solvency of industrial corporations as of insurance carriers, and the workman, the payment of whose compensation is dependent upon the financial strength of his employer, is left without recourse in the event of bankruptcy. The employer has also a direct interest in reducing the amount of compensation payments and may discriminate against workmen with slight physical defects or who have families. The same interest may result in efforts to avoid the payment of just claims or to secure agreement to inadequate settlements.

Types of Insurance Organizations.-Two general types of organization have engaged in the insurance of employers' liability and workmen's compensation, the stock company and the mutual association. The two forms differ fundamentally in their objects and in the control of their operation. The stock company is organized by a group of individuals who contribute their capital and control the management of the company. In return, they receive interest on their capital and any profits which the company may make, unless the venture is unsuccessful, when they must share the losses to the extent of their contributions of capital. Mutuals are coöperative organizations of the policyholders whose risks are insured and who control the affairs of the company and share such profits or losses as may result. Employers' liability insurance was first written by stock companies and the greater part of this business has always been carried by them, although two of the mutuals which are now engaged in insuring liability and compensation risks began business under the old liability laws, one of them as early

as 1887. Both of these companies are of the pure mutual type. With the spread of workmen's compensation we find a considerable growth in the mutual insurance field and a differentiation of types based on the mutual principle so that now there exist not only the old type of pure mutuals but also mixed mutuals, inter-insurance exchanges, and state funds.1 This last insurance carrier differs from other mutuals in being operated by the state while the first three owe their inception to private initiative and are managed by private individuals for their own ends. They may accordingly be called private mutuals to distinguish them from the state funds.

Insurance Requirements.-The various states, in enacting compensation laws, have followed diverse principles regarding provision for insurance of the compensation obligation. In eighteen states the requirement is made that the employer insure in a licensed insurance carrier or satisfy the administrative body of his financial ability to carry his own risk— in some of these states the option is granted of insuring or filing a bond. Seven states simply require that the employer make compensation payments as required in the act, permitting him to carry insurance or not

1

The term pure mutual is used to designate a corporate insurance organization managed by salaried officials who are appointed by a board of directors, which in turn is elected by the policyholders. A mixed mutual is similar to a stock company in organization but dividends to stockholders are limited, any excess earnings above a fixed percentage being returned to policy-holders. An inter-insurance exchange is managed by an attorney-infact who represents each of the members and who receives a percentage of the premium for his services.

as he sees fit. Six make it obligatory on all employers to insure with some recognized carrier, while one provides only for proof of financial responsibility or the filing of an acceptable bond. The accompanying map indicates the provisions in individual states.2

Methods of Insurance Permitted.-While one-half of the states have made no special provision for the insurance of workmen's compensation, leaving the field to existing liability companies and to private initiative in forming new organizations, the remainder have created new agencies for the exclusive purpose of assuming the liability created by their workmen's compensation acts. These new agencies have assumed two forms, the specially created mutual which owes its existence to the state but which is operated under private management, and the state fund which is operated on the mutual plan by state officials. Of these states, seven, including the three which have adopted the specially created but privately managed mutual, permit competition by private companies, while six provide that the state fund shall be the sole carrier of this form of insurance. Map. No. 3 shows the methods pursued in particular states.5

3

In the following discussion each variety of insur

2 Page 176.

In Kentucky the state is represented by three of fifteen di

rectors.

In Ohio and West Virginia private companies write workmen's compensation insurance by assuming the risk which the employer has first elected to carry himself. It was the evident intention of the laws, however, to exclude private companies from this field.

5 Page 178.