The Met Leads Off

For the first time in six years, the major U.S. life-insurance companies are raising prices. Metropolitan Life Insurance Co., world's biggest insurer, last week announced that premiums on all ordinary policies sold after Jan. 1 will be upped "slightly less than 10%." Because they were not raised in 1935, rates on "industrial" policies (nickel-a-day burial insurance for the poor) will be increased even more. Rates on existing policies remain unchanged.

The Met will also adopt new policy forms, mortality tables which better reflect the declining death rate, and a reserve interest rate of 2 3/4%. Previous reserve rate--the maximum expected investment return which is an important factor in computing cash values and premium costs--was 3%. In 1935 it was 3 1/2%.

Because there are some 65,000,000 policyholders in the U.S., the Met carefully explained the whys & wherefores of these changes. Biggest why: the steady decline in investment return. Average return slumped from 5.4% in 1930 to only 3.5% in 1939. It has since gone even lower. This is largely because insurance companies, for want of other investments, have had to buy more & more low-yielding U.S. Government bonds. Meanwhile rents, taxes and other operating costs have gone up. This week insurance-company offices crawled with guesses as to when other companies would follow the Met's lead. Some stock companies have already done so. But for the big companies, figuring new premiums is a long, arduous, technical job, and it may be six months before the last rate rise is announced.

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