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October 1991, Vol. 114, No. 10
Growth of employer-sponsored group life insurance
In 1911, the Equitable Life Assurance Society of New York issued a "yearly renewable term employees' policy" to the Pantasote Leather Co. and its 121 employees. This group policy provided each member employee with life insurance coverage financed through group rate premiums paid by Pantasote Leather. At the time, the life insurance industry and the general public took little notice. Instead, both continued to rely on the individual policies that had been the lifeblood of the life insurance industry since its inception.1
Nevertheless, Equitable Life proceeded with its development of the new product, writing five other group policies over the next few months. In 1912, Montgomery Ward and Co. insured the lives of its 2,912 employees through the Equitable in the amount of $5,946,564.2 The immense size of this single policy forced the remainder of the insurance industry and the U.S.business community to take notice. Group life insurance as a fringe benefit of employment began to take off.
The growth of employer-provided group life insurance has been tracked by the Bureau of Labor Statistics (BLS) and other analysts throughout this century. Recent data from the BLS Employee Benefits Survey indicate that nearly all full-time employees in the Nation's medium and large private establishments - those with 100 workers or more - are provided group life insurance that is at least partially financed by their employers. Additionally, close to two-thirds of full-time employees in small establishments receive life insurance coverage.3 Typical features of today's plans include coverage for retirees and for dependents of active workers, and options for employees to choose added protection (though often at their own cost). The following discussion tracks the changes in group life insurance plans, and in the data reported about such plans, from the implementation of the Pantasote Leather Co. agreement through the present day.
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1 The origins of the U.S. life insurance industry can be traced back to 1759, with the formation of a relief fund for Presbyterian ministers and their wives. The Insurance Company of North America, the first general insurance company to sell life insurance in the United States, was chartered in 1794. The growth of the industry took place in spurts over the next 100 years, punctuated by the introduction of insurance agents and mutual policies. As the Industrial Revolution progressed, the practice of purchasing individual life insurance policies became more widespread. (In 1905, 6 years before the introduction of the first employer-provided life insurance contract, nearly $ 1 0 billion of the $12 billion of life insurance in effect had been purchased by individuals.) For a more detailed discussion, see Paul A. Norton, "A Brief History," in Davis W. Gregg and Vane B. Lucas, eds., Life and Health Insurance Handbook, 3rd ed. (Homewood, IL, Richard D. Irwin, Inc., 1973), pp. 1089-99.
2 Protracted negotiations between Montgomery Ward and Equitable Life began in 19 1 0, before the issuance of the policy to Pantasote Leather.
3 The Employee Benefits Survey (EBS) studies the incidence and characteristics of selected leave and insurance programs in both the private and public sectors. Since 1989, the EBS has surveyed medium and large private establishments (defined as those with 100 employees or more) in odd-numbered years while conducting a similar study of small establishments and State and local governments in even-numbered years. Data from the first study of small establishments are available in "BLS Reports on Its First Survey of Employee Benefits in Small Private Establishments," USDL 91-260, June 10, 1991. Copies of the most recent study of larger establishments, Employee Benefits in Medium and Large Firms, 1989, Bulletin 2363 (Bureau of Labor Statistics, 1990), are available for purchase from the U.S. Government Printing Office.
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