that such things are not essential to the main purpose of a gown, their chief office being that of ornamentation; and everybody knows that ornaments are superficial things tacked on to an object for the sole purpose of attracting favorable notice. We cannot associate such things with the true character of a policy contract, which must have real substance and must be based upon enduring principles of equity and good conscience. My opinion is that policy contracts of this description (i. e. designed to be attractive and to meet competition) are not only in the nature of a false lure but in some instances they threaten the perpetuity of the company issuing them." The first example of ornamentation he cites is the total disability provision. Here is a frank admission that the disability clause has, in the minds of many insurance officials, no other purpose than that of ornamentation of the contract. It furnishes the talking point which the agent must have. If such be the case universally then the quicker we are done with this clause the better. Undoubtedly the speaker in the case referred to knew only too well the real nature of some of the clauses which have been adopted. The writer of the following probably had one of these "ornamental" clauses in mind: "There is a possibility for the said rider appearing to the prospective applicant for insurance as more valuable than its actual cash worth." More direct in its implications is the next: "As ordinarily framed, we do not believe there is any particular objection to including the feature. in all kinds of policies, as in most instances its provisions are so specific as to make the liability of loss to the company very small." For brutal frankness in analyzing the clause of his own company, the following from a secretary-actuary eclipses them all and shows what is in the minds of too many officials when drawing up one of these clauses. He writes, "Is of no value to the insured practically. Is only another outlet for deception on the part of the agent. Merely a cheap selling feature. . . We only use the rider in cases of competition. Is not a leader at all.

. A law prohibiting it until more was definitely known as to equitable rates, etc., would be a good thing."

Motive of the Policyholder-Protection

If this has been the attitude of many companies which issue the disability clause, the question may well be asked, is there no

2 The italics were not in the original.

3 Do.

further justification for its introduction into life contracts than its value as a talking point? If not, we can agree with this official that a law prohibiting it would be a good thing. But let the question be approached now from the point of view of the policyholder. Is there any great likelihood that the perpetuity of his policy will be endangered by the occurrence of the event against which the new clause insures? Is permanent and total disability a risk of any consequence to the average policyholder? It will be readily understood that the idea back of the clause is to prevent the lapsing of a policy and the loss of insurance by that living death which leaves a man in a helpless condition so far as concerns the continuation of his insurance, if he is dependent on the income from his daily work; and in a condition which from his own viewpoint justifies the maturing of his policy or at least justifies freeing him from the burden of further premium payments.

The Risk of Disability

Statistics again must be called upon to aid in the solution of this problem and fortunately we have them in the experience of fraternal societies in the United States which have insured against the risk of total and permanent disability. The scientific basis for determining rates for this risk will be discussed later but it is necessary here to call upon some of the tables that will then be considered. Three American actuaries, Messrs. Arthur Hunter, Sidney H. Pipe and Franklin B. Mead, have worked out, from the experience of the Foresters and the Maccabees, tables of disability and of mortality among disabled lives. It may be admitted that the risks of fraternal societies are not as good on the average as those of the old line companies, but absolute accuracy is not necessary and if these results will show the probability of becoming disabled to the average member of a fraternal society the purposes of the illustration will be served. These actuaries have each computed tables showing the yearly probability of becoming disabled. But it is desired here to know the total probability that a person will become so disabled and therefore be compelled to lapse his insurance. The following table has been arranged from Mr. Mead's probabilities based on the Maccabees by using the following method. The denominator of the probability fraction equals the number living and not disabled at the required age; the numerator equals the

number becoming disabled during the life expectancy of a person at the given age. These fractions are then reduced to decimal form. For example, at age 40, Mead's table, there are 77,864 persons living and active. The life expectancy of a person aged 40 is 28.18 years. The number of persons becoming disabled within 28 years from the beginning of age 40 according to Mr. Mead's data equals 10,969. To this was added eighteen-hundredths (.18) of the number disabled during the 68th year of age (=.18X2443 = 440) giving the total number disabled during the life expectancy, or 10,969 plus 440 which equals 11,409. The entire probability of becoming totally and permanently disabled, it follows, to a person 11,409 aged 40 is or .1466. The results from Mead's tables for 77,864 every fifth year are as follows:

Probability of becoming disabled within life expectancy:

=

Since the computation of these tables entails considerable work, results have been worked out from Mead's tables only. But to show that the results are fair and that they do not favor the result expected, namely, a high rate of disability, more than do the tables of Hunter and Pipe, the following comparison may be of interest.

Out of the number living and active at age 20, being 92,637 for Mead's and Pipe's tables and 92,483 for Hunter's (the slight difference in the latter being because it was engrafted on the American Experience table at age 15 whereas the other two began at age 20) the three tables show the following total number disabled:

The comparison stops at 60 since Hunter's disability table does not extend beyond that age. The result shows that had either Hunter's or Pipe's tables been used a greater probability figure would have resulted.

If these figures are justified as an estimate of the chance that a man will become totally disabled within the average length of life, the question of insurance against the risk of total and permanent disability is a very important one and it behooves a man to consider whether he will add this protective feature and safeguard his insurance against possible lapse. True, the problem is somewhat minimized by the fact that only the man who is dependent on his current income to pay his insurance stands in the greatest danger from this risk. But this is equally true of all insurance and if only men took insurance whose families would be completely unprotected against death of the income-getter, there would be little insurance written.

This clause has become popular then because the company and the agent demand it for business reasons and because the policyholder needs it for economic reasons. The business argument has been largely at the base of its sudden popularity, but if the clause is to persist there must lie behind this the more fundamental interest of the policyholder. A close study of the clauses betrays the fact that some companies have left the policyholder out of consideration and have issued their disability contracts wholly with the idea of meeting competition.

Objections to the Disability Clause

The popularity of the clause has been attained despite a constant flood of criticism from the companies which are not issuing it. These objections should be noted briefly before taking up the more important study of the clauses themselves. Five important objections have been raised against this clause, namely: (1) that it is not life insurance and therefore should not be included in the life policy;

(2) that there is a very remote probability of a person becoming permanently or totally disabled and that only a short time elapses between disablement and death, and therefore there is little need for the clause; (3) that agents are given an opportunity to misrepresent the clause to the policyholder, thus opening the way to much dissatisfaction on the part of the policyholders in later years; (4) that it is difficult to define permanent and total disability to the satisfaction of both company and insured, making adjustment difficult and troublesome; and (5) that there is no scientific basis for determining the risk involved.

1. Not Life Insurance

As regards the first objection, namely, that the clause is not life insurance, the attitude of many companies is to the effect that if this type of risk is insured against, it should be covered by an accident or health company; that it is not the business of a life company, and that a combination of such unlike risks should be prohibited or discouraged. This objection disregards the fact that the occurrence of the contingency in question, namely permanent and total disability, puts the insured in just that position, where the permanence of his insurance is imperiled unless he is able to call upon some source of aid outside of his income, such as a savings deposit. It is quite true that this risk is covered in part by the clauses in many policies providing for automatic extended term insurance or automatic premium loans, and it is equally true that the companies are becoming increasingly liberal in the use made of these half-way measures. But if there is a real risk, the policyholder wants complete protection against it and such is not afforded by automatic premium loans. The objection here considered fails furthermore to note that accident and health companies do not give the insured the protection desired for they issue only one-year term policies and of course when they see the near approach of disability due to age or disease (and these constitute the great majority of cases) they will refuse to renew the policy and the insured is left without the very protection he wanted. Protection to the insured against this hazard must comprise permanent insurance against the possibility of permanent disability without the privilege of cancellation on the part of the company, and it is difficult to see where this will be obtained if not from the life companies.