An Ohioan named Furjasz stepped onto a highway and was killed by a speeding car. "Furjasz failed to look in both directions," said the company, "and this amounts to voluntary exposure to unnecessary danger." The heirs finally collected, but it took a long trip through the courts, with the company resisting all the way.

Some insurance companies have even called it "unnecessary exposure to danger" to walk from one railroad car to another, to watch others handle fireworks, to ride in a canoe. They have tried to avoid paying even where the policyholder's reckless act consisted of submitting to anesthesia for an operation. Caution No. 5. If you hope to collect for accidental injuries, better be in perfect health when you have the accident.

In New Jersey, Sarah Fedner was cooking chicken soup in a covered aluminum pot on her gas stove. The pot exploded, burning her severely. She died. Her insurance company resisted paying, on the ground that other elements contributed to her death: Sarah had arteriosclerosis. The company won, the judges holding that there wasn't sufficient proof that the burns caused her death.

Caution No. 6. The "health features" of some policies may be frail and sickly. The average policyholder thinks, "If I get too sick to earn anything, the insurance company will pay me." Before buying, however, you will do well to take a good look at the list of diseases you are allowed to contract.

An honest company will show a respectable and proper list: This is what it pays off on. Or the policy will say it insures against all ailments except a few that are clearly specified.

Loss-conscious companies, on the other hand, play either of two favorite games. One is to recite a long and impressive list of diseases on which it will pay off, including bubonic plague, Asiatic cholera, and other ailments which the average American is no more likely to contract than he is likely to be hit by a flying saucer-but neglecting to mention more common diseases.

The other game is to offer a policy which lists as exceptions those illnesses you are most likely to incur. Policies of this sievelike type don't cover diseases or disorders of the heart or circulatory systems, infections (a fine, wide field) or pulmonary disorders-which apparently mean pneumonia and influenza as well as tuberculosis.

I am making these charges against only one kind of insurance: Health and accident policies. To get reliable, trustworthy insurance in other fields has required a long fight. A good deal of automobile insurance, until 20 years or so ago, wasn't much more than a racket; life and fire insurance were for many years the happy playground of chiselers. The States had to step in with regulatory legislation.

Health and accident insurance is a black sheep. At its shabby worst, it can amount to a legalized confidence game that involves browbeating the sick, the maimed, and bereaved. Michigan's State insurance department found that 71 percent of all insurance complaints were in the health and accident field.

There are indications that a reform movement is under way. The National Association of Insurance Commissioners is working to bring about a nationwide uniformity in policy provisions, and some State insurance officials are refusing to approve new policies which contain ambiguous terms. Some of the major companies have abandoned many of the deceptive exclusion clauses and other traps for the unwary. But the battle has not yet been won.

They would certainly

One reason the companies hesitate to clean house is that sound insurance costs more. But Americans in the millions carry this kind of insurance. They pay more than $12 billion a year for it, because they need it. rather pay a little more for insurance that really insures. Meanwhile, what can you do, as an insurance buyer, to protect yourself? Read the policy offered you in the light of the six cautions set out here. If you don't understand any important provision, ask the insurance company for an explanation in writing-and save it.

Devote the same care to selecting a reputable insurance agent or broker that you use in picking a doctor or lawyer. You're probably better off buying from established, well-known companies. Though a big name is no guaranty of generous theatment, the policy provisions usually are less deceptive.

Don't buy bargains; there aren't any. Good health and accident insurance is never cheap.

HEALTH AND ACCIDENT UNDERWRITERS CONFERENCE,
Chicago 4 Ill., September 14, 1953.

Mr. DEWITT WALLACE,
Editor, Reader's Digest,

Pleasantville, N. Y.

DEAR MR. WALLACE: The more than 200 insurance companies that comprise our association, the Health and Accident Underwriters Conference, have showered us with letters on an article, Health and Accident Insurance Policies, by John Appleman, appearing in the September issue of your magazine.

