Speech 70
FEDERAL REGULATION OF INSURANCE

FROM THE PRESIDENT'S MESSAGE AT THE OPENING OF THE FIRST SESSION OF THE FIFTY NINTH CONGRESS, DECEMBER 5, 1905

THE great insurance companies afford striking examples of corporations whose business has extended so far beyond the jurisdiction of the States which created them as to preclude strict enforcement of supervision and regulation by the parent States.  In my last annual Message I recommended “that the Congress carefully consider whether the power of the Bureau of Corporations can not constitutionally be extended to cover interstate transactions in insurance." Recent events have emphasized the importance of an early and exhaustive consideration of this question, to see whether it is not possible to furnish better safeguards than the several States have been able to furnish against corruption of the flagrant kind which has been exposed.  It has been only too clearly shown that certain of the men at the head of these large corporations take but small note of the ethical distinction between honesty and dishonesty; they draw the line only this side of what may be called law honesty, the kind of honesty necessary in order to avoid falling into the clutches of the law.  Of course the only complete remedy for this condition must be found in an aroused public conscience, a higher sense of ethical conduct in the community at large, and especially among business men and in the great profession of the law, and in the growth of a spirit which condemns all dishonesty, whether in rich man or in poor man, whether it takes the shape of bribery or of black mail.  But much can be done by legislation which is not only drastic but practical.  There is need of a far stricter and more uniform regulation of the vast insurance interests of this country.  The United States should in this respect follow the policy of other nations by providing adequate national supervision of commercial interests which are clearly national in character.  My predecessors have repeatedly recognized that the foreign business of these companies is an important part of our foreign commercial relations.  During the Administrations of President Cleveland, Harrison, and McKinley the State Department exercised its influence, through diplomatic channels, to prevent unjust discrimination by foreign countries against American insurance companies.  These negotiations illustrated the propriety of the Congress recognizing the national character of insurance, for in the absence of Federal legislation the State Department could only give expression to the wishes of the authorities of the several States, whose policy was ineffective through want of uniformity.

I repeat my previous recommendation that the Congress should also consider whether the Federal Government has any power or owes any duty with respect to domestic transactions in insurance of an interstate character.  That State supervision has proved inadequate is generally conceded.  The burden upon insurance companies, and therefore their policy holders, of conflicting regulations of many States, is unquestioned, while but little effective check is imposed upon any able and unscrupulous man who desires to exploit the company in his own interest at the expense of the policy holders and of the public.  The inability of a State to regulate effectively insurance corporations created under the laws of other States and transacting the larger part of their business elsewhere is also clear.  As a remedy for this evil of conflicting, ineffective, and yet burdensome regulations there has been for many years a widespread demand for Federal supervision.  The Congress has already recognized that interstate insurance may be a proper subject for Federal legislation, for in creating the Bureau of Corporations it authorized it to publish and supply useful information concerning interstate corporations, “including corporations engaged in insurance." It is obvious that if the compilation of statistics be the limit of the Federal power, it is wholly ineffective to regulate this form of commercial intercourse between the States, and as the insurance business has outgrown in magnitude the possibility of adequate State supervision, the Congress should carefully consider whether further legislation can be had.  What is said above applies with equal force to fraternal and benevolent organizations which contract for life insurance.