The decrease in the ratio of disability to death claims paid is due primarily to a stricter definition of disability and to better administration. The number of disability claims paid per 1000 of membership shows also, however, a slight decrease.
The records of the Trainmen which separate claims resulting from accidents still farther emphasize the need for disability insurance.
The data show the place disability insurance has occupied among the Railway Trainmen during twenty years. For this period disability claims for all causes were 32-1/3 per cent. of all claims paid. The percentage of claims from accidental causes—including both disability and death—was 73-2/3 of the whole number of claims paid, while the percentage from natural causes was only 26-1/2. In other words, these statistics show that the Trainmen's accidental disability and death claims, as compared with those due to natural causes, have averaged almost three claims paid as the result of accidental causes to one as the result of natural causes.
[39]
The old-line companies do not offer the form of disability insurance required by railway employees. These companies issue accident policies against death and total or partial disability from accident while on duty; but there are two defects in the form of this insurance. In the first place, the definition of total disability adopted by the companies is much stricter than that of the insurance departments of the railway brotherhoods. A typical insurance company's definition of total disability is incapacity for "prosecuting any and every kind of business pertaining to a regular occupation from the loss of both eyes, both hands, both feet, or one hand and one foot;" while partial disability is "the loss of one hand or one foot or any injury preventing the performance of one or more important daily duties pertaining to a regular occupation." In other words, to secure the indemnity for total disability, the insured must be disabled from performing any regular labor whatever. In the railway organizations total disability is so defined as to cover inability of the insured to continue in his position. Secondly, the disability insurance offered by the regular insurance companies is joined with accident insurance affording a weekly indemnity during the period of illness due to accident. The railway employee, if he insures against totally disabling accidents, must also insure against temporarily disabling accidents, since the companies do not separate the two forms of insurance. The inclusion of all accidents in one policy necessitates a heavy premium. For example, to secure accident insurance including, besides a weekly indemnity of $20, provision for the payment of $1000 in case of death or total disability resulting from accidents, an engineer must pay an annual premium of $50.40 or $56 according to the section of the country over which he runs, or the system by which he is employed. The combination of life with disability insurance meets the need of the ordinary railway employee better than any other combination.
The formative period of the two older organizations furnished opportunities for a study of the disability benefit and showed its usefulness in strengthening the nationalunions. These organizations, however, experienced grave difficulties in their attempts to administer disability insurance. The Engineers included "totally disabled members" among the beneficiaries of the fund provided for in 1866.[40]The by-laws of the insurance association founded by the Brotherhood on December 3, 1867, provided for assessments of 50 cents per member for the benefit of each totally disabled member—one half the amount assessed in case of death.[41]The history of this benefit was tersely summed up by General Secretary-Treasurer Abbott in his address to the Engineers' Association, December 3, 1871: "The Baltimore convention, 1869, adopted a disability clause, the Nashville, Tenn., convention amended it, and the Toronto, Canada, convention, 1871, repealed it." At St. Louis, 1872, the Brotherhood formed a separate association, known as the "Total Disability Insurance Association," for furnishing insurance against disability to members. An entrance fee of $2 was required and the assessment was fixed at $1.[42]In 1876 the convention dissolved the Total Disability Insurance Association, and the Engineers did not succeed in establishing a satisfactory system of disability insurance until 1884, when the prosperous condition of the association enabled the convention to carry out its long-cherished plan and to make provision for the payment of the same benefit in case of total disability as at death.[43]In the call of the Conductors for a convention to effect a permanent organization issued in November, 1868, the purpose of the proposed Order was stated to be the protection of "the members and their families in case of sickness, accident or death."[44]The mutual insurance association instituted by the first convention paid a disability benefit equal to the death benefit. The law under which the associationoperated was repealed at the second convention in October, 1869; but when the third convention in October, 1870, adopted a new insurance plan, provision was made that disability insurance should be paid in an amount equal to that paid in case of death. Not until 1881, however, did the Conductors satisfactorily solve the problem.
