APPENDIX J THE POST OFFICE INSURANCE FUND

The suggestion to establish a State Life Assurance was first made in 1872 by Sir Richard Temple, the Finance Member of Council. After a great deal of discussion it was dropped in 1873, but was revived again in 1881 by Mr. Hogg, the Director-General of the Post Office, when it was accepted by the Viceroy's Council and finally by the Secretary of State.

The principal features of the scheme which was actually introduced on the 1st February, 1884, were:

(1) For the time the Fund was confined to the employés of the Post Office.

(2) Provision was made for effecting life insurance in three ways, viz.—

(i) By a single payment.

(ii) By monthly payments until the person insured attained the age of 50 or 55.

(iii) By monthly payments during life.

(3) Provision was also made for two classes of monthly allowances, viz. "Immediate" or "Deferred."

(4) One life could be insured for any sum which was a multiple of Rs.50 up to the total of Rs.4,000, and the monthly allowance granted on any one life might consist of any sum which was a multiple of Rs.8 up to the limit of Rs.50.

(5) Medical examination of proposers for insurance was made free.

(6) Arrangements were made for the deduction of the monthly premia from the insured person's salary except the first premium or premium paid during leave without pay.

(7) Policies and contracts issued under the scheme were exempt from stamp duty.

The scheme worked smoothly, and, taking into consideration that many employés of the Post Office are poorly paid officials, a fair measure of success was attained during the first few years except in the Monthly Allowance branch and in the system of Life Insurance by single payment. The following figures show the proportion of officials who availed themselves of insurance during the first three years:—

1884-85	1·05%	of the whole	Post Office	establishment.
1885-86	1·46%	"	"	"
1886-87	1·79%	"	"	"

In 1887 the rule under which one-half surrender value could be allowed on all policies and contracts when payment had been discontinued was modified so as to exclude from this privilege policies and contracts on which three years' premia or subscriptions had not been paid. In September, 1887, the Fund was opened to the Telegraph Department, and in 1895 to employés of the Indo-European Telegraphs and to women employed in all the departments.

With effect from the 1st February, 1898, the benefits of the scheme were extended generally to all permanent Government servants whose pay was audited in Civil or Public Works Account offices and all members of establishments of the Military Department, under audit of the Military Account offices, who were subject to Civil rules. From the same date a system of Endowment Assurances providing for payment at any age between 45 and 55 was introduced. With this general extension of the scheme it was decided that the medical examination of proposers for insurance should be more stringent and that medical officers, who had until then been examining proposers for insurance free of any charge, should be allowed a fee of Rs.4 for each examination, as their insurance work would be substantially increased. In the same year (1898) the system of Life Insurance by a single payment which had proved to be a failure, was abolished.

In 1899, Temporary Engineers and Temporary Upper Subordinates of the Public Works Department were allowed by Government to be admissible to the benefits of the Fund, provided that the Chief Engineer declared that they were eligible for admission. In 1903 it was extended to permanent Government servants in foreign service in India, and in the same year Life Insurance policies were allowed to be converted into Endowment Assurance policies.

In 1904, the following relaxations of the rules were sanctioned with a view to meet the convenience of Government servants.

(1) Insured persons who had retired from the service and whose pensions were paid in India were allowed the option of deducting their premia or subscriptions from their pension bills instead of being compelled to pay them in cash at a post office.

(2) When there was any difficulty in the way of a proposal being signed by the proposer in the presence of his immediate superior, this duty might, with the permission of the Postmaster-General, be performed in the presence of the local postmaster or any other responsible officer who had to sign the certificate.

(3) The table of subscriptions for "Immediate Monthly Allowance," which contained rates up to the age of sixty, was extended so as to provide for contracts with persons above that age.

In the same year the benefits of the Fund were extended to Temporary Lower Subordinates, clerks of the Public Works Department and to clerks of the Punjab University on the same conditions as to Temporary Engineers and Temporary Upper Subordinates.

The year 1907 witnessed several important changes in the Post Office Insurance Fund made on the recommendation of the Government Actuary. These were:

(1) That the sums eventually payable in respect of policies in existence on 31st March, 1907, in the Life Branch of the Fund were increased by 10 per cent and that the premia payable in respect of sums assured in that branch after that date would be correspondingly reduced. The rates of premia for Life Insurance were revised accordingly.

(2) That a life policy, with monthly payments payable till death, was allowed to be converted into a life policy with monthly payments payable to a specified age or into a fully paid up policy payable at death.

