popular press had been particularly critical charging that consumers suffered needlessly from industry mismanagement. Harshest and most devastating was a series of "muck raking" articles by Thomas W. Lawson, which appeared in Everybody's Magazine beginning in July 1904. Another series of exposes by John w. Ryckman, editor of Era Magazine, that excited wide interest and resentment began in October 1904 and continued through June 1905. Unsparing in his attacks on the Big Three, Ryckman carefully exposed instances of reckless and unscrupulous practices in top management and called for immediate reform. When Joseph Pulitzer's crusading New York World took up the cause with a series of sensational pieces, the outcry became general.

Much of the attention centered on the cozy relationship between the executives of a number of big life insurance companies and some prominent figures on Wall Street. Public interest was aroused when such names as J. Pierpont Morgan, E.H. Harriman and Thomas Fortune Ryan became linked with James Hazen Hyde and James W. Alexander of the Equitable; with John A. McCall and George W. Perkins of the New York Life and Richard A. McCurdy of Mutual Life. Investment interests of the Equitable especially attracted wide attention, resulting in a power struggle among its top officers. Describing the circumstances which led to crisis, R. Carlyle Buley explains:

During the period after 1880 the investment banker had acquired a very important position in that American economy. After the railroad reorganizations of the 1890s, the investment bankers turned their attention to the consolidations in industry—copper, steel, international shipping, and others. These ventures required flotations of large amounts of securities which had to be purchased out of the savings of the people. One important pool of savings were the funds in the hands of the large life insurance companies….

Not only were the investable funds in the hands of the life insurance companies of sizable proportions, but, since they were not subject to call for long periods of time, they were particularly suited to the needs of the investment banker. Consequently, in the early 1900s strong competition developed among the leading investment bankers or banking groups for the control of , or positions of favor with, the large life insurance companies. In fact, it was this competition for the control of Equitable, the only stock company of the big three, which was one of the basic causes of the bitter conflict which developed within the Society in 1905 and which, in turn, was a major cause of the New York legislative investigation.[i]

For their part, the managers of the large life insurance companies needed the investment bankers for securities in which to invest their rapidly accumulating funds. They also used their close connections in the great banking houses to establish or acquire financial subsidiaries of their own—banks and trust companies. "These financial affiliates or subsidiaries widened investment opportunities," Buley explains; "they could make collateral loans and stock purchases and engage in syndicate operations in securities. With liberal deposits maintained in them by the life companies they earned and paid large dividends both to the life companies and to the officers of those companies who as individuals owned stock in them."[ii]

Prominent among the life officers who had invested heavily in such ventures was the young James Hazen Hyde, son of Henry Baldwin Hyde, sounder of the Equitable Society. This cultured young man was known for his great personal charm, intelligence, good looks—and considerable wealth. Following the death of his father in 1895, the younger Hyde had risen rapidly in the company, becoming second vice president in 1899 when he was only twenty-three years old. In 1902 he became chairman of the Executive Committee and the Finance Committee of the Society's board of directors, and commanded a salary of $100,00. His rapid rise to prominence cause bitter resentment among the Equitable's older executives.

Apart form the sizable fortune he had inherited from his father, along with 502 shares of Equitable stock, Hyde also benefited financially from his connections on Wall Street in various ways. As vice president of the mercantile Trust Company, he received an annual salary of $12,500 and as vice president of the Equitable Trust Company, $12,00. Of course, he owned stock in these companies, as well. Dr. Buley comments:

By 1905 he had become a Director of 48 corporations—mostly banks, trust companies, and railroads—and the Conried Metropolitan Opera Company and the Federation of French Alliances in the United States. These directorships brought him into contact with all the leading figures in the financial world—Morton, Ryan, Schiff, Hariiman, Morgan, and others. This rapid rise to such a position of importance he assumed was the result of outstanding ability in the field of finance; he did not seem to realize that it was largely owing to his position in Equitable in which he had become the majority stockholder.[iii]

The first sign of a power struggle at the Equitable occurred when Hyde objected to President Alexander's attempt to have his son, Henry Martyn Alexander, who had become a director of the Society in 1904, appointed to the Executive Committee. From then on, Alexander and other senior officers sought to curb Hyde's power and remove him from office. The notoriety surrounding Hyde's entertainments and sporting activities provided them with a handy weapon. Actually, his pleasures were quite innocent—coaching, the theatre and dinner parties, mostly. On average he spent about three months of the year at his Paris residence, but even some of his time there was devoted to looking after the Equitable's extensive European interests. Hyde was no debauchee, and his behavior was no more conspicuous than other wealthy young men of his New York millionaire set—the Gould and Vanderbilt boys, for instance. However, this was the age of the muckraker school of journalism, and when the trouble at the Equitable began to surface, the popular press had a field day.

