The Rise and Fall of the Fraternal Life Insurer: Law and Finance in U.S. Life Insurance, 1870-1920

Abstract

This paper studies the rise and fall of fraternal life insurance in the decades surrounding 1900. It shows that the rise of the fraternal life insurer took place while it was exempt from the solvency regulations that governed other insurance companies, and its fade into obscurity followed soon after this exemption ended. Enactment of fraternal regulation at the state level was associated with large drops in fraternal insurer formations. The evidence challenges the notion that claimant protection laws "enabled" insurance organizations to succeed by enhancing public confidence in their operations, suggesting instead that they were a burden on industry.

Keywords: Organizational Form, Law and Finance, Insurance Companies

JEL Classification: G220, G280, G380, K200, N210