INSURANCE AND SOCIAL WELFARE INSURANCE AND SOCIAL WELFARE well. The principle of all kinds of insurance is|surance. The miners' sick funds, which were fundamentally and essentially social. Whether also regulated by the law of 1845, were of provided by the state or by private business or- much older existence. In the United States ganizations, insurance is an effort to carry the principle of social insurance was recogcollectively the burden of risks to which all nized in the first decade after the adoption of who enter into the insurance relationship are the Federal Constitution, when the United liable at some time, or risks which are certain States Government established a sick insurance for some members of the insured group but not and benefit fund for seaman, which was one for all. The cost of carrying the risks or of the first systems of the kind in the world. of meeting the burden at the particular time As in the case of the later miners' fund in when it occurs is distributed through insurance Europe, the Government singled out a particuover a longer period of time. In the first class larly hazardous occupation and attempted to we have such risks as death, for which life provide for its risks, and from this small beinsurance is instituted; sickness for which there ginning the United States Public Health Servis sick insurance. In the second and more ice has been developed, which now serves the numerous group are the risks of loss of prop-cause of health in many other occupations as erty through theft, fire, earthquakes, hail, and various unusual natural phenomena; the loss of life or working power through accident, invalidity, old age, unemployment, etc. In all of these matters the state has an interest not merely to provide an easy and safe method to enable individuals to carry these risks and encourage them to provide a regular means of carrying them so that they are not worsted in the economic struggle and thrown upon the community as a public charge, but more particularly the interest of the state lies in the creation of insurance funds and business organization back of funds in which there is a very strong motive to prevent the occurrence for the relief of which these funds will be used up. Thus every force-and insurance is one of the strongest economic forces-that seeks to reduce mortality and prolong life, to promote and preserve health, to prevent accidents and make industry safer for the workers engaged in it, to make employment and the opportunity to earn a living by honest labor more secure, to lengthen the effective period of working life and thus postpone invalidity and old age, has for the state the highest value. Experiments in Social Insurance.-Only in recent times have governments recognized the possibilities of social insurance. For a much longer period governmental supervision and inspection as a means of preventing fraud in the use of insurance funds has been recognized as a necessary function of government every where. The most complete system of social insurance organized by the state is probably that of Germany, with the still newer scheme of England, a close second. One of the earliest attempts is found in the Prussian Code of 1810, which provided that an employer must care for and support his servants who became incapacitated for work. Prussia, likewise, in 1845, compelled workmen to join sick funds, and, in 1849, employers were also compelled to contribute to the cost of carrying sick in German Workingmen's Insurance Laws.— The German system began with a sick insurance law passed in 1883, compulsory for the majority of workers in all occupations, and requiring them to belong to an insurance fund and contribute two-thirds of the cost, while their employers contribute one-third. They receive free medical attendance, money benefits, maternity and funeral benefits, and pensions for invalid widows and orphans of insured persons. This was promptly followed by the law of 1884, providing for accident insurance to be paid for by employers, but so coördinated with the sick insurance plan as to provide that in the majority of accidents during the first fourteen days of incapacity, the burden falls on the sick fund. In 1889 was provided insurance against old age and invalidity. These acts have been amended and finally codified in a still more perfectly coördinated system in the German Workmen's Insurance Code of 1911, a translation of which, by Dr. Henry J. Harris, has been published by the United States Bureau of Labor (Bulletin 96, 1911). A new feature of this code is the provision for survivors insurance, popularly called widows and orphans insurance. The German insurance plan has been severely criticised by all parties to it; the general taxpayer, because of increasing tax burdens due to the relatively small state contributions the government bearing the whole administrative cost and making a substantial contribution to the old age payments; the employers, because of added cost of production; and workingmen, because of the burdens of premiums which they must pay, thus reducing their present income, and because of the small and inadequate benefits they receive when the misfortunes against which they are insured occur. On the other hand, there is, throughout the German Empire, universa! testimony to a greater