(3) That an endowment policy might be converted into a paid-up policy payable at some anterior date or at death, if earlier.

(4) That insurants could reduce their monthly premia to any desired extent from any specified date.

(5) That when a policy of either class was surrendered the policy holder should be given the full surrender value which on an actuarial calculation could be paid without loss to the Fund, instead of half that amount as hitherto given.

(6) That the surrender value of a lapsed policy was payable at any time after default, on application being made for the same.

(7) That the period up to which payment of arrears of premium or subscription was allowed for the revival of a policy of less than three years' duration was extended from three to six months.

The tables of premia, introduced at the time the Fund was started, as already stated, were calculated on the mortality rates which had been deduced from the experience of the Uncovenanted Service Family Pension Fund, Bengal—a Fund which was confined to Europeans resident in India—there being no more reliable mortality statistics available for the purpose at the time. In 1909 the India Office Actuary, in his review on the operations of the Fund for the year 1907-08, noticed that, in view of the rapid growth of the scheme, it was necessary to revise the tables according to more accurate mortality statistics. In his review on the work of the Fund for 1908-09 the Actuary asked for detailed particulars of all the policies issued by the Fund since its institution in the form of statements, in order to enable him to deduce therefrom the necessary mortality rates, and thus prepare fresh tables of premia. These statistics were submitted with the Director-General's Annual Report on the operations of the Fund for the year 1910-11.

In the meantime it was brought to notice in 1909 that, under the existing method of calculating surrender values of Life policies, the values in certain cases were found on calculation to be considerably in excess of the total amount of premia paid on the policies. Taking advantage of this, insurants began to surrender their policies in large numbers. The matter was referred to the Secretary of State. As a result, the Actuary at the India Office forwarded revised tables for the calculation of surrender values of Life policies, to be used until the general revision of the Mortality tables and of the tables of premia, which had been under contemplation, was effected. In 1909 an important concession was sanctioned regarding the payment of premia by insured persons while on leave or suspension or when retiring. It was laid down that an insured person should not be considered as in arrears of premium or subscription for any month so long as he has not drawn any pay, pension or suspension allowance.

In 1910, with a view to afford greater facilities to the lower grades of postal servants to insure their lives and to popularize the Fund, sanction was obtained to grant to these officials from the Post Office Guarantee Fund travelling expenses actually incurred by them in their journey for examination by the medical officer for insurance, provided the proposer actually took out a policy and paid the premium for not less than twelve months. In 1912 Mr. Ackland, the Actuary at the India Office, made a thorough investigation into the past experience of the Fund from the statistics furnished to him. He drew up a report showing the results of the investigation and prepared fresh tables of mortality statistics, as well as new tables of premia for both Life Insurance and Endowment Assurance. He also prepared new formulæ for the calculation of paid-up policies, surrender values, etc., and recommended the following further concessions and changes:—

(1) The grant to all policy holders on the 31st March, 1912 (the valuation date), of a bonus at the rate of 2 per cent per annum in the case of Whole Life Assurances, and at 1 per cent in the case of Endowment Assurances in respect of each month's premium paid since 31st March, 1907, up to 31st March, 1912.

(2) The grant of an interim bonus at half of the above rates in respect of the premiums paid since 31st March, 1912, in the case of policies which became claims by death or survivance between 1st April, 1912, and 31st March, 1917, provided that premiums have been paid for at least five years and up to date of death or survivance.

(3) "Age next birthday" should be taken as the age at entry for all classes of Assurances.

(4) An integral number of years' premia should be charged on Endowment Assurance policies and Life policies with limited payments.

(5) Transfers from the Whole Life to the Endowment Assurance class or vice versa should be allowed only after any number of complete years' premia have been paid.

(6) When surrender values were granted in the Monthly Allowance class, medical examination at the policy holder's expense should be insisted on and payment should in no case exceed 95 per cent of the present value of the monthly allowance.

(7) Policy holders should be allowed to commute future premia by payment either of a lump sum or of an increased monthly premium ceasing at age 50 or 55.

(8) Transfers from the Endowment Assurance to the Whole Life class should be allowed only on the production of a fresh medical certificate obtained at the policy holder's expense.

(9) The valuations of the Fund should be made at quinquennial intervals.

It was also decided that, as an Actuary had been appointed by the Government of India, all questions relating to the administration of the Fund, as well as future valuations of the Fund, might be dealt with by that officer instead of being submitted to the Secretary of State.