As you might well imagine, most of these letters severely criticized the Reader's Digest and Mr. Appleman and denounced his article as misleading, unfair, and harmful to the disability business and the public. But it is interesting to note that quite a few others have called for more light than heat. Their tone has been: "The facts presented by Mr. Appleman are quite damaging to our business, and an effort to document the article and evaluate it should be undertaken." Our staff, therefore, has been at work this last week trying to find what the truth of the matter is. We discovered misrepresentations, half-truths and erroneous conclusions, but very little truth. Briefly, we found that at least three of the examples given by the author involved the double-indemnity features of life-insurance policies-not health and accident policies, the "only one kind of insurance," Appleman says, "I am making these charges against."

Further, in a search of policies that we have in our files of more than 100 representative companies, we found no examples of exclusions for "disorders of the heart and circulatory systems, infections, and pulmonary disorders."

These and various other factual errors have been included in the attached memorandum that we are sending to our companies. We thought you would be interested in seeing this memorandum, as we know you attempt to publish only facts or opinions which can be verified.

Judged by any standards, the facts set forth in the article are so untrue or used in such a misleading fashion that the article is a discredit to your magazine, as well as an irresponsible attack on the health and accident insurance industry. We would appreciate your comments, and once more we offer our assistance should you contemplate publishing further articles related to our business.

Sincerely,

JOHN P. HANNA, Managing Director.

MEMORANDUM RE READER'S DIGEST ARTICLE, HEALTH AND ACCIDENT INSURANCE POLICIES-HOW MUCH CAN YOU RELY ON THEM?

The author of the article made several statements inferring or charging that policies are made difficult to read and contain coverages or exclusions designed to mislead the unwary: "The big print gives it to you and the little print takes it away," "Loss-conscious companies * * * recite *** diseases including bubonic plague, Asiatic cholera ***” "[These type companies might also use] sievelike [exclusions referring to the] heart or circulatory systems, infections (a fine wide field), or pulmonary disorders * * *.”

Possibly one could find old forms of a few companies purchased years ago having some of these objectionable features. But so far as policies being offered for sale for the past several years, a check of the facts indicates that these charges and inferences are unfounded.

Beginning in 1912, States were adopting laws which forbade a size of type variation for exclusions-except to increase the size or to bold face the printing of exclusions or exceptions. For many years, in some instances prior to 1912, States have required approval of the forms by the various State supervisory officials dealing with insurance matters. Nowadays all States have such requirements. The Illinois code, for example, has long indicated the director of insurance would withhold approval of forms which contain "inconsistent, ambiguous, or misleading clauses, or contains exceptions and conditions that unreasonably or deceptively affect the risk purported to be assumed * * *." Similar wording is found in the other States.

While the law is clear, it was believed proper to study the actual practices of the companies. Members of our staff searched through forms presently being marketed by over 100 companies in the business. Not one single example of the technique described in the forepart of this memorandum was found. The only forms in use which limit the coverage to certain diseases or certain types of accidents are called limited policies. These were imprinted across the face in

large red letters with the legend "This is a limited policy; read it carefully." These special forms were designed to cover specified accidents such as those occurring on railroads or airplanes, and specified diseases such as polio or cancer. Any business has a certain number of undesirables and ours is no exception, but our regulatory authorities are well able to cope with the rather transparent tricks the author describes. In this day and age the various bits of policy language quoted are nonexistent in policies being offered for sale.

The author names seven individuals and recites their experiences and the results. This technique of generalizing from a few examples is most improper. Even if his cases were all correctly used, to suggest that they are representative is ridiculous.

At least 6 of the 7 experiences deal with accidents only. They have nothing to do with health insurance. The one involving Sarah Fedner upon analyzation of the facts presented by the author means absolutely nothing. He infers that she died as a result of an accident. The court having been presented with detailed medical evidence determined that the accident described in the article was not the cause of her death. We see no plausible logic in the author's inference that a provision covering accidental death should be payable despite the fact that death was not accidental.