sense of security, less INSURANCE AND SOCIAL WELFARE worry, better health and a prolonged period of working efficiency, attributable in large part to the insurance legislation. No political party seriously proposes to repeal this legislation. ways save from their meagre incomes under the pressure of an increasing standard of living which is desirable from the point of view of public policy, and that in any event they will not make adequate provision. On the other hand, as experience in Germany shows, a compulsory plan on a meagre scale does reach the thriftless and those who would likely be a public burden, and does furnish an attractive, safe and economical plan for those who learn the first lessons of thrift and are encouraged to take out added protection not required by law. Constitutional Difficulties.-These make the introduction of workmen's compensation and compulsory insurance laws extremely difficult English Social Insurance.—In England a less complete scheme but, in some respects, a more far-reaching plan of state aid and interference has been enacted into law. This plan began with the Employers' Liability and Workmen's Compensation Acts of 1897, requiring employers to compensate their workmen for loss of life or working capacity arising from accidents during employment. This compelled the majority of employers to insure against accidents in private companies as the state did not provide any means of insurance. In 1908, how-in American states. A very modest New York ever, an old age pensions act, establishing a non-contributory system, was in reality an extension of social insurance because the pensions were paid out of the proceeds of taxation and the burden thus widely distributed. Finally, in 1911, the National Insurance Act, to provide for insurance against loss of life, unemployment and for other purposes, is a complete contributory scheme affecting a large part of the working population of Great Britain and requiring payment by employers and employees alike. Compensation and State Insurance in the United States. In the United States, apart from the federal action relating to seaman in the early days of our history, we have had an important development of insurance of all kinds through voluntary and private methods and agencies. The increased need for provision for industrial accidents has led to stronger employers' liability laws, giving rise to more adequate provision for the insurance of employees, and, in fourteen states, to an attempt to introduce workmen's compensation. All of these statutes are of very recent origin (Maryland, 1902, to Arizona, 1912) and all but three are elective, that is, employers are not required to accept the act but are subject to a greater liability under the employers' liability laws if they do not. In two states, Washington and Ohio, insurance is made obligatory, while Massachusetts and several of the other states that have the elective plan have provided for optional state insurance. Every effort is made in these statutes to encourage insurance as a means of economically meeting the risks involved and assuring the largest possible benefits at the least cost to those who pay the premiums. Also every effort is made to encourage foresight, prevention and safety devices, and to promote thrift. The prevailing spirit of American institutions is doubtless against compulsory insurance. That the workman ought to save and make use of savings banks to provide a fund for emergencies and, by annuities, for the protection of his possible period of invalidity or old age, coincides with our strong individualism, but there is an increasing feeling that workingmen cannot al | compensation act (1910), applicable only to extra-hazardous industries, was held, March, 1911, unconstitutional by the court of appeals (Ives vs. South Buffalo Ry. Co., 201 N. Y. 171) as the taking of property without due process of law. The supreme court of Washington, however, has since held valid a compulsory law providing for state insurance in hazardous industries, including work done under public authority (Act of October 1, 1911) and creating an industrial insurance department of the state government (ex Rel. Davis-Smith Co. vs. Clausen, 65 Wash. 156). The Ohio statute of January 1, 1912, which was elective but provided for state insurance under a state liability board of awards, was upheld by the supreme court of Ohio (State vs. Creamer, 85 Ohio State 349) but this act has been superceded by a new compulsory act, March 14, 1913, under the new constitution of Ohio. Federal Legislation.