It was James Hazen Hyde's famous party at Sherry's in New York City on January 31, 1905, that really provided grist for his enemies' mill. Many still believe that if Hyde hadn't given this one party, there would never have been an Armstrong investigation. Given as a coming-out party for Hyde's niece to which all of New York's "best people" were asked, it took the form of an eighteenth century costume ball intended to imitate the splendor of Versailles during th e last days of the monarchy. Over six hundred guests were treated to a ballet, a series of splendid dinners, as well as breakfast for those who chose to stay, and dancing in all rooms. The Metropolitan Opera Orchestra provided music for one of the ballrooms. Commending his exquisite taste as a host, one New York paper declared the next morning, "Mr. Hyde is a Master of the art of entertainment as it is understood in Europe…Nothing has been attempted on this side of the water which could be compared to it." The evening cost Hyde over $10,000.[iv]

Pulitzer's New York World was less kind. Opening with a sensationalized description of Hyde's lavish French ball, which it claimed cost $100,000,) it began expose installments on the troubles at the Equitable. The February 15 story unfolded to the public for the first time the company's internal conflicts. Considering Hyde to be totally irresponsible and voicing fears of having a "playboy" elevated to the presidency, the article said President Alexander and his faction hoped to oust Hyde, divest him of his stock in the Equitable, and mutualize the company. A few days later the paper printed a document in which Alexander and other Equitable officials threatened to quit unless Hyde resigned.

The negative publicity soon drew the Equitable's leading agents into the fray. Terminations were on the increase, and during the early month of 1905 over two hundred Equitable agents had resigned. As a result of the unsettled situation in the field, Alexander called a meeting of the general agents and managers at the Savoy Hotel on April 18; more than two hundred attended. U. Layton Powell of Louisville was elected permanent chairman. President Alexander was warmly received but when Hyde appeared he was greeted with some hissing. The following day the agents formed "The Association of Managers and General Agents" and Edward A. Woods of Equitable's famous Pittsburgh agency was elected president. Hyde declined to address the meeting but did receive a delegation of the agents (headed by Joseph Bowes, general agent at Baltimore) at his home which delivered a request that he resign.

Two investigations into the Equitable's affairs gave added weight to everything the press had been saying:

Equitable directors appointed a special blue-ribbon committee headed by fellow member Henry Clay Frick, the steel magnate and former partner of Andrew Carnegie, to examine the company's affairs. On May 31, 1905, the panel submitted its report. It charged that exorbitant salaries were being paid to officers and favored employees, that excessive commissions were being given to field agents, that in adequate accounting procedures for disbursements existed , and that company funds were being used to support prices of Wall Street securities in which Equitable officers were intimately interested. The Frick committee recommended a complete reorganization and the removal of Alexander and Hyde. When the board of directors refused, Frick and the directors on his committee who backed the report resigned and leaked its contents to an eagerly waiting press.[v]

A study released a few weeks later by the New York State Insurance Department confirmed the findings of the Frick committee.

While admitting that he had been less than circumspect, Hyde naturally felt betrayed by the very people who should have served as his guides and mentors. In a letter to Henry Clay Frick regarding charges of having "acquired an unpleasant notoriety by reason of my recreations and enjoyments," Hyde said he knew of no such instance "other than that of the occasion of a fancy dress ball in which it was reported occurrences of a scandalous and indecent nature took place. These reports," he continued, "were inspired from the same sources that are now attacking me. If it is an offense to drive a coach, or to give entertainments out of my private means, it is one that is committed by many men of means and by officers identified with the Society. I have learned to realize that undue publicity attaching to the doings of officers of an insurance company is hurtful to the Society, and I very much regret that the older officers, who now claim that injury has resulted from this cause did not see fit to call my attention to the fact which they now make the subject of complaint against me in this connection."[vi]

The consumerists, though, were out for bigger game. The Equitable' problems merely served as an obvious and convenient target. The popular press would only be satisfied with a full investigation into the entire business. On April 2, a full page editorial on "Equitable Corruption" had appeared in the Pulitzer organ, "asserting that the New York State Insurance Department, through its negligence, shared responsibility with Alexander and Hyde for this deplorable situation. 'A searching legislative investigation is now imperative,' demanded the World. 'It should extend to the other great life-insurance companies incorporated under the laws of New York…Mr. Hyde has become merely the embodiment of one scandal in a circle of scandals. He is hardly more than an illuminating incident.' [vii]

