Unemployment Insurance

I. INTRODUCTION

Unemployment Insurance, form of social insurance, designed to provide income to persons who have lost their jobs. Unemployment insurance is wage related and is payable as a matter of right to any insured eligible worker. The system has two major goals: to prevent unemployed persons from undergoing severe hardships and to get the unemployed back to work. Unemployment compensation benefits account for approximately 1 percent of personal income in most developed Western nations.

II. UNEMPLOYMENT INSURANCE IN THE U.S.

The need for a compulsory unemployment insurance program in the U.S. became apparent during the depression of the 1930s. Before that time, only a few companies had adopted voluntary unemployment insurance plans, and even fewer had capital funds strong enough to withstand the strain of prolonged unemployment. Some trade unions tried to cope with the problem by building up their own unemployment funds. Benefits, however, were small and for a limited period. The first state to set up an unemployment insurance system was Wisconsin in 1932.

The basis for nationwide unemployment insurance was the Social Security Act of 1935, which established a federal-state cooperative program designed to provide insured workers with partial replacement of wages lost by involuntary unemployment . The program was financed by taxes levied on business payrolls. Under the Social Security Act, the federal share of these taxes covers the cost of administering the unemployment insurance and employment service programs; the state share may be used only for benefit costs. Each state sets its own rules and has charge of program administration. State laws vary regarding eligibility for benefits, amount of benefits, and number of weeks during which they may be paid.

Initially, eligible workers had to wait from 2 to 4 weeks before receiving benefits, which could then be drawn for a maximum of 20 weeks. Because coverage was limited to certain industries, only half of all workers were eligible for benefits if they were laid off. Changes in legislation and administrative practice have altered these original features. Many states do not require a waiting period before benefits may begin, and in none does the wait exceed one week. Since 1970 extensions of benefits for up to 39 weeks go into effect automatically when the unemployment rate rises more than a certain amount. Emergency legislation in recessions extends the maximum duration still further; for example, in the 1981-82 recession, people were able to draw benefits for up to 55 weeks. States have liberalized benefits by granting an increased fraction of workers eligibility for up to 26 weeks of benefits at all times. In 1976 the program's coverage was amended to make laid-off workers in all industries eligible for benefits if they meet the state's requirements.

III. METHODS
State unemployment compensation laws establish a fund, financed by contributions from employers, from which weekly unemployment benefits are paid for a specified number of weeks. Employers' contributions are based on experience rating; that is, they are related to the amount of benefits received in the past by workers laid off from the business. A few states also require contributions from employees. To be eligible for benefits, an unemployed worker must have earned a given amount of wages within a specific period of time. In addition, a worker must file a claim, register for work at the state employment service, be able to work, and be available for suitable work. A claimant may be disqualified from benefits for varying periods if he or she left a job voluntarily without good cause, was dismissed for misconduct, or refused an offer of suitable work. Until another job is found or the benefit period ends, a worker receives a weekly payment by reporting at scheduled intervals to the local unemployment office.

In the U.S., unemployment insurance replaces about half of the aftertax wages lost each week up to a prescribed maximum; the higher the worker's usual earnings, the lower is this fraction. The average beneficiary draws benefits for about 15 weeks . Less than half of the unemployed receive benefits, mainly because many unemployed workers do not have sufficient employment experience to qualify for benefits. Fewer than one-third of all beneficiaries fail to return to work before exhausting their benefits.

IV. UNEMPLOYMENT INSURANCE IN OTHER COUNTRIES
Nineteen European nations had compulsory unemployment insurance programs before the U.S. program was established. The first was instituted in Britain in 1911, and it expanded rapidly to cover most low-wage, nonfarm workers. By the late 1920s potential duration of benefits was unlimited, and requirements for eligibility had been relaxed so that some workers could draw two weeks of benefits for each week they had been employed. The British have also altered their system over time and have introduced a redundancy payment, a one-time benefit paid at the time of layoff.

Most nations have some form of compulsory unemployment insurance. These programs differ from that in the U.S. in important ways. Potential duration is longer in many developed countries and shorter in most developing nations. Benefits generally are financed at least partly by income taxes rather than by taxes on employers alone. Where taxes on employers are used, they are not related to past records of layoffs.

V. ISSUES AND TRENDS
Evidence from studies in the U.S., Canada, Britain, and other countries indicates that higher benefits encourage some workers to stay unemployed longer. The failure to base taxes completely on an employer's record of past layoffs contributes to greater instability of employment. Thus, it is likely that some small part of total unemployment is induced by unemployment insurance. Taxing benefits, as is now done in the U.S., is one possible solution to this detrimental side effect of unemployment insurance.

