How Corporate Risk Monetization Helped Melt Away The Communal Glue in America

Tucked in the back of my recent nonfiction book (an exploration of the cultural experience of individualism as a way of life) is a lonely, sad Appendix that I'm guessing few readers visited. I only refer to it once in one chapter, but I published it anyway because it took some work, and true economic history geeks will find it interesting. This table reveals a lot of shocking truths about American household expenses, reflecting the journey from a working-class America of farmers and factory workers to the middle-class America we see today where we drive around in our cars, offer retail service, or sit at a computer all day. Our drastic reduction in food costs has helped us spend more and more on things your great-grandparents would shake their head at in dismay.What a waste. But insurance is NOT one of the modern expenses our ancestors would mock, although they would shake their heads a bit at how extractive the policies are. One of the more fascinating facts in this table is lying in plain sight: how Americans went from spending nothing or nearly nothing on modern, corporate-issued insurance policies to spending nearly 12% of their budget on them[see the yellow rectangle]. Modern (i.e., corporate) insurance is now the fourth-largest expense category in the average American household. We spend more on corporate, for-profit insurance every month today than we do on healthcare, restaurants, groceries, education, charity, gifts, etc. Insurers make billions a year in profit helping us spread our household-level risk across the financial system. At first, this may seem like one of the more positive social innovations in modern times. Until we understand how insurance morphed from a local, community savings bank whose owners we knew intimately into the slick, ID-card-issuing, for-profit service it is today, we can not understand the quiet trade-offs this grand corporate bargain has encouraged. Fig. 1 - Major Types of U.S. Insurance in 2026 In Order of Inception - 1700s - Home-Owner's/Renter's/Property (mutual fire societies) 1840s - Life (1840s w/industrial or 'penny' life insurance) 1840s - Disability (1840s with railroad travel policies) 1860s - Traveler's/Trip Insurance (railroad trips) 1890s - Auto-Insurance 1900s - Malpractice insurance 1920s - Health Insurance 1920s - Media Insurance (narrowly scoped) 1930s - Insurance for specific limbs or body parts (actors, surgeons' hands, etc.) 1930s - Professional Liability Insurance 1950s - Umbrella (largely to protect high-net-worth clients from aggressive liability lawsuits) 1970s - Long-term care insurance (phased out in the 2010s) 1990s - Cyber-Liability Insurance (i.e., due to hacking and other digital crimes) 1990s - Employment Practices Liability (i.e., corporate protection for illegal employee behavior) 1990s - Parametric Insurance (for threshold-triggered natural disaster indemnification)1 2000s - Reputational Risk Insurance (i.e., revenue loss due to bad publicity) Phew! And I didn't even include exotic types of insurance used purely within the highly distrustful financial world (e.g., credit default swaps issued by AIG prior to 2009). How did we get so hyper-insured, so professionally risk-managed as a society? Hmmm… Subscribe now It's important to recognize that prior to the 1970s, American women had few financial rights or independent financial access in this country or in any country, really. Men controlled household finances and signed virtually any financial instrument for the home, including insurance policies.Don't ever get my mother (b. 1942) started on this topic, unless you are well rested and hydrated to receive a Roman Senatorial monologue. So, the history of insuring risk is really the history ofpaternalisticmensigning policies to manage household or family risk on behalf of their dependents. By the turn of ther 20th century, having life and/or property insurance was a mark of responsible, modernmanhood. But what form ofmalerisk management went mainstream first and why? Of 21 million adult males (21+) alive in the U.S. in 1900, about 40% had some form of life insurance.2Life insurance was more mainstream than property insurance by then, according to my sources.3And there was a simple, social cause for all this life insurance. Shame. The mass motivation to obtain minimal life insurance, even among the working class living on poverty wages, was simple: avoiding a shameful pauper's burial (i.e. an unmarked, hidden grave in the pauper section of a local cemetery). Some cemeteries in this period operated these pauper sections like mass graves (yes, just likethosemass graves but minus the free bullet holes). This was also an era when family reputation mattered as much if not more than individual reputation. Family reputation tended to over-determine your individual reputation (as a man at least). If your family could not perform a decent, casket burial with a flat headstone, your family was morally shamed in local gossip networks. It reflected poorly in local marriage discussion as well I imagine. Life insurance actually went mainstream much earlier, in the mid-19th century, and it was called 'industrial' insurance. The product was an annual premium you paid