Beveridge: Voluntary Insurance

375.    Scope for Voluntary Insurance:    Compulsory social insurance provides, up to subsistence level for primary needs and general risks.    The scope of voluntary insurance is two-fold:—

(a)    To go beyond subsistence level in meeting general risks, by adding to the amount of compulsory benefits;

(b)    To deal with risks and needs which, while sufficiently common for insurance, are not so common or uniform as to call for compulsory insurance.

In so far as voluntary insurance meets real needs, it is an essential part of security; scope and encouragement for it must be provided. The State can ensure this negatively, by avoiding so far as possible any test of means for its compulsory insurance benefits, and by limiting such benefits to sub­sistence and primary needs. The State can ensure this positively by regula­tion, by financial assistance or by itself undertaking the organisation of voluntary insurance. In considering the action of the State in regard to voluntary insurance, regard must be had to the extent to which voluntary insurance has already developed in various fields and the different circum­stances under which it has developed.

376. Encouragement of Thrift:  Development of voluntary insurance and saving among persons of limited means is desirable also from another point of view.  Material progress depends upon technical progress which depends upon investment and ultimately upon savings. If the distribution of the product of industry in any community is very unequal, savings come naturally either from the surplus income of the wealthy or from profits which are not distributed.    If and in so far as, after the war, incomes are distributed more equally than at present or the share of wages of the total product is increased, it is important that part of the additional resources going to wage-earners and others of limited means should be saved by them instead of being spent forthwith.    Increase of means brings a corresponding increase of obligations, in this as in other respects.  A continuation of the War Savings movement in one form or another after the war seems likely to be an essential measure of economic policy.    The same purpose can, and should be, served by develop­ment of organs for voluntary insurance to supplement State insurance.

377. Unemployment Insurance through Trade Unions:   Voluntary insur­ance against unemployment is practically limited to Trade Unions, which, alone of all organisations other than the State with its Employment Exchanges, can test the genuineness of unemployment and availability of the insured person for work. Even within the Trade Unions, the sphere of voluntary insurance against unemployment is limited and it has shown no signs of growing.  The number of wage-earners who by voluntary insurance now add anything substantial to what the State provides probably does not exceed one million.  In the main, unemployment insurance must be compulsory, if it is to be effective. But under the existing unemployment insurance scheme scope and encouragement are afforded for voluntary insurance by arrangements under which Trade Unions giving their own benefit may act as agents for administering the State benefit and receive a grant for administrative expenses on this account.

378. Voluntary Insurance through Special Schemes:   The Trade Union Schemes of out-of-work pay enable a limited number of skilled wage-earners to supplement their statutory unemployment benefit;   most of the insured population make no such provision and have no easy means of doing so. Both on general grounds and in view of the extension of compulsory insurance to higher income ranges among non-manual workers, the possibility of extend­ing the opportunities for supplementary insurance against unemployment should be explored. One obvious way lies in the development of special schemes for particular industries as a means not of contracting out of com­pulsory insurance but of adding to it. The two special schemes’ already established, in the Insurance industry and in Banking and Finance, cannot, under the proposals made here, continue as alternatives to the general scheme. But they might continue for the purpose of adding to statutory benefit and of administering it with their own benefit under an arrangement with the Social Insurance Fund. The principle of giving statutory sanction to special schemes for supplementary benefit is already admitted, under Section 72 of the Unemployment Insurance Act, 1935, though the powers given by that Section have not been used hitherto. In the actual special schemes for Insur­ance and for Banking it has been found possible to provide benefits exceeding those of the general scheme without any direct contribution from the employees or the State and a contribution from the employer of 2d. or 6d. a week. Half that sum would provide a very substantial supplementary benefit and justify the State in continuing to entrust insurance in these industries to the same agencies. If the organisation which has built up these two schemes could be directed successfully to such a new purpose, it might set a fruitful example to other industries.

