American Practice

AMERICAN PRACTICE With regard to accident and health insurance in the United States, American practice differs in various details from that of Great Britain, though the general principles are the same. In America the proposer is called the applicant and the proposal becomes the application, while the capital sum is styled principal sum. The word "indemnity" as used in American policies is synonymous with "benefit," the amounts provided in the policies being classed as fixed or premeasured indemnity, regulated in amount by the ability or willingness of the insured to pay, and the policy becomes a valued benefit contract ; there is no provision by which the amounts payable may be reduced in case of dis ability even though benefits payable under all insurance carried exceed the insured's earnings, but underwriters exercise great care against overinsurance in the original issue, requiring each appli cant to certify that his earnings are in excess of benefits payable under all insurance carried and usually limiting the amount of insurance permitted to approximately three-fourths of the earn ings.

There is never any right of subrogation in American policies by which the insured surrenders any claims against a third party who may be responsible for his injury. American policies do not carry a condition prohibiting the obtaining of additional insur ance without consent of the company, but some contain a condi tion to the effect that if other insurance is obtained without notice to the company the amount of existing insurance is proportionately reduced. A great variety of accident policies, and also of accident and health policies, is issued in America, with many variations in amounts payable and in the sundry features. With a fixed prin cipal sum payable for accidental death and a fixed weekly benefit payable for disability, there may be variations in the percentage of principal sum payable for loss of eyesight, or for loss of one or more limbs, or even for the degree of loss of a particular limb. Likewise, many variations occur in the period for which dis ability benefit is payable. It may be limited to a specified number of weeks, varying from a few to many, or the period for which benefit is payable may be limited only by the period of disability. Under the most common practice no period limit is fixed in case of disability from accident, while a limit of fifty-two weeks in case of disability from sickness is most favoured.

Partial disability is usually provided for at the rate of 4o% of the total disability rate in respect to disability caused by acci dental injury, but is not generally provided for in case of sickness disability, though in some instances a certain provision may be made for partial disability, or disability not requiring confinement to the house may be classified as partial and a smaller benefit provided. The usual American accident policy provides specific sums for loss of life, limb or sight and a stated weekly benefit for disability, while the usual health policy, commonly combined with the accident policy into a single document, provides a stated weekly benefit for disability due to sickness with occasional addi tional payments in case of complete blindness or complete paralysis. Most accident policies contain a provision doubling the benefits payable in case of accidents occurring in public passenger conveyances, elevators or burning buildings, and some include in this class other hazards more or less incident to the risk of travel.

Other provisions common in American policies include addi tional payments against surgical operations, hospital treatment, nursing and payment of doctors' bills in the case of non-disabling injuries. Some include an optional clause under which in case of certain specified injuries, such as fractures and dislocations, the in sured may elect to take a lump sum in lieu of the disability benefit. There is no real uniformity as respects the inclusion of these subordinate features. Some accident policies are of more re stricted scope and may exclude from their coverage a certain class of accidents, specified in greater or less number, in which case proportionately less premium is charged. There is also a great variety of special or "limited" policies designed to insure only against a certain class or a small number of classes of accidents. These are often referred to as "coupon" insurance because gener ally sold by special advertising or offered as an inducement to purchase of goods, subscription to a newspaper or other period ical. Generally they apply to accidents of least common occur rence and because of that fact a merely nominal price is charged, and are issued upon receipt of coupons attached to the adver tisement.

The insuring clause most commonly in use in America differs somewhat in wording from that in use in Great Britain. Usually it defines the insurance to be "against bodily injuries caused directly and independently of all other causes by accidental means," or by violent and accidental means, or by external, violent and accidental means, and there are other variations of verbiage without significant change of substance, the purpose always being to insure against the physical results of injury to the body caused wholly by accident, as distinguished from the natural processes following either wholly or partly from disease, degeneration or disintegration, which latter in case of disability becomes the function of health insurance and in case of death becomes the function of life insurance.

