Armstrong Investigation

File:WilliamWArmstrongRochester.jpg, who spearheaded the investigation]]

The Armstrong Committee, formally the Joint Committee of the Senate and Assembly of the State of New York to Investigate and Examine into the Business and Affairs of Life Insurance Companies Doing Business in the State of New York was an investigation begun in late 1905 when the New York State Legislature initiated an investigation of the life insurance companies operating in New York. The findings of the investigation led to more extensive regulation of the American insurance industry.{{Cite journal |last=Roe |first=Mark J. |date=1993 |title=Foundations of Corporate Finance: The 1906 Pacification of the Insurance Industry |url=https://www.jstor.org/stable/1123112 |journal=Columbia Law Review |volume=93 |issue=3 |pages=639–684 |doi=10.2307/1123112 |issn=0010-1958}}

The Equitable Life Assurance Society of the United States had grown to be one of the largest insurance companies in the United States, with over $1 billion in assets around 1900. After continued elaborate activities by the executives at the company, allegations of corruption occurred. The investigation by the New York Insurance Department began after an accumulation of complaints by consumers and other insurers, and was catalyzed by rumors that James Hazen Hyde, a vice president and expected next corporate president of The Equitable Life Assurance Society of the United States, had charged the expense of an immense costume ball that year to the corporate account. The investigation uncovered a series of corrupt practices used by the company. The report came to the conclusion that “A cancer can not be cured by treating the symptoms. Complete mutualization, to be paid for at a price only commensurate with its dividends is, in my opinion, the only sure measure of relief."

The findings led to the creation of the Armstrong Commission to investigate such practices across the industry. Spearheaded by William Armstrong, a State Senator, the commission began work in 1905.{{Cite web|url=http://qa-de.milliman.com/uploadedFiles/insight/life-published/great-american-insurance-novel-11-01-11.pdf|title=David Graham Phillips and the Great American Insurance Novel|last=Skwire|first=Daniel D.|website=Milliman}}{{Cite web|url=https://timesmachine.nytimes.com/timesmachine/1905/08/04/101417864.html?pageNumber=12|title = PHILBIN OR RAND MAY RUN INSURANCE INQUIRY; Chairman Armstrong Will Not Answer Concerning Them. MANY GOOD MEN UNAVAILABLE the Committee is Having Difficulty in Finding a Lawyer Not Affiliated with the Insurance Business}}

The Armstrong Committee eventually issued a report highlighting a number of questionable practices. The legislature in New York and several other states adopted many of the recommendations, including a restriction on policies with lengthy deferred payouts, including the 19th century version of tontines.Evolving Financial Markets and International Capital Flows: Britain, the Americas, and Australia, 1865–1914, Lance E. Davis and Robert E. Gallman, p 286 The report also recommended a prohibition on political campaign contributions by such corporations. It is credited with launching the political career of Charles Evans Hughes.{{Sfn|Ransom|Sutch|1987|pp=380|p=}} It conducted 51 investigatory sessions and its recommendations were incorporated into eight New York State statutes. Numerous other states soon followed suit.{{Cite journal|last=Miller|first=John W.|date=October 1982|title=Faded History: The 1905 Armstrong Investigation|journal=CLU Journal|volume=36|pages=78–85}}