Clearly, it was time for both Alexander and Hyde to go. But it was Hyde who made the greatest sacrifice to ease the situation. In the face of so much adverse publicity he decided to sell his stock for a comparatively modest $2,500,000 to street railway promoter and financier Thomas Fortune Ryan. To restore Equitable's sagging reputation, Ryan placed his newly acquired stock in the hands of three trustees of impeccable respectability: former President Grover Cleveland, New York Supreme Court Justice Morgan J. O'Brien, and inventor-businessman George Westinghouse. Paul Morton, Theodore Roosevelt's former Secretary of the Navy, became president of the Equitable Society.

Yielding to public pressure, New York governor Frank Wayland Higgins reluctantly asked the state legislature to create an investigating committee. On July 20, 1905, the Assembly and the Senate passed a concurrent resolution authorizing creation of a special unit to examine life companies operating in New York. Senator William W. Armstrong of Rochester was named chairman of the eight-member committee.

Known as "the watchdog of the senate," Armstrong enjoyed a reputation as a conscientious and public-minded legislator. At the opening session of the hearings in the jammed, tension-charged aldermanic chamber of New York's City Hall on September 6, Armstrong announced their object was not to punish anyone for wrongdoing in the past, but rather "to get at all the salient features of the modern insurance business, so as to suggest to the next legislature an adequate law that will… protect the policyholders in all life insurance companies."[viii]

The choice of Hughes as grand inquisitor was greeted with general applause:

The appointment of the brilliant and resourceful Charles Evans Hughes as general counsel further stregthened the committee. Hughes had just recently achieved fame and public admiration by investigating the high cost of gas in New York City….

It became immediately apparent that the choice…was superb….Thorough and precise, he interrogated scores of witnesses about wasteful, hazardous, and dishonest practices….By calling prominent witnesses over the course of the three-month investigation, Hughes kept the public intensely interested.[ix]

Adroitly, Hughes probed into methods of company control, investments, participation in syndicates, political lobbying (which sometimes bordered on bribery), instances of nepotism, policy restrictions and the expense of acquiring new business. In questioning Richard A. McCurdy, president of the Mutual, on size and expenses, Hughes elicited the response that life insurance was essentially a great, beneficent missionary institution which should be extended to all people as far as possible.

"Well, you have made a very full explanation and treated it as missionary enterprise," Hughes said. "The question comes back to the salaries of the missionaries." Further inquiry revealed that McCurdy's salary was $150,000; the salary of his son, Robert, who was general manager of the Mutual, was $30,000. In addition he received commissions on the foreign business which amounted to about $100,000 per year. McCurdy's son-in-law, Louis A. Thebaud, through his interest in the general agency in New York City (Colonel Raymond'' agency) had an income of $147,687 in 1904; his brother-in-law was medical director of the company and his son-in-law'' cousin was inspector of risks. Other members of the family were attached to the payroll, as well.[x]

Byzantine method, favoritism, nepotism, as well as other "irregularities" uncovered during the hearings, were not unusual at the time. By no means limited to the life insurance business, these we4re practices common throughout the business world. As Stalson observes, "These men were not only the victims of a system within their own business, they were part of the larger system of ruthless competition and business autocracy characteristic of the day. Moreover, if the leading companies and the leading officers in the heyday of their glory had enjoyed the greatest gains, they were also administered the greatest punishments when retribution day rolled in. McCurdy, Hyde, McCall and Perkins resigned; the McCurdy family returned large sums of money to the Mutual Life; McCall died early 1906, broken by his discredited portion, his many good services to life insurance mostly forgotten –he also had refunded large sums to his company."[xi]

The Equitable was mutualized. Having testified before the Committee and sold the family estate ("The Oaks" on Long Island), Hyde sailed on the French liner La Lorraine on December 28, 1905, toe take up permanent residence in Paris. As for Charles Evans Hughes, He became the next governor of New York and ended his career as Chief Justice of the U.S. Supreme Court.[*]

The hearings closed on December 30, and the Committee released its findings on February 22, 1906. As Stalson wryly notes, "The implications for policyholders were anything but reassuring and the public was not amused." Noting that the cost of getting new business was very great and that rebating was common and unfair, the Committee was particularly critical of the Big Three in their fierce drive for business:

