140 Garden Street
Hartford, Connecticut 06154
Fax: (203) 727-6644
Assets: $11.66 billion
The Connecticut Mutual Life Insurance Company (CM), in its second century of operation, is the 12th-largest life insurance company in the United States, with more than $70 billion of life insurance in force for its more than one million policyholders. Its staff of more than 2,900 full-time agents is based in all 50 states, the District of Columbia, Guam, and Puerto Rico, and writes a complete portfolio of participating permanent and term life insurance, universal life insurance, and other interest sensitive products.
By the mid-1840s the city of Hartford, Connecticut, with a population of nearly 13,000, was a leader in the burgeoning U.S. insurance industry. Even though the city was located some 40 miles from the sea, it became a center for first marine and then fire insurance. The concept of life insurance, however, which was firmly rooted in Europe, was not as well accepted in the United States. Many Americans believed that life insurance was nothing more than a lottery, and in 1846 there were fewer than 15,000 lives insured in the entire country. Those life insurance policies came from British underwriters who controlled the five life insurance companies that had been doing business in the colonies since 1787.
Guy Rowland Phelps, a graduate of the Yale medical school and a practicing physician, and his attorney friend Elisha Pratt felt that there was a future for life insurance in the United States. They decided to found a company in Connecticut, a state where no such enterprise existed. On May 6, 1846, a petition for a life insurance company was introduced in the state legislature and on June 12, Governor Isaac Toucey signed the charter creating the first life insurance company in Connecticut and the sixth oldest in the United States.
The company’s first board of directors was elected on July 29, 1846, and in August of that year, Eliphalet Bulkeley was elected Connecticut Mutual’s first president. Phelps became the company’s first secretary and Elisha Pratt its first vice president. The board created a “guarantee fund” of $50,000 to protect CM from any heavy initial losses. By the end of the year more than $100,000 in new applications had been received.
Each application was screened by the entire Connecticut Mutual board, using the Carlisle Table of Mortality, a table based on the lives of 45,000 people in England. By using what was then considered scientific methods of risk evaluation, the average life span of any person could be calculated by considering the individual’s lifestyle and general health. This conservative approach limited the number of people who were eligible for coverage. Coverage was generally limited to the United States, and death was not covered if the policy-holder traveled south of Virginia and Kentucky from June to November because of the risk of yellow fever. For an extra 3% premium, policies permitted travel to and from any major seaport in the world, providing the traveler chose “first class vessels.” The company also charged extra premiums to permit travel to Central America, Europe, the Mediterranean, and the coast of Africa.
Many insurance companies at the time covered slaves. One company had a special “Negro life insurance policy” that was not valid if the slave was either kidnapped or chose to run away. Planters usually insured only those slaves who worked in dangerous planting jobs or on the accident-prone loading docks at seaports serving the cotton trade. Phelps had strong views against writing this type of insurance. Whether his position was inspired by an abolitionist point of view or that of a shrewd underwriter is not known.
The California gold rush created an increased demand for special coverage from those who wanted to cash in on opportunities in the West. Connecticut Mutual’s board, as always, took a very conservative stand when reviewing these requests, but between 1848 and 1853 the company issued more than 2,200 of these special policies.
Phelps never forgot that the company was a mutually held concern and worried that it might become careless in its approach to risk taking; but conservatism also restricted many of CM’s opportunities for growth, and the board’s frugality caused a serious rift with its field staff. Agents complained about low pay and that the board did not spend enough on advertising. At the same time, Elisha Pratt, who was running the company’s agency in Boston, advocated increasing agents commissions to attract more professional salespeople. CM had traditionally sought men of high social and business standing to sell its policies because their good reputations and lofty status in the community would make them more credible; but reputation alone did not assure sales, and CM’s agents’ records were inconsistent.
These grievances led Pratt to challenge control of the company at Connecticut Mutual’s second annual meeting in January 1848. Pratt arrived from Boston with proxies in hand and took the board members by surprise. When the smoke cleared, CM’s president Bulkeley had been defeated by Hartford financier James Goodwin. The battle resulted in the resignations or retirement of several board members. Elisha Pratt himself resigned as vice president on September 18 of the same year. He went on to help found the Union Mutual Life Insurance Company in Boston.
James Goodwin, CM’s new president, was a member of the influential Morgan family by marriage. His relationship with what became the most powerful banking firm in the nation ended up having very practical uses for CM. The company became the first commercial account of what would eventually become J.P. Morgan and Company. Goodwin used those financial resources to invest in urban and farm mortgages and initiated a program of investing in the “West,” which at the time meant as far as Chicago and Saint Louis.
