INSURANCE

the years immediately preceding the world war were not extraordinarily interesting from the insurance pomt of view, although those of military age who then effected assurances had, later, excellent reasons for satis- faction that they had dene so, since all who were insured with british offices were covered, whether or not the risks of war were specifically excluded from the terms of the policy. i. great britain life insurance most of the british offices transacting what is known as ordinary life assurance had issued policies free from all restric- tions, whereas some of the companies transacting industrial assurance had specially excluded the risks of war. all these companies which had done so decided, however, to waive their insurance rights. the value of the complete cover may be gauged by the facts that, after the outbreak of hostilities, an additional premium of £7-7:0% was quoted to cover the war risks, and that the rate soon advanced to as much as 20%% per annum. losses of the war period —\what the world war meant for life assurance was indicated in a paper read by mr. ih. brown, assistant actuary of the commercial union assurance co., before the insurance institute of london on dec. 20 1920. re- ferring to the british offices, mr. brown estimated the war losses during the five years 1914 to 1918 inclusive as follows:— 1. mortality in excess of the pre-war ratio resulted in a loss of about £3,000,000 a year. 2, depreciation in excess of the amount for just before the war was estimated at £4,000,000 a year. 3. the reduction in the net rate of interest due to the high income tax resulted’ in a loss, as compared with the pre-war period, of about £500,0co a year. : the total losses, as compared with the period immediately preceding the war could, therefore, be estimated atl, roughly, about £7,500,000 a year during the five war years. in the years immediately before the war the total divisible profits of the british offices, in respect of ordinary life assurance, amounted to about £6,500,000 a year, of which about {6,000,000 was divided among the pelicy-holders, and about £500,000 was distributed among the shareholders of the proprietary com- panies. during the war the nermal profits continued to be realised subject to the deduction of the special war losses de- scribed. the special war losses thus exceeded the normal profits of the same period and it may be estimated that, down to the end of 1918, the war probably cost the life offices, as a whole, about five years’ bonuses. | ~ post-war conditions.—after the end of the war a great change came over life assurance conditions. instead of suffering de- preciation in security values year by year, the investments began to appreciate, while favourable opportunities for the investment of funds continued. against this fact had to be set the consideration that taxation continued to be heavy. the offices were, however, relieved from the burden of the serious war mortality. they were still guided in their calculations of premium rates by mortality tables relating to the experience many years ago. investigations are being made by the in- stitute of actuaries into mortality experience, but the results are not to be expected for some time. meanwhile, these two bodies have issued the results of their inquiries into the experi- ence of annuitants. these show that the longevity of annuitants is distinctly greater than that of the general public. conse- quently, in 1924-5 most of the british oflices amended their annuity rates and would probably have further increased the prices asked but for the favourable rates of interest which they obtained on their investments. while the difiiculties of the british offices due to the war were serious, they were far less formidable than those of some of the continental companies in countries whose currencies de- preciated heavily in value. agreements were reached between the different countries respecting the basis of settlements. <a large number of policies were, for instance, efiected by belgians with german institutions, and an agreement was only reached at the end of 1925 respecting the settlements. in the united states the effect of the war on the insurance offices was com- paratively small. the american offices have mostly withdrawn from life assurance outside the united states. this secession has provided opportunities for canadian offices some of which have vastly increased their business within the last decade. the assurance per head in canada and in the united states is very much greater than the corresponding amount in great britain. the average sum assured in the last-named is only about 5096 of the corresponding sum assured in canada and not much more than one-third the assurance per head in the united states. industrial life assurance —crniticism of the industrial life assurance system in great britain led to the appointment in may ror1o, of a departmental committee by the board of trade to inquire into the business carried on by industrial assurance insurance companies and collecting societies. the report of this com- mittee was issued in july 1920, and made various recommenda- tions. evidence was given before the committee that the con- venience and