INSURANCE. 6H« INSUBANCE. ngrcenients, and the attempts of the legislatures iif various Stales to reinstate competition by leg- islative liat acconiplisli praelically iiotliiiig. It may l)e true that in many oases the rales are ni'ne loo high to cover losses and e.]>enscs as insurance companies are at present managed, but in many cases losses, and in ])ractically all cases exi)enses, are unnecessarily high. It is one of the nilvantages of unreslrieled comjielilion that it forces the adoption of economical methods. In the insurance business, however, such conipetition as survives does not result in cheaper nietliods and a lower cost of insurance, but rather in the expenditure of larger sums in the attempt to secure new business, and in the presentation of more attractive but more expensive methods of settling policies. iloreover, altogether aside from the (piesfion of cost within a single com- pany, large numbers of companies, and the con- sequent multiplication of managers, agents, and material cipiipmeiit. greatly increase the cost of insurance. There is no other line of economic activity in which the gain from production on n large scale is so great as in the insurance business. With respect to sectirity, governmental insur- ance clearly has the advantage. Nothing could l)e more scctire than the insurance i)oli<v guar- anteed by the Government, With respect to cheapness the case is not so simple, though the advantage would probably be with the Oovern- nicnt ollice. The possible saving in the actual management of the business would be enormous, and the large scale on which governmental insur- ance could be carried on would greatly reduce its cost. It would Ik- unnecessary for the Gov- ernment to accmnulate large reserves when the number of the insured had become so great that the amount of loss Avas practically uniform from year to year. Tlie only reason why there can be any inicertainty as to the comparative econ- omy of governmental insurance and private in surance is that tlie Government is generally a wasteful manager: but in this particular case the opportunities for economy are so numerous that it seems hardly doubtful that the net cost of insurance would be lower if the entire business were in the hands of the Government. The diffi- culties in the way of governnu-ntal insurance are of a political nature, aiul that I hey are verv serious cannot lie questioned. The business would present imlimited opportunities for the mani- festation of favoritism for the purpose of fur- thering personal and political ambition. So that while an ideally managed governmental insurance would be far preferable to the present system of private underwriting, the political evils which would restilt might be so great that they would overbalance the economic gain. The experience of the governmental offices al- ready established does not alTord conclusive evi- dence either for or against public insurance. Public fire insurance offices have been maintained for nuiny years by some of the Prussian towns and by some of the Swiss communes. All sorts o'f methods have been tried — governmental monop- oly with compulsory insurance, governmental monopoly with voluntary- instirance. compulsory insurance with choice of public or private office, and voluntary insurance with the same choice. The experience of the j)ublic offices is. on the whole, unfavorable to governmentnl insurance. The governments have generally found it neces- sary either to introduce a large amount of for- nullity and supervision, thus rendering the busi- ness unpopular, or to adopt a loose classifica- tion of risks, which, in cases where the com- petition with ])rivate companies was allowed, resulted in the better risks going to the private companies with a more accurate classification, and the poorer risks going to the Government office. Kinally, all these public ofiices arc on so small a scale, generally limited to a single town or commune, that they have failed lo realize the great advantage which comes from a large num- lur of well-distributed risks, vi/. the relatively slight lluclnation in loss from year to year. The English tiovernment has for nearly forty years olVered life insurance to its citizens through the Post-ollice Uepartment. It has made no at- tempt to develop the business, either through personal canvassing by its agents, after the nuinncr of private companies, or through adver- tising. The amount of business written has been very small. This experience, however, is not ((MicUisive as to the results of a similar ex- periment in the United States, where the habit of insurance is more thoroughly established than in any other country, except possibly New Zealand. Xew Zealand furnishes the only example of a thoroughly successful governmental life insur- ance otllce. In this ease, however, the success of the ollice has been largely due to the deliberate adoption of the methods of private companies, especially the solicitation of business through agents paid by conunissions. This has prevented the office from realizing any great economies of management, and its rates do not dilfer much from those of private offices. New Zealand is said to have a greater per capita amount of life insurance than any other country, and a little over half the business is taken out through the public ollice. The experience of European governments in establishing compulsory insurance of working- men is of little service in estinialing the value of governmental insurance. (Jermany has the most thorough system of workingmen's insurance, and its methods may be taken as typical. The busi-. ness is organiz/"d in three separate departments — accident insurance, sickness insurance, and old age and invalidity insurance. All the indemni- ties paid for accidents, as well as the cost of administration, are borne by the employers; the laborers make no contribution in any form. To the indemnity for sickness and the cost of man- agement the employers contribute one-third and the laborers two-tliirds. The cost of manage- ment of the old age and invalidity insurance is borne by the Government, and the Government also makes a contribution to ei"ery pension grant- ed; of the remainder of the pension, one half is paid by the employers and one-lialf by the labor- ers. It is clear, therefore, that it is only by a loose use of language that the term insurance can be applied to the system. It is in reality an elaborate system of poor relief, and its success or failure has little significance for the question of the practicability of the public management of insurance on scientific principles. The con- clusion is therefore unavoidable, that while the economic and social benefits of insurance are beyond dispute, and while the advantages of an ideally perfect system of governmental insurance would lie many and great, the political dangers
