Last Friday evening several of us from Homer Smith Insurance enjoyed the Kiwanis Broadway Dinner Theatre, held at the Northwest Maritime Center. This fundraising event was to support the Port Townsend Kiwanis Club Children’s Programs and the Edensaw Woods Ltd Community Cancer Foundation (some of our friends at Edensaw Woods are represented in the photo above). The menu was catered by Rick Unrue and The Belmont restaurant, and the entertainment was Broadway tunes presented by Key City Public Theatre. Event sponsors included Jefferson County Chamber of Commerce, Key City Public Theatre, KPTZ Radio Port Townsend 91.9 FM and The Belmont restaurant. Kiwanis is a global organization of volunteers dedicated to changing the world one child and one community at a time.
“Those who don’t know history are doomed to repeat it.” Edmund Burke
We are just beginning to emerge from “The Great Recession” which, depending on who you ask or how you phrase the question, started sometime between 2006 (turn at the peak of housing prices) and 2009 with the advent of a $780 billion stimulus package. Even years after either of these events, there is no real agreement on the causes. Googling “causes of the great recession” reveal explanations ranging from too little government oversight of banks to too much regulation and from globalization to a weak dollar. Maybe someday in the future analysts will add “government shutdown” and “debt ceiling” to the current list.
This isn’t necessarily surprising because the “Great Depression” also comes with a lengthy list of causes and contributors that include the 1929 stock market crash, bank failures and an associated credit crunch, reduced spending by businesses and individuals, protectionist economic policies and even the extended drought in the southwest in the 1930’s. Some of the putative causes of the depression – the failure to regulate the stock market and banks sound a bit like our current problems. Each of these economic catastrophes has resulted in changes in the regulatory landscape in an attempt to insure that history doesn’t repeat itself. But, of course, it seems to do just that.
Before these two cataclysmic economic events, there was another major event in our economic history that had a bit in common with the depression and recession. The insurance industry scandal of 1905 is another example of a situation where a lack of oversight – if not a lack of regulation – created a national economic event – not a depression or a recession, but a loss of confidence in a whole segment of American business.
The insurance industry has a long history – some date it to 4,000 years ago and the Code of Hammurabi. No matter where or how it began, by the end of the 19th century in America insurance was an idea whose time had come. Leading insurance companies at the turn of the twentieth century were worth hundreds of millions of dollars. Their wealth was built on policy premiums and their financial power was huge. They were subject to some regulation in some states but there were problems ranging from failures to honor obligations to policyholders to the use of premiums in risky investments.
In 1904 and 1905, a series of articles in “Everybody’s Magazine” by Thomas Lawson – a financier turned reporter – exposed the speculative practices and outrageous excesses of the industry. The country’s attention became focused on the activities of three life insurers – Equitable Life Assurance, Mutual Life, and New York Life. When the dust settled, it was clear these companies had been involved in unsavory or even illegal practices which included paying excessive executive compensation, paying excessive commissions, using company assets for personal gain, speculating in investments using premiums and making payments to politicians to ensure favorable legislation. There were also payments to newspapers to print favorable copy. By the time the scandal had run its course, the entire life insurance industry was implicated and millions of consumers were affected.
The scandal even hit the peninsula with a sort of “buy American” twist. An Editorial in the Port Townsend Morning Leader of October 18, 1905 identified the excessive salaries of large insurance company executives and noted that insurers in Britain, Germany and France are standing by to enter the American market in the wake of the scandal. Like the depression 25 years later and the recession 75 years after that, the Insurance Scandal of 1905 brought calls for regulation of the industry. Today, we have a system of state insurance commissioners that function to help prevent the sort of abuse that led to the scandal of 1905.
Some of us at Homer Smith Insurance were fortunate enough to attend a Rotary fundraising dinner at the home of Gary Kennedy last Saturday. It was a fun evening visiting friends, complete with great food in a beautiful setting overlooking the ocean.
Gary is a long-time Port Townsend resident who has generously helped fundraise for a number of local organizations for many years. At a Centrum benefit dinner he hosted last summer, he was acknowledged as consistently being one of the top fundraisers for various local non-profits.
Gary is on the Board of Directors for the Northwest Maritime Center. His bio on their website says that he is an Architectural Designer who came to Port Townsend as a weekend resident in 1973 and became a full time resident in 1997. He has been involved in historic restoration of Port Townsend’s Siebenbaum Building, Delmonicos and several residences. He serves as vice-chair of the City of Port Townsend commercial design review advisory group, is a volunteer with Centrum and Habitat for Humanity, and has worked on Shoreline Master Plan revisions. Gary was born and raised in Missoula, Montana, and served in Korea with the U.S. Army. He holds a BS in Architectural Design from Montana State.
Homer Smith Insurance would like to thank Gary for the fabulous dinner parties he’s hosted over the years. We appreciate his fundraising efforts and all that he does to help make Port Townsend a wonderful place to live.