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tem more realistic, provided, always, that the people can and will pay for it. We naturally assume that such proposed revisions would contemplate that the plan be maintained on a self-supporting basis. In planning such changes it would seem vital to the committee's deliberations that you have available the services of an independent actuary who is in a position to raise issues as well as answer technical questions. In our opinion, the proposed new types of benefits are directly contrary to the established purposes of the Social Security Act. However, believing that other segments of the life-insurance business are better qualified to deal with most of those proposals, we are electing to confine our testimony to one of these features of the proposed bill which, if enacted, would immediately and drastically affect our business existence for reasons which I will state. I refer to the funeral or so-called lump-sum death benefit.

At present the act provides for a lump-sum death benefit to be paid in the event an insured worker dies without leaving a survivor immediately eligible for benefits. We understand that this provision was adopted, not because of an existing social problem but as a carry-over of an original money-back principle. H. R. 6000, however, provides a lump-sum death benefit for all insured workers, whether or not other benefits have been paid. The amount of this lump-sum payment would be equal to three times the insured worker's primary monthly benefit. Here again there appears to be no justification in a socialinsurance program for the continuation of a guaranteed payment not intended to meet a social need.

Latest figures indicate that approximately 80,000,000 persons in the United States own life-insurance policies. As has been previously stated in testimony, a large segment of those in covered employment today have made provision for their funeral expenses through ownership of some kind of life insurance. Of this number of persons, two out of every three, or over 55,000,000, pay life-insurance premiums on the weekly basis and on policies in smaller amounts. Let me emphasize that the life-insurance business has done one of its most outstanding jobs in the distribution of voluntary protection to meet the needs of the lower-income workers and employees-the same lump-sum payments on death which this section of the bill proposes to duplicate or take over on the assumption that a need exists. The amount of such weekly premium life insurance in force in the United States is over $32,000,000,000.

Senator KERR. Is that a part of the $207,000,000,000 referred to earlier in the day?

Mr. GUERNSEY. Yes, Senator.

Now it may be possible that a frugal employee, for example, owning a $5,000 life-insurance policy would not allow a funeral benefit in the neighborhood of $150 to affect his individually purchased insurance. On the other hand, there is little doubt that the low-income employee, owning insurance in small amounts, and, through force of circumstance, watching every penny, would discontinue the privately purchased small insurance policy, especially when he realizes that he is being taxed for similar Government lump-sum death payments. And inevitably the removal of incentive to private thrift would mean that oncoming generations would increasingly rely on the Government rather than their own efforts to take care of the inevitable expense of death.

In most instances, the small life insurance policy has taught the lower income employee and his family their first, and probably only, continuing example of thrift. If you remove it, you will weaken and perhaps destroy his one financial demonstration that he believes in private initiative and dependence on himself.

Rather than deal entirely with national figures and averages, it would seem of equal importance and interest to introduce an example and to show just how such a proposal would affect our business and policy owners in a specific State. We have chosen for this illustration the State of Virginia because of its stable economy-being neither preponderantly industrial, agricultural, nor to any large degree affected by tourist trade, though my own State of Florida and others we have considered, would show comparable figures. The population of the State of Virginia is approximately 3,000,000 persons. There are in force in that State 3,372,000 weekly premium life insurance policies, representing over $814,000,000 of life insurance. Simply stated, there is already in force in Virginia more than one policy for each inhabitant of that State.

Senator KERR. Could you tell us how many inhabitants of that State do not have such a policy?

Mr. GUERNSEY. It would have to be a guess.

Senator KERR. Would you make a guess?

Mr. GUERNSEY. Senator, I fear a guess would not be of great value to you. I would have no idea.

Senator KERR. You do know that there are quite a number who do not have any such policy?

Mr. GUERNSEY. Admittedly.

Senator KERR. Would you say that you could safely estimate that half of them do not have?

Mr. GUERNSEY. I would not consider any figure I might give you a safe one, because it would be a guess.

The conspicuous absence of a social problem to be solved in this instance points to the unnecessary inclusion of the proposed lumpsum death benefit in this bill.

If this effort of free enterprise is not recognized and the lump-sum death benefit is retained in H. R. 6000, then the $814,000,000 of voluntarily purchased life insurance in this one State alone would be put in jeopardy and, if not immediately, would, in our opinion, through Government competition, begin to disappear.

Following this same example further, it is of equal important to show how these small privately purchased policies pay benefits. Last year in the State of Virginia there was paid out on 24,369 weekly premium life policies death benefits amounting to $4,334,000. In addition to this insurance in force and benefits paid, there are millions of dollars of life insurance in force in larger amounts under ordinary and group life insurance contracts. In fact, the total amount of life insurance in force in that State is in excess of $3,000,000,000. Senator MILLIKIN. Are we talking here about insurance to take care of funeral expenses? Is that what we are really talking about? Mr. GUERNSEY. Exactly.

This is the story of only one State. A similar outstanding job is being done elsewhere in the Nation. A pauper's burial, known frequently a decade or two ago, is now almost unheard of.

Senator MILLIKIN. Do we have any statistics on that?

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Mr. GUERNSEY. No, sir; nothing except our observation.

We do not presume to speak for all weekly premium life insurance nor the larger companies writing such life insurance which do not belong to this association. Nonetheless, it must be apparent that their business would be affected in proportion to ours. There is also reason to believe that were this proposal enacted, it would not be long before appeals would be made to further increase these benefits to compensate for increased costs of funerals, thereby putting in jeopardy life insurance in even higher amounts.

We are sincerely convinced that this public need is not only being met, but that every year a better job is being done. We feel that the public has demonstrated its wishes on this point by its large scale voluntary purchase of life insurance. We therefore see no realistic purpose for the inclusion of a lump-sum death benefit in H. R. 6000 and strongly urge that the provision be stricken from the bill.