economy in collection could be improved by the introduction of the block system, under which an agent is assigned an exclusive area for his work. the lead in the reduc- tion of working costs has been taken by the prudential assurance co., which by gradual steps has lowered its working costs fram 40°5°% of the premium income in 1920 to 27-86% in 19024. this reduction made possible the introduction of a reversionary bonus system for the industrial policy-holders on the general lines ap- plied to ordinary life assurance. ‘the committee recommended the appointment of an industrial assurance commissioner, and his first report, which was issued in 1924, showed that the ap- pointmert had been of value to the assuring population, particu- larly in its relations with the less satisfactory type of offices. fire insurance fire insurance was affected by the world war in so far as relations existed between insurance companies and the assured in countries which were at war with each other and also by the influence of the war on prices on commodities. ‘this was par- ticularly scen in the great increase in the amount of the claims during 1919-20. in fact, the cost of the claim settlements has been much higher in the post-war period than in the pre-war period. this development is illustrated by the estimates of the cost of the principal fires in great britain and ircland. the cost of these, which only take into account fires in which the dam- age amounted to {1,000 or more, as estimated by the times, amounted to £3,300,000 in 1916, to rather over £4,000,000 in 1917 and to £5.500,000 in rg18. in ro1g the cost of the prin- cipal outbreaks advanced sharply to £9,462,000; in 1920 they were {9,374,000; in 1921 they amounted to £8,128,000; in 1922 to £6,218,000; in 1923 to £7,192,000; in 1924 to £5,017,400; and in 1925 to {s,122,100, it will be seen that since 1920 the cost of the claim settlements has very much declined, which reflects, at any rate partly, lower valucs. losses from fires——in order that the total cost of all the fires in great lritain and ireland may be estimated, it is usual 10 assume that so®%,, may be added te the above figures in order to include the cost of ail fires in which the damage amounted indtivislually to less than f100,c00. excluding the exceptionally costly years i919-20 it will be seen, therefore, that the total cost of all the fires in great britain and ircland may be calculated at something like {£10,000,- ooo. these figures are small in comparison with the cost of the fires in north america, in which the british insurance comipanties transact a large voluine of business. the losses in the united states vary very much from year to year, since losses, when they occur, are usually extremcly costly. in 1922, for instance, the total cost was estimated at about £50,000,000. losses from earthquakes there have been no other losses com- parable with those caused by the earthquake at san francisco in 1906, the british offices settled all claims made upon them prompt- ly, in full. on sept. 1 1924 there occurred the great earthquake in japan. the british and american insurance companies had, how- ever, been careful specifically to exclude the risk cf earthquake from the terms of the insurance. it was generally held that, with such a definite exclusion, they could not pay claims for damage for which they were in no way liable. in order, however, to show practical sympathy with the japanese people, the british companies olfercd to return all premiums for the year which had been paid in respect of property damaged or destroyed, the american offices also in- timated their readiness further to return the premiums paid, and the attitude of the insurance companics was known to have created a favourable iiipression in japan. claims were also made in respect of the damage caused by a great fire at smyrna in sept. 1922, during a war between turkey and greece. insurance companies main- tained that the fire was a direct outcome of war, the risks of which had been definitely excluded from the policies covering property in the city. their attitude was upheld in the courts. insurance managers have pointed out that claims are frequently paid in respect of damage for which they are not actually hable. by inadvertence, some fact may have been omitted from the proposal form, and insurance companies, instead of standing on their rights, have been ready to settle claims. in the case of damage directly caused by earthquake and war, an essential principle was involved which, it was declared, they could not throw to the winds in justice to the rest of the assured and to their shareholders. the increase in the size of buildings has meant a great increase in the values at risk in limited areas, and losses in respect of com- 45 modities stored in warehouses now amount to very large figures. as an example, a fire in a tobacco warehouse in the port of london in april 1923 amounted to as much as £{1,050,000. the risk af damage caused by civil disturbance, which has been apparent in various countries since 1911, has induced the insurance companies to make the fact clear that such damage ts not covered by the terms of the ordinary fire insurance policy, the risk may usually be covered