379. Friendly Benefits:   Provision for sickness is the classic ground of voluntary insurance efforts in Britain.   The registered Friendly Societies, in 1939, had approved society membership of 5 ½ million and expenditure on cash benefits for sickness in that year per head of this membership was practically equal to expenditure on sickness and disability per head of membership under the health insurance scheme; that is to say, these 5 ½ million members doubled by voluntary insurance the provision for sickness made for them by the State scheme.   Sickness benefit given by Friendly Societies covers accidents also of all kinds; other benefits—on death, on maternity, on old age and by way of deposit insurance—are provided on a substantial scale.   The member­ ship of the registered Friendly Societies has grown, since the introduction of national health insurance in 1911, but this growth has been steady rather than spectacular and these societies still cover not much more than a quarter of the total number for whom disability benefit is required.    That proportion is too low to justify keeping compulsory disability benefit below subsistence level.   It is large enough, however, to make it unnecessary for the State to take any action in regard to voluntary insurance against sickness, except to leave scope and encouragement for the Friendly Societies.    One of the principal objects of the proposal to use Friendly Societies and Trade Unions giving friendly benefits as organs for the administration of State disability benefit is in order to encourage through these associations the greatest possible supplementation of State insurance by voluntary insurance in this field.

380. Unregistered Friendly Societies: In addition to the registered Friendly Societies mentioned in the last paragraph, there exist innumerable unregistered Societies of every degree of permanence and financial stability.    Some are large and firmly established institutions with Approved Societies attached to them; others are fleeting.   Little definite information as to the scale and methods of these societies is available since they come now under no official scrutiny, but figures collected by Mr. Rowntree for York suggest that in numbers the membership of unregistered Friendly Societies is comparable to that of the registered societies.   There appears to be good ground for requiring every society in whatever form which receives contributions with a view to providing payments in sickness or on death to be registered and to conform to statutory conditions.

381. Superannuation Schemes:  Provision for retirement additional to or exclusive of old age pensions is now made in many occupations as a whole (civil service, local government service, teaching, railway service, public utilities) and by innumerable individual firms. No special action by the State is called for, except that of making its own development of compulsory insurance for retirement gradual, so as to give time for any necessary rearrange­ments of the occupational and voluntary schemes.

382.[Life and Endowment Insurance:]   The development of insurance for funeral expenses, against death generally and for endowment through the agency of Industrial Assurance Companies and Collecting Societies is discussed in Appendix D and under Change 23 in Part II.   For reasons set out there it is proposed that there should be established under the general supervision of the Minister for Social Security an Industrial Assurance Board working not for profit.   This statutory corporation would have a monopoly of insurance with the use of collectors and would be authorised to undertake ordinary life assurance subject to a maximum of amount insured, say £300, in order to prevent its entry into the general field of life assurance.    The  Board would take over the bulk of the work of the existing Industrial Life Offices with their staffs and would bring about economies, first by eliminating competition, second by encouraging payment of premiums otherwise than through collectors, third by limiting voluntary insurance so far as possible to insurance likely to be within the permanent means of the policy-holder.   This proposal is bracketed, as desirable, but not essential.

383.   Loss of Independent Earnings: It appears impracticable to provide unemployment benefit generally, except where there is employment under contract of service.    Independent earners of Class II will be able to obtain training benefit, if they need to change their occupation.   For deficiency of earnings in their occupation, whether through seasonal fluctuations or through other causes, no general provision can be made, but the possibility of voluntary insurance, possibly with State aid, for particular sections of Class II needs full exploration.   It might become a function of the Industrial Assurance Board.

384.    Voluntary Continuation of Compulsory Insurance: Persons who pass out of compulsory insurance against sickness or for pensions, through change of occupation   (from employment to independent earning or to no paid occupation) or through rising above the remuneration limit for non-manual workers, can now continue voluntarily in insurance.    These arrangements are used extensively, there being nearly 1 million voluntary contributors for health or pensions insurance.   With the extension of compulsory insurance to Classes II and TV and the removal of the remuneration limit, they will become unnecessary, though there will be problems of transition from the old system to the new system.    Health service, retirement pensions and funeral grant will be available for all at all times in return for compulsory contributions.   It may be argued that those who after contributing for dis­ability benefit in Class I or Class II give up gainful occupation late in life, but before retiring age, should be allowed to continue insurance for this benefit. The answer is that cash disability benefit, as distinct from medical treatment, is compensation for earnings lost through disability;  in the case considered there are no earnings at the time when disability occurs.