Actuary Helped Form Workers’ Comp, Social Security, Casualty Actuary Society

Since the insurance industry and its actuaries tend to be politically conservative, it might surprise people to know that it was an actuary who influenced the beginnings of workers’ compensation, Social Security and what is now the Casualty Actuarial Society.

The actuary was Isaac M. Rubinow who moved to the United States in the

1880s at age 18 to attend Columbia University. He left pre-communist Russia where Karl Marx’s political philosophy was growing in popularity. While attending Columbia, he was part of a group of young intellectuals on the lower east side of New York who discussed social reform, according to Leon S. Senior, who was part of the circle and wrote an obituary about Rubinow.

Rubinow helped pioneer social insurance in the United States by writing articles and later publishing his 1913 book “Social Insurance.” In 1916, he wrote “Standards of Health Insurance.” His 1934 book, “The Quest for Security,” was so appreciated by President Franklin D. Roosevelt that he had Rubinow serve the economic security committee that formed Social Security.

Before his post in Washington, D.C., he was also appointed to the Ohio Commission on Unemployment Insurance. Around that time, the Ohio Bureau of Workers’ Compensation, the nation’s largest exclusive state fund, was founded in 1912.  (As an aside, BWC’s building, named after labor advocate William Green, was dedicated in 1992. I wrote the dedication speech, which is in a time capsule to be opened in 100 years.)

Before studying statistics and becoming an actuary for a New York insurance company, he was a medical doctor who practiced in the lower east side for five years. Senior wrote that Rubinow found being a doctor to be “uncongenial and too narrow for his mind.” Philosophically, he wanted to help people on more of a collective basis.

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The reality is that private engagement has played a critical role
in improving workers’ compensation as social insurance.

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Rubinow laid the foundation for the “workmen’s compensation” rate structure as chairman of the first statistical committee in casualty work. He wrote the Standard Actuarial Table that guided rate making in the early years of workers’ compensation and founded what is now the Casualty Actuarial Society. The CAS represents actuaries who work in all property/casualty lines including general liability, medical malpractice, home and auto insurance. Workers’ compensation remains the most complicated coverage for rating.

Public vs. Private Coverage: Philosophy and Reality

Rubinow’s ideas helped begin workers’ compensation, which is the nation’s oldest form of social insurance. Its formation 100 years ago came at a time when labor unions were growing in strength and before other nations began wholesale experimentation with Karl Marx’s ideas. (You will find a great critique on Marx in the book, “Intellectuals” by Paul Johnson.)

We have seen the economic, social and political ramifications of wholesale communism and socialism in other countries have done little to keep workers from being “miserable commodities” as Marx would say.

The workers’ compensation social insurance system, mostly run by the private sector, has continued to grow more efficient. The workplace continues to become safer. Thanks to medical management and return to work programs, workers are getting better care and returning to work more than ever. For the most part, employers are protected from tort suits related to work-related incidents.

The private sector, through insurers and self-insured employers, handles the lion’s share of the workers’ compensation market. The debate, however, continues as to the degree to which the insurance industry should “profit from pain.” The reality is that private engagement has played a critical role in improving workers’ compensation as social insurance. (To learn more about insurer profitability, click here.)

While other countries are finding social insurance to be economically untenable, our nation is transitioning to its newest and most expansive form: ObamaCare. (For more on the future of health care and the implications of ObamaCare, check out my Leader’s Edge article on these subjects by clicking here.)

As the United States struggles with the implications of ObamaCare, I wonder what Rubinow would say about social insurance in our country today.

Would he side with the labor unions that want their members to keep the labor-movement-inspired employer-sponsored health care instead of embracing ObamaCare?

Or would he want to see social insurance expand despite its disregard for actuarial tables, which encourage solvency?

That question is really the root of the challenge of social insurance. It’s philosophy appeals to our desire to help others, but its reality is tough on the wallet.

Go ahead and comment! You know you want to! 

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