in weekly chunks to a guy who came to your door…often in mere pennies. It functioned as a savings account that covered little beyond your burial. Industrial insurance was not intended to do more than that in an era before unionization. It was very similar in intent to today's corporate equivalent - the $10K MetLife policy they keep direct mailing you about (once you sign up for AARP). This form of insurance extended into the early 20th century as the mass-market option for anyone. The savings function here was the key social innovation. Most men in 1900 paid for life 'insurance' through the 'industrial' policies OR through fraternal or labor associations (as part of their membership dues). All of these functioned as a form of savings account for ordinary people in a world with ultra-low, sub-1% annual inflation.4The cash given built up and was returned to the beneficiary. Remember, this was an era when most men were still unbanked.5 Most Americans in 1900 were living what we could call a working-class, blue collar lifestyle. The equivalent to today's modern middle class was perhaps 5-6% of the U.S. population. I can not prove but suspect that this elite tier was a key audience for the first widespread form of corporate life insurance; insurance that initially some pretty impressive benefits that virtually no policy today matches for an equivalent premium. Early life insurance was the industrial worker policy that guaranteed burial costs, not income replacement through a forced savings process. And there were no dividends or interest windfalls in these policies. You could not withdraw the money early. But you could take out a loan against the balance (!). The most revolutionary insurance policy product, the one that accelerated privately issued, corporate life insurance into the mainstream, was something much more financially ambitious than an Elks Lodge policy. This new instrument combined the periodic savings function of industrial and fraternal insurance policies with a generous, termed pay-out function. It was a deferred dividend-earning savings plan, essentially, designed to replace some lost income from the male householder (until the spouse could remarry). One portion of the premium purchased insurance on the life of the policyholder. The remaining portion was deposited in an investment fund managed by the insurance company. This fund grew both from the continuing receipt of payments and from the earnings received on investments. After a stipulated period had elapsed (usually twenty years), the entire amount accumulated in the tontine fund was divided among the surviving policyholders. Its popular name was Tontine. No, not Tatooine, the planet.Tontine. Tontine insurance was the dominant form of life insurance in the late 19th century before corporate group life (whole and term) took in the 20th century. Like modern term life insurance, the rates were reasonable and set up to replace the lost income of the male breadwinner. And like today's wildly overpriced whole life insurance, tontine policies paid out a huge end-of-term savings + interest return if you were still alive. Healthy folks earned the dividend. The alcoholic who died during the term made far less. In other words, with Tontine term policies you were covered for a fixed amount during the term, AND you got your money back and more if you survived the term. The policyholder couldn't really lose. The innovating corporations like Equitable Life and Mutual of Omaha made money too. Obviously, this entire system relied on a low male life expectancy and the majority of policyholders NOT surviving the term. But market conditions in the 19th-century made tontinue policies significantly more lucrative than contemporary savings accounts (in an era before the non-rich had access to Wall Street).6Hence the allure for white-collar workers with more expensive lifestyles. In 2026, if you want the equivalent of a late 19th century Tontine policy, you can purchase a whole life insurance policy. The problem is that, today, due to greater life expectancy and atrocious healthcare cost structures, your 21st-century whole life policy will cost many orders of magnitude more per month than a basic term policy with no savings or dividend at the end. 10-30 times more! For a middle-class clerk or professional earning $1,000 to $1,500 per year, maintaining a $5,000 tontine policy (i.e. $168K in 2026 dollars) at the turn-of-the-twentieth century cost roughly $130 to $140 annually—representing8% to 10% of gross annual income. Today, a term life insurance with no such financial benefits at all (the dominant product in American life insurance) is much, much cheaper than this investment-grade tontine alternative. The equivalent benefit in a 20-year term policy for a healthy young adult today would be about $7 annually OR 95% cheaper than a tontine policy was in 1900. Of course, the products are NOT equivalent. But, is our transition away from fraternal and labor policies to ultra cheap, modern term life truly as progressive as want to believe? What the growth of Tontine insurance proved to the insurance industry was that there was a growing audience of men in America who wanted their spouses to be able to recoup multiple lost years of income in the event of the