The Bedside Companion

In its 50-year history, Mutual of Omaha has pioneered in many a new form of individual health and accident insurance, while making itself the largest such insurance company in the world. Last week Mutual, which has paid out more than $1 billion in benefits, took steps to grow even bigger. It launched a new hospital-surgical Senior Security Policy for people 65 and over. For $8.50 a month the Mutual policy will pay up to $1,600 in hospital or nursing-home costs, plus surgical fees. Already tried out in four states (Oklahoma, Louisiana, Texas and Georgia), the coverage is similar to that offered on a twelve-state basis by Continental Casualty Co. (TIME, Feb. 16). But Mutual is offering it in all states and U.S. territories and possessions, the first such nationwide plan.

Mutual's rise is one of the success stories in U.S. insurance history. But like many an old-line company, Mutual sowed some financial wild oats on the way up. It was frequently accused of giving policyholders a false sense of security with its promises, then yanking the bed sheet from under them when they got sick, citing the fine print of the contract. The company has also been involved in policyholder suits. One rose out of a decision by the company's officers in 1926 to set up a parallel life insurance company, using Mutual's facilities and staff. Not only did the parallel company, United Benefit Life Insurance Co., wax rich in the years that followed, but later, Mutual officers who owned most of the privately held United stock proposed to have Mutual buy them out for $24.5 million, half of Mutual's surplus. The suit led to a compromise in 1952. Mutual was allowed to spend $16 million to buy some 65% of United's shares. United had to pay $1,000,000 in damages to Mutual.

Sweeten the Benefits. When V. (for Vestor) J. Skutt took over the presidency of Mutual in 1949 from the late founder Dr. C. C. Criss, he set about building up--and drastically changing--the company. South Dakota-born Skutt studied law at Omaha's Creighton University, and in 1924 entered Mutual's legal department. When he rose to president, Skutt found that nobody could keep straight the legal name, Mutual Benefit Health and Accident Association, copyrighted a nickname--Mutual of Omaha. He plugged it widely in ads, was delighted when a Buffalo, N.Y. school pupil, asked to identify Omaha as a city, state, river or mountain, told his teacher: "It's an insurance company."

Skutt's flair was for more than public relations. He decided the real way to build up the company was to sweeten the benefits. He did this by making policies noncancellable by the company, writing income-protection policies to cover the whole family, and liberally interpreting the policy clauses in paying claims. In the 40 years before Skutt's presidency Mutual paid out $250 million in claims. In his ten years on the job it has paid out $750 million. The rise in premium income was equally dramatic: $187 million last year, against $77 million in 1949.

Spurring Skutt and Mutual on is the fear among private insurancemen that unless a free-enterprise way is found to insure the U.S. public against loss of income due to disease or accident, socialized medicine will take over. Flying more than 100,000 miles a year over Mutual's far-flung empire, and working six and sometimes seven days a week even when "vacationing" (as he was last week in Florida), Skutt has dedicated himself to proving that socialized medicine is not needed. The campaign is paying off. A few years ago the Federal Trade Commission took out after health and accident insurance companies for misleading advertising, scared many into cleaning up their operation before FTC dropped the cases for lack of jurisdiction. Skutt was not satisfied with a decision won on a technicality, queried all of Mutual's policyholders. Of the more than 350,000 replying, 96.4% said they were satisfied with Mutual's overall service.

Service at Cost. In a further move to forestall socialized medicine, Skutt volunteered Mutual's vast and efficient claims-handling service "at cost" to the Defense Department to handle claims for servicemen's dependents in 17 states. Last year Mutual processed more than 125,000 such claims for an average cost of $1.20 apiece. Says Skutt: "Many in business criticize the Government because it gets into the realm of private enterprise. Then when the Government asks business to take over, they are busy looking out the window."

To Mutual's Skutt, heading off compulsory Government health insurance is not the real satisfaction of his job. That satisfaction he finds in working out new ways of attaining old objectives. "In the old days," he says, "when a person got sick, he looked to his neighbors for help. Now, in our more complicated society, that is usually not possible. We like to feel that we are the good neighbor."

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