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INTRODUCTION

General Considerations on War and Insurance

CHARACTER OF INSURANCE

It is in some respects a mystery why society has failed to use more extensively the insurance principle as an agency to further social and economic welfare. This is especially true when one considers that the basic principle of insurance is cooperation, a kind of social conduct for which man by his very nature is suited and in which either from necessity or choice he has had long experience. Socrates and earlier students of human society pointed out long since that man is by nature a social animal, and yet on account either of his group conflicts or of his personal competitive conduct man is limited continually in the use of this natural agency, cooperation, to further his welfare. Insurance is cooperation, organized on the most scientific basis. It is but the application of the law of average to some of the most important risks to which man is subject. In life insurance it is a combination of the laws of mortality and the principles of finance, and in the other well organized forms of insurance the same or similar well known principles are used in devising the system of insurance. Yet there is little general appreciation of the simplicity of the insurance principle. This is doubtless due in part to the fact that sufficiently well organized efforts on a wide scale to popularize the insurance have never been made, and in part to the fact that the masses have had little direct experience with the apparently complex principles of finance, mortality laws, averages, and other basic factors, underlying insurance conduct. After giving

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all due credence to the avowed purposes of the officials of private insurance organizations to have the public understand the principles on which their business was conducted, the fact remains that even few of the policyholders, not to mention the public at large, have had any considerable understanding of insurance. It has sometimes happened that campaigns of education, designed to acquaint the public with the merits of insurance, have unconsciously been devised for the purpose of persuading the public to purchase more of the particular kind of insurance which the originators of the educational campaign had for sale. And yet no particular criticism is to be imputed to the officials of the insurance organizations. It is a situation for which neither the managers nor the public can be blamed. The gulf between the insurer and the insured is yet very wide, but it is one which must be closed if private insurance is to justify itself. There is no doubt that the insurance principle has increasingly been used to meet economic and social needs. During the past half century it has been applied to serve the purposes of private business, such as group insurance, corporation, rent and profit insurance; likewise, in the purely social field of human affairs, the insurance principle has had new applications, such as those of disability, sickness, old age, and compensation insurance.

SCIENTIFIC DEVELOPMENT

Nor is there any doubt that the old forms of insurance have become more scientific along with these extensions of new forms of insurance which, as data become more abundant, will place the newer forms on as scientific bases as these older forms of insurance. Marine insurance, which was one of the earliest forms of insurance to be well organized, yet retains in its standard policy some of the provisions of the early policies that are strangely out of harmony with modern conditions, but this has not prevented the extensive application of marine insurance to the twentieth century world of international trading which is happily free, at least in times of peace, from "pirates, rovers, thieves, jettisons,

letters of marque and contremarque, detainments of all Kings, Princes and Peoples.'

In life insurance, there have been refinements in the mortality tables, the construction of tables of select lives, and the tabulation of increasingly accurate vital statistics. Medical and sanitary science have been making such rapid advances, the collection of accurate vital statistics has so greatly improved in so many countries, that students of life insurance had begun to believe that nothing could invalidate the increasingly scientific principles, upon which the business of life insurance was conducted.

In fire insurance, of the older forms of insurance perhaps the least scientific, so far as the determination of rates on a fair and equitable basis was concerned, there had been considerable advance in scientific systems of rate determination by a more careful and complete separation of the risks and an analysis of their constituent elements. In all the preceding forms of insurance uncertainty as to rates on individual risks or groups of risks was being replaced by scientific rates.

In the new forms of social insurance, great interest and popular approval were being manifested. The great service to society rendered by the use of the insurance principle in the case of compensation insurance for injured industrial workers, or health or old age or accident insurance compensated for any inaccuracies from a scientific standpoint in the rates which were charged to individuals or groups.

In short, the ability to predict with accuracy the happening of future events, which is the prime prerequisite of all insurance, was becoming increasingly possible and hence insurance of all kinds was becoming increasingly scientific.

SOCIAL CHARACTER

Insurance is but a cooperative organization on the most scientific basis. It has all the good features which characterize individualism, and none of its evils, inasmuch as the individual member of the insurance group is left the largest measure of

individual conduct, while through his association in the insured group, he is able to secure all the good results which come from collective or cooperative conduct. As contrasted with many other cooperative associations, the liberty surrendered, and the restricted conduct imposed, are infinitesimal when compared with gains achieved through the insurance organization. Indeed, the individual secures for himself the impossible of accomplishment as an individual. He frees himself, as an insured individual, from the chaotic and evil workings of chance.

In the life insurance group he secures for his dependents that protection which only the fortunate beneficiaries of the normal operation of the law of mortality and of the uncertainties of struggle for economic security enjoy. In the property insured group, he has restored to him by the group his losses. Likewise, in other forms of insurance, the insured individual, or his dependents, is restored to the status approximating that preceding the misfortune, and this without any necessary relation between the cost to the individual insured and the benefits which he or his beneficiaries receive. And insurance is the only known institution by which this end can be achieved without a semblance of charity. Insurance is always concerned with the future which it is constantly discounting in terms of the misfortunes of the present. It offers the single method known to socialize charity; that is, a means of protecting the individual against most of the contingencies in life which make him, or his dependents, look to society for aid in times of misfortune.

And yet insurance does not replace or produce either tangible or intangible capital. It simply distributes what is already in existence. It takes from the many to give to the few. Insurance itself is an economic and social burden. It is one of the costs of human society. It is to be valued only because it lessens. certain other costs or burdens which society by its very organization must bear. Insurance, viewed as a mathematical process, is always one of subtraction and not of addition. It is always of this character for society and ought to be such for the individual who receives the benefit of the insurance. The life still lived,

the property not burned, the body not injured by accident, the surety bond not paid-each should be valued more highly than any sum paid to the insured or his beneficiary. Insurance is thus the most social of institutions, and its uses as a social and economic agency have scarcely yet been realized. Its social advantages are as constructive as those of war are destructive. As the peoples of the nations have been brought into closer relation, their interdependence has greatly increased and hence any such destructive agency as war has much more serious and permanent evil effects on society. Its influences ramify throughout the social body. It is not, therefore, surprising that there is an increasing tendency to use a constructive agency-insurance-as broad in its scope and influence as is the destructive agency which it seeks to combat-war. Not the least of the already apparent evil results of the great war is the effect which it is having on the development in the use of the insurance principle.

WAR HAZARDS

It has been stated that insurance in all its forms was becoming increasingly scientific, and it is in its effect on this development that war is having on insurance one of its most serious effects. That is, war is interrupting this scientific development of insurance because it introduces new hazards which can not be accurately calculated.

Since the United States found it necessary to enter the war, no department of American business has found it more imperative to set about accommodating itself with the utmost energy and the utmost speed to the requirements of the new situation than has insurance. In every direction the activities of the managers of American insurance to this end have been most striking. The task has naturally been a most difficult and burdensome one, because at least three different orders of considerations have had to be kept steadily in mind; and these considerations have been in certain important respects of a conflicting character. The first of these considerations is that of patriotic duty, involving the employment of our entire system of insurance in all its varieties to ease, in so far as this is practicable and feasible, the strains and hazards of war for the community at large. War brings with it strange shiftings of the incidence and of the collateral effects of the risks of life. While it is being prosecuted, the greatest dif