The business of the Mutual, the Equitable and the New York Life has grown beyond reasonable limits. Notwithstanding the fact that they have long since passed the point where further enlargement can benefit their policy holders, they have resorted to every effort to obtain new business, regardless of the expense which is reflected in diminishing dividends. Fearful of losing prestige, the chief concern of each has been to keep up with the others. Extravagant commissions have been paid and these have been supplemented by liberal bonuses and prizes. Clubs have been formed, conventions held, and money lavishly expended for the entertainment of agents to excite them to their utmost endeavor. Some have sought to justify his mistaken course by the claim that they were fulfilling a duty in distributing broadcast the benefits of life insurance. Much has been due to pride of growth and zeal for impressive totals, while the huge accumulations of the companies and the great responsibilities involved in their management have furnished pretexts for increased salaries and extravagant administration.[xii]

For the life insurance industry, the Armstrong hearings marked the end of free-wheeling autocracy in the conduct of its affairs. The committee's findings sent shock waves throughout the nation. Other states conducted similar examinations and their legislators followed New York's lead in passing laws designed to make the companies answerable to the public and subject to the close supervision of insurance commissioners.

Among other reforms, the Armstrong hearings spelled eventual doom for tontine insurance in its various guises. These deferred dividend policies (first devised in the seventeenth century Lorenzo Tonti, financial advisor to King Louis XIV) paid dividends only if the insured survived the time period specified in the contract. Thus, survivors supposedly would receive handsome returns while those who died before the specified date of distribution or who allowed their coverage to lapse would forfeit all rights to accrued dividends. In its report the Committee had noted that the Big Three sold mostly tontine policies on which dividends had fallen far short of the estimates made for policyholders at the time of purchase. As the hearings bought out, companies which marketed tontines had accumulated large amounts of capital through the sale of these policies since, unlike annual dividend insurance, they did not have to disperse yearly payments. Furthermore, since the company did not pay a cash surrender value on tontine policies, lapsed money was not returned. The amount provided sizable; a twenty-five percent or higher lapse rate was common. By outlawing tontine policies, New York and many other states cut off a large supply of revenue for a number of companies and a popular source of income for their agents. Many of the laws resulting form these highly publicized hearing coincided with concepts the leaders of the NALU had been advocating all along. As Prochansky comments, "To the NALU the cataclysmic events of 1905 did not occasion surprise. It had been putting up storm warnings for a decade and a half." From the beginning, it had sought a marketplace where enlightened and fair practices prevailed. If anyone wanted prudence, competence and social consciousness to predominate in company boardrooms, certainly the associated life underwriters did.

Although the investigation focused on company management, and only company officers were put on the witness stand, the agency force was also under scrutiny—by implication. The question of high commissions and bonuses as one cause of the "exorbitant cost" of insurance came up repeatedly. While they welcomed reform, association leaders also felt some apprehension. The abuse heaped on the life insurance industry through the exposure of questionable practices among the chief executives of life insurance companies shook public confidence in the business. A scandalized public became a leery public, reluctant to put their faith and money in the institutions run by wheelers and dealers. It became increasingly obvious that the public image of both the business and its agents had suffered serous damage. Members of local associations feared that reform might go too far, creating a marketplace so restrictive that their efforts to promote life insurance sales would be inhibited unduly. They eagerly sought ways to moderate the voices of a hostile press and restrain the hands of legislative zealots.

There was ample reason for alarm. Observes H. Roger Grant, author of Insurance Reform: Consumer Action in the Progressive Era:

Disclosures of the Armstrong Committee excited insurance agents and executives alike, but for reasons quite different form those motivating consumers and the press. As daily reports appeared, worried individuals began to cancel policies, and agents found it increasingly difficult to find new customers. In fact, the volume of life insurance in force when the Armstrong hearings began would not be equaled again until 1910. In addition to their anxieties about the decline of business in force, life insurance men feared policyholders would begin to patronize fraternals for their needs or, worse yet, agitate for public sponsored insurance.[xiii]

These considerations absorbed much of the NALU's attention during the next decade. Consequently, a good deal of the activities of each local association—as a sort of NALU in miniature—reflected this preoccupation with reform. In each community, enlightened leaders in the life underwriters associations strained to improve the agent's status and restore public confidence in the industry. For members of a badly shaken industry with a demoralized field force, these were uncertain times. To appreciate the accomplishments of the NALU and its affiliates during these years, it is necessary to remember that they continued to function and grow under singularly trying circumstances when morale was low and prospects not altogether bright.