-Congress has passed a federal compensation act applicable to persons employed as artisans or laborers in certain government employments (Act of May 30, 1908) which was extended, March 11, 1912, to apply to hazardous work under the Bureau of Mines or the forest service, and, also was made to cover the Isthmian Canal employees engaged in hazardous employment, Act of March 4, 1911. These acts however, are generally considered relatively inadequate and have estab lised a standard lower than that in many states. Efforts are now being made to revise them. A federal scheme of complete social insurance-sickness, accident, invalidity and old age-has been discussed for years and might be constitutionally established through the taxing power, but has not yet reached the stage of practical consideration. See INSURANCE, INDUSTRIAL; INSURANCE, LEGAL BASIS AND REGULATION OF; PENSIONS, CIVIL; PENSIONS FOR TEACHERS; SAVINGS BANK INSURANCE; UNEMPLOYMENT. References: H. R. Seager, Social Insurance (1910); W. H. Dawson, Social Insurance in Germany, 1883-1911 (1912); U. S. Commissioner of Labor, "Workmen's Insurance and Benefit Funds in U. S." in 23d Annual Report, 1908, "Workmen's Insurance and Compensa INSURANCE COMMISSIONS-INSURANCE, LEGAL BASIS AND REGULATION OF is collected by state officials, and in others by local officials; if by the former, the tax is frequently apportioned to the cities; and often the city's share, where this system prevails, is devoted to the benefit of the fire department. D. R. D. tion System in Europe" in 24th Annual Report, | two per cent upon the gross receipts of foreign 1902; L. K. Frankel and M. M. Dawson, insurance companies. In some states the tax "Workingmen's Insurance in Europe" in Russell Sage Foundation, Publications, 1910; N. Y. Employers' Liability Commission, Report (1910-1911); Mass. Commission on Compensation for Industrial Accidents, Report, 1912; Nat. Municipal League, Proceedings, 1909 (At-See CORPORATIONS, TAXES ON. lantic City), 1910 (Chicago); A. S. C. Carr, W. H. S. Garnett and J. H. Taylor, National Insurance (1912). S. MCC. LINDSAY. INSURANCE, INDUSTRIAL. The term is used in a technical sense and should be differentiated from workmen's insurance (see) and INSURANCE COMMISSIONS AND COM- other forms of social insurance. It differs MISSIONERS. Insurance commissions and from the ordinary level premium life insurance commissioners are appointed by the governor in four essential pionts: (1) the premiums are of a state for a period usually as long as the payable weekly; (2) they are collected by an term of the governor. The appointment of such agent who calls at the house instead of being commissioner is often made for political serv- payable at the office of the company; (3) the ice rendered or to be rendered. In the Ohio amounts of insurance are adjusted to a unit campaign of 1912 one of the candidates before premium which the insured elects to pay-thus the convention had, for his manager, his in- he buys whatever amount of insurance he can surance commissioner. A good salary is at- get for five cents per week premium or multiple tached to this position. In the insurance de- thereof; (4) every member of the family can partment there are usually a superintendent, be, and often is, insured for a small premium. deputy, actuaries, clerks, statisticians-in all The term industrial was applied to such inemployees to the number of twenty to forty.surance by the first company which developed The duties of the department are largely the system in England in 1849 known as the clerical. A list of all companies doing in- "Industrial and General"; and popularly, besurance business and a statement of the cause it is a form of insurance that seems to amount of business, securities, assets, losses meet the needs of the working classes. It bepaid, and other information, are published in gan as a form of burial insurance and its chief the annual report of the commissioner. The purpose has been to secure a decent burial for office collects fees and taxes from the com- each individual in the family. Grave charges panies, and turns the amount collected into have been made that this insurance encourages the state treasury. Companies from other extravagant funerals, also that the insurance states and foreign countries are very carefully of young children has led to their sacrifice for administered and must pay for the privilege the insurance money. Such charges are vigorof transacting business in the state. The in- ously denied by the big insurance companies surance department makes its reports annually, and numerous governmental investigations in usually a volume each on fire and marine, life, England and this country have not sustained and fraternal insurance. See BOARDS, STATE them. There is some basis for assuming that EXECUTIVE; INSURANCE, LEGAL BASIS AND this is an expensive and not wholly advisable REGULATION OF; STATE DEPARTMENTS, HEADS form of saving. A New York statute (1910 ch. 634) restricts the amounts of insurance that may be written upon the life of another person without his consent. OF. References: Insurance Commissioners of the States, Annual Reports; F. J. Stimson, Law of the Federal and State Constitutions of the U. S. (1908). T. N. H. See FRATERNAL INSURANCE; INSURANCE AND SOCIAL WELFARE; INSURANCE, LEGAL BASIS AND REGULATION OF. INSURANCE COMPANIES, TAX ON. Insurance companies are taxed in a variety of References: F. L. Hoffman, Hist. of ways, the most common being a tax on premi- | Prudential Life Insurance Co. of America um receipts. For example, in New Hampshire, (1900), Life Insurance of Children (1903); New York, Pennsylvania, New Jersey, Illinois, A. C. Campbell, Insurance and Crime (1902). Wisconsin, Kansas and Missouri the rate is S. McC. L. INSURANCE, LEGAL BASIS AND REGULATION OF Legal Basis of Regulation.