per cent. on the wage bill and from $2.50 to $2.80 per man per annum. This is chiefly for liability insurance premiums. Less than half of this money reaches the victims of accident. The board recommends the following principle:

Let the employer contribute an amount which he probably would have to pay if he continued with the law of negligence, release him from liability to damage suits, and then distribute that money on the insurance principle, the employee being encouraged to carry as much additional insurance as he could.

This is essentially the recommendation of the Illinois Commission.

CHAPTER VI

PRIVATE INSURANCE COMPANIES

I. INDUSTRIAL LIFE INSURANCE

The purpose of these companies, from the standpoint of directors and stockholders, is profit; their social end is to secure for the policy-holders a certain sum to provide for the expenses of mortal illness and for burial without appeal to charity. Some of these same corporations carry on an ordinary life-insurance business which does not in any important factor differ from other life-insurance agencies, and does not require special attention in this place.1

The vast importance and extent of the business of these burial insurance companies may be indicated by their statistics. In a previous part of this discussion the principal facts have been cited. The face promise of all policies of industrial companies in the year 1902 was $1,806,890,864. The number of policies was 13,448,124, and the average value of the policies was $135. Mr. Dryden estimated that the

1

1 References: Frederick L. Hoffman, History of the Prudential Insurance Company of America, 1875-1900; Handbook and Reference Guide to the Exhibits of the Prudential Insurance Company of America, prepared for the Louisiana Purchase Exposition, St. Louis, 1904; John F. Dryden, The Inception and Early Problems of Industrial Insurance, 1905; Description of Ordinary Policies of the various companies; article on "Industrial Insurance," Encyclopedia Americana, by Haley Fiske, vice-president of the Metropolitan Life Insurance Company; Haley Fiske, Testimony before the Legislative Investigating Committee of New York, 1905; H. Fiske, "Profits of Industrial Insurance," United States Review, thirtieth anniversary number; H. Fiske, "Industrial Insurance," Charities Review, March, 1898; Memorandum submitted on behalf of the Metropolitan Insurance Company, respecting the proposed insurance bills, New York, 1906; W. A. Fricke, Insurance, 1898, pp. 212-77 (article by John R. Hegemann, president of Metropolitan Life Insurance Co.).

companies distributed annually to their beneficiaries more than $20,000,000 in burial benefits.

The burden of this enormous business is heavy and is borne exclusively by members of the wage-earning groups, and especially by those whose wages are lowest or next to the lowest. This expense has come to be regarded in this country as a necessary part of the weekly budget. There prevails among the people of our cities, among immigrants as well as among native born, a strong feeling against "pauper burials," and this sentiment is quickened and stimulated by the persuasions and representations of the numerous agents of the industrial insurance companies; it is their stock in trade. According to Hoffman2 the average policy in that company in 1899 was for $114.22. The entire payments of premiums into the treasury of this company in 1899 amounted to the sum of $19,028,792, and the payments of benefits to $5,426,545. The entire receipts from the beginning to the year 1899 were $120,505,542, and the payments of burial benefits $39,901,006. The ratio of cost of administration to income was 39.17 per cent., as compared with 17.34 per cent. in the ordinary life-insurance companies. At first sight this contrast is so startling, and the difference of cost so great as to raise a suspicion of foul play. But further analysis mitigates the severity of judgment, although it may lead us to dislike the system even more than before. (The figures may be found in the Standard of September 17, 1898, pp. 314 ff., as given by Mr. J. R. Hegemann, president of the Metropolitan Life Insurance Company.) In Statistics, Fraternal Societies, 1905, p. 213, the editor asserts that in twenty-five of the ordinary life-insurance companies the ratio of administrative expenses to premiums was 18.3 per cent. (varying from 10.4

"History of the Prudential Insurance Co., p. 289.

to 31.7 per cent.); while in twenty-five fraternal societies the cost was on the average only 8.4 per cent.

The explanation of the difference and of the enormous burden which falls upon the poor insurers is given by the administrators of the industrial companies themselves, at least in part. Of the cost for salaries and the amounts absorbed by profits of directors and stockholders we must learn elsewhere, but of the chief facts they make clear disclosure. One of the factors in explanation is the small size of the poor man's policy, as compared with that of the rich man. The average policy in ordinary companies is $2,468, while that in industrial companies is only $142, and that of the weekly payment plan is much lower still. The industrial company must write at least eighteen policies to make the sum of one policy in ordinary insurance. In connection with each of these little policies visits must be made to solicit and write the policies; each policy must be carefully examined by experts, immense correspondence must be carried on from the central office with agents all over the land, the payments of premiums demand time and expense, the accounts must be kept with each policy holder and each agent, and the medical examinations also call for heavy payments. It is estimated that the agents of these companies must make in the United States annually more than 416,000,000 visits in homes, or about 1,328,000 each week day. To these causes of expense we must in fairness add the fact that the rate of mortality among working people is much higher than among the members of the well-fed, comfortable classes, and this makes the cost of insurance higher. The habits of life of many working-people, their unsanitary homes, inadequate or improper food, hard and monotonous labor often at depressing tasks, close confinement, and occasionally inherited defects, all have a bearing on death rates

and hence on premiums which must be charged to cover risks. The table shows the relative rates of mortality according to Farr's English Life Table, based on the general population of Great Britain; the Actuaries' Table, based on the combined experience of seventeen English companies; and the table based on the experience of 12,000,000 insured lives with the Metropolitan Life Insurance Company.

The actual premiums paid in the industrial companies are set forth in their tables, and typical tables are here reproduced.

Value of industrial insurance.-We may freely admit that the claim of the companies that they offer real benefits to low-paid workmen has considerable foundation in fact, and they are entitled to consideration. It is incredible that such a vast business should rest upon unmitigated falsehood and injustice. The companies are right in their claim that no considerable number of workmen of this level will voluntarily insure, even if rates are low, and that solicitation by agents is costly and the expense must be charged in the premiums. They are right in claiming that the benefits have often spared the poor family the shame of a pauper funeral; that family feeling and affection are fostered; that a spirit of independence and seif-respect is maintained; and these