An interview with the award-winning professor
Murphy’s Book on Life Insurance Wins Hagley Prize
A book on the history of life insurance in the antebellum era by Dr. Sharon Ann Murphy, associate professor of history at Providence College, has been awarded a prestigious business history prize.
Murphy received the 2012 Hagley Prize from the Business History Conference and the Hagley Museum and Library for her book, Investing in Life: Insurance in Antebellum America (Johns Hopkins University Press, 2010). The award honors the best book in business history published within the past two years.
She described the achievement as the highlight of her career.
“I could not believe I had actually won it,” Murphy said. “Some of my very favorite business history books have won this prize.”
Murphy came to PC in 2005, after earning her doctorate from the University of Virginia. She teaches 19th and 20th century American social and business history, as well as in the Development of Western Civilization program.
The professor recently answered questions about her research process and the ways insurance adapted to changing social and economic mores, including women’s rights, the development of an American middle class, and the evolution from rural to urban societies.
What drew you to study the history of life insurance in the United States?
My book is based on my dissertation. I’ve done more research and revised it, so it looks completely different from the dissertation. My specialty was economic and business history. What I study, really, is financial institutions and their interactions with their clientele. I’m kind of a nontraditional business historian, because I’m not just interested in the institutions — I’m really interested in the people and how they interact with the people as well.
I originally was going to do banking, and my next project is getting back to banking. But my advisor was talking to one of the major historians of banks and he said, “Oh, everybody does banks, and no one does life insurance, and it’s a major financial institution. Why doesn’t she do that?”
I started realizing it really is an interesting institution and there really is almost nothing written on it. What scholarship there was, was mostly outdated and the more research I did, it was kind of wrong.
It really gave me a blank slate. I could sort of do whatever I wanted with it, because I wasn’t confined by all the other historiography — what everybody else had already written.
Originally, I was doing late 19th, early 20th century life insurance but the more I read about the early history, the more I got sucked backwards. So, actually this goes about from the 1810s to the 1860s. I really kind of backtracked quite a bit from what my original intention was.
By the end of the 19th century, life insurance was the second largest financial intermediary after commercial banks, so even in the 19th century it was a major institution. It’s just little studied. No one really talks about it, and people don’t want to think about life insurance.
How did you go about researching this book?
I’m kind of an archive rat. I love being with the dusty old books. I started looking for who had records of life insurance companies. Most of them were actually up at Harvard Business School.
I spent quite a bit of time up there, looking at their records, and they had some great records from some of the oldest companies — not just brochures, but also letter books of the company talking to potential customers back and forth, talking to their agents, so you really got kind of an inside view of what was going on.
Also a big part of the book, about a chapter of it, was about slave insurance. Baltimore Life Insurance Company was one of the biggest slave insurers in the country, so I went down to Maryland and looked at their records.
And then beyond that, pretty much anything I could find in newspapers, people’s diaries … wherever I could find anyone talking about life insurance, I was just kind of seeking them out.
How did the social and economic changes under way before and after the Civil War impact the American insurance industry?
The industry was responding to what was happening. In a rural society, you’re not going to have a life insurance industry developing. This is really an urban phenomenon, because what you’re really doing is protecting women and children.
In a rural society, if the main breadwinner dies, you still have your land, and you still have your crops. Women can work the land and children can work the land. You can bring in hired laborers to work that land. It’s a loss, but it’s not a kind of deadly loss, economically.
Once people start moving to cities, you have a male breadwinner leaving the home to go work. You lose him, you lose everything. Women could take in boarders, they could teach if they were educated, but they didn’t have many options. They could remarry, or else they would lose their status and their children would lose status.
So life insurance was really filling that niche — what happens when you lose that male breadwinner. They were really targeting it at those families, middle-class families. So this really goes part and parcel with the creation of a real middle class in America.
A life insurance policy insures that your children can still go to school and get that education they need to be part of the middle class, that your wife doesn’t necessarily have to remarry. It’s kind of almost protecting your family from beyond the grave.
It’s also helping promote [cultural changes] on the back end, but I’d say it’s primarily responding to a changing urban society. This is why you see it first in the cities — you see it first in New York City, in Philadelphia, in Boston.
Early on in 1830s or ’40s, women had few legal rights. So, once you got married your husband had full control over everything, all your property. You couldn’t enter into contracts, you couldn’t sign contracts, you couldn’t own land.
Life insurers realized this was a problem. While the men were saying, “Oh, I’m not going to die,” the women were saying, “I want some protection. I want to take out a life insurance policy on my husband.”
There were two problems: one was they couldn’t sign contracts, and the second one was you had to have an insurable interest in the person you’re insuring. You had to be more interested in them living than them dying.
And this was a problem in Europe. Life insurance had been banned in Europe for centuries, because there were a lot of people gambling on people’s lives.
So to protect that, you had to have an insurable interest in someone living, and they defined that as a monetary interest. If you owed me $500, I could take out a life insurance policy worth $500 on you and if you died before you paid me back, I got paid either way.
Well, did a wife have an insurable interest in her husband, because it’s not a direct monetary interest? She can’t live without him. Logically, she needs him.
This was kind of a fight. It was like, “Well, she can only take out the policy on you if she has a direct monetary interest and, really, she can’t because she can’t sign a contract.”
In 1840, New York State was really progressive on this and, prodded by the life insurance industry, passed a law saying that women could take out policies on their husbands and they would be legal contracts and they could sign for them.
There were all sorts of women’s property acts that are emerging in the 1830s and 1840s giving women more rights to maintain their property when they married, but this was specifically aimed at life insurance and enabling them to take out these policies. And, they don’t have to prove an insurable interest — just being married gave them that.
And once New York did it, other states started doing it and other companies started putting it directly in contracts. The state may not recognize it, but we recognize it.
They recognized that women were more likely to want those policies and it was good business for them to allow women to take out the policies rather than having the women prod their husbands to take them out. It was a great market for them, it really was.
It kind of gets all packaged up in women’s history and change in women’s rights at the same time. Once you allow them to do life insurance, what else are you going to allow them to do? This was kind of a generational sweep going on changing women’s rights, kind of on the early end of it. Changes were going on throughout the 1840s and ’50s.
What does your research tell us about the modern business of life insurance and consumer attitudes about it?
Anything that’s new and innovative in life insurance was done in the 19th century. Everything I hear about today has precursors in the 19th century.
In the 19th century, you had every range of fraud, from people lying on their policy applications, to faking their own death — which was much easier when you didn’t have fingerprints and Social Security numbers — to actually murdering people to get a life insurance payout, which received a lot of media coverage but actually rarely occurred in the United States.
You hear about things like “key man” insurance today — a company will take out policy on a major employee where they feel if they lost that employee it would be a major loss to the company.
And that harkens back to the 19th century. But it raises questions: Should they be allowed to do that, and who counts as a key man? Say IBM might take one out on their CEO. It could be a major loss if they lost the CEO. But does that mean every engineer who works for IBM also?
Where do you draw the line on who has insurable interest? In late 19th century, should parents insure the lives of children?
When life insurance moved out of the middle class into the working class, you see the beginnings of burial policies. I want to have enough money to at least give my family member a proper burial but it’s also a question of you have families working, so it’s not just a male breadwinner — every member of the family worked, so anyone dying hurts the family. You start having people insuring children. Is this encouraging poor families to kill one of their children? There is no evidence that it did, but this possibility was a major point of debate.
My favorite statistic is by the eve of the Great Depression there was the equivalent of one life insurance policy for every man, woman, and child in the United States.