policyholder's premature death. In a world before penicillin, where infectious disease and injury were at the top of the list of mortality causes, and when women could not easily replace male income, the mass appeal here was obvious. The later consequence of this conceptual shift is that new forms of corporate, for-profit term life insurance appeared in the 20th-century focused not on forced savings but on replacing lost income of the male householder and defending social status for the surviving spouse. Companies would strip away the tontine investment benefits to lower the price and increase volume, while distracting you with the income safety net logic. As more and more Americans augmented their lifestyle into a middle-class position by the mid-20th century, the appeal of life insurance becomes more clear as does its exponential growth during the first half of the 20th century. My 2008 20-year-term life policy ends soon. It has no dividend and no savings function. I'm throwing away $1104 a year every year that I survive. I give Prudential $92 a month for 20 years in case I die prematurely. I sleep better knowing my wife would NOT have to immediately find a new partner just to pay bills and preserve our kids' lifestyle. When I got the policy, I measured out the mortgage balance and seven years of my gross income at the time as the buffer. $1M. The policy was 1% of my gross income in 2008. I did exactly what the industry wanted me to do - focus ONLY on income replacement and debt erasure. What many have forgotten is that origin of 19-century fraternal organizations, now derided by some as sexist relics of a bygone era, formed in large part due to the social safety net functions they offered, including life insurance to cover burial costs. When you broke your leg and could not work for six weeks at the plant, your 'brothers' would step in to help you. Fraternal organizations formed a local, in-person precursor to what would become federalized later as Social Security (and later with Medicare and Medicaid). And many had 'axuiliary' women's organizations. This is why fraternal insurance policies were 50% or more of all policy dollars in the latter half of the 19th-century (Look at the proportion of the brown bar in the center of chart between 1880 and 1890). 'Legal Reserve' refers to corporate tontine and other products, including mutual life insurance products. Social security's advent would mark the beginning of the end of local men's organizations. The decline of young male enrollments began in the Depression and continued even though the older men stayed active. You can see this in my own family, where my maternal grandfather (b.1902) was a Mason but my paternal grandfather (b.1919) never joined a fraternal org (but did join a Union to boost his hourly wages). There was a lag between the onset of corporate term and whole life insurance and the decline in fraternal memberships because life expectancy grew rapidly in the early 20th century, keeping older members around longer. The peak membership years were the 1950s. Then new recruits could no longer replace the dying members. Clubs still exist with aging Baby Boomer members, but they continue to decline. A relative told me a few years ago that he popped into an Eagles club when he moved down to Arizona but only found 'a few drunks at the bar.' This seems like an unfair anecdote, but it may reflect the lifestyle take-over of these clubs by tiny, orthoganal niches of local men organized for other reasons (!). In my relative's case, the heavy-drinkers had overtaken the club. Sounds like the cheap beer 1980s caught up with the Eagles club? Fraternal organizations were once vibrant social organizations. Many had regular dances, dinners and others ran cash bars. But the financial safety net was the original membership draw…the hook as they say in marketing. Yet, the social and ritual life of these organizations kept men around, much like a secular church. The clubs and lodges were 'fun' in modern parlance; an adult fraternity in a world when most men never went to college. The corporate life insurance, social security and modern savings banks ultimately destroyed the financial hooks of the fraternal organizations. No hooks means weaker membership rates. Capitalism's relentless development sabotaged fraternal organizations' future in unintended ways that have become lost to history. And like with many changes driven by corporate innovations, the social consequences are deemed collateral problems. Many voices decry the acceleration of social alienation since the pandemic, especially the AI-driven chatbot and its illusory ability to replace asking friends for help or advice. But the problem of social alienation is now old in America. For many decades, we have adapted ourselves to see the federal government, corporate insurance and personal finance as a replacement for one of local community's primary functions anywhere:to provide a social safety net. While this combination of replacements for local community has 'worked' financially for most middle-class Americans, a social safety net is about more than cash. It's about having your individual biographical context known by hundreds of people such that you can obtain quick, localized assistance from a NGO