Evening star., 1921-05-08
by ERNEST GREENWOOD.

| washington, the Washington BoarC
! of Trade and other civic organiza-
! tions in protesting against the So
! called Fitzgerald bill, providing for
| compulsory compensation insurance
| in the District, will be commended by
| every thoughtful citizen, whether he
| be an employer or a worker.
1t is very evident that none of these
| organizations. nor the employers OF
| the District as a whole, are opposed
| to compulsory compensation lnsur-
| ance. AS a matter of fact, it is felt
| by both employers and workers that
! the District is far behind most of
sive legislation. Employers through :
out the country have come to realize
that compensation insurance mas
many advantages over the old form
of liability insurance, In every state
where just and equitable compenSa-
ton legislation has been passed, both
employers and workers have been
benefited. What the District does
want, however, is a law which will
accomplish the purpose of protecting
time will not only work a minimum
amount of hardship on the employers.
but which will be economically
sound. This. it is claimed, is not true
of House Bill No. 40S9. which pro-
vides not only for compulsory COM
pensation insurance. but requires
every employer to insure in So
called fund under the control of the
United States Employees Compensa-
tion Commission.
Provisions Regarded UnsOund.
From a standpoint of economics and
good insurance procedure the pro-
visions of this bill are absolutely un-
al
| the purpose of insuring against
| financial loss from any cause
| whether it be a stock company. a
! mutual company. fraternal organ.
| ization, state fund. or any one OF
| dozen other forms-must base its
| constitution on certain Fundamental
| principles if it's solvency is to be
| assured. 1t must. in the first in
| stance, have a capital, either in cash
or in some form of sound financial
| guarantees. 1t must have a surplus
| it must establish reserves and 1t
| must keep intact its unearned
premiums.
An examination of the Fitzgerald
measure develops the interesting fact
| that it does none of these things
True. it does provide that the United
States Employees Compensation Com
mission shall promulgate rates suffl-
cient to pay all losses and establish a
! surplus and reserves. In other words,
/ it Speculates on the probability that
| the commissioners will either have
available experience tables applicable
to the District. which will enable
| them to fix the rates at a sufficiently
| high figure without chance of error,
| or that their judgment viii be equal
to the situation without the necessity
of any experience. Applying this
scheme to a stock company. where is
there an insurance department or an
! insurance commissioner who would
; tolerate the suggestion that a COM
Iany be permitted to start business
| with nothing more than promise 10
! charge sufficiently high premiums to
establish a fund out of which they
could pay both losses and expenses
Yet this is just what the Fitzgerald
bill proposes.
Need of Experience Statistics.
Just what experience statistics the
commissioners shall use i'll liking
these rates has not been suggested.
| and it is very doubtful if the pro-
moters of the bill have given this
more or less important matter a
thought. After perhaps decade of
experience in writing this class of
| insurance casualty companies cannot
Yet claim that the limit of liability
has been SO fixed that rates can be
promulgated with sufficient accuracy
| to guarantee that premium receipts
VIII always equal or exceed the sum
of losses and expenses. Liability un-
der the compensation laws runs
event of death the widow receives
weekly benefits until she dies, and
the children in most cases until they
are eighteen years of age.
The position of the District with
so-called compulsory state fund is
much worse than the position of any
other state fund or of d private cas-
ualty company. The area is small and
the population confined practically to
the population of Washington, which
is not an industrial city in any sense
of the word. The volume of busiesS
will be comparatively small and un-
less the rates are unbearably high
the premium income will be so small
as to be almost trivial.
Cites Case as IllustratiOn
TO illustrate. suppose the District
fund should be started on the 1st of
July and the commissioners collect
$50, 900 in premiums as of that date.
1t must be kept in mind that at the
outset the fund has neither capital
surplus nor reServeS-nOthing, in
fact. but Immediate expenses. to be
paid out of premium income, and
prospective losses. Expenses start
on the Ist of July, but even though
I the commission might collect $4,000
on that date it actually possesses not
1
premiums belongs to the fund on that
date. They are unearned premiums
which have been paid in advance.
Suppose now. by the 31st day of July.
certain losses have accrued. The
death of single worker with a wife
thirty years old and two or three
small children might entail a con-
tinuing liability for period of
twenty-five or thirty years. which
would involve loss in the payment
of weekly benefits amounting to. when
concluded. $4,000 or 10000. Where
is the money to cstabli reserve
for this single loss? On the 3lst
day of July the fund has earned one
twelfth, or a little over 81 900 of the
$4,000 collected on the 1st. Out of
this expenses-as for example sal
aries due on the 3lst for clerical help
will have to be paid. Whatever is
left is all that the fund has to pay
the July losses.
Problem for Com fssiOn.
What is the commission going to
do? Is it going around to the policy
holders on the 1st of each month
and collect additional premiums in
the event it Is found to he insolvent?
And who is going to determine
whether it is solvent or not. when
there is no way of determining, un-
less the commissioners are omnipo-
tent, what the total loss is going
to be-? Or are the commissioners
going to entirely disregard all proper
insurance procedure and pay ex-