for a small extra premium, and many commercial enterprises now take the precaution of specially effecting such insurance. when there are no exceptional circumstances rendering the risk unusually hazardous it is accepted for a nominal rate. in cases, however, in which the risk has secemect to be a quite serious one, high rates have at times been paid. the london market is the principal centre for the accept- ance of such risks, and business has from time to time been trans- acted there in respect of most countries. aiarine insurance in the years immediately preceding the world war there was a demand for the insurance of shins and cargoes against war perils. the insurance was granted as a rule at nominal rates, but the existence of the demand was indicative of the uneasiness which prevailed. happily for the maintenance of british com- merce, a government scheme had been prepared in advance, since it had been realised that, unless the resources of the nation were behind british shipping. vessels would, on the outbreak of hostilities, remain in port or would immediately take shelter there and overseas commerce would have been brought to a standstill, when war broke out, schemes were immediately brought into operation. that designed to cover vessels was worked through the instrumentality of the mutual shipping clubs, and provided that, in return fora premium, the governinent should assume the greater part of the risk. for the purpose of accepting the war risk on cargocs a government office was estab- lished in the city of london under the auspices of the board of trade and with the active assistance of leading underwriters. at the same time, underwriters at llevds and of the insurance companies themselves wrote risks, with the result that the lesser risks were accepted by underwriters at rates below those quoted by the government office, which was thus called upon to assume the more serious risks. underwriters also granted war insurance in respect of many neutral ships and their cargoes to which the british govt. scheme did not apply. ‘the maintenance of the government schemes was, however, of great value, especially at times when josses due to the submarine warfare were very heavy. but for the fact that the government scheme was available for the acceptance of the war risk, in respect of cargoes in british ships, the rates of premium quoted in the open market must at times have risen to very high, if not prohibitive, levels. a substantial surplus was realised on account of the government cargo in- surance scheme. | missing ships—one difficulty which had to be taken into account was that a large number of ships became missing, and that it was not always easy to decide if these had been lost though direct war perils, or if their loss had been due to the ‘isks of navigation, especially as some of the usual aids had been withdrawn. this question was carefully considered by a com- mittce representative of shipping and underwriting, and it was agreed that, in the event of vessels becoming missing, there should be arbitration. the underlying idea was that an arbitrator, after hearing such evidence as was possible, could form an opinion as to the probable loss of the vessels, whereas if the question had been taken into court the proceedings might have been long and costly and no better decision could have been expected. in some cases the loss was apportioned by the arbitrator in such proportions, as seemed reasonable, among the war-risk and marine-risk underwriters. uiederwriting.—in spite of the war, or rather because of it, large underwriting profits were made in the london market during the period of hostilities and immediately after it. under- writers took great risks in which they were, as events showed, justified. the remarkable rises in the values of ships and com- modities meant that premium incomes were very much aug- mented, and many companies, new and old, were attracted to the business. two years after the cessation of hostilities there was a muirked reaction. with the sharp decline in the values of 486 tonnage and commodities the amount of insurance business like- wise declined. in view, especially, of the great increase in the size of the market, there was not enough insurance to feed it, particularly as underwriters had become accustomed to assum- ing far larger lines than they had been used to write before the war. severe depression set in, and various attempts were made, extending into 1926, to try to obtain some stiffening of rates. an extraordinary feature of marine underwriting in recent years has been the extended period over which claims have been presented. before the war it was considered that an account could, for practical purposes, be considered as closed at the end of the third year. there might then be still a few claims unset- tled, but the total of these would not be of sufficient magnitude to disturb the main results of the underwriting as then disclosed. after the war no such calculations could be made, and it is now common for claims to be presented for any of the years up to 10 after which the insurance was written. there were special reasons for such delays during, and immediately after, the war period, when tonnage was in keen demand. any repairs that could be postponed were deferred for as long as possible, especially as the repairing yards were fully occupied with work. miscellaneous workmen's compensation.