INSURANCE BENEFITS UNDER THE ACT.

Comparing the results of the workmen's compensation law, so far as the benefits to injured employees are concerned, with the former indemnity liability law, the report of the Insurance Commissioner for the year 1912 shows that there was collected in liability insurance premiums in 1911 $3,360,558.52. These premium payments included the cost of employers' liability and public liability. This report also shows that there was paid out in losses in 1911 for both these classes of liability $1,412,579.

It is generally estimated that the loss payments on employers' liability were about equal to those on public liability, and that the average cost to the injured person of collecting a loss under either head was not less than 50 per cent. of the gross amount received.

On this basis, the net payments to wage earners under employers' liability in Massachusetts for the year 1911 amounted to less than $400,000.

Reports from all the insurance companies doing business in Massachusetts under the Workmen's Compensation Act show, for the year ending June 30, 1913, a total expenditure of $1,677,380.82. This amount covers the liability for compensation to dependents and widows, and continued payments for total and partial disability, but does not include insurance administration costs, commissions, profits, dividends, etc.

The amount paid by employers in Massachusetts for premiums under the Workmen's Compensation Act is not yet available, but a minimum estimate of the premium insurance cost under workmen's compensation for the period July 1, 1912, to June 30, 1913, is set at an average rate of 1.2 per cent, of the pay roll. In computing this figure due allowance is made for error and for the reductions in rates made by the insurance companies. To arrive at the actual cost of the insurance to the employers of Massachusetts, which is not otherwise obtainable except by estimate, it is found that the total pay roll of the 608,590 persons employed in manufacturing indus

tries alone was $335,553,704, or an average wage of $551.36 a year.

Assuming that the 191,410 additional wage earners estimated to be engaged in trade, transportation, etc., who are not specifically recorded by the Bureau of Statistics, receive the same annual wage as that shown for those employed in manufacturing (although it is likely that the persons engaged in these occupations would have wages in excess of those in manufacturing), the total pay roll of the Commonwealth for wage earners subject to the act would be $441,089,521.60.

On the estimated number of employees covered by the act, as shown by the accident reports, and allowing a reasonable margin for error, the premium income of the insurance companies under the act for the first twelve months of the Workmen's Compensation Act would be not less than $4,000,000, and this, taking into consideration all reductions of premium rates made since July 1, 1912, when the act went into effect.

On the basis of the insurance companies' own figures, $1,677,380.82 was paid out in actual losses, exclusive of insurance cost, under the act. The estimated losses paid to wage earners engaged in manufacturing alone would be $1,575,060.

According to the last report of the Bureau of Statistics, the value of the manufactured products in Massachusetts for one year was $1,596,734,445.

The actual cost of losses under the Workmen's Compensation Act, to be charged against the finished product of Massachusetts manufactures, was $.0009 for each dollar of product. This is exclusive of the administration cost of insurance. In other words, the consumer paid for every $10 unit of purchased product less than 1 cent as the per capita cost for the actual losses paid under the Workmen's Compensation Act.

After the payment of the compensation due under the act, and setting apart the necessary reserves with which to meet future payments due for injuries causing incapacity and fatalities necessitating weekly payments to dependents beyond the period covered by this report, insurance companies had a margin of more than $2,000,000 with which to pay for the cost of administration and profits during the year. This shows that

for every dollar received by the insurance companies for premiums under the Workmen's Compensation Act less than 45 cents was paid out in losses, and more than 55 cents retained to pay for the cost of doing business and the payment of dividends to stockholders. Stock insurance companies generally claim. that they must have from 50 to 60 cents on the dollar of premium in order to transact business, and the difference between the payments made and future liability on account of injuries occurring during the first year's administration of the law, and the premiums collected, indicates that insurance companies have retained that proportion of the premiums. No allowance has been made on account of the dividends which mutual companies have paid to their subscribers, the Board having no means of obtaining information with respect to these dividends, except that it is generally known that dividends of about 25 per cent. of premiums, and upwards, have been returned to mutual company subscribers. This refund is in addition to the reductions in rates which have been made by stock and mutual companies alike.