It is contrary to the basic principles upon which the economy of this great country is founded for the Government to enter into a field where private enterprise has made such a contribution and for which it has so ably demonstrated its ability to adequately provide.

Gentlemen of the committee, I find it difficult to speak without emotion on this subject for in this plan I see so clearly a perfect example of the type of proposal which has brought so many nations of the world today to that position where they are dependent upon the United States of America, a free enterprise nation, for the essentials of life which their socialistic systems cannot provide.

Two years ago it was my privilege to visit 20 nations, where I sought and found the opportunity to talk to men and women of all stations in life-porters in hotels, waiters, drivers of busses, small merchants. business and professional men in the larger fields, American consuls and ambassadors, and governing officials of the countries in which I was a visitor, including mayors, governors, prime ministers, and presidents. I sought to learn without fear or favor what they thought of the governing policies of their country. Particularly did I seek this information in those countries where the so-called welfare state had made the greatest inroads, and I am thinking primarily of Australia and New Zealand, whose peoples in most respects are more like our own than those of other nations. With the exception of those who were forming or administering the socialistic policies of those nations. I found dissatisfaction, disillusionment, and in many places, discouragement. Many said to me, "A few years ago we said it can't happen here, but it did. The symptoms, the trends are identical in your country today. If you would keep your country what it is, you will go back to America and use your utmost effort to preserve and protect those things which have made your country great." That is why I am here today.

You are aware that in recent weeks the citizens of both Australia and New Zealand have rebelled against the impractical theories of dreamers and the wastefulness of bureaucratic administrations and replaced them with a government wherein there is a hope of equality and opportunity for all. To be sure, I am here to try to protect the interests of my own company and a large segment of our policy owners. I am here to fight for the life-insurance business as a whole, but above all, I am here in a conscientious and hopeful effort to try to do my

part to preserve those things which have made by country the admiration of all others, except those who have envy or malice in their hearts. We sincerely believe that the decision which is made in connection with H. R. 6000 will determine in large measure the extent to which individual responsibility and private initiative are subordinated in this country to Government control-or-call it what you will. We do know that the prosperity of this country under its present system should dictate a far wiser plan for its future than that conceived in this section of the bill. The proper action is to strike the lump-sum death benefit from this act.

The CHAIRMAN. Mr. Guernsey, we appreciate your appearance, sir. Are there questions?

Senator MYERS. I just wondered whether this gentleman appeared when the original social security bill was under consideration, 10 or more years ago.

Mr. GUERNSEY. No, Senator, I did not.

Senator MILLIKIN. I would like to ask Mr. Cohen, Mr. Chairman, whether he has any statistics on pauper burial.

Mr. COHEN (Wilbur J. Cohen, technical adviser to the Commissioner for Social Security). We have some statistics, Senator Millikin, from the public-assistance figures, as to those burials of people on the public-assistance rolls, with which we can supply you.

The CHAIRMAN. Anything that bears on this question, Mr. Cohen.

USE OF PUBLIC FUNDS FOR BURIAL OF NEEDY PERSONS

Public assistance agencies in the United States generally have policies that make it possible to provide for burial of needy persons. Some assistance agencies make payments directly to the undertaker or others for burial of an assistance recipient. It is common practice also to permit recipients of assistance to maintain cash or liquid asset reserves to meet the cost of such contingencies as last illness and burial. In many States, moreover, budgetary standards provide for including a sum for insurance premiums in determining the amount of the money payment to the recipient. Even if the cost of insurance premiums is not specifically taken into account in determining how much assistance a needy person is to receive, the recipient is free to use his money for this purpose if he wishes.

On the basis of reports received from 37 States, it is estimated that in the Nation in the fiscal year 1949, payments for burial from assistance funds, including funds appropriated for old-age assistance, aid to dependent children, aid to the blind, general assistance, and burial assistance, were about $5,500,000. Although there is some provision for meeting burial costs under each type of assistance, the problem is most acute in the program of old-age assistance. The table attached summarizes the provisions for burial in the State plans for old-age assistance.

As of January 1950, 28 of the 51 jurisdictions making payments to the needy aged had some plan for making payments for burial either to the undertaker directly or to others. Such payments are not subject to Federal participation. In some States amounts spent for burial of recipients are recovered from their estates wherever possible. In other States the recovery provision is not enforceable during the lifetime of a spouse or other dependent. All of the 28 States making payments for funeral expenses also permit recipients to maintain cash or liquid assets reserves which may, in some instances, include the cash surrender or loan value of insurance policies and which can be used to meet burial expenses or other contingencies such as the expense of last illness. In 23 States the maximum amount of the reserve that may be held is specified in the State plan; in the other States the amount is not indicated.

All of the 23 States that do not make vendor payments for burial permit the recipient to maintain a reserve which may sometimes include the cash-surrender cr loan value of insurance policies, and may in all probability be used for burial. Thirty-three of the fifty-one State jurisdictions have provisions in their oldage assistance plans for including an amount for insurance premiums in de

termining the size of the recipient's cash assistance payment. Seven States specify the amount to be allowed for this purpose and nine States, the maximum amount. In other States the amount included is probably the amount actually paid by the recipient, within specified limits.

Although the plans of 18 States do not specifically include an amount for insurance in determining the recipient's needs, the item may be covered by other budgeted items such as "Miscellaneous expense." Among the 18 States with no specific provision for budgeting the cost of insurance payments are seven with average assistance payments above the national average. It cannot be concluded that in the absence of a specific provision for budgeting this item recipients are unable to pay insurance premiums out of their current income.

Old-age assistance: Provisions for burial in State plans

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