This first chart shows the distribution of life insurance. The righthand part of the chart, which contains the bar charts in green, shows the percentage of life insurance in the various income class groups. For example, in the $500 to $750 income a year group, about 52 percent of the families-I am talking about families now-have life in CHART No. 1 PROPORTION OF TOTAL FAMILIES PAYING surance. This is derived, I should say, from a study prepared by the Bureau of Agricultural Economics, the Bureau of Labor Statistics, and the National Resources Committee as of 1935-36. That study also indicated 74 percent of all the families in the country had life insurance. You will note that the percentage of the families in these various income groups that own life insurance, rises quite rapidly from the $500 to $750 income group to about the $2,000 to $2,250 income group, and thereafter the percentage rises slowly until one reaches the $10,000 and over income group. These bar charts show how wide is the distribution of insurance according to income classifications. By regions you will notice there is likewise a broad distribution. If I may go back to the income groups for a minute, you will notice at the general income group of $2,000 to $2,250, 85 percent of all the families have life insurance, and of the $10,000 and over income group, 93 percent have life insurance. Senator ELLENDER. When you say family, you mean the head of the family, or any member of it? Mr. DOUGLAS. When I use the word "family," I am using the definition applied by the Census. A family according to the Census definition is a group related by marriage or by blood, or an individual that owns or lives in quarters, housing accommodations. That is the Census definition of a family. Senator HICKENLOOPER. And this is purely on the family classification? Mr. DOUGLAS. That is right, purely on a family basis. Senator HICKENLOOPER. In other words, if a family consisting of two, three, or more people each have life insurance, that is not necessarily reflected? Mr. DOUGLAS. That is not necessarily reflected here, sir. Senator HICKENLOOPER. Where the head of a family has insurance, that is counted as a family? Mr. DOUGLAS. That is right. Senator HICKENLOOPER. If every member is insured, that is still so counted? Mr. DOUGLAS. That is right. Senator TAFT. Out of 140,000,000 people, how many individuals have policies? Mr. DOUGLAS. Between sixty and seventy million people have policies. I do not want to overstate it, and I am sure I have understated it. It is a tricky figure to use. I could, for example, give you the number of policies Senator TAFT. There may be two or three policies in one family? Mr. DOUGLAS. I know that in some cases there are four or five policies. But the number of policyholders is between sixty and sev enty million. I am confident that is an understatement, and not an overstatement. This is the geographical distribution of life insurance, on the left. In New England, about 82 percent of the families, or thereabouts, have life insurance, and the percentage drops in the Mountain States, where it rests at about 60 percent. The distribution by "size of place" is interesting. In the metropolitan areas, as would be expected, there is a larger percentage of families owning life insurance than in the rural areas. You see how sharp is the percentage of decline between the smaller communities and the strictly rural parts of the country. That, too, is not surprising; indeed, it is what we would expect. The CHAIRMAN. What does the blue represent? Mr. DOUGLAS. The blue represents the distribution of life insurance among the families according to the size of the communities. In the large metropolitan areas, 90 percent of the families own insurance. The percentage declines rather slowly on through to the small communities, and then abruptly drops as between the small communities and the rural communities. That chart indicates, I think, what an extraordinarily wide coverage life insurance provides, and what a very large group is concerned with life insurance, and affected either well or poorly or badly, according to the way in which life insurance is affected. A review of the cost of security obtained through life insurance during the course of the last quarter of a century discloses clearly that it has, for the average American family, risen markedly, principally during the course of the last 14 or 15 years. This is particularly true of policies in which the interest element or investment factor predominates. The cost of endowments and annuities, which represent a type of policy purchased or carried by those who wish to provide a nest egg for their later years, has risen exceptionally. Chart No. 2 represents the combined performance of 11 mutual companies that account for 1314 percent of the total insurance in force. The reason those 11 are selected is because their business is similar and their figures therefore fairly comparable. This chart reveals how the costs of ordinary life policies issued at specific ages and endowment policies issued at the same ages have risen since 1921, and thus adversely affected the economic status of the large number of people to which reference has been made in the first chart. This chart No. 2 shows that the actual increase in the annual cost of life insurance has ranged from 1.8 percent on an ordinary life policy issued at age 35 and in force 10 years, to 9.9 percent in the case of an endowment policy issued at age 45 and likewise in force 10 years. But this is not a full reflection of the meaning of the decline in interest rates. This chart represents the difference as between the year 1921 and the year 1944. Now from 1921 to 1930, the cost of insurance was falling, until in about 1930 it reached its lowest point. Subsequently the cost of insurance increased very substantially. In one company, for instance, and a substantial company, the dividends in 1944 were less than 40 percent of the dividends in 1930. The CHAIRMAN. Why was that? Mr. DOUGLAS. Well, because there was, among other things, a steep decline in investment yield which more than offset substantial mortality savings since 1930. That is the point I was coming to later on. So if we compare the cost in 1944 with 1930, these percentage increases would be increased very substantially. But even that does not tell the whole story. |