to the State courts for the proper discharge of his duties. The administrator and the State court is bound by the identical State law relative to distribution which governed the bureau in making its own awards to distribute beneficiaries. Therefore, section 303 in effect merely continues the law in existence prior to its passage with reference to this particular case. Unless the theory of term insurance should be changed that now followed with respect to converted insurance, section 303, except in one very minor respect, needs no modification. The legal questions noted do not concern the law itself but go to the question of whether or not in making the distributions under certain circumstances the bureau actually followed the law of the State governing such distribution. If the bureau has made errors, those errors are not the result of the law, but must be remedied by the proper application of existing law rather than by seeking any change therein. The only particular in which your committee finds the present section 303 defective is in the omission to give the director authority to make payments direct to distributees in cases in which, under the law of certain States, administration of the estate of the insured is barred after the expiration of a certain period subsequent to his death. Should term insurane not be continued beyond the present date set for its termination, it is recommended that the only change made in section 303 be the one above mentioned. In its study of this section the committee has endeavored to ascertain whether or not in its judgment any compelling reason exists for a difference in the law governing the distribution of term insurance and United States Government life insurance (converted insurance). The law pertaining to those two types of insurance differs radically. For term insurance the following provision is made: "SEC. 303. If no person within the permitted class be designated as benefciary for yearly reasonable term insurance by the insured either in his lifetime or by his last will and testament, or if the designated beneficiary does not survive the insured or survives the insured and dies prior to receiving all of the 240 installments or all such as are payable and applicable, there shall be paid to the estate of the insured the present value of the monthly installments thereafter payable, said value to be computed as of date of last payment made under any existing award." The portion of section 301 of the World War veterans' act with respect to the distribution of converted insurance is as follows: "If no beneficiary within the permitted class be designated by the insured as beneficiary for converted insurance granted under the provisions of Article IV of the war-risk insurance act, or Title III of this act, either in his lifetime or by his last will and testament, or if the designated beneficiary does not survive the insured, then there shall be paid to the estate of the insured the present value of the remaining unpaid monthly installments; or if the designated beneficiary survives the insured and dies before receiving all of the installments of converted insurance payable and applicable, then there shall be paid to the estate of such beneficiary the present value of the remaining unpaid monthly installments. It will be noted that in the case af term insurance resort is had to the estate of the insured to determine the distributee beneficiaries, whereas in the converted insurance distribution of the remaining portion of the insurance is made to the heirs of the designated beneficiary. The law obtaining with respect to the distribution of converted insurance is the generally accepted insurance law with respect to commercial insurance. Its application is familiar to all courts, and the committee is advised that distribution of converted insurance presents no problem to the bureau. The committee is unable to ascertain any valid reason why at this date at least any need exists for one law governing the distribution of term insurance and a different law governing the distribution of converted insurance. Some of the material examined indicates that Congress felt it desirable when the 'war risk insurance act was first passed to restrict the class of beneficiaries to the immediate dependents of the soldier in order to prevent speculation on the part of persons with no interest in the life of the insured and no dependency upon him. From the reports of hearings, etc., it would appear that Congress considered it inequitable to continue such restrictions when the insured converted his term policy, but felt satisfied to give the insured all reasonable latitude in the designation of a beneficiary for converted insurance. With the enlarging of the permitted class no particular reason appears to continue for the distinction, although the restriction may have been wise during the period of the war, when a vast amount of term insurance was in force. In view of the fact that the law with respect to converted insurance does not require the reopening of the estate of the insured perhaps at a time long subsequent to his death is simple and easily understood and can be applied without confusion, the committee believes that should term insurance be extended beyond July 2, 1926, new legislation should be secured providing that from and after the adoption thereof all term insurance be distributed as provided by the present provisions of section 301 with respect to the distribution of converted insurance, saving and excepting from the operation of the new law all rights which have already accrued under the law in effect up to the date of the passage of such new legislation. The words in section 301 with reference to escheat of converted insurance would have to be changed after the words "United States" to "and be credited to the military and naval insurance appropriations" for all term insurance. The director should, as at present, be empowered to make lump-sum settlements upon the death of any beneficiary now receiving monthly installments of term insurance in the absence of a further designation by the insured. SECTION 304 The committee recommends that all time limitations restricting the right of beneficiaries with service incurred disabilities be modified so that reinstatement and conversion of