Responding to the new order inaugurated by the Armstrong hearings, the leaders of the National Association considered their options, took into account the available means, and set their priorities. In formulating their goals, they concentrated on four areas: two required immediate attention while the other two became long-range programs.

First, seize every opportunity to influence all proposed legislation affecting the business. Action must be timely, well-thought-out and highly coordinated.

Second, strengthen and extend the Association movement by enlarging membership and improving the organizational structure. New associations would have to be formed where none existed and agents everywhere urged to join an association. A revision of the constitution was needed, and funds would have to be raised to set up a permanent headquarters with a paid staff to assist the officers in coordinating activities, maintaining regular communications with local associations and producing a magazine.

Third, seek the cooperation of the companies in launching publicity campaigns to restore the tarnished image of the business and educate the public in an appreciation of the value of life insurance.

Fourth, raise the occupation of agent to that of a profession by developing educational programs to train agents in business ethics, salesmanship and informed marketing practices. Assure the integrity of the marketplace by establishing qualifying credentials for everyone engaged in life underwriting. Create pressure to dismiss incompetent and unethical agents and discourage the appointment of part-timers, thus reserving the field for dedicated, full-time career agents.

These goals inspired all the NALU's activities during the next few years and determined the future course of the Association for the rest of its history.

At first the NALU assumed a watch-and-wait posture, going about its business quietly and cautiously, thought there is ample evidence that its leaders anticipated some of their organizational needs as they braced for the coming storm. The clouds of trouble were only on the horizon on April 13, 1905, when the Executive Committee met at the Hotel Bellevue-Stratford in Philadelphia. Twenty-seven officers and members attended, making it the largest midyear meeting by five so far. Reporting to the convention following fall, committee chairman Everett Plummer remarked, "The attendance alone emphasized the great interest in the work of the association and marked the character of enthusiasm that has accompanied the administration of President Dolph from the beginning." (Dolph had already visited twenty-seven local associations.)

It didn't take a genius to figure out that the life insurance business was facing a crisis. The leaders of the NALU set about strengthening their organization, expanding its influence and visibility and shoring up its reserves. Their approach was practical and no one seemed above giving attention to mundane details—including the matter of finances. Dolph suggested engaging a permanent secretary to assist either the president or the secretary throughout his term of office. At the national convention the previous year the delegates had approved a recommendation of the Executive Committee to raise money by subscription from the various local units to meet such operational expenses. Some associations were quite generous. Chicago and New York each contributed $250; Philadelphia and Boston gave $200 each; St. Louis sent in $100. By September Plummer was able to report $1,180 had been raised.

Realizing the need to improve communications and publicize the work of the Association, Earnest J. Clark expanded considerably the role of the NALU secretary. Plummer's report to the national convention in Hartford included this suggestion regarding the use of Association funds:

During the past year the office of secretary has been an exceedingly busy one, made so by the energy and earnestness with which Mr. Clark has performed his duties. He has organized the work and instituted such an excellent system that the entire association movement is receiving an impetus because of his splendid efforts. This he has done practically at is own expense, but we are sure the association would not have this continue. We, therefore, recommend that the sum of $50 per month be appropriated for an assistant to the secretary….

With the problems at the Equitable making front-page news and the press clamoring for "full investigation," the committeemen were especially anxious that the convention be run as smoothly as possible. They also took pains to ensure that the sessions would prove fruitful and interesting for the delegates. Among other items on the agenda the midyear meeting was the report of the committee on topics. After the listing the subjects selected for the five-minute discussions, the committee's chairman, E.O. Sutton of Springfield, Massachusetts, recommended greater care in the selection of speakers and making certain they were well prepared:

Experience has shown that its complete success can only be assured when a good number of delegates of ability and fertility of ideas, and who are accustomed to public speech, come to the convention pledged to speak to each topic. When this plan is followed a general debate is quieted sure to ensue. In the absence of prearrangement the discussions have either painfully dragged or failed altogether.[xiv]

The Armstrong Committee hearings had been in session a little over a week when the associated agents convened on September 19 in Hartford—then, as now, the site of the home offices of a number of important life insurance companies. Despite the tension pervading the industry, the reports of the convention generally reflected a spirit of confidence and camaraderie, not only among the agents, but also between the field men and their companies. "The selection of Hartford," the report reads, "proved to have been most fortunate, officers of the local companies showing their interest in the National Association by their presence at the various sessions."[xv]

But inevitably, with the topic on everyone's lips, the events taking place in New York crept into he discussions on the convention floor. This was reflected in the heated debate over the resolution offered by J.J. Raleigh, a delegate from St. Louis. It was a tense moment for the NALU, as Proschansky notes:

