The Reduction of the Cost of Industrial Insurance

Two further developments helped to reduce the cost of industrial insurance in the twentieth century. As early as 1911 the company inaugurated a plan whereby industrial policyholders willing to pay weekly premiums directly and continuously to the home office or to a district office would receive a refund of 10% of the premiums. The following year this provision was included in the policy and became a contractual right of the insured. The Metropolitan was the first company to grant this allowance.

Large numbers of policyholders have taken advantage of this provision; in fact, more than 30% of the weekly premiums in force are now paid directly to the company, without collection commissions to agents; and the amount returned to policyholders in 1942 for such direct payment was about $7,700,000.

It is interesting to note that almost 30 years after this practice was adopted by the Metropolitan, it became a statutory requirement for companies in New York State, illustrating once again how the company's voluntary provisions for the benefit of policyholders have later become part of the insurance law, whether it be life insurance or cheap auto insurance.

The second development was the introduction in 1927 of industrial insurance on the monthly premium plan. This form of insurance was designed primarily to meet the requirements of men and women who could afford to buy policies for between $500 and $800 and to pay their premiums monthly. In the main, the monthly premium Industrial policy was intended for better circumstanced wage earning families. In recent years this type of insurance has also been made available in smaller amounts and on the lives of children.

The monthly premium policies are similar in their provisions to the weekly contracts. From its very inception this insurance has been participating and has had the benefit of the company's nursing service. Yet current rates for monthly premium insurance are 12% lower than on corresponding rates for weekly premium policies. In fact, Metropolitan monthly premium industrial insurance compares very favorably in cost with ordinary insurance in many other companies. It is not surprising, therefore, that its growth has been phenomenal. At the end of 1942 there were nearly 3,000,000 monthly industrial policies on the books for a total amount of insurance of nearly $1,400,000,000. In the following years an increasing proportion of the company's industrial business was on the monthly plan.

We may conclude this section on cost by referring to a report made in 1938 by the insurance department of the State of New York, after an intensive study made of Metropolitan industrial insurance. The State Examiners concluded that the net cost of weekly premium industrial insurance exceeds the cost of comparable substandard ordinary insurance, and even private health insurance, on the average, by only approximately 15% of the industrial gross premium.

The report pointed out that this figure may be further reduced to about 5% if premiums are paid to a district office under the privilege of the 10% refund. The examiners of the state insurance department, after 18 months of study, reached the conclusion that "these costs are not excessive in view of the service rendered." Their conclusions were reaffirmed as the result of a later examination.