The case of the Delaware man who died after having fallen down steps in an effort to escape an irate husband toward whose wife the Delaware man had been making improper advances, also is presented in a dubious light. Most courts and most citizens look with disfavor on such activities and believe that good public policy does not entitle individuals involved in such nefarious activities to be able to protect themselves insurancewise. Incidentally, the facts were not properly presented in the case. The individual did not fall. He was under the influence of liquor and the husband caught him and assisted in his rapid descent. Likewise the facts of the case involving the Ohioan named Furjasz were incomplete and presented a false implication.

At least three of the remaining cases-Lunnie Boney, the Texas woman who was fatally injured by monoxide poisoning from the fumes of her bathroom gas heater; Ross Bounds, the Mississippian killed in an auto accident while illegally transporting liquor; and Annabel Baker, the Ohio housewife who poured kerosene on a balky fire—did not even involve accident and health insurance. They were double-indemnity life insurance cases. The author said: "I am attacking only one kind of insurance-health and accident policies."

The general public is well aware that the double-indemnity portion of life insurance is not intended to be complete accident and health protection. This insurance is secondary to the regular life coverage and is relatively inexpensive. It is not sold as full protection accident and health insurance. Yet the author comments about the Bounds case: "Is that the kind of an accident you would expect an accident policy to cover? Of course it is." He does not disclose to his readers the fact that the case involved only the double indemnity portion of a life insurance contract-the life insurance feature having been paid without contest.

To round out his attack, the author quotes figures which the average reader would assume are authoritatively supplied by the commissioner of insurance of the State of Michigan. A Reader's Digest staff member wrote the department and asked: “Is it correct that Michigan's State Insurance Department found that 71 percent of all insurance complaints were in the health and accident field?" To this Michigan's insurance commissioner, Joseph A. Navarre, replied: "We took the pains to make an analysis of the so-called complaints file and found that the percentage as indicated by you would be incorrect and most misleading." Commissioner Navarre went on to invite further correspondence and to note that the quoting of such statistics without proper and adequate explanation would also be misleading.

Insurance people know, but the general public does not, that complaints statistics are meaningless unless measured against claims paid or claims handled. In an authoritative survey made several years ago, it was found that only onetenth of 1 percent of health and accident claims result in complaints. The author made no mention of such realistic information.

In concluding the article, the author asserts that the "National Association of Insurance Commissioners is working to bring about nationwide uniformity." This much is true, but his inference that this is an effort to clean up an insurance black sheep is not. The industry is wholeheartedly supporting the legislative program endorsed by the National Association of Insurance Commissioners. This organization, its member companies, and others in the industry have spent

time, effort, and money to get the legislation adopted. The program is indeed directed toward uniformity. A comparison of the uniform individual policy provisions law, presently the law being offered, and the standard provisions law which was the basic part of the program begun in 1912, will demonstrate that the new law simplifies the provisions and leaves room for the development of better coverages. It does not take a different directional pattern than did the old law; i. e., it does not weed out black sheep.

Aside from his charges against the health and accident insurance industry, the author has indirectly maligned others. He has attacked the judges who have decided the cases which he has used as examples. He has attacked the court system itself when he says: "Litigation carried to the highest courts may take years and cost more than the customer would recover." Most Americans, aware that a democratic society has shortcomings, still prefer our system. Even a casual reader should know that companies could ill afford litigation costing more than the claim is worth. A quick check of any court calendar anywhere is all that is needed for an outsider to learn that there is no concentration of cases involving health and accident insurance despite the fact that over 85 million Americans have hospitalization insurance alone one of several coverages sold by accident and health writing companies.

By inferring that policies containing the clauses and exceptions mentioned are relatively normal and by flatly stating that at long last "a reform movement [among the supervisory officials] is under way," the author has attacked the regulatory officials. These people are charged with supervising a vast financial empire, a part of which is represented by the more than $2 billion accident and health insurance industry. To assume that the insurance departments are staffed with individuals who could not previously find fault with the sort of practices the author describes is highly insulting and certainly inaccurate.