—In a long series | authority to supervise the business, and of decisions, beginning in 1868 with the case "that there is no doubt of the power of the of Paul vs. Virginia, the Supreme Court of the United States has repeatedly refused to recognize insurance as commerce, and has therefore held that the Federal Government has no state [using that term as contrasted with the Federal Government] to prohibit foreign insurance companies from doing business within its limits. INSURANCE, LEGAL BASIS AND REGULATION OF "The state can impose such conditions as it pleases upon the doing of any business by these companies within its borders, and unless conditions be complied with the prohibition may be absolute." Even as regards alien insurance companies, the executive of the United States will not entertain complaints of unjust discrimination by the several states, and such companies must seek admission specifically to each state in which they may wish to operate. In addition to the full supervisory powers of the state over the insurance business, the various local governments usually exercise a limited number of functions such as the enforcement of building codes or ordinances designed to promote fire prevention, and the imposition of taxes and license fees for general revenue purposes, or for the maintenance of inspection services or the support of fire departments. the several states. The more important provisions are the following: (1) Enactments relating to organization of companies, from the time the articles of agree. ment are arranged until the company is authorized to assume risks; this includes regulation of the payment of dividends; conversion of mutual companies into stock companies; filing of reports, making of deposits of approved securities with the state, and the investment of the assets. (2) The so-called reserve laws which define the standard of solvency and vary according to the type of insurance. (5) Taxes imposed on the companies' funds, license fees, agency fees, fees for filing papers, charters, etc. In some states the insurance department has developed into little more than a tax and fee gathering agency. (3) Definition of the procedure in case of litigation. (7) Regulation of the expenses of companies, especially in the field of life insurance. (3) Statutes regulating the types of contracts and endorsements used. Over one-third of the states have adopted a "standard fire policy" by statute; and in recent years the more advanced states have undertaken to standardize contracts and endorsements also Duties of Insurance Commissioners.-The in the life and accident insurance business. courts of the several states vitally affect the Many states, while not establishing the policy insurance business through their interpretation by statute, prescribe features which must be of the laws and the companies' policy contracts included in or omitted from the contract. and clauses; but in nearly all the most progres- (4) Laws relating to the licensing and susive states, supervisory control over in-pervision of agents and brokers, including the surance companies of all kinds is exercised by prohibition or regulation of certain practices a special official designated as the superintend- such as rebating; making of estimates; and ent or commissioner of insurance, in nearly all the manner of advertising. cases appointed by the Governor. In exercising such control over the business of the companies he is vested with extraordinary discretionary powers. Not only must he enforce the insurance statutes in their application to all companies (and as regards probably no business is there such a mass of legislation), but it is his duty to apply some fixed standard of solvency for each company. All non-resident companies must secure his permission before transacting business in the state, and all their agents must have his certificate of authority. Brokers must be licensed by him, and all companies must annually render a financial report in the form and manner prescribed. He may require statements from the officers or agents of the company at any time and on any matter, and may demand free access to all books and papers of any company or agent transacting business in the state. Any persons connected with the company may be examined by him under oath and for probable cause he may visit the home office of the company for the purpose of examining its affairs. Neglect or refusal in any of the foregoing matters usually subjects the company to heavy fines or to a supension of its right to transact business in the state. The latter penalty may be applied whenever the assets of the company appear to the insurance commissioner to be insufficient; or if in his judgment it has violated the insurance laws of the state; or if it has failed to comply with his requirements for information. Scope of State Insurance Legislation.-The insurance laws of the country show an astonishing absence of uniformity or method among (8) Special laws, among the chief of which may be mentioned valued policy laws; anticompact laws; anti-coinsurance laws; state fire marshal laws; retaliatory laws of various kinds; and laws governing the manner of conducting the election of directors. State Control of Rates.