THE DEVELOPMENT AND SCOPE OF LIFE INSURANCE ANNUITIES IN THE UNITED STATES*

Abstract

THE ROOT OF THE RECENT development of the annuity business in the United States is the growing recognition of the risk of old-age dependency. Not only has the awareness of this need been growing, but other factors, such as a loosening of family ties and changing attitudes toward family responsibilities, increased complexities of modern industrial life, and the lengthening of the average lifetime of the individual, have combined to magnify the need. In recent years, the writing of hundreds of thousands of annuity contracts and the collection of billions of dollars of annuity premiums have brought about a major change in the life insurance business. This study assembles the facts in this development and analyzes its causes. It should be of particular interest to all who seek for themselves something more than minimum financial security. Although the annuity principle has been applied in various forms and by various organizations, the life insurance companies are the principal private business institutions offering annuity contracts. Accordingly, this study deals only with annuities written by the legal reserve life insurance companies of the United States. Government plans such as the old-age pensions provided under the Social Security Act and the annuity settlements of United States Government and National Service Life Insurance are outside its scope. The assembly and analysis of data are restricted to the American scene and concentrate on the experience of the past thirty years. The study is laid out as follows: The first chapter reviews briefly the history of life insurance up to the early years of the twentieth century, emphasizing the role of the annuity in the evolution of actuarial science and describing some of the economic and social changes in the United States which preceded the recent revival of interest in annuity contracts. This is followed by a broad classification of annuities which separates all life insurance annuities into two categories-regular and optional-and classifies them according to the more important variations in contract provisions.