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EFFECTS OF THE WAR UPON INSURANCE,
WITH SPECIAL REFERENCE TO THE
SUBSTITUTION OF INSURANCE

FOR PENSIONS

BY

WILLIAM F. GEPHART
Professor of Economics, Washington University, St. Louis

NEW YORK
OXFORD UNIVERSITY PRESS

AMERICAN BRANCH: 35 West 32ND STREET
LONDON, TORONTO, MELBOURNE, AND BOMBAY

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COPYRIGHT 1918

BY THE

CARNEGIE ENDOWMENT FOR INTERNATIONAL PEACE

2 Jackson Place, WASHINGION, D. C.

EDITOR'S PREFACE

This study of the effects of the war on insurance by Professor W. F. Gephart of Washington University, St. Louis, is the sixth in the series of preliminary studies on the war, issued by the Carnegie Endowment. The author is a well known authority on life insurance and the writer of two or three books on the subject. In his study of the topic he has directed attention not only to the immediate methods and purposes of the government in providing for the families of soldiers by these new schemes of insurance, but has also inquired into the effect of the large draft of men into military service, and of the governmental insurance plans referred to upon the ordinary activities of the established life insurance companies. For it is evident that their constituency is largely diminished by the inclusion, under the new government scheme, of a large number of physically fit subjects of insurance. It is true, of course, that their risks are at the same time diminished in a considerable degree by the limitations of their policies with reference to war. In short, the influence of the new governmental policy on this old and well established business is a matter for earnest consideration, and this fact justifies the author in his careful presentation of this phase of the subject.

The plans of life insurance put into effect by the governments of Great Britain and the United States, in lieu of, or in anticipation of, the old fashioned pensions, are full of interest. Certainly a country which causes its members to take the extraordinary risks of war is bound to care for their families in some adequate way. The old fashioned method of pensions was unsatisfactory from several points of view. Not only was it inadequate in numerous instances, but it afforded many opportunities for corruption, political intrigue and unfair distribution. So far as can be judged at the present time the new method is much superior. In any event, it is a burden which the people ought to carry through their government, at least as largely as the present legislation requires. The participation of the insured men in the payment of premiums is, of course, a desirable feature. It will not only arouse but hold their interest, and it will go far towards preventing the imposition of an unfair burden on the public. Taken as a whole, the war life insurance legislation is a notable forward step.

Some of the profoundest changes in insurance methods caused by the war have been in the field of marine insurance. As the author points out, risks in this field have been largely multiplied. The two methods adopted, one by Great Britain, and the other by our own government, are indicative, perhaps, of some differences of temperament of the peoples of the two countries. Both governments are carrying the extra risks caused by the war. But Great Britain discharges, or performs, its service in this matter through existing companies, while our government has made the work that of a special government department created for the purpose. Both methods indicate an extension of government activity, but neither may safely be relied on as evidence of a disposition on the part of the public either to extend the liability of the public ireasury to cover other than additional war risks or to prolong the liability beyond the period absolutely necessary.

In short, the whole study shows that while there is a more widespread belief than ever before in the propriety of what is commonly called social insurance, not only in the field of life, but of other insurance, there is no evidence that after the war the services of private insurance companies will be dispensed with or their field of activity seriously limited by government participation in insurance.

DAVID KINLEY,

Editor.

FOREWORD

To attempt a study of the effect of the war on the leading forms of insurance in the midst of the war, may appear futile and therefore useless. That such a study has been made under great difficulties is apparent. Data on some phases of the effect of the war on insurance have been impossible to secure, especially from the Central Powers, owing to the interruption of communication. Even in the other nations, the publication of much insurance data has been delayed on account of the pressure of other work. The private insurance companies have had their office forces reduced by enlistment. In other cases there is no disposition to make public some of the effects which the war has had on the business. Old laws and regulations governing insurance have been subjected to frequent material changes and extensions. And yet it has been thought worth the effort to make such a study, both because the fundamental readjustments in insurance legislation for the period of the war have already been made, and especially because a collection of these changes and a discussion of their character and import may be of some service in aiding in the profound adjustments which must be made later as a result of the war. Civilized society in all the leading nations seems to be on the eve of a wide extension and application of the insurance principle, and whether this is done by direct government action or by private companies under the supervision of the government, there will need to be a careful study of the plans adopted during the war and the success which has been achieved, if the greatest measure of service to society is to be secured by this increased use of the insurance principle.

No one is more conscious than the writer of the regrettable gaps in the discussion, occasioned by the inability to secure data. Nor has it been an easy matter to decide what material to use of that available. The writer, therefore, directs the attention of

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