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Scotland Insured
Chapter II - The National Insurance Act, 1911

The main reasons for the introduction and passing- into law of the above Act, which provided for Insurance against loss of health and for the prevention and cure "of sickness, and for insurance against unemployment, were an increased public interest in social reform, a greater realisation of the importance of public health, a desire to initiate a crusade against tuberculosis, and the spread of the idea that voluntary insurance against sickness had exhausted the measure of its capacity. The example of Germany had some educative effect, but the final determining factor was the exhaustive report of the Poor Law Commission with its emphatic expressions of opinion with regard to poverty and its causes and the inadequate medical service available for the mass of the nation. Moreover, the desirability of continuing the scheme of social reform exemplified in the Employer’s Liability for accident and disease, Workmen’s Compensation and Old Age Pensions was patent to all social students.

The National Insurance Act, 1911, was introduced in the House of Commons on 4th May, 1911, by the Chancellor of the Exchequer and, after much discussion in the House and country, received the Royal Assent on 16th December, 1911. The Act came into partial operation on 15th July, 1912.

A short outline of the provisions of Part I. of the Act, relating to prevention and cure of sickness, to the contributions due by insured persons in respect of the health portion of the Act, and the benefits conferred under this Statute, will be appropriate at this point.

The scheme is compulsory for all employed persons between the ages of 16 and 70 whose rate of remuneration is not over £160 a year, and all persons of above age employed by way of manual labour irrespective of rate of remuneration. Persons who have an income or pension of £26 a year or more, independent of their personal exertions or who are ordinarily or mainly dependent for their livelihood upon other persons may obtain certificates exempting them from liability to insurance, but contributions are payable by employers in respect of them. Persons between 16 and 65 who earn their own living or for some other reason are not obliged to be insured may, subject to the income limit of £160, insure under the Act. These persons are known as voluntary contributors.

The scheme is termed a contributory scheme. The contributions payable for benefits are paid jointly by employers, employees and the State. The ordinary amounts, with the exception of special cases, are :—Employer 3d. per week ; -Id. from insured men and 3d. from insured women, the State contributing 2/9ths in the case of men and l/4th in the case of women of the cost of benefits and their local administration as well as the whole cost of central administration. Voluntary contributors who insured between 15th July, 1912, and 15th January, 1913, and were then under £45, pay contributions at the flat rate. Those who were 45 or over when they entered insurance, and all who entered after January 15th, 1913, pay contributions at higher rates, varying with their age at entry, which are so calculated as to enable the contributors to receive the ordinary benefits.

The Act gives to every person over 21 and under 50 who becomes a member of an Approved Society within a year from July 15th, 1912, the full advantages which would normally be available only to those who became insured at the age of 16. There are reduced rates of benefit for those under 21 who have no dependants and those who are over 50 when they enter insurance. In providing benefits for all insured persons over 16 in return for the usual contributions an initial liability of about 87 millions, of which 7/9ths (or 3/4ths) has to be borne by contributions, is incurred as from the coming into operation of the Act, and in order to provide the necessary reserves against so much of this liability as falls on contributions, book credits are created. For each person who was over 16 at the time of his entry into insurance the amount required to relieve him from the burden which must otherwise have been imposed upon him of paying additional contributions without increased benefits is credited to his Society. The amounts so credited are termed Reserved Values. These book credits are converted year by year into actual cash by means of an annual charge upon the contributions collected. The sum necessary to meet this annual charge is procured by retaining 1 5/8d. and lid. from the weekly contributions of 7d. and 6d. in respect of insured men and women. This sum is applied to providing interest at 3 per cent, on the reserve values, and the balance not used for this purpose is used to write down the reserve values. In other words, a sinking fund is created which will replace the book credits given to the societies by cash credits. This operation, it is estimated, will take about 18 years, and when it is completed the proportion of contributions formerly retained for sinking fund purposes will be set free to provide additional benefits.

The method of collection by paying contributions by means of stamps affixed to cards is well known and does not require description. It is simple, inexpensive and saves trouble to every one concerned.

The benefits provided under the Act are:—

Medical Benefit
Sickness Benefit
Disablement Benefit
Maternity Benefit; and
Sanatorium Benefit.

