with government on many fronts. On the one hand, they resisted proposed laws that were at odds with the fundamental economics of their industry. On the other hand, they turned to government to stabilize their business environment.50 Thus insurance leaders exhibited the same conflicted perspective on regulation that characterized many industries at the beginning of the twentieth century.
Reckless competition posed the biggest threat to the stability of the fire insurance business. Upstanding companies were often undersold by naive or fraudulent firms that didn't have the means to pay claims if disaster struck. These “wildcatters” sparked rate wars. Although established insurance companies promoted their stability and trustworthiness to counter the wildcatters’ price competition, customers had little ability to discern what fair rates for fire insurance should be and often selected companies on the basis of the price of their premiums rather than their reliability.
Incumbent insurance companies responded to this market competition by lobbying for limited regulation. They urged state governments to require new companies to post bonds, but these efforts to create state-sanctioned barriers to entry were largely unsuccessful in the late nineteenth century.51 Insurers also tried self-regulation or cartelization.52 In various states and nationally, they created underwriting boards to collect data and assess the level of risk associated with different kinds of buildings and uses. They then established systems of uniform rates. The best-known of these organizations, the National Board of Fire Underwriters, was launched after the Civil War by seventy-five companies from the East and the Midwest.53
Cooperative rate setting, however, prompted an outcry from customers. Some states accused the underwriting boards of violating state and national antitrust laws. In Nebraska, the legislature passed a law in 1897 barring insurance companies from combining to set rates or commissions paid to agents.54 Although these efforts to apply antitrust laws to insurance were generally unsuccessful in the courts, state legislators introduced bills banning insurance compacts in thirty-three states between 1885 and 1900, and in sixteen states these bills were adopted into law.55
Frustrated, some customers turned to government. In 1909, Kansas adopted a law giving the state superintendent of insurance the power to approve rates. Insurers challenged the law, but in 1914, in German Alliance Ins v. Lewis, the U.S. Supreme Court upheld the state's authority.56 Many other states followed Kansas. In Nebraska, the legislature passed a “New Insurance Code” in 1913 to establish comprehensive insurance regulation. The new structure withstood both judicial and electoral challenges in part because of an emerging consensus that regulation was a reasonable means to avoid various scenarios that would put the government in control of the marketplace as an agent of either labor or corporate interests.57
Even as they resisted efforts to bar them from collaborating and fought state rate regulation, fire insurance companies saw how they could benefit by working with government. Research developed by the fire insurance underwriting boards led to the development of model building standards and codes that lowered the risk of fire. Insurers pressured communities to adopt these standards and to develop and maintain fire departments. Where cities fell behind on their investments in fire departments, the industry raised rates or threatened to withdraw altogether. Will Ahmanson served on the Nebraska State Committee in 1918 as a volunteer building inspector looking for potential fire hazards. Altogether, these efforts to prevent fires represented the epitome of Progressive reform: collecting data, addressing underlying causes, marshaling citizen volunteers, often soliciting compliance and sometimes compelling it through state-enforced regulation.
A LOCAL COMPANY TO TAKE THE PLACE OF EASTERN CAPITAL
Will Ahmanson watched all of these developments with an eye to his own opportunities and a growing frustration that his hometown was so dependent on East Coast insurance interests. In April 1919, he saw an opportunity to launch his own local company. But the effort nearly cost him his reputation.
In the securities markets of the 1910s and 1920s, stock scams were common and often targeted rural investors. Will Ahmanson must have known this, but for some reason he trusted the two stock promoters who came to him with the idea of creating National American Fire Insurance.58 They appealed to his personal and civic aspirations and convinced him and other investors that they could create “the largest insurance company west of the Mississippi.”59 To reassure investors, they wanted Will to serve as president and become a major owner. Will agreed and recruited a friend and colleague, James Foster, from Columbia Fire Underwriters, to serve as secretary-treasurer.60
The stock promoters traveled throughout Nebraska and Iowa selling shares to farmers and small-town merchants and bankers. They bought full-page ads in the Omaha World-Herald promising profits and security. “No more attractive investment ever has been offered the public of the west,” the ads exclaimed. “Sound, substantial, and certain of profit.” The writers explained, “The state sees that the company's capital, which you helped to furnish, is kept intact.”61
The promoters offered liberal terms to investors—half of the money down, with the rest due in six months at 6 percent interest.62 Patriotic farmers and citizens were allowed to exchange their deflated Liberty Bonds, purchased during World War I, at full par value for National American stock. Some buyers were even offered seats on the board.63 Using all of these tactics, in six months the promoters sold $1,115 million worth of stock to bankers, merchants, and farmers in towns and cities scattered across Nebraska.64
Will Ahmanson apparently didn't realize that the promoters were more interested in extracting capital than launching an insurance business. He was dismayed when an insurance examiner for the State of Nebraska found that nearly $142,840 had to be written off for “organization expense.” This was money the promoters had skimmed for themselves.65
Ahmanson worked hard to redeem the investors’ trust and protect his own good name. National American Fire Insurance leased an entire floor in downtown Omaha and recruited nearly three hundred agents in the surrounding territory.66 In its first year, the company wrote policies for fire, tornado, automobile, hail, and marine insurance; it had gross premium income of more than $26,000 and net losses of only $1,210. It turned a small profit.67 The chamber of commerce gushed that the company's success was yet another sign of Omaha's growing maturity and place among the nation's great cities. “At the end of its second year [National American] shows a remarkable growth which proves that Western men are beginning to have confidence in Western institutions.”68
With this success, Will Ahmanson imagined his boys becoming executives with the company. He suggested to Howard that after college he might become National American's vice president and treasurer.69 He moved his family to a new home in a part of town that would both reflect his position and epitomize all that he and Florence prized—family, community, responsibility, and stability. The neighborhood they chose was full of like-minded families in pursuit of the American dream.
THE MIDWESTERN IDEAL
The neighborhood of Dundee epitomized the suburban ideal at the beginning of the 1920s, and it would play an important part in Howard Ahmanson's vision of the relationship of home, community, and the economy in his later career. Established as an autonomous community just west of Omaha, it was served by a streetcar that carried businessmen like Will Ahmanson from home to office and back every day.
Advertisements for the development in its early years noted the “high dry pure and clean air,” in contrast to the stench of the stockyards and factories on the city's south side.70 Covenants precluded commercial development and barred all immoral and illegal businesses, including the sale of spirits or malt liquors.71 In short, Dundee offered a refuge from the crowds and corruptions of urban life.
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