without shame or humiliation because the group makes requesting aid ritually legitimate. Today, American local communities focus on civilprotectionmore than civil nuturing. Our police have special ops-grade equipment, including semi-automatic rifles and drones. But no community college program can replace the 19th-century social effect of a robust fraternal organization in its local community. Fundamentally, there is something hollow about anyone having to fill about forms for Welfare, SNAP, WIC etc. when our local communities could very easily provideinformallyeverything that these programs provide formally. One could argue that federal assistance has allowed us to become more and more callous and ignorant of our neighbors' needs. Even though we fund these government programs, federal and state aid let us off the social hook by not really knowing the people we aid. Thus, we have fragile empathy for them. This easily allows us to be annoyed or outraged at homelessness, the ultimate sign that governmental welfare solutions do not work in the long run anymore. The recipients of aid are no longer known to those who finance the aid. They numbers without stories. Corporate services like life insurance are powerful financial safety tools, but they also focus our attention away from local community relationships as a source of aid. According to one insurance industry website, 48% of workinage age adults in 2026 do not have any active life insurance policy.7And many of those who do active policies are not happy the size of their benefit, but it's all they can or want to afford.8 The immediate (3-6 month financial loss) of an income-generating partner today is most likely much worse financially than it was in the 19th-century, when most of us had large extended family networks we could tap to survive in the short-term. Food may be cheaper, but housing is 45% more expensive than it was 1900. Many of us need cars, gasoline and many additional products just obtain a wage at all. The minimum middle-class consumer spending to avoid 'hallway shame' at your local high school is much higher. Though poor and working class Amerians may be more vulnerable than ever financially (and also a smaller % of the U.S. population), they do not have access to as many financially liberal, NGO social networks of mutual aid like they use to at the turn of the 19th-century (The Church of Jesus Christ and Latter Day Saints is one notable exception here). We have encouraged most Americans to develop relationships with corporations and the federal government for emergency aid and financial safety.Not their local communities. If distrust in federal government continues to grow as it has in the past two decades, we face a national security risk from within -the private sector will be the only force left to offer real financial safety in a cash-hungry way of life. Think about this.For-profitsocial safety is the ultimate conflict of interest. And the two-hundred year old life insurance industry still can not convince most of us to purchase. Subscribe now This insurance class is not widely known. More info from a corporate provider, so read with care :https://www.aon.com/en/capabilities/risk-transfer/parametric-insurance US Census and https://eh.net/encyclopedia/life-insurance-in-the-united-states-through-world-war-i/ The relative paucity of property insurance prior to widespread urban home-ownership and modern mortgage requirements appears related to two factors: most Americans were either a) urban working-class people had so little valuable property, or b) owners of a rural farmstead, where the land specifically was probably not viewed as highly vulnerable to destruction. This is most likely why the government data in 1901 did not count 'separate' insurance expenditures in the above table (i.e., the highly educated federal statisticians likely had too modern a definition in their heads). For most men around 1900, 'insurance' was simply not a separate expense item, except for the wealthy, who had boutique policies with large insurers for their property or to provide years of replacement income for a widow with a very expensive lifestyle. There were only 6M savings accounts in the U.S. in 1900 and 21M adult males. If some of these savings accounts were commercial, the proportion of personal savings account holders was even smaller than I'm implying. Most American men preferred fraternal organizations to banks, because these were men 'like them' who they could vet for moral character up close, unlike a bank officer. And many men preferred keeping their limited wealth in precious metals at home. One analysis cited in a 2009 working paper by Tony Yang -'Mutual savings banks averaged 4.5% rates of return while the rate of return from tontines from 1871- 1891 are around a nominal rate of 6.5% which not only was significantly higher, but in an era of falling prices represented a real growth of wealth through savings [Ransom and Sutch, draft 1986: 20].' - cited inThe Performance of Life Insurance Companies : 1860-1905; Accessed http://www.americasmutualbanks.com/images/0714_YangPaper.pdf https://choicemutual.com/original-research/life-insurance-statistics/ https://insurancy.com/studies-surveys/life-insurance-consumer-and-industry-statistics/