In the spring of 1861, 16 of the major life insurance companies, including CM, met in New York to consider the impact of the Civil War on life policies in force at the time. They decided to offer those insured the option to either pay an additional war-risk premium or renew their policies once they were discharged from military service. By the time the war ended, CM had paid in excess of $110,000 to the beneficiaries of 64 policyholders who had lost their lives as a result of the war.
The end of the Civil War brought an explosive growth in the life insurance business. Limits on policies were increased to $25,000. During the years following the war, the number of CM life policies issued increased from 1,200 in 1859 to more than 8,000 in 1864. As a result of this boom, many new life insurance companies were formed, causing increased competition in the life insurance business for both buyers and sellers of life insurance. The growth in the number of companies doing business created a drain on CM’s existing employee pool. Many former employees, including both board members and agents, resigned and participated in forming new companies. Not all these new companies were sound risks. During the post-Civil War years, over 50 new insurance companies failed, causing a credibility problem with the buying public. To make matters worse, Phelps, after taking ill at a board meeting, died on March 18, 1869.
Like every insurance company in the United States, CM was forced to take a hard look at investments in the West after the Great Chicago Fire. Under Goodwin’s leadership the company had made considerable investments in what were considered frontier communities. After the smoke in Chicago had cleared, Goodwin toured the smoldering ruins and returned to Hartford to confer with his associates. The board decided to reinvest in the city, granting a $1.7 million loan, the largest in company history, to industrialist Potter Palmer to help rebuild many structures, including Chicago’s famed Palmer House Hotel. In the three years following the Chicago Fire, CM invested over $3.7 million in rebuilding the city.
CM managed to weather the financial storm created by the depression of 1873, which followed the downfall of the nation’s most influential banking house, Jay Cooke and Company, and a ten-day closing of the New York Stock Exchange. During the depression, CM showed its optimism for the future in the face of mass unemployment and bank and business failures by building a new home office in Hartford.
On March 15, 1878 Goodwin died. He was succeeded by Jacob L. Greene, an attorney and agent who had been with CM for eight years. Greene continued Goodwin’s policy of western investment and was responsible for introducing post-maturity settlements, which offered the options of receiving policy proceeds over a specific period of time or a life income for the beneficiary.
Greene was also chiefly responsible for an industrywide change in the way premiums were calculated. Life insurance premiums were based on a formula that took three factors into account: the mortality tables, a fair estimate of the ongoing cost of doing business, and an anticipated return on investment of reserve funds of 4%. Greene anticipated that interest rates might drop below 4%, but calculating premiums using a lower rate of return created an increase in premium rates, which shocked the board and agents alike. William Cahn in A Matter of Life and Death, reported that Greene responded, “No life insurance is safe which is not more than safe,” and stuck to his controversial policy of using a lower interest rate in the formula. Within 25 years a majority of U.S. life insurance companies followed suit.
Greene also faced the controversial tontine system during his tenure. Introduced by the Equitable Life Assurance Society to increase sales of life coverage, tontine policies revived an insurance concept developed in the late 1700s to raise money for French nobility. The idea was also embraced by other companies under names such as “percentage dividends,” “life rate endowments,” and “deferred dividends.” A tontine policy not only provided security for a policy-holder’s family after his death, but also the possibility of making a fortune on the policy if he lived. Under the tontine plan, money earned on the policyholder’s premiums was withheld by the company for a specific period of time. If the insured died during that period, the face value of the policy was paid to his family. If the insured lived for the agreed-upon period of time and continued to pay his premiums, he shared in the added profits his money had earned and in money earned by those who had forfeited their own funds because they could not keep up the premiums.
The possibility of becoming wealthy as a result of buying life insurance created more business, but many people bought policies they could not afford to maintain. Accumulated funds were put into “tontine reserves,” and opponents of the concept claimed that companies were making fortunes off the lapsed policies of those unfortunate enough to be unable to keep making payments.
For 30 years the CM board and Greene were the most vocal critics of the tontine system. Their refusal to offer a tontine plan caused a decrease in sales, again creating problems in hiring and keeping agents in the field. Four months after Greene’s death in March 1905, the Senate Assembly of the New York legislature launched an investigation into the business affairs of insurance companies. Along with other restrictions imposed on the industry, the tontine system was outlawed.
John M. Taylor, CM’s fifth president, faced damage control as a result of the tontine investigations. In addition, congressional hearings into corporate abuses and the passage of the Sherman antitrust provisions had produced a general distrust of large corporations. Sales and growth lagged, and in the 30 years preceding the turn of the century CM slipped from the second- to the eleventh-largest life insurer in the nation.
