2. Risk is Small and Interval Brief between Disability and Death In answer to the second objection, namely, that the probability of becoming totally disabled is very remote and in case of its happening the time between disability and death is so short that an insurance against the risk is not needed, it is only necessary to offer the table on page 9 dealing with the probability of becoming disabled within one's life expectancy. This table shows that at age 35 one person in ten is liable to suffer total incapacity within his life expectancy, and that as the age increases, the probability of becoming disabled increases rapidly. At age 45, the probability has increased to one in five, at age 50 to one in four, at age 55 to one in three, at age 60 to one in two, and at age 70 to three in four. These figures make it appear that the risk of total disability is not an unimportant one. Moreover, the statement that only a short time intervenes between disability and death is untrue in many instances. We need only refer to the instances where persons lose both legs or arms, or become insane, or totally blind, or totally paralyzed, to appreciate the fact that one may live for many years after the occurrence of disability. While these cases are not important in the aggregate and do not mean a substantial addition, therefore, to the cost of the risk, the protection offered in such cases is of great importance to the individual who does not desire to face this uncertainty. 3. Misrepresentations by Agents The third objection, namely, that the clause gives agents an opportunity to misrepresent facts and therefore may cause much dissatisfaction with the company in later years, is to some extent justified. Such dissatisfaction, however, will be great only in proportion as a company attempts to interpret its clause strictly. Insurance companies have passed through the same experience in the past with reference to many of the policy provisions which are now an inseparable part of the contract, and their failure to meet great dissatisfaction now, as compared with former years, is due largely to carefully drawn clauses and to a liberal interpretation on the part of the companies. If this liberality has become the established custom of the companies with regard to other features of their contracts, why fear that they will encounter more difficulties in connection with the disability clause? A study of the disability clauses issued by American insurance companies shows that some have been drawn apparently for advertising purposes only, and are of very limited value indeed, furnishing ample justification for the fear that agents desiring to convince prospective clients may advertise such clauses as real disability protection, and that the policyholders will later, in time of need, find a discrepancy between promise and fulfilment. But it is apparent that this objection is directed, not against disability insurance as such, but merely at particular disability clauses, and the more quickly such criticism succeeds in eliminating these clauses from the field of competition, the better for all parties concerned. 4. Difficulty of Defining Disability The fourth objection is in some respects similar to the one just discussed. The difficulty of determining what constitutes total and permanent disability is largely a question of wording and interpretation. In the first place, the clause should be so worded as to include within the scope of its benefits every legitimate case of permanent and total disability. A few companies unfortunately have attempted to restrict the definition of total disability in their clauses in such a manner as is bound to result in much quibbling if they insist on strict construction, and dissatisfaction will doubtless arise when policyholders have their attention called to the narrow limits of these definitions. Most of the clauses, however, are liberally worded, and in view of the past attitude of most American life insurance companies as to the liberal construction of contracts, there is little reason to anticipate difficulty with the clause. In the settlement of claims, many of the opponents of the clause fear that fraud on the part of the insured will assume large proportions. In the opinion of the actuaries of two of the larger companies issuing the clause, as expressed in letters to the writer, the attitude of the companies and their desire to be fair will go far toward minimizing the difficulties which may arise in the construction of the contract. Here undoubtedly lies the crux of the situation. There is little reason to see why fraud on the part of the insured will be a large element in this type of insurance, when companies today issue contracts against the risk of fire, or accidents to persons, or against burglary, cases where the element of fraud is sure to be greater than it will be with the disability clause. A company issuing this clause should charge a premium high enough to justify liberality in the construction of its contract, and the contract should then be so construed. The first two objections discussed bear primarily upon the statistical problem of the magnitude of the risk and its effect upon a life policy. There is little difficulty in showing that the risk is so considerable within the period of a person's expectancy of life that it may easily endanger the permanence of a man's life insurance protection. The last two objections cannot be advanced against disability insurance as such, but only in opposition to particular forms of clauses, or particular companies which seem to grant a disability benefit but qualify it with so many restrictions as to cause it to lose all semblance of its original purpose. 5. The Lack of Disability Statistics The fifth objection to the adoption of the clause is more fundamental than any of the foregoing, and has reference to the absence of any scientific basis for the determination of the risk involved. The consideration of this objection requires a study of all the data dealing with the measurement of the risk in question and the application of those data to the clauses included in the present investigation. To this subject the next chapter is devoted. CHAPTER III MEASUREMENT OF THE RISK OF DISABILITY Disability benefits have been granted by American life insurance companies only since 1896, and as noted before, 78 per cent of the clauses have been issued only since 1905. In this short time the companies have developed no experience of their own, and must look elsewhere for data to ascertain the risk involved. Permanent and total disability benefits as such have long been granted in Germany and Austria, and it was to this experience that American actuaries turned for data to measure the risk. The limits of this paper will permit no more than a cursory examination of the most important of these early data in their bearing upon the risk from the standpoint of American life insurance companies. German Invalidity Tables Permanent disability insurance began, as was stated, with the mutual aid societies organized by the miners of Austria and Germany and it was among these societies that the earliest statistical investigations were made. Among the tables published may be mentioned a table by Zeuner, showing the disability occurring among Saxon miners from 1860 to 1868 inclusive; the table by Caron including the experience of Prussian miners from 1870 to 1879; a table by Morgenbesser of the same data for the years 1868 to 1878; a table by Kaan dealing with Austrian miners from 1882 to 1890; and one by Küttner of Prussian coal miners from 1869 to 1883. Disability data for engineers and metal workers were published in a table by Zillmer in 1884. The investigation of experience among German railway employees was begun by Dr. Wiegand, who in 1868 completed the first inquiry into the rate of invalidity conducted on scientific principles. After the death of Dr. Wiegand these researches were continued until 1883 by Behm, after which they were carried still further by Zimmermann. Bentzien also published a table based on the years 1868 to 1889 dealing with invalidity among railway employees. A table, for workmen in various trades was compiled by Behm in 1887, and this table is of special importance |