With the higher unemployment rates in Western nations since 1973, the protection offered by unemployment insurance has increased in importance. If unemployment stays high, pressures for extensions of potential duration and for increased weekly benefits are likely to grow, while public concern about preventing payment to those not seriously seeking work expands. In the future as in the past, interest in a country's unemployment insurance program will be directly related to the degree of the unemployment problem.

National Insurance

National Insurance, payments made by employers and employees in the United Kingdom to fund state benefits, such as unemployment pay and pensions. The money goes into a separate fund and technically is not part of central government revenue. National insurance has some of the characteristics of a tax, although the payments employers and employees make are referred to as “contributions.” The distinction made by William Beveridge was “that taxation is or should be related to assumed capacity to pay rather than to the value of what the payer may expect to receive, while insurance contributions are or should be related to the value of the benefits and not to the capacity to pay.”

National insurance contributions are based on earnings. The percentage of earnings paid by employees is different from that paid by employers, and that paid by self-employed workers. Those earning below a certain amount do not have to pay any national insurance and those earning more than a certain amount do not pay national insurance on earnings above that amount. In the case of someone earning just under £23,000 , the employee’s total national insurance contribution is currently set at just over £2,000, which is about 9 percent of earnings, and the employer’s contribution is higher . However, for those earning up to about £10,660, the employer’s contribution ranges from 3 to 7 percent.

Many countries operate similar systems, in which there is a distinction between taxes that finance such things as public sector wages, and compulsory social insurance that finances welfare benefits.

Marine Insurance

Marine Insurance, insurance that generally applies to the risk associated with the transportation of goods. The first marine insurance company in the United States, the Insurance Company of North America, was established in 1792 and covered American clipper ships and their cargoes. Today that company still insures against perils on the high seas, but now the coverage is for oiltankers and huge cargo ships. Over time, marine insurance has become a mixture of broad property coverages, divided between land risks and sea risks .

Inland marine insurance covers domestic risks associated with some element of transportation. It has been broadened to include perils incidental to transportation of property and now deals mostly with personal and commercial property of a mobile nature. Its most familiar form is the personal articles “floater,” which offers an opportunity to insure many valuables, such as jewelry, furs, silverware, and fine arts, in a single policy.

Ocean marine insurance is broken into three basic types: hull ; cargo ; and protection and indemnity .

Hull insurance affords protection to owners of all types of ships for loss or damage to their waterborne property. Typical perils insured against are stranding, sinking, fire, and collision. The hull policy offers an unusual coverage under its collision clause, which provides liability insurance for loss or damage to the other vessel involved in a collision, as well as to its cargo.

Cargo insurance is available for shippers of goods moving by sea or air in international trade. The terms of insurance can be specific or “all risk” and can be underwritten for a single transaction or on an open-ended contract for the international trader. The open cargo policy is the most common form used and usually covers the cargo “warehouse to warehouse,” thus including exposure to those risks that are associated with land transportation as well.

When a ship is imperiled at sea because of fire, storm, or other danger, all efforts must be made to keep the ship afloat. Such efforts often cause damage to portions of the ship or cargo. To prevent inequity, each owner assumes a share of the property damaged or lost as a result of actions taken to save the ship. This method of apportioning losses is known as general averaging.
Protection and indemnity insurance protects the vessel owners against their liability for damage to cargo in their care and custody; death or injury to passengers, crew, cargo loaders, and others; damage caused to piers, docks, underwater cables, and bridges; and, more recently, damage caused by pollution.

Other forms of related coverages are included in ocean marine insurance, such as miscellaneous liability policies for owners of piers, docks, marine repair facilities, marinas, and shipyards. Policies on yachts can be underwritten by an ocean marine insurer , providing property and liability insurance in one policy. Powerboats and smaller pleasure craft are more often insured by inland marine insurers. Builder's risk insurance is available to cover damage to a ship under construction.

Common exclusions found in marine insurance policies are loss or damage resulting from strikes, riots, civil commotions, and war. These risks can be, and frequently are, insured through use of endorsements for additional premiums.

Ocean marine insurance rates and policy forms are not regulated by any government authority. Coverage can be tailored to suit the individual needs of ship and cargo owners, and rates are based on the underwriter's experience and judgment in a competitive worldwide marketplace.
Underwriters consider many factors in setting terms and rates for a risk. Factors common to all marine policies are the underwriter's experience with a commodity or vessel, the cargo owner's or shipowner's loss history, and current competition in the industry. Important factors relating to the ship include owner management, crew experience, trade routes, ports frequented, and age and maintenance of a vessel.