The difficulties experienced by the Engineers and the Conductors in establishing disability insurance, without doubt, served to deter the Firemen from adopting a similar system until their fifth convention in 1878. During the period 1868-1880 the disability benefit was in process of evolution. By 1880 the three older organizations had demonstrated the possibility of maintaining the benefit, and since that time it has been regarded as an essential element in railway insurance systems. Hence the Trainmen in 1883, the Telegraphers in 1887, and the Switchmen in 1886, in their first constitutions, and the Trackmen in 1893, made the disability insurance equal to that paid in case of death. All of the railway organizations, except the Telegraphers, follow this policy at the present time. The Telegraphers have not paid a disability benefit since 1897. They provide, however, that should a member become totally or permanently disabled the insurance committee may order his assessments paid and shall deduct the amount of these assessments when the benefit is finally paid.[45]The failure of the Telegraphers to pay a disability benefit is largely due to the fact that their occupation is less dangerous than other forms of railway service.
The Letter Carriers also have not the same urgent need for the payment of a disability benefit and until the Denver convention, 1902, paid insurance against death without direct provision for disability. At this convention, however, the National Association organized a Retirement Association for the payment of superannuation benefits to the aged and disabled members.[46]The Association had in view infounding this department the growing necessity of making some provision for the large number of carriers whom old age prevented from doing the regular amount of work.[47]Under the original plan, which went into effect January 1, 1903, the Association issued retirement certificates to members in the sums of $500, $400, $300 and $200 at monthly premiums of $6.70, $5.35, $4.00 and $2.70, respectively. On retirement, after having paid thirty annual premiums, or their equivalent, the beneficiary was entitled to receive annually the amount of his certificate. The retirement might also take place after thirty years' service, or after thirty years' membership in the Association, or after the age of sixty-five had been reached, provided ten annual premiums had been made.[48]This "ten annual premium" concession was for the special benefit of old men whose circumstances would not allow them to pay the sum of thirty years' premiums. The concession was allowed only for a period of ten years.[49]
The scheme also included provision for disability. After January 1, 1906, any member of the Retirement Association who became permanently incapacitated, mentally or physically, for any kind of remunerative labor before thirty years' service or before attaining the age of sixty-five years, was to receive annually from the retirement fund a certain per cent. of the face value of his retirement certificate. The amount was proportionate to the years of service. For five years' membership such a member received fifteen per cent.; for ten years', thirty per cent.; for fifteen years', forty-five per cent.; for twenty years', sixty per cent.; for twenty-five years', seventy-five per cent. Any member of not less than five years' standing might, after ninety days' notice to the chief clerk, withdraw from the Association; and in such event he became entitled to receive seventy-five per cent. of the annual premiums paid to the Association. Also in case of death within two years of his retirement and prior to the payment of not more than twenty-four monthly installmentsof pension, the Association agreed to pay to the widow, the children, or legal heirs the annuity provided in the deceased member's certificate until the amount paid should aggregate seventy-five per cent. of all premiums received by the Association.[50]
This plan was a failure. In it business principles had been sacrificed for fraternity. Relief had been provided for the old man particularly, but very few took advantage of the opportunity. The young men refused to enter because the favorable rates to old men placed a heavy burden upon the younger members.[51]The report of the chief clerk to the Syracuse convention, in 1903, showed that up to September 1, 1903, only eighteen retirement certificates had been issued, of which thirteen were for $500, two for $300, and three for $200. The average age at entrance was fifty-three and the average length of service, twenty-two years. The total receipts of the retirement fund were only $390.90.[52]On September 1, 1905, the total number of certificates issued had reached twenty-five, with only nineteen outstanding, while the retirement fund had increased to $2839.88.[53]The originators of the Retirement Association were forced to abandon their experimental fraternity scheme and to formulate a plan based more upon business principles. Consequently, at the Portland convention in September, 1905, Chairman Goodwin and Chief Clerk Wilson of the retirement committee proposed a new plan.[54]
