might then be still a few claims unsettled, but not of sufficient
magnitude to disturb the main results of the underwriting as then
disclosed. After the war no such calculations could be made. The
books of the same important insurance company showed that of the
1917 premium income 17% had been settled in claims alone during
the first year. By the end of 1918 the total settlements had risen to
56%; by the end of 1918 the settlements represented 72%, and by
the end of 1920 89%. The total showed that for the fifth-year
settlements 11% of the premium income remained. The earlier
figures showed that 9% of the premium income was absorbed in the
fifth-year settlements on the 1916 figures, so that if the settlements
in the fifth year on the 1917 account were on the same basis, only 2%
of the premium income would remain for expenses. It thus appeared
that a substantial loss was inevitable. The figures were extracted
from the books of a first-class office, and it is only reasonable to
assume that those of other offices which were not in the same
favourable position would be still worse.
A further factor responsible for heavy claims in respect of hulls was the loss of a number of steamers under remarkable circumstances. Vessels flying certain foreign flags were especially prominent in this connexion. A large number of steamers foundered near land, with little, if any, loss of life. In some cases the vessels were alleged to have struck drifting mines, especially in the Mediterranean. Some of the vessels were lost shortly before the expiration of policies covering them for far larger values than could be insured again. The epidemic was so notorious that underwriters could not feel justified in paying the claims without full inquiry into the mysterious circumstances of the losses. In this matter Government aid was forthcoming. It was, perhaps, unfortunate that a large number of steamers should be at sea insured for very much larger sums than they could be worth under current market conditions.
If, in connexion with the values of shipping, there seemed to be some weakening of the standard of morality, there was an obvious lowering of the ideals in other forms of commerce. Claims in respect of cargo losses were on an enormous scale, and were attributed in large degree to pilferage of goods throughout the world. Legal decisions have been held that there is a distinction between robbery with force and sneak-thieving, or pilferage. The ordinary marine-insurance policy covers the risk of robbery by force, but the risk of theft and pilferage has usually been specifically excluded. Gradually underwriters were asked to accept it, and they did so in various trades, quoting nominal rates for the risk. Then the evil grew steadily to vast proportions—encouraged, no doubt, by the high value of commodities and a laxity induced by the experience of vast numbers of men in the armies, where it was often a question of every man looking after himself as best he could. All classes of business men became alarmed by the growth of the pilferage evil, and committees were formed in the various ports, led by London, to consider what action was required. The shipping companies, who were called upon to pay a vast number of claims, were naturally active in adopting measures, such as the formation of special police forces and the institution of special systems of tallying the cargo on loading and discharging. The marine underwriters, in order, partly, to bring pressure to bear on the shippers and shipowners, resolved to accept only 75% of the shipping value of the goods, thus leaving merchants with responsibility for one-fourth of the value. Early in 1921 there was a strong agitation in the London marine-insurance market in favour of refusing to accept the pilferage risk at all, but this did not seem compatible with the functions of marine underwriters in protecting the interest of their clients. Such action as they did take was undoubtedly successful. It had a good deal to do with a decision on the part of the owners of lighters and barges to accept some responsibility, although of limited character, for the safety of goods carried. Until the matter was brought to a head by publicity and the action of shipping managers, merchants and underwriters, the owners of lighters and barges had, under the London Lighterage Clause, refused to accept responsibility for loss of or damage to goods carried, whensoever, wheresoever or howsoever such loss or damage might be caused. The question had many complications. Thus goods might be resold in course of transit at a profit to the original owners. It was pointed out that a settlement by underwriters of not more than 75% of the shipping value would not be adequate compensation to buyers of the goods at enhanced prices. This matter, in particular, was receiving the careful consideration of underwriters and merchants in the summer of 1921.
Workmen's Compensation for Injuries.—Important recommendations respecting the system of compensation for injuries to workmen in the United Kingdom were made by a departmental committee appointed by the Home Secretary in May 1919, which reported in July 1920. The committee was presided over by Mr. Holman Gregory, K.C., M.P., and included representatives of the workers and of the insurance companies. In the introductory paragraphs to the report (Cmd. 816) the committee pointed out that the system then obtaining, which was based on the Workmen's Compensation Act of 1906, imposed on employers a burden of upwards of £8,000,000 a year, and its cost was an item which every business enterprise had to take into account. The total number of workers within the scope of the Act was calculated to be about 15,000,000, and the negotiation and settlement of the claims of those who belonged to organized labour were an important part of the work of trade-union officials. Sixty-five joint-stock insurance companies did workmen's compensation business with employers having a wage-roll exceeding £600,000,000 a year, and their annual premium income in respect of the workmen's compensation risk was well over £5,000,000. Further, there were about 50 mutual indemnity associations which insured their members against the workmen's compensation risk and paid about £2,000,000 a year in compensation. The majority of employers in several of the most important industries in the country covered their risks by this means.
The committee, after examining the subject thoroughly, found that there were certain defects in the system then obtaining, but were of opinion that these defects could be remedied largely without resort to a State system of insurance, although not without the introduction of a certain measure of State control. They proposed that in future at least 70% of the premium income should be expended in benefits to injured workmen or their dependents, and that the remaining 30% should be available for the management, expenses or profits of the companies and the payment of commission to agents, the latter not to exceed 5% of the premium income in any case. They calculated that there would thus be saved on the then cost to employers a sum of between £1,250,000 and £1,500,000 a year which, under the existing organization would be paid away in expenses of management, commission and profits.
In order to provide against the risk to the workman of uninsured employers proving unable to meet the obligations incurred under the Act, it was proposed that every employer other than the Crown, a local or public authority, a statutory company, or householder in respect of servants not employed by him for the purpose of his trade or business, should be required to insure against the workmen's compensation risk. Employers with an annual wage-roll exceeding £20,000 were to be entitled to claim exemption from compulsory insurance upon compliance with prescribed conditions. Householders were excluded from the provision of compulsory insurance because, as the risk of accidents to domestic servants is small, the premium charged by insurance companies is more or less nominal, and also because it was considered that the cost and difficulty of enforcement would be out of all proportion to the number of persons involved. The committee were informed that a large proportion of householders already insured, and they believed that when the proposed increased liabilities were effective “few would be so unwise as to fail to cover their risk by insurance.”
The maximum rates of premium were to be approved or fixed by a Government official who was, for convenience, referred to in the report as the proposed Commissioner. It was proposed to bring within the scope of the Act large new classes of persons. These were:—
(a) Persons employed otherwise than by way of manual labour whose remuneration is at a rate not exceeding £350 a year (instead of £250 as under the existing Act).
(b) Employment of a casual nature for the purposes of any game or recreation where the persons employed are engaged or paid through a club.
(c) Taxi-cab drivers who, on the ground that they are the bailees of their cabs rather than the servants of the cab-owner, were excluded from the original Act.
(d) Share fishermen employed in the trawler industry.
(e) Share fishermen employed in the herring or other fishery to be brought within the Act by order of the Commissioner, if he was satisfied, after public inquiry, that they ought to be included.
(f) All persons ordinarily resident in the United Kingdom who were emploved, or were travelling in the course of their employment, in a British ship.
Under the original Act the dependents of a workman killed were entitled, under the Workmen's Compensation Act, to a payment of not less than £150 and of not more than £300. Provision was made by the committee for a substantial increase