The resolution demanded that those responsible for executive mismanagement be punished, and that the floodlights of publicity be directed against the guilty parties. This was clearly aimed at the big Three, and especially at the Equitable. The executive committee refused to approve the resolution. Fiery Charles W. Tuyl, delegate from the Minneapolis Life Underwriters' Association, protested violently against the action of the executive committee, and threatened that unless the resolution was adopted, a group of members would issue a statement on their own endorsing Raleigh's views. A compromise resolution finally won approval. It favored a policy of publicity but stressed the achievements of life insurance instead of directing attention to its abuses.[xvi]

Besides feeling the effects of the Armstrong hearings, the national body was entering a new era in another sense. This was a time for the changing of the guard. By the end of 1905 five former presidents of the NALU—Carpenter, Tillinghast, Ferguson, Calef and Hendricjk—as well as the organizations only honorary member were all dead. The Association was developing a new generation of leaders. In its choice of such rising young men as Charles W. Scovel for president and Ernest J. Clark for secretary—who proved very able indeed—the national organization displayed renewed vigor and optimism. A general agent for Provident Savings at Pittsburgh, Scovel broke all previous records as a traveling executive, visiting forty-two local associations during his administration. To his colleagues, he seemed tireless. In his report to the 1906 convention, Ernest Clark let everyone know how impressed he was:

President Scovel's association visits have covered the entire United States and Canada from Portland, me. On the East to Salt Lake City, Utah, on the West, and Montreal and Toronto on the North to Mobile and New Orleans on the South. Outside of this extensive work he has made numerous trips to Washington, Chicago, New York, Philadelphia and Baltimore for conference, legislative meetings, etc., these extra trips alone involving 90 days absence from Pittsburgh [sic] and fifteen thousand miles of travel. Much of the time he had left at Pittsburgh was occupied with correspondence, keeping up with current developments, studying proposed laws, writing addresses, etc. Think of the sacrifice financially and physically which all of this involved and by a busy general agent with an extensive agency.

This sacrifice as made by President Scovel, however, combined with the untiring assistance and co-operation of our other officers in taking advantage at the psychological moment of conditions as we found them, has given the National Association a strength and influence throughout the continent that it could not have gained under normal conditions in the next ten years.[xvii]

Some of the old guard were pressed into service too. Recalling those hectic days years later, Scovel said:

In 1905-6, year of the great upheaval, Mr. Cochran did yeoman service as Chairman of the Executive Committee. He, at New York, with Secretary Clark at Baltimore, and former Presidents Plummer and Register at Philadelphia, were the ever-ready counselors, to consult whom the then president wore smooth the rails between Pittsburgh and those cities. (From this informal beginning, sprang the present Executive Council, authorized by the new constitution of 1908.) Without the constant advice of these four wise men and a few others occasionally, the Association's new duties in the epoch making year could not have been done.[xviii]

It was indeed the right psychological moment. Clark's assertion that the Armstrong hearings had thrust the NALU into the fore front was no overstatement. When the dust settled and the nation's leaders looked around for an identifiable and viable group that could adequately represent the life insurance business, there was only the NALU. All the half-hearted efforts of the companies to organize before 1905 had failed. The actuaries and medical examiners had formed societies, but they were small and displayed nothing like the teamwork and organizational dedication that the agents had built up over the past fifteen years. All the time spent in railway coaches, on giving dinners, listening to long speeches, hammering out the wording of resolutions and in private conference with one another was at last paying off. Perhaps more than anything else, the associated agents' strength rested on long-standing relationships. The leaders of the NALU formed a network of close friends, prominent in the business and known for their good sense, integrity and dedication to high standards. They were also, in most cases, men of considerable means who generously gave their money as well as their talents to building an effective organization. A rallying point for a distraught field force, the NALU stood alone as an organization that could speak for the industry.

Scovel and his colleagues were the only representatives of the insurance industry invited to participate in the Chicago Conference, called by President Roosevelt, to determine ways to reform abuses in the insurance business. Specifically, the aim was to devise uniform legislation for the various states in the light of the Armstrong Committee's findings. The conference, primarily for governors, solicitors and attorneys-general, as well as insurance commissioners, met in Chicago on February 1-2, 1906. Though not allowed to vote, the NALU delegates were invited to participate in the discussions.