term insurance under the conditions stipulated and not otherwise shall be reopened and continued for the same period of time as all term insurance may be extended, and that in the event a general extension for term insurance is not provided by Congress that the disabled be granted this privilege for a period of at least three years. The committee is unanimously of the opinion that the disabled who have lost their insurability as the result of a service-incurred disability merit a far greater consideration with respect to their right to reinstate and continue term insurance than the able-bodied veterans. SECTION 305 The committee is very much opposed to the indefinite continuation of legislation of this character for the reason that it confuses the theory of compensation with the theory of insurance. War-risk insurance, while in many respects possessing features not found in commercial insurance, is still based on the insurance theory of a contract, for the continuance of which the payment of a premium is necessary. Section 305 assumes by law that had the veteran been in receipt of all compensation due him up to the date of his death he would have used the money from this source to continue his insurance. As a matter of fact, no one knows whether or not this would have been the case, as many veterans who have received every cent of compensation due them from the Government have permitted their war-risk insurance to lapse. Furthermore, reinstatement under this section is not contingent upon the soldier leaving a person or persons within the permitted class or otherwise who are dependent upon the soldier or in any way in need of the insurance money. The section operates as well for a millionaire beneficiary as for a pauper. While the committee understands that this section was enacted by Congress for the purpose of providing for a number of very meritorious cases, it is believed that every purpose contemplated has already been served by this section, and that its continuance as a part of the insurance law is unnecessary and inadvisable. A recent opinion of the Attorey General with respect to what may be considered back compensation reaches a conclusion which, if not changed, might in the future reinstate a very large number of insurance policies upon the death or permanent total disability of the insured, and might impose a burden of considerable magnitude upon the Government. The committee is informed that this section of the law has already cost the United States the sum of $65,000,000. The committee therefore recommends the immediate and unconditional repeal of section 305. If, however, such action is not considered advisable at this time, and a modification of the provisions of this section should be considered in lieu of a repeal thereof, it is recommended that reinstatement under this section be continued only in cases wherein the death or permanent disability is clearly the result of a service-connected disability, and in death cases in addition thereto a soldier must leave a person or persons within the permitted class of insurance beneficiaries who at the time of his death were actually dependent upon him for support. SECTION 22 A difference of opinion exists as to whether or not when the proceeds of a war-risk insurance policy become payable to the estate of the insured such funds may be held liable by State courts under the State law for the debts of the insured, also whether or not the proceeds of insurance may be held exempt from all State taxation. In the opinion of your committee section 22 might well be clarified by adding a provision stating that when in making distribution or payment of war-risk insurance funds it is necessary to pay to the estate of the insured these funds shall not be subject to the claims of creditors of the insured and shall be exempt from all taxation. Under the present law the bureau is not a party to any proceeding distributing insurance money through the estate of the insured and is not directly concerned with this question. However, in order to guide the State courts properly it is believed that a clear statement governing this matter should be included in section 22. SECTION 30 Section 30 has received the attention of the committee for the reason that in certain types of cases it is considered necessary for the bureau to furnish information to State courts relative to the distribution of all of the funds paid as the proceeds of the insurance policy. This question has arisen in a number of cases where one distribution has been made through the estate of the insured, and upon the death of one of the distributee beneficiaries a further distribution must be made. This question is also involved in the settlement of 42 cases wherein because certain beneficiaries were incompetent, minors without guardians, or could not be located no awards were in course of payment on March 4, 1925. It appears in these cases that it may be necessary in order to insure a just distribution that all of the facts with respect to the insurance fund must be furnished to the court. It is believed that in this manner these cases can equitably be settled without any change in section 303. It is the opinion of the committee that paragraph c of section 30 gives to the director all necessary legal authority to furnish any information relative to the distribution of insurance to a court having jurisdiction over probate matters which he deems it necessary and proper to disclose. Just what facts should be disclosed in any case will be determined by a proper exercise of the discretion vested in the director by this provision of the law. For convenience a very brief summary of the recommendations of the committee relative to changes in the present law follows. SUMMARY OF RECOMMENDATIONS Continuation of term insurance subsequent to July 2, 1926. The committee recommends that the time be extended for a period of two years. SECTION 303 In case term insurance is not continued beyond July 2, 1926, the committee recommends as the only change that section 303 be so amended as to give the director authority to make payment of war-risk insurance benefits directly to distributees in cases wherein under the law of certain States administration is barred because of the expiration of a statutory period subsequent to the