The Effect of the 1918 Influenza Pandemic on US Life Insurance Holdings

Abstract

This paper examines the effect of a sharp rise in mortality, the 1918 influenza epidemic, on life insurance holdings in the USA. The BLS Cost of Living Surveys of 1918–1919 provide a unique opportunity to examine the effect of the pandemic—some households were surveyed before, and others during or shortly after the worst of the influenza outbreak. In addition, I use state-level insurance sales data to compare the increase in spending on insurance in states particularly hard hit by the epidemic, relative to those that were not. I find some evidence that, in the immediate aftermath of the epidemic, those in severely affected areas spent more on industrial insurance. They were less likely, though, to hold ordinary or fraternal policies and the effects appear to be short-lived. I consider a few explanations for the smaller-than-expected results.

Appendix: A Tribute to John

I did not know John E. Murray personally. I narrowly missed my best opportunity to meet him several years ago. Back in 2006, I presented my first effort to understand demand for life insurance at the SSHA meetings in Minneapolis. John was scheduled to be the discussant for the panel. By email, he seemed genuinely enthused to receive my paper. Unfortunately, he was ultimately unable to attend. I was somewhat disappointed given how much I admire John’s work.

I am an avid fan of good work in economic history. I also introduce undergraduate students to the field. One of the main goals of my economic history course is for students to consider the qualities that make research strong and convincing. In the process, I hope that they also come away with an appreciation for economic history—but even if that does not occur, they should be able to recognize and emulate good research in any field. Outstanding work in economic history tends to have the following qualities: it is engagingly written. It sheds light on an important aspect in the lives of ordinary people. The insights we gain from the work may also help inform us on current or recurring issues. Great economic history brings data to the question in useful and convincing ways—while also providing qualitative evidence through old-fashioned archive work. It is carefully sourced and documented. Finally, the best work is evenhanded and respectful. Even when the research contradicts that of others, it does so without an apparent “axe to grind.”

I have read (and reread) John Murray’s books on industrial life insurance and the Charleston Orphan House several times. To me, they check all the boxes above, representing the best of what economic history can be. While reading, I frequently get the feeling that I am tagging along to explore the treasure of records that the author just found. Even among eminent economic historians, John’s work seems particularly adept at achieving a balance between quantitative and qualitative evidence. When coupled with an unparalleled evenhandedness, his work is an absolute pleasure to read.