the most important industrial hazards. Governmental schemes of insurance against invalidity are now found in Austria, Belgium, France, Germany, Great Britain, Italy, Russia and Sweden. In Great Britain sickness disability benefits, whether caused by disease or accident, have been granted by the Friendly Societies. The Friendly Societies have not attempted to distinguish permanent from partial disability. But the experience of these societies has been carefully analyzed by actuaries with reference to the duration of disability, so that there has resulted a considerable volume of data bearing upon what is known in the United States as total and permanent disability. In America a number of trade unions have granted these benefits for many years, as have also the fraternal societies. In fact our best statistics regarding total and permanent disability are taken from the records of two of the larger fraternals. Disability Insurance in Life Insurance Contracts Disability insurance, incorporated in a life insurance contract, is a later development. The credit for this new departure likewise belongs to Germany, where such a contract was first issued in 1876. Thereafter it did not develop among the German companies with the rapidity shown at a later date in America. In 1900, out of 45 companies in the Empire, 17 were issuing it. Since 1900, however, most of the important companies in Germany have adopted the disability provision in one or both of two forms. First, in connection with regular life contracts, it is issued with limited payment life, endowment or straight term policies, the benefits granted being either waiver of premium or the maturity of the policy, to be paid in the form of an annuity of ten to twenty payments. The second form, the purchase of a life annuity, is granted as an independent contract and pays the insured an annuity from the time of disability until death. This latter contract may be paid for by a single premium or by periodic payments, each payment creating the right, after three years, to an annuity based on the age at which the payment is made. Under both forms the disability insurance ceases at age sixty-five. The Russian companies issue an unusual type of policy including this clause. They will issue participating policies and then grant the insured, upon his relinquishing the right of participation, the privilege of receiving invalidity insurance in lieu thereof. In case of disability, premiums cease and the policy matures, the insured receiving immediately a cash sum of fifty to seventy-five per cent of the sum insured, the remainder, if any, to be paid at death or at the end of the endowment period. The participating policy is loaded to the extent of about ten per cent of the non-participating premium, thus showing about what the benefit costs. Development of Clauses Among American Companies As already explained, the disability clause has been a part of the life contracts of American companies only since 1896, and at the time of writing there are, including two large Canadian companies which write insurance in the United States, 135 companies which grant the clause. The importance which this clause has assumed in the brief space of 16 years can better be shown by comparing the relative amount of insurance represented by the companies granting it and by those which do not grant it. The Insurance Year Book shows that on January 1, 1912, the 239 companies of the United States had insurance in force (not including industrial business) to the amount of approximately $14,500,000,000. Add to this the insurance of the two Canadian companies included in this study, and it gives a total of over $14,800,000,000. Of this total insurance in force, the 135 companies granting the disability clause with their contracts had $11,700,000,000, or approximately 79 per cent of all insurance in force by American companies. It is apparent that these figures are slightly unfair in including only two Canadian companies in the list; but this inquiry has not extended generally to Canadian companies granting the clause. By eliminating the two Canadian companies from the comparison, however, over 78 per cent remains. The following table shows the exact figures: A. Total for 239 companies of United States (January 1, 1912,) (ordinary business).. $14,577,131,497 C. Grand Total ..... 229,026,360 $14,806,157,857 11,704,645,000 D. Total of 135 companies granting disability clause (approximately). Proportion of "D" to "C"-79 per cent. It is not desired to leave the impression that this eleven and three quarters billions of insurance represents the amount covered by the disability provision. It represents all the insurance in force by these one hundred and thirty-five companies and many of them refuse to apply the disability clause to old policies. Some companies have announced their intention of including old policies and some do so when requested but are not advertising the fact. It would be interesting to know just how much insurance is now covered by the new clause but it would be impossible to determine it at present without a personal canvass of all the companies concerned. CHAPTER II REASONS FOR AND OBJECTIONS TO THE DISABILITY CLAUSE Motive of the Agent and the Company Competition The extraordinary growth in popular favor which the disability clause has shown justifies the belief that there are very good reasons for its existence. The reason for its adoption so generally may lie with the company, the agent or the policyholder. Of course the disability clause must ultimately be tested by its utility in serving the public interest as an insurance measure even though that may not be the immediate reason for its popularity. If a history of life insurance shall ever be written, certainly no more interesting phase of it will be found than the evolution of the life contract and the gradual liberalizing of its provisions. To take only a single instance, the granting of cash loans was bitterly opposed by a number of companies until they were forced either by statute law or by competition to grant such loans; then they reversed their position and, making a virtue of necessity, exploited their loan privileges to the limit of their advertising ability. This competitive struggle among life companies is always active and the wide-awake manager is always looking for some feature that will make an appeal to popular interest. Let us then look at the disability feature from the standpoint of the agent. The agent sells insurance by convincing his prospective customer that his company grants a better bargain than any other company on the market. To do this he must have something to talk about and any new feature which a number of keen competitors do not grant will tend to make his contract a good seller. There is no doubt that pressure from agents for a "selling feature" has induced many companies in the United States to make the disability clause a part of their contracts. This attitude on the part of the agent quickly reacts on the company. A great number of small companies have sprung up in recent years throughout the south and west and have written a considerable amount of their insurance in their immediate localities. Then they have extended their activities beyond the sphere of their local surroundings and have found that they must compete for business. The appeal to patronize home companies which is of great value locally is of no avail when a company enters a new locality as a stranger. This is its opportunity to exploit a selling feature. But before long the larger companies, which solicit risks all over the United States, realize that the selling feature counts and they meet the competition of the smaller companies by introducing the new clause. The following figures bear out this statement. Of 135 companies issuing the disability clause 94 are small companies, each having on January 1, 1912, less than $10,000,000 of risks on its books; twelve are large companies, each having over $100,000,000 of insurance in force. These twelve began the granting of the disability clause as follows: one each in 1896, 1904, 1907, 1910 and 1911 respectively; three in 1912; one in 1913; while for three the information is not at hand. There is no doubt that competition has been a powerful weapon in the "progressive enlightenment" of these companies. The companies in question do not suffer by this statement, for their clauses are among the best. A classification of the companies according to the year of organization shows even more certainly that these clauses were issued largely as a competitive measure. Of the 135 companies in question, 70 per cent have been organized since 1905, 78.6 per cent since 1901 and 21.4 per cent of them were organized previous to 1901. Is not this adequate proof that it is the newer and smaller companies which have taken up the new "selling feature" and that they have done it in order to meet competition? Attitude of Officials of Companies If statistical data are not sufficiently convincing, the attitude on the part of officials who have been frank enough to express their opinions will help in reaching a conclusion. An address was delivered September 6, 1912, before the American Life Convention at Chicago by Bascom H. Robison, President of the Bankers Reserve Life of Omaha, on "The Frills and Furbelows of Recent Years." He said in part, "It will be my pleasure to invite your attention to a few reflections concerning some of the trimmings which have been sewed on to policy contracts for purposes of ornamentation. The average man has a hazy notion that such things. (real frills and furbelows) have to do with the ornamentation of the feminine gown. Without going into the subject deeply I find |