death of the insured. In case term insurance is continued subsequent to July 2, 1926, the committee recommends that the law with reference to distribution now applicable to converted insurance be adopted for term insurance also. SECTION 304 The committee recommends that this section be continued in force for as long a period as term insurance be continued by Congress; if Congress does not continue term insurance beyond July 2, 1926, the committee recommends that section 304 be continued for an additional period of three years, permitting disabled veterans only to reinstate and carry term insurance for the additional period mentioned. SECTION 305 The committee recommends repeal of this section. If repeal is inadvisable. the committee recommends that reinstatements under this section be limited to cases wherein death or disability is the direct result of a service-connected disability, and where death results that insurance will be payable only in the event that claimant leaves surviving him a person or persons within the permitted class of insurance beneficiaries who at the time of insured's death were actually dependent upon him for support. SECTION 22 The committee recommends an additional provision to the effect that when, in making distribution or payment of war-risk insurance funds, it is necessary to pay to the estate of the insured these funds shall not be subject to the claims of creditors of the insured and shall be exempt from all taxation. SECTION 30 The committee recommends no change in the present law. Respectfully submitted. H. L. McCoy, Chairman. J. O'C. ROBERTS. J. E. DOWNIN. I am furnishing herewith what I have chosen to call a recapitulation of the insurance activity of the insurance division, Veterans' Bureau. The purpose of furnishing this data is that you and your committee may have a clearer view of the extent of the insurance than can be gathered from isolated statements: 5. Amount of premiums received this year to date, Nov. 30, 1925: Term (gross amount). Converted (net amount) 6. Amount of claims paid this year (current year): Term (Oct. 31, 1925). Converted (Nov. 30, 1925) 7. Amount of the reserve fund to date of Dec. 31, 1924_. 8. Amount of loans to date, Nov. 30, 1925. 12. Amount of dividends paid out this year, Nov. 30, 1925_- $11, 383, 842. 23 $37, 405, 059. 04 $7, 195, 012.00 $6, 587, 902. 51 $120, 608, 656. 68 $28, 949, 272. 77 $14, 457, 289.83 $14, 491, 982. 94 29, 355 $2,582, 724. 85 33, 495 2,879, 339 15. Amount of certificates issued to Dec. 5, 1925-. tion) $2,973,717, 008. 00 $10, 917, 809. 00 $2,007, 316. 66 17, 118 It should be mentioned that insurance claims are not handled in the insurance division. They are, nevertheless, a part of the insurance activity. Term insurance premiums are given in gross amount. Some refunds are made by finance service, and I have not felt it necessary to obtain the next figure. Items 13 and 18, insurance and adjusted compensation correspondence, refer to the number of letters answered, but do not include correspondence origi nated or correspondence requiring no answer. You will note from the above data that we have $2,815,968,366 of insurance, both term and converted in force, and adjusted service certificates, which are 20-year endowment policies upon which the Government pays the premium, in the amount of $2,973,717,008, in force as of this date. Adding the two items, we have the total amount of all insurance, both term, converted, and adjusted service certificates in force, which is $5,789,685,374. There is but one insurince company in the United States handling a larger volume of business. The insurance will continue through most of the twentieth century. It is estimated that the last policy will be paid in 1997. This is, of course, only an estimate. Within such period of time, however, all of the above-mentioned liability will be liquidated in some of the methods provided, such as either by death, total permanent disability, cashing adjusted service certificates at the end of 20 years, cash surrender of insurance policies, lapses, etc. It seems apparent that this activity must be maintained in conformity with sound legal principles and by strict adherence to unquestioned insurance practice and procedure. The reserve fund is given you as of December 31, 1924. The policy reserves are only computed for annual statement purposes at the close of each calendar year. It is estimated-and you and your, committee should bear in mind that this is only an estimate that the reserve fund will reach the maximum in 1939 of $540,000,000. During that year it is estimated also that we will disburse $77,000,000 from the fund, and in the following year, 1940, $91,000,000, in round figures. The reserve fund is legally considered, in my judgment, a trust fund, in which every policyholder of converted insurance is interested, since he makes contribution to the fund and looks to it for the payment of his claim upon maturity of his policy, either by death, total permanent disability, or otherwise. It is highly important, therefore, that the fund be dissipated in no manner whatsoever, and therefore the greatest possible care and circumspection is constantly required in order that no criticism may be leveled against the director of this bureau. You may find some discrepancy between the figures submitted herewith and other figures which may come to your attention. If such occurs, it will probably be due to estimates or statements being made in gross or net amounts and difference in dates as to which the figures are given. L. C. JESSEPH. General HINES. The fact that the majoriy of the four million five hundred thousand and some odd policyholders almost immediately upon their discharge from the service dropped their insurance indicated in a measure either a lack of knowledge of the value of the insurance or the disregard for it and their desire to get insurance otherwise. I take it that we are particularly interested in the matter of insurance in covering the actually disabled man; in other words, the man who is not an insurable risk in the commercial companies and who can not get insurance from any other source except the Government insurance. Our campaigns of education throughout the country-and I am sure that the ex-service organizations have followed the same pro |