—\mportant recommendations respect- ing the system of compensation for injuries to workmen in the united kingdom were made bv a departmental committee appointed by the liome secretary in may 1919, which reported in july 1920. the committee was presided over by mr. holman gregory, k.c., m.p., and included representatives of the workers and of insurance com- panies. the committee, after a thorough examination of the sub- ject, found that there were certain defects in the system then obtaining, but were of opinion that these defects could be remedied, largely without resort to a state system of insurance, although not without the introduction of a certain measure of state control. ‘they proposed that, in future, definite percentages of the premium income should be expended in benefits to injured workmen or their dependents and that the remainder should be available for the man- agement expenses or profits of the companies, and the payment of commission to agents, the latter not to exceed 5°% of the premium income in any case. they calculated that there would thus be saved on the then cost to employers a sum of between £1,250,e00 and £1,500,000 a year, which, under the existing organisation, would be paid away in expenses of management, commission and profits. in order to provide against the risk to the workmen of uninsured employers proving unable to meet the obligations placed on them by the act, it was proposed that every employer other than the crown, a local or public authority, a statutory company or a householder in respect of servants not employed by him tor the purpose of his trade or business, should be required to insure against the workmen’s compensation risk. employers with an annual wage-roll exceeding 20,000 were to be entitled to claim exemption from compulsory in- surance upon compliances with prescribed conditions. |touscholders were excluded from the provision of compulsory insurance because, as the risk of accidents to domestic servants is small, the premium charged by insurance companies is more or less nominal, and also because it was considered that the cost and di ficulty of entorce- ment would be out of all proportion to the numbers of persons in- volved. the committee was informed that a large proportion of householders already insured, and they believed that when the proposed increased liabilities were effective, few would be so unwise as to fail to cover their risk by insurance. up to the end of 1925 no legislative action had been taken on these recommendations. motor-cur insurance.--the general insurance department of a composite company includes miscellaneous forms of insurance, among the chief of which is motor-car insurance. during the world war comparatively little was done in this type of business. jn 1g19- 20, when private cars again caine into use, the insurance experience was very unsatisfactory. costs of repairs were on a high scale, and there was an epidemic of thefts. for 1920 some of the leading com- panies reported substantial losses. early in 1921 rates of premium were advanced, and since then the business has, on the whole, been transacted on a fairly profitable basis. credit insurance-—ol recent years notable developments have taken place in the insurance of bad debts tn british oversea trade. this business has for many years been successfully transacted by the ‘trade indemnity co., in which the great composite insurance companies have taken a financial interest. in 1925, on the initiative’ of mr. a. m. samuel, m.p., then head of the overseas trade dept. a committee of bankers, financiers and business men was sct up in order to investigate the advantages that might be secured from a further extension of insurance facilities for this purpose. this com- mittee, whose report was issued in the spring of 1926, made certain recommendations with a view to a further development of this type of business. (c. ma.) insurance ihe the: united states the business of insurance, with its basic element of mutual assistance, has shown a progress in the past 15 years both in volume and ramification unsurpassed by that of any other industry. in the united states as in no other country has in- surance in all its various phases become universally recognised as an essential of commerce and industry. to this fact may be attributed in large measure the achievements of america in business enterprises. insurance coverages permit men and corporations to hazard their resources on new developments without fear of loss from natural and unavoidable catastrophes. the importance of insurance as a national factor may be visualised by the fact that at the end of ro25 the combined companies had a premium income of $4,000,000,000 with total admitted assets of over $14,000,000,000. life insurance.