Monday, December 19, 2016

Shanda or no? [UPDATED]

[Scroll down for update]

So FoIB Holly R tips us to this potentially scandalous story:

"Sales were sluggish that year. So the company looked south ... the New York-based company encouraged Southerners to buy insurance to protect their most precious commodity: their slaves."


Here's the thing: at the time, slavery was perfectly legal, and slaves were a valued (and valuable) asset to those who owned them. This is, by the way, a purely legal and economic argument: I'm certainly not condoning the "peculiar institution" as moral or ethical. But as a specifically financial arrangement, it would make sense to insure one's assets, including slaves.

We still have these kinds of policies, by the way: we call them Key Man life insurance policies, and employers take them out on valued employees all the time.

We profoundly regret that in the 1840s our predecessor company, Nautilus Insurance Company, insured the lives of slaves for a brief period of time"

So says New York Life's spokescritter in a vapid display of "mea culpa." The reality is that, at the time, it was a perfectly legal and sensible application of basic life insurance principles. Eventually, slavery was outlawed, and thus the need for (and attraction of) these plans no longer existed.

As a purely historical phenomenon, I agree that this offers a fascinating glimpse into the early days of the life insurance business here in America. But I see no particular lessons to be drawn, or amends to be made.

Interestingly, the Gray Lady fails to note that these experiences eventually led to the founding of Pilgrim Life, which was founded in 1898, and which:

"[B]ecame the first insurance provider for African Americans in Georgia. A black-owned and -operated company, Pilgrim was one of the largest employers of African Americans in Augusta and issued tens of thousands of policies in the first decades of the twentieth century."

And why do I bring this up?

Because it demonstrates that my industry is capable of learning from the past, and (eventually) making things right.

Again, no one's condoning the circumstances that led up to either of these, but to impute some evil motive to the former is unsupportable.

UPDATE: Co-blogger Bob points out that this is perhaps more akin to STOLI (Stranger Owned Life Insurance) than Key Man, and I tend to agree:

Like slavery, STOLI plans were eventually outlawed. And, like STOLI, it's likely that the insureds didn't even know they were insured.

Still, I don't think it changes the basic point that this is, in fact, much ado about nothing.
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