Taylor attacked the problem on several fronts. He began to redevelop a strong agency system. CM’s conservative reputation made finding suitable representatives a major challenge.
In an attempt to strengthen the agency system, Taylor appointed Robert H. Kellogg, a veteran CM agent, to the post of regional superintendent of agencies. Kellogg in turn named Griffin M. Lovelace as his assistant. Kellogg instituted a program to recruit quality agents to represent CM’s product line, and Lovelace was responsible for training them. He believed that insurance should be sold on the basis of the specific needs of the buyer. This required a more educated agent, so Lovelace held a series of agent meetings that evolved into an agent training program. Professional agent organizations, the National Association of Life Underwriters and the American College of Life Underwriters, were created, the latter to help provide professional training for underwriters.
Taylor also introduced new products. The company began selling business insurance, which covered the loss of key personnel. CM introduced industrial insurance and disability insurance, liberalized the terms for payment of premiums, provided an opportunity to reinstate policies after they had lapsed, and relaxed its policies on insuring women.
In 1913 the Connecticut legislature, as a result of a petition by CM, passed a statute permitting life insurance companies to execute trusts. CM gained the authority to hold the proceeds of any life policy and pay beneficiaries under terms previously agreed upon by the purchaser of the policy. The statute permitted the new policy to be extended to those who already had policies in force.
Henry S. Robinson succeeded John Taylor as CM’s sixth president. His term in office began with a nationwide influenza epidemic. CM paid out over $1.6 million in claims. In 1926 the company moved into a new home office located in the Lord’s Hill section of Hartford, and later that year Robinson died, leaving his duties as president to James Lee Loomis.
Despite business growth, Loomis was concerned about the nation’s economy, and he was proved right by the collapse of the New York Stock Exchange in 1929. The disaster took several years to affect CM. As interest rates and dividends to policyholders dropped, Loomis oversaw the transfer of CM investments into more secure U.S. government securities. The company survived the Depression without major losses, and in 1930 the board appointed one of CM’s most successful agency managers, Peter M. Fraser, as new vice president.
Loomis prepared Fraser for the company presidency, emphasizing the investment end of the business. Fraser began investing in new areas. One was Florida real estate. Fraser saw Florida as the nation’s next great recreation area due to increased leisure time and a trend toward winter vacations. The company also began to invest heavily in hospitals and churches and initiated a policy of making mortgage loans in the midwestern corn belt.
When Fraser became president in 1945, the company began a period of growth. Total CM assets passed the $1 billion mark and CM’s urban portfolio grew from $17.3 million to over $204 million.
Fraser’s successor, George F.B. Smith, became CM’s tenth president but was forced to retire due to ill health less than one year from his election to the post. The search for a replacement concluded with the election of Charles J. Zimmerman, who left his post as managing director of the Life Insurance Agency Management Association to assume the CM presidency. A former agent with CM’s New York City agency and general agent in Chicago, Zimmerman had substantial sales experience and was aware of the circumstances in which field agents worked. He was surprised by CM’s poor agent support. Recognizing the role of an agent as an insurance counselor, he made educating his sales team a priority. By 1970 eight of every ten CM agents had attended college, and the trend toward a better-educated sales force had a firm foothold.
Throughout the 1960s and 1970s CM looked for more ways to broaden the financial services it offered the public. The company’s new breed of agents became qualified practitioners in fields such as business preservation, employee benefits, estate management, and all phases of business insurance. Zimmerman’s successor, Edward B. Bates, was just such an agent.
Under Bates, CM moved into the electronic age, forging a tight technical relationship between the agent in the field and the home office. Bates also promoted community involvement. CM joined with other insurance companies to invest over a billion dollars in cities throughout the country for on-the-job-training, tutorial programs for underprivileged children, and other community projects.
Bates was succeeded by Denis F. Mullane, who reassumed the presidency when his successor, S. Caesar Raboy, retired in 1989. Mullane spearheaded a drive to bring the company fully into the computer age by streamlining information processing and installing more sophisticated computer systems capable of handling electronic mail. CM also developed a program to further improve agents’ knowledge and skills in 1983. The program included training agents to use a software package as a sales tool.
With a portfolio of competitive disability-income and whole-life insurance, and attention to clients, Connecticut Mutual Life Insurance Company should remain an industry leader.
CM Life Insurance Company; Diversified Insurance Services of America; GroupAmerica Insurance Company.
Cahn, William, A Matter of Life and Death, New York, Random House, 1970; Yalanis, Despina, “A History of Connecticut Mutual Life Insurance Company,” Hartford, Connecticut, Connecticut Mutual Life Insurance Company, 1990.
—William R. Grossman
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