—the life insurance companies aim to supply the demand for life insurance «as best suits the wants of all classes and conditions of men. ‘the old life insurance policy, while the business was in an experimental stage, was so joaded with conditions and restrictions and so limited in its applications, that comparatively few persons availed themselves of this pro- tection; but recently numerous forms of policies have been devised to suit the wants of all sorts of people, and the conditions and restrictions have been eliminated to such an extent that practically the only exaction remaining is that the person insured shall pay his premium. the last 15 years have been notably prolific in the invention and development of plans of life insur- ance. ordinary life insurance, through its several classes of policies—whole life, limited payment, term.and endowment— provides ample choice for the selection of a form of protection best suited to the needs, financial resources and saving abilities of all classes from the average wage-earner to the multi-million- aire. the great industrial insurance companies, with their weekly payment contract, reach the homes of the working classes and enable them to provide for funeral benefits and against personal distress and dire want. paramount among the receut innovations in life insurance is group insurance, through which industrial corporations collectively insure employees re- gardless of age or physical defect. the premium is lower than that which could be obtained through individual contracts, by reason of the overhead savings in insuring a large number under one policy. other introductions include business and partnership insurance, disability, double indemnity benefits and monthly income insurance. the comparative aggregates of the old line legal reserve companies are proof of life-insurance expansion. in rgro the total life insurance in force was over $16,000,000,000 and the wggregate admitted assets totalled something short of $4,000,- 000,000. during rg1o the combined companies had a total premium income of about $600,000,000 and wrote during that year a trifle over $2,500,000,000 of new insurance. the totals for these companies for the year ending dec. 31 1925, show that legal reserve life insurance companies had over $71,000.00¢c,0c0 of insurance in force, including industrial business, and assets of over $11,600,000,000. the premium income was almost 22,590,- 000,000 and the new insurance written in 1925 was over $16,0c0,- 000,000. in a country with a population of 115,000,000 people, there were in 1926 practically 100,000,000 policies of life insur- ance in force, on what were estimated to be about 60,000,000 lives. so extensively has the idea of life insurance been sold in the united states that it is estimated that more than every other person in the country ts insured. fire insurance.—because fire insurance has for years been recognised as an essential adjunct of industrial and commercial enterprise, its growth in the years since 1910 has not been, from a comparative standpoint, as spectacular as life, casualty or miscellaneous insurance. nevertheless, its progress has kept pace with the industrial development of the country and has met the demands imposed upon it by the upheaval occasioned by the world war and the evolution of recent years and recent inventions. while in the period there was nothing in the nature of a catastrophe such as the conflagration and earthquake in insurance, social san francisco in 1906, nevertheless losses were uniformly high and consistent underwriting losses were incurred. in the period, too, there were upward of 75 single fires in the united states having property losses of over $2,000,000, and reaching as high in one instance as $35,000,000. the energy and resources of the fire-insurance executives during the period have been directed along the lines of fire prevention and fire protection work. fire-insurance engineering experts are now consulted in every building operation, and there is no incorporated village or city which has not taken cognisance of the fire hazard by the organ- isation of fire departments, by water systems and by the adoption of fire prevention and protection ordinances. control of the physical hazard, however, has been offset by the development of the moral hazard te which a great part of the fire losses at the present time may be attributed. the growth in resources and volume of the fire insurance business is indicated by a resume of the total transactions of the companies. the figures show that the assets of the companies totalled $550,000,000 in igio, were slightly over $700,000,000 in 1915, over $1,000,000,000 in igt9q, and over $1,730,000,000 at the end of 1925. in igtothe premium income of these companies was but $287,000,000. it had reached $353,000,000 by the end of 1915 and almost doubled itself in the intervening four years, for during 1919 it was almost $700,000,000. consistent progress during the succeeding years resulted in these companies showing a premium income in 1925 of $901,000,000. modern industrial advancement has done much to stimulate the growth of fire-insurance companies, while at the same time demanding a wider scope of indemnification. this has resulted in the undertaking of many additional lines of insurance by the fire-insurance companies, the principal of which is motor-vehicle insurance. other lines of insurance transacted by fire companies include tornado, windstorm and cyclone, hail, inland