Under the new law, which became operative January 1, 1906, the Retirement Association was authorized to offer insurance against disability and old age. The members are, therefore, divided into two classes, annuity members and disability members, but those duly qualified may hold both annuity and disability certificates. Any member of the National Association of Letter Carriers may become an "annuity member;" but only those under sixty-five years ofage and in good physical condition may become "disability members." A member retiring from the carriers' service ceases to be entitled to disability relief; on the other hand, however, retirement from the carrier service does not affect the right of a member to an annuity.[55]
The plan provides for annuities of one, two, three, four or five hundred dollars. The annuities can begin in five, or any multiple of five years after the policy is issued and the rate varies according to the deferment of the annuity. A member may withdraw at any time prior to reaching the annuity, and in that event all payments are to be returned, with interest. Members may receive loans to the amount of ninety-five per cent. of the sum accredited to them in the retirement fund, provided this aggregates two hundred dollars or over, and they surrender their certificates as collateral, so that members credited with one hundred dollars or more may receive a loan of fifty dollars as an emergency loan for three months during any one year.[56]
The following table shows the cost of the annuity per $100 for various ages according to the age at which the annuity begins:
The new system differs in two important respects from the old. In the first place, the rates are graded accordingto age, and secondly, the new system provides that a member may retire five years after entrance, or thereafter at any successive period of five years up to seventy, and that his premiums shall be fixed according to the time of retirement and the period of his expectancy.
The disability certificates provide for an indemnity of eight dollars per week for loss of time resulting from disability caused by accident or sickness, a maximum of twenty weeks' disability during any one year.[58]However, should a member, after entrance into the association, become disabled permanently by "tuberculosis, paralysis, locomotor ataxia, dropsy, cancer, diabetes, sciatica, chronic rheumatism, chronic kidney or mental disease, or any other chronic disease," not especially named in the constitution, that may, in the judgment of the board of directors, cause permanent drain upon the funds of the Association, the said member shall receive the disability allowance for twenty weeks, after which all payments shall cease and his certificate shall be cancelled.[59]The disability insurance is thus really sick insurance.
To aid members who are too old to take advantage of the plan offered for securing annuities by their own financial efforts, the Association, in convention at Portland, September, 1905, endorsed an "extended leave of absence retirement plan."[60]The Post Office Department of the United States was requested to grant an extended leave of absence to "superannuated or permanently impaired" carriers on condition that they accept 40 per cent. of their regular salary, while retired, and that they pay the remaining 60 per cent. to the senior substitute in their office. Under the conditions of this plan, the applicant for retirement must submit himself to the board of examiners, who shall, after a physical examination by the physician of the board, determine his eligibility. The results of this plan would be two-fold: first, to relieve the detrimental effect of superannuationupon the efficiency of the service, and, secondly, to remove the fear of those who look for more drastic measures of relief. Aside from a regular pension grant by the Government this plan is considered the most efficient method of securing adequate protection for the superannuated who are too old to avail themselves of the opportunities offered under the system of annuities.[61]
The principal obstacle to the successful operation of disability insurance has been the difficulty experienced in its administration—largely on account of the impracticability of closely defining permanent or total disability. With almost every revision of the constitutions changes were made in the definition of the term "disability." Strict construction of the law by the executive officials led to dissatisfaction and often to appeals from their decisions to the insurance committees, or to the boards of trustees.[62]During the early years disability claims were often presented through subordinate officials, who were either unable to interpret the laws aright, or were unwilling to assume the responsibility of pronouncing the claims illegal. The Engineers, after a period of thirty-two years, in 1898 adopted a satisfactory definition of total disability: "Any member of this Association losing by amputation a hand at or above the wrist joint; a foot at or above the ankle joint; or sustaining the total and permanent loss of sight in one eye or both eyes, shall receive the full amount of his insurance."[63]Similar definitions of disability have been worked out by the other railway organizations. The Conductors add to this "total loss of the sense of hearing." The Switchmen include "the loss of four fingers of one hand, at or above the second joint." Disability, as defined by the Letter Carriers, means inability, because of sickness or accident, to perform the regular duties of a letter carrier.[64]