Most important, the author has adversely affected countless citizens who have read the article and thought it to be a true recitation of the facts. Many of these people have contacted their insurance companies and others will contact them in the future. Some will drop coverage valuable to them, and some will go to the various State insurance departments and further burden these officials. A few might have been led to conclude that a socialistic government-sponsored program is preferable to a private-enterprise solution to their health insurance needs. It is probable that most all companies will satisfy their policyholders by letter or by having their agents revisit the individuals, but all this is expensive, and it is an expense that the policyholders themselves will bear in the long run. No suggestion that the author is performing a public service in telling people to buy carefully can possibly justify the damage that has been done and will be done. Of course, people should buy accident and health insurance carefully. But the author's recommendations are of little, if any, value.

It is very regrettable that a magazine of the standing of Reader's Digest has chosen to publish this article, especially since accurate information is available. We hope the Reader's Digest editors will take a second look and do their best to undo as much of the damage as they can. Respectfully submitted.

SEPTEMBER 14, 1953.

HEALTH AND ACCIDENT UNDERWRITERS CONFERENCE. By ROBERT H. RYDMAN, Associate General Counsel.

The CHAIRMAN. Well, maybe it could be dismissed that easily, but the cases I have had come to my attention, which were not in the Reader's Digest, would indicate that there is a field there which seems at times to produce distressing results.

Mr. FAULKNER. We would be the first to agree with you, sir, that the business is not perfect. The one thing of which we are absolutely certain is that it is making substantial progress toward providing ever better protection for the American people.

The CHAIRMAN. I have no doubt of that and I would not want my questions to indicate that I had any but the highest regard for the industry you represent so well.

What do you think of a situation such as this: We are all familiar with the Blue Cross, the White Cross, and all the other kinds of crosses that have hospital plans. I have in mind the people who put the

money into them, believing that they are getting insurance. Do you think that there should be any supervision of any kind to make sure that those organizations are able to do the things that they promise to do and that they are financially responsible, in much the same way that the Government examines and watches over the condition of banks?

Mr. FAULKNER. I believe, sir, that the same kind and degree of supervision which is extended to insurance companies could properly be extended to insurors operating under other labels. The voluntary nonprofit associations, like Blue Cross, have done a magnificent job. More and more States are recognizing that while we approach the problems differently, inherently we are attacking the same problem, and that as a result of that insurance department supervision of Blue Cross and similar voluntary nonprofit corporations is being extended to those corporations.

The CHAIRMAN. Do you think it could be helpful and advisable for the Federal Government to have some supervision of these Blue Cross plans to the point that they would make certain that they observe certain rules and conditions which would provide security, such as is now exercised with respect to banks, with the Government itself assuming a responsibility if the particular agency-whether it be the Blue Cross or White Cross or whatever it is-should fail, the same as the Government guarantees deposits now in banks?

Mr. FAULKNER. As to the first part of your question, sir, I believe that supervision at the State level is doing a competent job.

As to the second part of your question, should an insurance carrier become embarrassed the opportunity is almost always present for the business to be reinsured by another carrier and the benefit carried on. I presume that some such arrangement as that would suffice to take care of the possibility of any difficulty that a voluntary nonprofit organization got into.

The voluntary nonprofit organizations, however, have an additional safeguard against being financially embarrassed, and that is that the participating hospitals in effect underwrite the solvency of the Blue Cross. In the event of difficulty the hospital simply would not be paid its full cost on the patient. So until the plan could get out of difficulties the service to the subscriber would still be carried on.

The CHAIRMAN. You do not think very well of the Government assuming a responsibility to make certain that the different voluntary cross plans should be what they claim to be, and to insure that they will continue to be what they must be to provide the benefits which people pay for; and that in failing in that then the Government would assume a responsibility, the same as it has now with respect to depositors in banks under the Federal insurance system.

In other words, the Government fixes all kinds of rules and regulations under which a bank shall operate. They make continual examinations to make sure that those rules and regulations are being observed and that there is safety for the depositor. And for the small fee that is charged to the bank the individual depositor is insured.

Now I wonder if the same principle-I do not mean in detailgenerally speaking might not be helpful in making certain that our hospitalization and sickness plans and so forth are similarly operated?

Mr. FAULKNER. If I saw the possibility, sir, of any real difficulty, I would agree that such a program might be feasible. I see little possibility of any difficulty of that kind, and because I am convinced