-During the last few years, owing largely to the widespread belief ́ that fire insurance rates are too high and often arbitrary and discriminatory in character, the subject of state made rates has assumed great importance. Two legislative commissions, namely those of Illinois and New York, reported exhaustively on the subject in 1911. In 1910 and 1911 Kansas, Texas, and Louisiana passed laws giving power to certain state authorities either directly or finally to fix the rates that fire companies may charge. In other states legislation is suggested which will give property owners the right to appeal to state authorities where it is felt that rates are too high or discriminatory in their application. In a number of other states a determined movement is also on foot to abolish fire underwriters' associations by statute or court decision, and thus prevent the companies from combining in rating associations. INSURANCE, SAVINGS BANK-INSURGENCY IN INTERNATIONAL LAW The question of state control of rates of See FIRE DEPARTMENTS; FIRE PROTECTION; the insurance business led in the years 1910 FRATERNAL INSURANCE; INSURANCE AND SOand 1911, to epoch making cases relating to CIAL WELFARE; INSURANCE COMMISSION AND the constitutionality of the states' function. COMMISSIONERS. INCOME AND PAYMENTS TO POLICY HOLDERS OF INSURANCE COMPANIES, 1890-1910 *Years 1905 and 1910 include records of Lloyd's and inter-insurance associations. In the suit of the American Surety Company of New York against the state of Nebraska (Judge Thomas C. Munger of the United States district court rendering the decision) the Nebraska law of 1909 fixing the rates of surety companies was declared unconstitutional on the ground, to quote the decision, that: The surety business is in no way a monopoly, for individuals and partnerships are free to furnish such bonds in competition with them and to make any charge or no charge for assuming such risks. The public interest in the business of such companies is no different from its interest in the business of any large mercantile or manufacturing company, whose capital, experience and facilities may enable it to have a widely extended patronage, If the state may fix the amount of compensation for which an insurer may lawfully contract for furnishing such insurance, the state may dictate the price for which all other commodities shall be sold, including the price which may be paid for labor. This cannot be done. The Fourteenth Amendment to the Constitution protects the right of those engaged in purely private business to fix the price at which they will sell their services or commodities. References: S. H. Wolfe, "State Supervision of Insurance Companies" in Am. Acad. of Pol. and Soc. Sci., Annals, Sept., 1905; S. S. Huebner, "Federal Supervision and Regulation of Insurance" in ibid, Nov., 1905, State Supervision and Regulation of Fire Insurance Companies (Address, Feb. 19, 1906); Illinois Insurance Commission, Report, Jan. 4, 1911; Senate and Assembly of New York, Report of Joint Committee on the Fire Insurance Business, Feb. 1, 1911; Am. Year Book, 1910, 346, 359, ibid, 1911, 320-323, ibid, 1912, 353363. Principal cases are: Paul vs. Virginia, 8 Wall. 168 (1868); Liverpool Ins. Co. vs. Mass., 10 Wall, 566 (1870); Hooper vs. California, 155 U. S. 648 (1894); New York Life Ins. Co. vs. Cravens, 178 U. S. 389 (1899); Nutting vs. Mass., 183 U. S. 533 (1901). S. S. HUEBNER. INSURANCE, SAVINGS BANK. See SAVINGS BANK INSURANCE. INSURGENCY IN INTERNATIONAL LAW. From time to time there have arisen conditions in which, while hostilities existed within a state, the circumstances were such that the state did not wish to recognize the existence of war; and outside states were also unwilling to recognize the belligerency of the party fighting against the state. The Supreme Court of the United States has taken cognizance of "the distinction between recognition of belligerency and recognition of a condition of political revolt, between recognition of war in a material sense and war in a legal sense . . the political department has not recognized the existence of a de facto belligerent power engaged in hostility with Spain, but has recognized the existence of insurrectionary warfare" [Three Friends (1906) 166 U. S. 1]. It was generally felt (as by the Illinois Commission) that the same principles must be applicable to fire insurance rates. More recently, the Federal Supreme Court in the case of the German Alliance Insurance Company vs. Hale, put a different construction on a law passed in Alabama, according to which the property owner was permitted to recover an extra 25 per cent of the amount of the loss if it appeared that the company in which he carried insurance belonged to, was a part of, or in any way connected with, any insurance tariff association. In passing on the constitutionality of this law, the United States Supreme Court took the position that the law does not infringe on the Constitution nor deprive the insurance company of any rights granted thereby. The state was held to have the power to impose any restrictions upon insurance companies that it chose prior to permitting them to transact business within the state. Follow-defined, but practice seems to show that in the ing this decision the United States district court, at Topeka, rendered a decision in 1911 declaring the Kansas Rating Law of 1909 constitutional. | The status of insurgents is not completely time of an insurrection both parties must conduct the hostilities with regard to the rules of civilized warfare and that citizens of foreign states are not liable to the treatment to |