marine, sprinkler leakage, riot and civil commotion, air-craft, explosion, earthquake, rain, crop, flood, frost and freeze, tourist baggage, parcel post, water damage, use and occupancy, and registered mail. while the total premium volume from many of these lines is at the present time small, neverthcless it indicates a comprehensiveness of service quite in keeping with the modern tendency to place upon insurance the burden of preventing economic or financial catastrophes from any possible anticipated contingency. ocean marine insurance—ocean marine, which is the oldest known form of insurance, reached a volume during the period of the world war never before approached. the demands placed upon insurance companies for marine coverages exhausted the resources of existing carriers, and induced the entry of most of the larger fire-insurance companies into this field. to supplement further the demand during the war, there was organised a bureau of war risk insurance by the u.s. treasury department. this was of inestimable assistance to american commerce, and pro- duced a premium volume during the period of its existence of about $50,000,000, the bulk of which was obtained between nov. 17 1916 and april 27 1918—almost $39,000,000. ocean marine insurance, however, has not progressed in america with other forms of insurance, because it js bound by national laws and subject to national taxation, though it is an international business and in direct competition with international carriers, unrestricted by laws and not subject to the high taxation 1m- posed upon american carriers. the premium volume of ameri- can companies for ocean marine insurance amounts to around $40,000,000 per year. casualiy and miscellaneous insurance —casualty insurance is the latest development among the general classifications of insurance prevailing in the united states. ‘to a great extent it typifies modern progress, and the bulk of its business is directly due to modern economic and inventive conditions, workmen’s compensation and automobile liability insurance being the two leading classes in regard to premium volume. ‘the forms of casualty and miscellaneous insurance cover accident; automobile collision, property damage, and liability; bail bonds; bank deposits; burglary and theft; credit; check forgery; engine and machinery; fidelity; flywheel; health; live stock; liability, ae 407 public, elevator, employers, etc.; plate glass; property damage and collision; surety; steam boiler; sprinkler; title; workmen’s collective and workmen’s compensation. in rgro casualty and miscellaneous insurance companies had total assets amounting to about $300,000,000, while their total premium receipts were $94,000,000, the leading classes of business were liability insurance, with premiums of $28,000,000; accident, with pre- miums of $23,000,000; fidelity and surety, $15,000,000; health, $6,000,000; plate glass, $3,500,000; burglary and theft, $2,500,0c0 in 1925 we find that companies offering the various forms of casualty insurance and miscellaneous insurance had over $1,700,000,000 of assets, while their premium volume was almost $650,000,000. in that year the leading classes of coverage were as follows: workmen’s compensation, premium income, $130,- 000,000; automobile liability, $117,000,000; surety bonds, $56,000,000; liability (public, etc.), $47,000,000; accident, $45,000,000; automobile damage, $41,000,000; fidelity, $33,000- ooo; burglary and theft, $28,000,000; health, $20,000,000; plate glass, $16,000,000. it is worth noting that the writings in two of the individual lines of casualty insurance in 1925 exceeded the total writings in all classes in 1910. (a. l. j..s.) bibliograpiy.—w. gow, marine insurance, 4th ed. (1909); h. g. penniman, manual of fidelity insurance and corporate surety- ship (1911); actuarial society of america and association of life insurance medical directors, aedico-actuarial mortality investt- gation, report of joint committee, 5 vol. (1912-5); c. h. harbaugh, the adjuster’s manual for the settlement of accident and ifealth claims (1915); actuarial society of america, anglo-canadian mer- tality investigation, 2 vol. (1918-9); w. d. winter, afarine in- surance (1919); r. p. barbour, the agent's key to fire insurance (1920); r, riegel and h. j. loman, insurance principles and practice (1921); s. s. huebner, property insurance (1922); e. c. lunt, surety bonds (1922); j. a. henderson and j. e. matthews, profits insurance (1923); j. b. welson, public liability insurance (1923); c. c. dominge, fire insurance inspection and underwriting (1923); life, fire, accident and marine insurance (life assurance by h. e. rayner; fire insurance by c. h. hickson; -accident in- surance by c. e. golding; marrne insurance by b. dick, modern business institute, 1924); sir w. h. beveridge, znsurance for all and everything (1924); j. a. eke, the principles of insurance, etc. (1924); a. philpott, the business man's guide to insurance (1924); w. breiby, the essence of life insurance (1924); j. b. porter, assisted by w. p. craies, the laws of insurance, 7th ed. (1925); s. b. ackerman, the practice of workmen's compensation insurance (1925). see also the insurance year book, 3 vol., new york, annual.