Health Insurance.

The most favoured form of health in surance in America insures against all sicknesses from whatever cause, and in such policies there are numerous variations. They may provide for all disability from the first day thereof to a specified period or without limitation. They may exclude f rom benefit the initial period of any disability and cover only disability after one week, or of ter a number of weeks or a number of months, with premiums varying in proportion. They may restrict pay ment of benefit to the period of confinement to house or may be without this restriction. They may exclude sickness contracted within a certain short period after the date of the policy or may cover any sickness contracted of ter the policy date. Additional payments may cover surgical operations, hospital treatment and nursing charges, or any or all of these may be omitted. Usually health policies stipulate that the insured must be under the treatment of a physician during any period for which disability may be claimed in order that there may be competent certifica tion and that the necessary disability may be delimited as far as possible by proper care and treatment. So-called "limited" health policies are also issued to some extent, which confine their coverage to disability from certain diseases specifically named. Untold variations in this respect may be devised with propor tionate variations in premium.

Statutory Provisions.

Those provisions of accident and health policies that relate to the performance and operation of the contract after issue are generally regulated by law. Many states have enacted statutes prescribing certain "standard pro visions" which must be included in all such policies and prohibit ing the inclusion of any contradictory or inconsistent conditions. Even in the states where such statutes have not been enacted it is the common practice of the companies to issue the same poli cies uniformly in all of them. These provisions govern such matters as the pro-rata reduction of the insurance in case of a change of occupation to one more hazardous, alterations or assign ments of policies, reinstatement of ter lapse, the timely giving of notice and filing of proof of claim, examination by the company's physician in connection with claims, time for payment of ter proof, right of cancellation by insured in case of change of occu pation to one less hazardous, rights of beneficiary, time when legal proceedings may be instituted. Certain other provisions may be included or omitted at the option of the issuing company. These permit reservation by the company of a right to cancel or to refuse to renew the policy, reduction of the amount of insur ance in case additional insurance is obtained without notice, de duction from any benefit payable of premium then due and un paid, limitation of the amount of insurance one person may have under various policies in the same company, limitation of the coverage within certain minimum and maximum age limits.

American policies do not require notice by the insured of a change of occupation, but the effect of such change, if any, is regulated by the statutory provisions. No notice is required f rom the insured of any change in his state of health except when it is to be made the basis of a claim for benefit. No arbitration clause is included in American policies, such a provision being commonly held illegal as tending to oust the courts of their juris diction.

Physical Condition of Applicant.

In the underwriting of both accident and health insurance the general physical condition of the applicant is given much weight, the application requiring disclosure of his present physical condition and past health record, which may influence the action of the underwriter even in the issue of accident insurance where the state of health suggests susceptibility to more serious results in case of accident than would be common with a normal person, while both physical con dition and health record are even more carefully considered when the application is for health insurance because of the possibly greater susceptibility to disease or sickness.

Premium Rates..

The premium rates for accident insurance are governed wholly by occupation, a basic rate first being fixed to cover the general hazards of life outside of the occupation and this rate being increased in proportion to additional hazards in volved by the occupational exposure. For this purpose all known occupations are classified by the companies and they are brought into groups of relatively equal risk, resulting in some eight or more different rate classes as indicated by developed experience. Rates for health insurance do not commonly vary according to occupation, though benefit provisions often vary for the purpose of adjusting the cost in such occupations as involve particular exposure to occupational disease.

Canadian Practice.

In the Dominion of Canada general practices and forms of policies are very similar to those of the United States and statutory standard provisions also are required, these being similar to those in use in the United States.

See M. W. Van Auken, Ready Reference Digest of Accident and Health Insurance Law (1922) ; S. S. Huebner, "Modern Insurance Tendencies," Am. Acad. of Pol. Sci., Annals, vol. cxxx., No. 219 (1927) ; S. B. Ackerman, Insurance (1939). (S. M. LA M.)