for the same amount of insurance in case he separates from the concern that was paying his premium. If this privilege is exercised within a certain period no medical examination is necessary in most cases. The presence or absence of this priv ilege often indicates whether the employer has adopted group insurance as a selfish method of controlling his labor or largely for humanitarian reasons.

c. An accident and health clause is sometimes endorsed on these policies and an extra premium must be charged for this. It should be mentioned that many separate group policies covering accident and health only are now being written.

d. Group insurance may be participating or non-participating, and this will also affect the premium. The participating insurance usually has an unchangeable premium for an indefinite period but is subject to refunds if the experience is favorable. While the non-participating policy will have a lower premium, the rate will be guaranteed for a limited time only.

Advantages of group insurance.—The advantages of group insurance are many but may be classified as they apply to the group, the employer, and the community.

1. The Group.-Group insurance is not intended as a substitute for individual insurance, but merely as a supplement. However, it has been found that approximately 40 per cent. of industrial workers carry no protection and group insurance most ably meets this urgent need. As previously mentioned, a medical examination is seldom required, and this results in many persons obtaining insurance who could not obtain individual policies. It should not be concluded that the 40 per cent referred to are individually uninsurable, as the larger part of them could secure policies if they so desired. Thus group insurance renders a great benefit to the individuals of the group and more especially to the dependents of those who are negligent of their responsibilities.

2. The employer. The employer is really the one to whom the contract is sold and there are many inducements from his standpoint, although as the number of group policies increase, the advantages to the individual employer decrease. Nevertheless, he usually buys insurance for one or more of the following reasons:

a. Gives him publicity and advertising.
b. Attracts efficient labor.

c. Creates a better feeling between him and his employees. d. Reduces labor turnover.

e. Where the insurance is based on an annual wage it supplies a stimulus for higher efficiency.

f. Makes better workers by alleviating distress among employees and their families.

3. The community-The burden of caring for an insured employee's family, instead of falling on the community, is carried by an efficient organization. Much suffering and misery is in this manner prevented and the community becomes a much better one in which to live.

Consequently group insurance serves a great need and is becoming more important each year. This growth in all probability is destined to continue, because there is a great demand for insurance of this kind. It is possible that the plan may eventually be extended to insure whole communities regardless of employment. In fact, this is quite practicable in every respect except the collection of the premium.

Sub-standard insurance its purpose.-A sub-standard risk is one which a company will not accept by its regular method of selection and at its regular rates. This definition, of course, must be viewed from the individual standpoint of each company, because rates and method of selection differ considerably among the several companies and a risk that may be classed as sub-standard by one company may be normal for another. There is a point, however, below which all companies will consider a risk as undesirable according to their regular standards. The failures of risks to meet the standard are due to many causes, of which the following are the most common: occupation, overweight, underweight, family history, heart murmur, rapid pulse and sugar and albumen excess in the kidneys. Nevertheless these risks are possibly in greater need of insurance than the more fortunate who can pass the regular medical examination. The development of insurance on such cases is recent but, as experience in connection with these impaired lives grows, the various companies are extending their risks. Undoubtedly a great service is rendered by those companies which adjust their premiums to take care of this class of individuals and it is stated on good authority that, of the 10 per cent of applicants who fail to pass the regular examination, a majority can secure sub-standard insurance.

Method of rating sub-standard lives.-There are several

methods of rating sub-standard risks but those principally used are: (1) to defer the dividend; (2) to place a lien against the policy; (3) to charge a flat extra premium; (4) to grant only a restricted type of policy, or (5) to charge a premium as of some advanced age. A brief description of each follows:

1. Deferring the dividend.-This was one of the first methods employed, and no dividend was paid until the policy had been in force for 15 or 20 years. It is not a very satisfactory method and has fallen into disuse.

2. Placing a lien against the policy.—Under this system a lien is placed against the policy and deducted if death occurs within a certain period. Usually it is on a decreasing plan, so that if the insured lives beyond a certain number of payments, no deduction is made from the face of the policy. This plan has never been very popular.