Medical benefit provides for insured persons on the occurrence of illness, treatment by a qualified medical practitioner and a supply of drugs, medicines and appliances. With certain exceptions pertaining to the Mercantile Marine and the Army and Navy, and to residence in the Channel Islands and the Isle of Man, Ireland and abroad, all insured persons are entitled to medical benefit when they require it, and medical benefit does not cease at 70. The benefit runs for life if the insured person should require it. Certain conditions, must be conformed to, but otherwise insured persons are entitled to medical benefit on entering insurance.

Sickness benefit entitles insured persons to a weekly payment of 10s. a week for 26 weeks for men and 7s. 6d. a week for 26 weeks for women, beginning on the fourth day of an illness which makes them incapable of work. There are certain special classes to whom this does not apply, and there are waiting periods which are explained elsewhere. Disablement benefit entitles insured persons to a payment of os. per week subject to certain conditions.

Maternity benefit consists of the payment of a sum of 30s. on the confinement of insured women or the wives of insured men.

Sanatorium benefit enables insured persons who are suffering from Tuberculosis to be recommended for treatment in Sanatoria, or at dispensaries, or at their own homes.

It is necessary to observe that some conditions are attached to the receipt of benefits under the Act. To qualify for sickness and maternity benefits, employed contributors must have been 26 weeks in Insurance and must have 26 weeks’ contributions to their credit. Voluntary contributors are required to have 52 weekly contributions to their credit and to have been 52 weeks in Insurance in order to qualify for maternity benefit. To secure disablement benefit 104 weeks insurance and 104 weekly contributions are necessary. Persons who become employed contributors after the 15th July, 1913, and are then 17 or over, will ordinarily receive sickness benefit at less than the full rate, except when they have been completing- their education or serving apprenticeship, or if they pay the necessary reserve value. Benefits are liable to reduction when insured persons are in arrear with their contributions. No arrears count during the year to 15th July, 1913, and there are certain other conditions which will be explained later. It is to be noted that arrears due to unemployment during sickness do not count, and that the only arrears that are charged against employed contributors are those which accrue during unemployment.

The Central administration of the Act is under four national Commissions who have offices in London, Edinburgh, Dublin and Cardiff. There is further a joint Commission for the United Kingdom as a whole. This Commission deals with actuarial and other matters in which uniformity is necessary.

Advisory Committees are set up under the Act to give the Commissions advice and assistance in the making and altering of Regulations under the National Insurance Act.

Insurance Committees are constituted in each county and in burghs of a certain size for the purpose of administering medical and sanatorium benefits on behalf of insured persons, and also for administering benefits to Deposit Contributors. A number of important duties rest upon these Committees in relation to disseminating information regarding Public Health, and there are powers of far-reaching significance in connection with excessive sickness and the responsibility for such.

For the purpose of administering- sickness, disablement and maternity benefits to insured persons, organisations termed Approved Societies are recognised under the Act for the transaction of State Insurance and the administration of money benefits to their members. The term “Approved Society” includes various kinds of combinations of persons and covers the great existing Friendly Societies, the Trade Unions, the Industrial Assurance Companies, Village Friendly Societies or Slate Clubs, and provident funds established by employers in connection with particular works.

The chief points in connection with Approved Societies are that each Society must be approved by the Commissioners, but any Society may be approved which conforms to the requirements of the National Insurance Act. The chief requirements are that each Society must be under the absolute control of its members and must not make any profit out of the State transactions. The rules of the Society must be approved as well as the Society itself, accounts must be kept in certain prescribed ways, and security must be given by Societies against the risk of malversation of funds. Approved Societies accounts are under Government audit, and there are important provisions relating to periodical valuation of assets and liabilities and consequential action in the event of valuation disclosing a surplus or deficit. Each Society has the right to admit or reject any applicant, except that that rejection must not be made on the ground of age. There are also provisions relating to the transfer from one Society to another and transfer from the Deposit System to a Society. Membership of Approved Societies confers real advantages on insured persons. Every person liable to be insured should choose his Society with care and take a real interest in its management and concerns. A well managed Society will usually be able to pay the minimum benefits to its members, and in the event of not being subjected to excessive sickness claims, will probably be able to pay additional benefits, if there is a disposable surplus on valuation.

The alternative to membership of an Approved Society is membership of the Deposit Contributors’ Fund. In this event the insured person docs not get the benefit of real insurance, but only receives such benefits as can be given to him from any sum that is standing to his credit. The deposit system is not to be recommended, and it is a temporary expedient meant only for persons who cannot find entry into an Approved Society. The deposit system is only intended to last till the end of 1914.

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