furniture-nest.com

Workmen’s compensation funds existed in 18 states in the beginning. In seven of these states, the fund was monopolistic; that is, every employer oper­ating under the workmen’s compensation act was required to insure in the fund. In two of these seven states, self-insurance was permitted under certain conditions. In the remaining 11 states, state funds operated side by side with private carriers in competition for business. In these states, however, the state funds usually had a monopoly on the insurance of public corporations.

The state funds were usually under the control of the same state board or commission which administered the workmen’s compensation act. The monopolistic state funds usually wrote only nonparticipating life insurance policies, whereas the competitive state funds wrote their insurance on a participating basis. In the monopoly funds, good experience simply meant lower rates in the future.

Monopolistic state funds obviously had little or no business-ac­quisition expenses. Competitive state funds had to actively solicit business. This was done by salaried employees. State funds did not use commissioned agents or brokers.

The state funds themselves had to be self-supporting from pre­miums collected. They did not have access to the general treasury of the state to bail themselves out. This lack of access to the general treasury was not an adverse factor, since the state funds appeared strong enough to withstand unusually excessive losses. State funds differ from state to state.

The bases of the differences center around: (1) whether they were taxed, (2) whether they were subject to the same rate regulations as private companies, (3) whether they were subject to the deposit-of-securities regulations of some states, (4) their freedom in risk selection, (5) how their ex­penses were regulated, and (6) the types of risks they were permitted to carry. To make a comparison among all eighteen state funds upon these bases would have in itself fill a volume. It is sufficient here simply to recognize that major differences did exist.

Unemployment insurance funds were created by the individual states after the passage of the federal Social Security Act. The impetus came from the federal act itself. The federal social security tax was so arranged as to encourage the states to pass unemployment compensation legislation. The federal government levied a tax on payrolls but provided that, if the employer had to pay a similar tax to the states for an approved unemployment no exam life insurance plan, he could credit this tax against the federal tax up to a limit of 90%.

Thus, he could charge up to 2.7 % in state taxes against the federal tax of 3%. Since the employer would be required to pay the tax anyway, it was to the advantage of the state to pass an approved act and thus provide benefits for the home folks. The costs of administering the state unemployment compensation laws were met by the federal government by grants-in-aid to states from a fund created by that part of the payroll tax which is not deductible. (All but 10 % was deductible.)

Thus, the states did not even have to bear the burden of financing the administration of the plan. Moreover, the states had no problem in the investment of the un­employment compensation funds, since one of the requirements for approval of the plan is that the federal authorities would have charge of investing the fund.

Unemployment compensation acts varied from state to state. In every state, however, the plan was financed by taxes on payrolls; and benefits were limited to the covered unemployed who were ready, willing, and able to work and who reported regularly to the public em­ployment office. The benefit structure contained a minimum and a maximum indemnity and a required waiting period.

Disability or sick benefit funds were then set up in several states. Rhode Island was the first state to establish this type of fund. When that state designed its unemployment compensation system in 1936, it charged a 1.5% tax on employees in addition to the tax on employers.

These taxes brought in contributions in excess of need, so that heavy surpluses were quickly amassed in the unemployment compensation fund. In order to reduce these surpluses, a proposal was made in 1942 that the employees’ tax be eliminated. Instead, the final decision was to continue the tax and apply two thirds of it to build a sickness life insurance fund. Accordingly, Rhode Island passed its compulsory state sickness insurance law and set up its monopo­listic state sickness fund, which began paying benefits in April, 1943.

Tags: life insurance policies | life insurance policies | no exam life insurance | no exam life insurance | life insurance | life insurance

del.icio.us Digg Furl Reddit