It should be said at this point, and it will be brought more clearly to view in another chapter of the report, that if the experience elsewhere is to be followed in Massachusetts, as is most likely, the loss charge of insurance will be higher the second and third year after the introduction of the act than it has been the first. Even if no legislative additions are made which will add to the cost of insurance, it is probable that the cost will be 20 per cent. more next year than it was during the year from July 1, 1912, to June 30, 1913.

Emphasis should be placed on the point that the rates of insurance companies should not be fixed merely by guesswork, as they apparently have been in the past. While economy of administration should be provided for, no rate should be allowed in any hazardous class to become so low as to permit the business to result in an excess of charge to employers paying premiums on classes of business not of such great hazard, because this tends to discredit the law in the minds of employers who are unequally burdened.

INSURANCE COMPANIES AND THE ACT.

As originally drafted, the Massachusetts act contemplated the establishment of a mutual company, composed wholly of employers, and authorized to have a monopoly of workmen's compensation insurance in the State. Amendments were added in the Legislature allowing all insurance companies authorized to do business in Massachusetts to write workmen's compensation insurance on the same basis as this mutual company. Instead, therefore, of dealing with one insurance unit, organized especially to administer insurance for industrial accidents on a workmen's compensation basis, at cost, the Industrial Accident Board had to deal with twenty-one different private and three mutual companies, all but one of which had been passing on claims for years for industrial injuries, on the basis of employers' liability.

The Industrial Accident Board laid down the rule that an ideal administration of the law meant that in death cases, where the injury was without doubt the cause of the employee's death, the insurance companies should begin to pay the widow the compensation due her at the end of the seventh day following the fatal termination of the injury; and in all non-fatal cases, where the injury lasted more than fourteen days, compensation should be paid the injured employee at the end of the third week, or twenty-one days after the date of the injury, and that medical services should be furnished promptly by the employer, and paid for without delay when the services were rendered by the employee's own doctor, if the bill submitted was reasonable.

It was immediately found necessary in the interests of speedy administration, to notify injured employees and dependents of fatally injured employees of their rights under the statute. Occasionally insurance companies refused compensation because of a strict technical interpretation of the law, but in these cases it is the policy of the Board immediately to send the matter to a hearing before a committee of arbitration, and to have a formal decision rendered at the earliest possible moment,

with the slightest possible inconvenience to all parties concerned.

The Board desires to express its satisfaction with the spirit of co-operation shown by almost all the insurance companies in furtherance of the effective administration of the act. Only a few of the companies have given any evidence of a tendency to revert to the methods which prevailed under the former liability law.

The broad interpretation given the act by the Industrial Accident Board, in accordance with what it understood the intent of the Legislature to be, has been approved by the Supreme Judicial Court, as shown in the several decisions thus far handed down, in one of which it said: "the act should be interpreted broadly and in harmony with its main aim of providing support for those dependent upon the injured employee." In another, the court refers to the "broad scope of the act and its comprehensive dealing with the whole subject," making it plain that the highest judicial tribunal in Massachusetts favors a liberal interpretation of the statute, and thus setting forth the ideal which the insurance companies and all concerned must follow.

In the beginning of the Board's administration of the act, statements were made by representatives of the insurance interests that a liberal interpretation of the law must ultimately be followed by an increase in the premium rates, which were at that time from three to ten times more than the former rates for employers' liability insurance. Interest on the part of the general public was keen as to the workings of the law, and especially on the part of employers of labor and the wage earners as to the cost of insurance.

The first statistical bulletin issued by the Board indicated that the rates as charged were more than necessarily ample to provide for the payments of losses incurred as a result of injuries under the law, but the estimate of the cost then made, which a summarization of our first year's statistics has proved to be absolutely correct, was considered too premature to be regarded as acceptable from an insurance standpoint. The Board then made a special study and inquiry, not contemplated by the law, into the actual cost of the workings of the act for the first