CONVERTED INSURANCE The World War Veterans' Act, 1924, provides that all term insurance shall be converted not later than July 2, 1926, which is five years after the date of the termination of the war. Six different forms of converted policies are provided by the Government, i. e., ordinary life, 20-payment life, 30-payment life, 20-year endowment, 30-year endowment, and endowment at age 62. The premium rates on all these policies are net rates according to the American Experience Tables of Mortality, with interest at 3 per cent per annum computed for payment on a monthly basis. The premiums paid on account of converted insurance are covered into the Treasury to the credit of a special fund called the "United States Government life insurance fund," from which are paid all liabilities arising under converted-insurance contracts Special provision is made in the World War Veterans' Act, 1924, section 302, whereby this fund is reimbursed for all converted claims on account of permanent total disability and death resulting from the extra hazard of the military and naval service. The United States Government is trustee for this fund, disbursements from it being made in accordance with the awards made by the director of the bureau. The ledger assets now approximate $121,000,000 (see table, p. 29), of which amount about $112,000,000 is invested in United States Government securities yielding an annual interest return of over $5,000,000. CONVERTED AND TERM INSURANCE IN FORCE At the close of the fiscal year there were 562,600 Government life insurance policies in force, amounting to $2,984,573,458. Of this number, 353,215 were on the converted plans, aggregating $1,375,542,924, and 209,385 on the term plan, aggregating $1,609,030,534. An average of 3,500 new converted policies, aggregating $15,000,000, are being issued each month to World War veterans. LAPSATION OF INSURANCE AT CESSATION OF WAR It was quite natural to expect that the sudden termination of the war and the consequent rapid demobilization would eliminate from the minds of most of the veterans all need for insurance. The great bulk of men in the service were young, vigorous, and free from family responsibilities. The cessation of hostilities freed them from the dangerous occupation for which insurance protection was especially provided, and in view of the financial handicap they invariably encountered in reestablishing themselves in civil life, the great majority allowed their insurance to lapse. Notwithstanding these conditions and the further fact that the Government did not use any methods of personal solicitation, the continuance at the present time of $2,984,573,458 of insurance is a worthy achievement and represents a real service in the interests of the 562,600 policy holders who have availed themselves of this form of Government insurance protection. 17231-241- -29 REINSTATEMENT ACTIVITIES The bureau is not in the business of life insurance in competition with commercial insurance companies. It is, however, sensible of the rights of ex-service men to renew their Government insurance, and recognizes that it is its duty to apprise all of them of their rights and privileges under the World War Veterans' Act, 1924. In carrying out this duty, insurance representatives were established in each district office and the work of the insurance cashiers was continued in the district and larger subdistricts offices. On October 6, 1923, insurance representatives were permitted to travel, under certain conditions, throughout their districts and to subdistrict offices, to enable them to discharge their duties more effectively as set forth in General Order No. 83-A. Circulars, pamphlets, and literature, fully explaining Government life insurance, have been printed and widely distributed throughout the district offices and among soldier and welfare organizations. Publicity has been liberally and generously contributed by the press in this worthy cause. In central office there has been continued the practice of mailing to all ex-service men who allowed their war-time insurance to lapse, a circular letter with appropriate inclosures, informing them of their rights and privileges to reinstate and convert. A total of 3,000,000 such letters have been mailed to date, with approximately 500,000 remaining, which will be completed within the next month. While experience shows that about 19 per cent of these letters are returned to the bureau marked "Unlcaimed," approximately 80 per cent of the letters apparently reached the addressees, and it is gratifying to note the large number of reinstatement and conversion applications received as a direct result of this activity. It is felt that by means of these various facilities, every effort will have been exerted, consistent with the law, to carry our the Government's duty in informing the great majority of ex-service men of their Government insurance rights and privileges. ORGANIZATION The insurance division is organized in 3 major subdivisions and 19 sections, with an administrative staff consisting of a chief of division, who is directly responsible to the assistant director in charge of claims and insurance service, an assistant chief, an actuary, and a consulting specialist. The principal operating activities are organized under what is termed the "unit" plan. Under this plan, all insurance policies in force are divided as nearly as possible into numerical units, to which units are assigned the application files, the premium