"Our delegates," Scovel assured the agents at the NALU convention the following October, "were regularly enrolled as members of the Chicago Conference and participated in its deliberations at both meetings, besides appearing by invitation before its Committee of Fifteen and before the Judiciary committee of the House of Representatives, at Washington, at its hearing on the Ames bill, which the Chicago body had helped to frame and which President Roosevelt had recommended in a special message to Congress."

The so-called Committee of Fifteen, appointed by the Chicago Conference to make a further study of the intricacies of uniform legislation, met in Chicago on March 20-22, 1906. As Scovel pointed out, the NALU was invited to participate in their deliberations as well. Both he and Edward A Woods testified before the group. Subsequent meetings produced a model insurance code. Though not agreeing with the Committee on all of its proposals, the NALU endorsed the code in principle. Proschansky comments:

It enthusiastically supported it [the Committee] in opposing the following features of the Armstrong legislation: limiting volume of new business and expenses; restricting commissions and other related expenses; limiting investments, except in real estate; and limiting surplus or contingency reserve. It backed the recommendation for "complete publicity, with frequent accounting for surplus as well as reserves, and the forbidding of rebates, board and stock schemes, dated-back policies and other forms of misrepresentation or discrimination." Partly through the efforts of the NALU, the recommendations of the Committee of Fifteen were embodied into law in such states as Montana, North Dakota, Minnesota, Michigan, Illinois, Tennessee, West Virginia, Colorado and New Jersey.[ixx]

It was early May when Scovel, George Benham of St. Louis and Clark appeared before the House Judiciary Committee in Washington. The purpose of the hearings was to consider the Ames Model Code which the Committee of Fifteen had endorsed. The Ames bill actually represented a compromise between those who favored federal supervision of life insurance (led by John F. Dryden, New Jersey's junior senator and Prudential's president) and those who preferred state regulation (supported by Morgan Bulkeley, senator from Connecticut and head of Aetna Life.) Initially, Roosevelt strongly favored a national insurance department but modified his position when the idea proved controversial and its constitutionality questioned. "It is doubtful whether Congress will assert its power over the insurance business," he said, "and it is even doubtful whether it has the power to assert." This uncertainty, Grant suggests, "conceivably led the often unpredictable Roosevelt to abandon the Dryden proposal. Instead of the Dryden format the chief executive suggested that Congress pass a set of model insurance laws for the District of Columbia, which other states and territories might then copy. Thus Roosevelt adopted the model code as the practical and 'safe' method of insurance regulation." [xx]

It is impossible to say whether the NALU's first appearance on Capitol Hill helped or hindered the situation since the proposed law never came up for debate. As Grant Explains:

Brainchild of congressman Butler Ames of Massachusetts, this measure proposed to transfer the District of Columbia's Department of Insurance to the Department of Commerce and labor. There it would be streamlined and its laws and procedures publicized to serve as a standard for existing insurance departments. Even though the bill received both White House and industry support, the model code proposal experienced trouble. In committee the Ames bill became so burdened with amendments that it never appeared before the House. Furthermore, the House and Senate Judiciary committees concluded that Congress lacked authority to supervise insurance in any way. It is likely that these lawmakers merely reflected the lack of public interest in model insurance legislation.[xxi]

Scovel and the others reported their experiences in Washington the following week at the midyear meeting held at the Hotel Gotham in New York City. It as the Largest meeting by eight ever held by the Executive Committee. Clark felt that it was "by far the most important because of the many subjects acted upon which vitally affected the future growth and influence of the National Association throughout the United States and Canada."

Register and William D. Wyman were appointed to write a tribute for another former NALU president who had recently died, James L. Johnson. Noting "he was genial and kindly and made friends by his sunny disposition, and gracious manners," the tribute stated, "He gave much time to the Under writers' Association work, and was always earnest and painstaking." Commenting on his death at the national convention that fall, Cochran told the delegates, "James L. Johnson really gave his life for this Association—for the strenuous work he did during the years 1899-1900 was the direct cause of his failing health and ultimate physical and mental break-down."