The most important development in the insurance systems of the railway unions has been the change in the amount paid from an uncertain to a fixed amount. This evolution is best illustrated in the history of the older organizations. In the period from 1868 to 1884 the amount paid was the sum collected by levying upon each member a certain assessment for each death or disability. The amount of the benefit therefore varied with the number of members. In the first stage, the Engineers paid one dollar per member upon each death and fifty cents in each case of disability, the Conductors paid one dollar per member upon each death or case of disability, while the Firemen paid fifty cents upon each death or case of disability.[65]The membership was small and the assessments were largely regarded as benevolent contributions. This phase is well illustrated by the early history of the benefit among the Conductors. The first benefit, paid in December, 1871, amounted to $48. During the first thirteen years of the department's activity 19 claims were paid. The last was $70, and the average amount paid was $88.[66]This system continued until 1881-1884, when a general revision of constitutions in these three brotherhoods limited the amount of insurance paid, and laid the foundation for issuing insurance certificates in fixed sums. In the second period, from 1883 to 1890, the number of assessments remained undetermined; but the amount of the benefit was limited to a fixed sum and all surpluses were placed in reserve. The Conductors and the Firemen took the initiative in this change and in the constitution of 1881 fixed the maximum amount for death or disability at $2000 and $1000, respectively; the Engineers, in the constitution of 1884, placed this maximum at $3000.
The Brotherhood of Railroad Trainmen, the Order of Railroad Telegraphers, the Switchmen's Union, and theMaintenance-of-Way Employees did not pass through the first period of development, but were organized during the second stage when the amount of insurance was limited. The Trainmen, the Telegraphers, and the Switchmen, in their first constitutions of 1883, 1887 and 1886, respectively, and the Trackmen (Maintenance-of-Way Employees) in 1892 fixed the amount paid at the definite sums of $300, $1000, $500 and $1000, respectively.[67]The Letter Carriers, although organized after the railway unions had fixed at a definite sum the amount of insurance to be paid, for several years paid only a sum equivalent to one assessment, at the regular rates, upon all the certificates in force at the time of the death of the insured.[68]The amounts paid on the second death, March 22, 1892, and on the third death, July 28, 1893, were $599.16 and $596.12, respectively.[69]Finally, in the third period, from 1890 to the present, the number of assessments was also fixed.
Another important change in the method of conducting these insurance systems was made in the decade from 1890 to 1900. The organizations with two exceptions have not adopted the policy of the insurance companies in varying the charge with the age of the insured. The device they have commonly used is the differentiation in the amount of insurance which may be taken in such a way that the older members may insure themselves only for a smaller amount. As early as 1886 the Firemen provided that only members under forty-five years of age might take insurance,[70]and in 1887 the Telegraphers adopted an age limit of fifty years.[71]The Conductors, under the constitution of 1890, provided that any member between the ages of fifteen and fifty might take $2500 of insurance against death or disability, and any member between the ages of fifty and sixty might take$1000 against death and $500 against disability.[72]In 1892 the Engineers introduced an age limit of fifty, and in 1894 further differentiated applicants so that those under forty years of age might secure $4500, those under forty-five years of age might obtain $3000, and all over forty-five and under fifty years of age, $1500.[73]Even now the Switchmen and the Trainmen offer equal amounts to members of all ages at the same rate.
The Maintenance-of-Way Employees and the Letter Carriers not only limit the age of the insured but also grade the charge per $1000 according to age. In the case of the former, members from eighteen to thirty-five years of age pay $1 monthly per $1000 of insurance; those from thirty-five to forty, $1.25; from forty to fifty, $1.50. Insurance rates in the Letter Carriers' Mutual Benefit Department have, with the exception of the first year of operation, been graded according to age. The minimum and maximum age limits are twenty-one and fifty-five years. The monthly rates vary according to age from 77 cents per $1000 of insurance at twenty-one years to $2.06 at fifty years.