accounts and other basic records, with an adequate number of specialized personnel, such as accounting clerks, examiners, dictators, stenographers, typists, file clerks, etc. The files and premium records and the clerks assigned to them are placed in adjacent positions. thus affording the most convenient and direct contact with employees and records. These units each comprise approximately 90,000 insurance accounts and handle correspondence, premium accounting, contract changes, filing, billing, issuing receipts, reinstatements, and other similar routine functions. The original functional type of organization, in which each section was organized to handle some special activity, resulted in considerable overlapping and duplication and was found expensive and unsatisfactory. There has been a consistent adherence to the policy of perfecting this "unit" system of organization by consolidating as much work as possible in the unitized sections, maintaining specialized sections only where the nature of the work requires uniform and independent handling. This "unit" plan, which has been in operation for over three years, is excellently adapted to the needs of the insurance division and has proved highly satisfactory and economical. On December 15, 1923, in the interest of a closer coordination of the bureau functions, the insurance division was consolidated with the claims division to form the claims and insurance service. As a direct result of this consolidation, the claims contact section, insurance division, was consolidated with the insurance contact section, claims division. The insurance index section and claims index section were similarly consolidated on January 16, 1924, and established as an independent section, responsible to the assistant director in charge of claims and insurance service. In line with the established organizational policy of transferring as much work as possible to the unit sections to be handled on the unit basis, the record card section was abolished October 15, 1923, and the remittance control section abolished January 31, 1924, and their functions absorbed by the term and converted accounting sections. All of these organizational changes have resulted in economies in personnel, space, and equipment, have eliminated overlapping functions, and represent real progress in efficient administration. ACTUARIAL RECORDS ON ACTIVE TERM INSURANCE During the past fiscal year, efforts were directed towards the establishment of permanent actuarial records on all active term-insurance policies similar to the actuarial records on converted insurance. A complete system was developed for preparing, tabulating, and maintaining these records, which involves an individual code slip and punch card on more than 210,000 term-insurance policies. These records were completed on May 1, 1924, making it possible for the first time since the establishment of the insurance division, to accurately determine the number and amount of term-insurance policies in force, and to make actuarial and statistical studies, necessary and vital to the efficient administration of yearly renewable term in surance. PROCEDURE Considerable planning work has been accomplished in the development of standard procedures covering all important operating functions, the principal procedures so effected being as follows: 1. Revised procedure for handling unpaid checks (November 22, 1923). 2. Revised procedure for handling reinstatements under regulations 14 and 15 (February 4, 1924). 3. New procedure for auditing all term and converted insurance premium accounts. 4. Uniform procedure for handling premium interest and partial payment of premiums (April 25, 1924). 5. Procedure for handling suspense items (April 9, 1924). 6. New procedure for handling automatic extended insurance on converted insurance policies (May 31, 1924). While this work largely concerns refinements along the lines of uniform and standard pratice instructions, they are mentioned here in view of their value in simplifying methods, effecting economies in operation, and general improvement of the service. INSURANCE IN FORCE At the close of the fiscal year 1924, 562,600 term and converted insurance policies, amounting to $2,984,573,458, were in force which represented an increase of 2,535 policies, and a decrease in amount of $85,636,359, compared with the number and amount of insurance policies in force at the close of the preceding fiscal year. Term insurance decreased from 240,291 policies, amounting to $1,854,145,796, to 209,385 policies, amounting to $1,609,030,534, representing a loss of 12.8 per cent in number and 13.2 per cent in amount. This was due largely to the natural loss resulting from lapses, deaths, and to the conversion of term insurance, to the decrease in the number of men in the active military and naval service carrying insurance, and to the fact that policyholders who convert their term insurance into the permanent forms usually reduce the amount of insurance previously carried because of the increased premium rate. The converted insurance in force has increased from 319,774 policies, amounting to $1,216,064,021, to 353,215 policies, amounting to $1,375,542,924, representing an increase of 33,441 policies, amounting to $159,478,903, or an increase of 10.4 per cent in number and 13.1 per cent in amount. The following chart shows the number and amount of term and converted insurance policies in force from month to month during the fiscal year 1924: |