3. Charging an extra premium.-This is used extensively in the case of occupational hazards, such as a flat-rate increase in the case of locomotive engineers.

4. Restricting the type of policy.-This plan causes less objection from the insured and where the defects of the individual are slight it is possibly the best method of rating. Thus, a limited-payment policy or an endowment may safely be granted, while ordinary-life or term insurance could not.

5. Advancing the age. For most purposes this is the method now used and seems to meet the needs better than any other single method. The manner of rating is to charge the premium as of some advanced age, depending on the seriousness of the cause for being classed as sub-standard. In extreme cases it frequently happens that the individual is not only rated up but also restricted to certain types of policies.

The greatest advantage of such a system of insurance is that those people who need it most are able to secure it. The only disadvantage is the lack of experience on which to base the rate, which results in some inequality of charges.

CHAPTER XI

ACCIDENT AND HEALTH INSURANCE

Losses due to accident and disease.-Life insurance protects a man's dependents from poverty and suffering after his death but the man who is incapacitated and unable to earn a livelihood also has need of insurance, for the financial hardships in such a case may be worse than those resulting from death. Compensation insurance covers industrial accidents but there are many accidents occurring without relation to occupation, and sickness causes about seven times the loss of time attributable to accidents.

It is estimated that over 250,000,000 working days are lost each year in the United States due to sickness alone, and that there occur annually about 5,000,000 accidents, of which less than one-half are incurred in the course of employment. In other words the majority of the losses due to accident or dis. ease are not covered by workmen's compensation, and while an examination of the causes leads to the belief that accidents can be reduced, they cannot be entirely eliminated.

Some of the accidents and diseases arise from conditions of employment, and are therefore partially covered by the compensation acts of the various States, as explained in Chapter XII. These, however, provide only limited indemnity for accidents and very few provide at all for so-called "industrial diseases." Such laws also cover only accidents incurred in the course of employment and the remaining one-half of the accidents and diseases are unaffected thereby. So important has this economic factor been considered, that compulsory government insurance has been proposed as a remedy, designed to make the individual provide against the evil results of accidents and ill-health. It has been argued that sickness and injury give rise to so much suffering and poverty in the incapacitated person and his dependents that they constitute a community problem to be solved by community effort. Bills have

therefore been introduced in State legislatures to provide systems for such insurance. In the past, however, the forms of private insurance discussed in this chapter have been the individual's principal protection against non-industrial injury and sickness and probably will continue to be for some time in the future.

The accident and health policy is a natural complement to the life insurance policy; the latter protects against a permanent loss of earning capacity, the former against a permanent or temporary loss of the same through accident or disease. Two partially overlapping forms of protection against these risks are therefore offered. The "disability clause" which appears on many life insurance policies protects only against pemanent disability and sometimes only against permanent and total disability. Accident and health insurance policies, on the other hand, usually also protect against those temporary disabilities which cause the greater part of the economic loss and suffering.

Disability clauses in life insurance policies.'-In recent years various life insurance companies, by adding a disability clause to their policies, have sought to make some provision for such contingencies. In most instances these clauses provide only for total and permanent disability or, at best, partial and permanent disability, the definitions of disability being usually narrow and restricted. Since over 97 per cent of all disabilities are of a temporary nature the actual value of these clauses is open to debate.

Their limited value is perhaps due to the unwillingness of many of the life companies to enter a field concerning which comparatively little is known. They inaugurated the disability clause mainly for competitive purposes and the extension which has taken place was made necessary by the same cause.

Originally they promised, for a small additional premium, to waive all future payments of the premium in case of total and permanent disability. This could not possibly cost the insurance company a great sum, because the average length of life of a person so incapacitated is less than two years. Later, however, the clause was broadened so that the policy would mature under such conditions and the insured would receive the proceeds in accordance with some specified plan. Some clauses fix this plan definitely, while others give the insured an See Appendices III and IV.