The following table shows the regulations as to the amount and rate of insurance issued according to ages:
The necessity for a reduction in the amount of insurance issued to the older men was more urgent among the Engineers and the Conductors than among the other railway organizations, since the latter form the school of apprenticeship from which the engineers and the conductors are drawn. In the Trainmen's and the Switchmen's organizations the young men contribute materially to the cost of insuring the old men. This charge is not so heavy as might appear at first sight, since in both organizations many members withdraw when they are promoted to higher positions in the service. In grading the amount of insurance offered according to age, the brotherhoods have made a compromise between an assessment on each individual according to the liability incurred, and a system in which the welfare of the individual is regarded as entirely at one with the welfare of the membership. The principle of solidarity is still recognized, but under limitations.
Originally these unions collected assessments to meet death or disability claims after the occurrence of the death or disability. Considerable delay was thus entailed in the final settlement. All of them, with the exception of the Engineers, now hold reserve funds for the payment of claims. The Conductors took the initiative by providing in the constitution of 1881 that the grand secretary-treasurer, on paying a claim, should levy the regular assessment upon each member to be held in reserve to pay the next claim.[74]This was followed in 1885 by a regulation of the Trainmen which required all members to pay in advance one death assessment. This was repealed by the convention of 1886; but the convention of 1888 re-enacted the law. The Firemen provided in 1888[75]that the subordinate lodges should collect all dues quarterly in advance.
In determining the amount of insurance offered, the organizations have had necessarily to consider what their members can afford to pay. Only a certain per cent. of earnings can be set aside for insurance purposes, and thatamount has been determined only by the long experience of the organizations. Again, the insurance must be in an amount which accords with the idea of the workmen of what constitutes a satisfactory provision against death or disability. The amount offered must for this reason be comparable with that offered by insurance companies.
The following table shows the minimum and the maximum amounts paid by the several brotherhoods:
Originally, except in the case of the Letter Carriers, the maximum amounts paid were much lower than at present. As the membership increased, a greater benefit was paid. In 1887 the Conductors' maximum insurance was $2500, and in 1888 the Firemen's, the Trainmen's, and the Switchmen's was raised to $1500, $1000 and $800, respectively. Each of the railway organizations has since raised the maximum; the Engineers to $4500 in 1892; the Conductors to $5000 in 1893, reduced since 1899 to $3000; the Firemen to $3000 in 1903; the Trainmen to $1350 in 1903; and the Switchmen to $1200 in 1901. While the Engineers, the Conductors, and the Firemen offer insurance in relatively large amounts, only a small per cent. of the membership take out certificates for the larger sums. On June 30, 1904, of the 54,434 Firemen, 43,228 carried $1500 certificates, while only 717 carried $2000 certificates, and 824, $3000 certificates.[77]On November 1, 1904, of the 41,124 Engineers, 24,187 carried $1500, and 10,337 and 1602 carried $3000 and $4500, respectively.[78]In each of these organizations the $1500 certificates are thus in greatest demand. The rule restricting the amount that members over forty-five years of age may take lessens the number of policies for larger sums, but it is evident that the great majority of members in these unions do not care to insure for more than $1500. The Letter Carriers are an exception to this rule. The report of the Chief Collector for December 1, 1905, shows that out of 5284 insurance certificates in force there were 473 $1000 certificates, 386 $1500 certificates, 541 $2000 certificates, and 3884 $3000 certificates.[79]
The advantage of insurance as a means of securing identity of interest within the organization was not fully recognized in the early development of the insurance systems, consequently entrance into the insurance departments of these organizations was originally optional. The Brotherhood of Locomotive Firemen first adopted compulsory insurance at the fourth annual convention, 1878.[80]The Brotherhood of Railway Trainmen next adopted a similar feature in 1888. Although the Engineers and the Conductors did not enforce compulsory insurance until 1890 and 1891, respectively, during the twenty years preceding its adoption frequent proposals were made by subordinate divisions of both these organizations for the adoption of such an arrangement. On different occasions the national conventions considered the wisdom of such proposals, weighing in turn the advisability of such a measure and the ability of the organization to enforce it. The thorough discussion of the subject among the Engineers and the Conductors undoubtedly prepared the younger organizations for the settlement of this question at an earlier stage in their development. The Trainmen adopted compulsory insurance in 1888, while the two older organizations were in the midst of thestruggle.