This year marks the beginning of Life Association News, the official organ of the NALU. Having been assigned the task of reporting on the feasibility of publishing an official news letter or magazine, Scovel, Plummer and Wyman spent considerable time corresponding with association leaders and with one another on the merits of the plan. They held a final meeting in New York on August 25. Cochran in reporting their decision to the convention that year, said, "As the result of a very free and candid discussion, it was decided to recommend to the committee the publishing of an organ of its own, under its own management and subject to its supreme control. That it might be brought before the convention in a practical shape, it was decided to issue two preliminary numbers of such paper (one in September and one in October) at a minimum cost."[xxii]

As might be expected, the Armstrong hearings and legislative reforms dominated the meeting of the national organization, held in St. Louis on October 23-25, 1906. "Life insurance is all the better for the Armstrong investigation and the tremendous outburst of enraged public opinion," Scovel declared in his opening address. "Such an upheaval could not fail to cause every life insurance man to search each nook and corner and do his best to correct form within any error or evil he could disco ver. Such an wholesale house-cleaning could not fail to be good for any human institution, could not fail to five it a might impulse along the road of improvement, which its leaders, with very few exceptions, have themselves at all times been seeking to follow."[xxiii]

Though generally optimistic about the long-range effects of the Armstrong hearings on the future of the life insurance industry throughout the country, Scovel still cautioned against indiscriminate reformers. "The most threatening phase of the incidental injury," he pointed out, "lies in the direction of well-meant but mistaken legislation."

Foreword by Alan Press, 1988-1989 NALU President

Preface by Jack E. Bobo, 1989 NALU Executive Vice President

Introduction

Acknowledgements

Chapter 1

Laying the Foundation—A Meeting at the Parker House

Leading Figures—Ransom, Carpenter, Blodgett and Plummer

Conditions Leading to the Foundation of the NALU

Rise of Modern Life Insurance and the General Agency System

Issues and Accomplishments of the First 15 Years

Chapter 2

In the Wake of the Armstrong Investigation

A Royal Commission Investigates Life Insurance Operations in Canada

A Period of Growth and Visibility for the NALU Under Strong Leadership

The NALU Plays a Leading Role in Insurance Education

The NALU During World War I

Chapter 3

The Post-War Decade

The NALU's Extension of Activity

The Agents Move for Recognition

Chapter 4

The Depression and Aftermath

Annual Conventions and Midyear Meetings

The NALU Celebrates Its 50th Anniversary

Chapter 5

The Agents Earn Their Wings

World War II

The NALU Joins the Industry in Legislative Battles

The NALU Establishes the National Quality Award

Chapter 6

Controversies and Schisms (1946-1956)

The Foundation of LUTC

The Nola Patterson Affair

GAMC Formally Organized

Chapter 7

The NALU Goes to Washington

Dispute Over Minimum Deposit Insurance Plans

GAMC Stages First LAMP Meeting

The NALU Celebrates Its Diamond Jubilee Year

The NALU Increases Political Activity

U.S. Senate Antitrust and Monopoly Subcommittee Investigate Life Insurance

The NALU Responds to Consumerist Activism

Chapter 8

The NALU Reaches the Century Mark

FTC Releases a Study Critical of the Insurance Industry

Formation of the Women Life Underwriters Conference

Drop in Local Membership

The NALU Issues Statements on AIDS

The NALU Combats a New Wave of Attacks

The NALU Celebrates a Century of Service

Open Book

Short Takes

Book Marks

* One result of the subsequent house-cleaning as the Mutual was to change general agencies to managerial agencies. This was, according to Clough, "a move which was designed especially to break up the Raymond Agency." In May 1906, Thebaud and Raymond were dismissed as general agents for the Mutual Life of New York.

[i] Buley, Op. Cit., p. 573.

[ii] Ibid., p. 574

[iii] Ibid., pp. 589-590.

[iv] For a detailed description of the evening, Cf. Buley, Op.cit., pp. 596-598.

[v] H. Roger Grnat, Insurance Reform: Consumer Action in the Progressive Era, The Iowa State University Press, Amers, Iowa, 1979. P. 34,

[vi] Buley, Op. Cit., p. 633.

[vii] Grant, Op. Cit. P. 34

[viii] Ibid., p. 38

[ix] Ibid., p. 38

[x] Cf. Buley, Op. Cit., pp. 682-683

[xi] Stalson, Op.; cit., p. 551

[xii] N.Y. Legislature, Armstrong Committee Report, 1906. Vol. X pp. 392-394

[xiii] Grant, Op. Cit., pp. 44

[xiv] Proceedings, 1905, p.54.

[xv] Ibid., p.9.

[xvi] Proschansky, Op. Cit., pp. 190-191.

[xvii] Proceedings 1906, p.45.

[xviii] LAN, March 1919, pp. 36-37

[ixx] Op. Cit., p. 193.

[xx] Grant, Op. Cit., p. 161.

[xxi] Ibid., pp. 161-162.

[xxii] Proceedings, 1906 p. 79.

[xxiii] Ibid., p. 24.

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