The Switchmen adopted it in 1892, and, after reorganization, again on October 1, 1901, and the Telegraphers on January 1, 1898. The Letter Carriers alone retain the system of optional insurance.
Only in the Switchmen's Union and in the Brotherhood of Maintenance-of-Way Employees has the operation of the compulsory system met with interruption. The compulsory rule of the Maintenance-of-Way Employees during the early nineties was frequently repealed and readopted. The opposition to it was due in a large measure to uncertainty as to the number of yearly assessments necessary and also to the fact that many of the members carried insurance in old-line companies.[81]The Switchmen's insurance department suffered a suspension from 1894 to 1897, and although the Union had compulsory insurance before its suspension, on reorganization a voluntary system was adopted, and not until October 1, 1901, did the Union succeed in reëstablishing a compulsory system.
In all the organizations there is a class of members, called non-beneficiary, who are not eligible to the insurance departments because of partial disability or because of having passed the age limit. The Brotherhood of Locomotive Firemen provides that the non-beneficiary member shall be entitled to all the privileges of the subordinate lodge, but shall not take part in the national convention or in any way participate in the benefits and privileges of the beneficiary department.[82]Similar rules are found in the other brotherhoods. The Trainmen and the Switchmen issue to non-beneficiary members insurance certificates only against death in the sums of $500 and $600, respectively.
The efficiency of compulsory insurance rules in securing and retaining members in the brotherhoods is generally acknowledged among the railway employees. After the member has carried insurance for several years, his financial interests are bound up with the interests of the organization, and his loyalty to the union is increased. From this loyaltyflows greater interest in every phase of the brotherhood's work. The operation of compulsory insurance appears to have caused an increase in the membership of the brotherhoods. On January 1, 1890, the date on which compulsory insurance became operative, the membership of the Brotherhood of Locomotive Engineers numbered 7408; on January 1, 1897, it had increased to 18,739; and in May, 1904, to 46,400.[83]On January 1, 1891, the date on which compulsory insurance was inaugurated, the membership of the Order of Railway Conductors numbered 3933; on January 1, 1898, it had increased to 15,807, and again on January 1, 1904, to 31,288. It is noteworthy that during the depression, 1893-1897, those organizations having systems of voluntary insurance suffered far more severely than those enforcing compulsory insurance. Thus, the Telegraphers were almost annihilated, while the Firemen and the Conductors practically maintained their position.
The cost of insurance per $1000 varies greatly in the different organizations, as may be seen by the following table:[84]
The differences in the cost of insurance are the result of several factors. The slight degree of risk in the occupation is largely responsible for the relative cheapness of theTelegraphers' and the Letter Carriers' insurance. More important differences are due to the age grouping of the membership. Thus the Firemen, whom old-line companies, for the most part, classify as extra-hazardous, furnish insurance against death and disability at $12 per $1000. The principal reason for this low rate is the rapid change in membership, the old men withdrawing and being replaced by young men. Near the close of the nineties the cry of "Something must be done to keep the old members in the Brotherhood of Locomotive Firemen" was raised; but it was clearly shown that "the greatest favor a member of the Brotherhood could show the insurance department was to pay his assessment for ten years and then withdraw, permitting a man ten years his junior to take his place." The grand secretary-treasurer states that the membership practically changes every seven years, due to promotions to the position of engineer and to withdrawals of older men for various reasons. The withdrawal of old men conduces to a more favorable age grouping, to a decrease in the death rate, and to a consequent decrease in the cost of insurance. The Switchmen's Union presents an interesting contrast. The Union prescribes no age limit, and higher positions in the service are not so frequently open to the advancement of its members. The result is that the number of older members is relatively greater, and insurance is maintained at a considerably higher cost.
The cheapness of the insurance offered by these organizations is better appreciated when compared with that offered by old-line companies. The following table shows the cost of insurance per $1000 in a typical life insurance company for different classes of railway employees and letter carriers at thirty-five years of age: