This Fund started business on November 1, 1914, the day the Law
went into effect, its beginning was small and the money available at
that time consisted of premiums paid into the Fund by those insured
with it, which premiums were based on an advance estimate of the
payrolls of the insuring employers for a period of four months. The
State industrial Accident Commission transferred from the funds
alloted to it by the State of Maryland the amount of $15,000.00 for
the purpose of maintaining the solvency of the Fund. A few years later
this amount was returned to the State of Maryland.

During the first few years of the Fund's operations the principal
business carried on its books was coal mining operations, and the Fund
during these first few years was a comparatively small writer of com-
pensation insurance, the large bulk of the business having been secured
by the private insurance companies operating in the State. This condi-
tion gradually changed from year to year, and, while the Fund still
carries the risks of most of the coal operators in the State, there has
been a gradual transferring of the risks of other industries to the Fund
of a very desirable character, and for several years the State Accident
Fund has been the largest writer of compensation insurance, from a
point of premiums written, in Maryland.

During the' operation of the Fund a net surplus for the protection
of the policyholders amounting to $500,000.00 has been accumulated,
and as this surplus is in addition to adequate reserves which have' been
set up to carry all unpaid or undetermined claims to completion, it
leaves the Fund in a strong financial condition.

in carrying out the idea of the General Assembly when it created
the State Accident Fund—that the Fund should endeavor to write busi-
ness at cost and also to keep this cost as low as possible—it would
appear that this purpose has been accomplished. The average expense
ratio of the private companies carrying this form of insurance is from
35 per cent to 40 per cent of the premiums written while the expense
ratio covering all operations of the Fund has always been materially
lower than this, and for the last fiscal year was 8 per cent of the
premiums written. During that year the interest earned on the invest-
ments of the Fund practically paid the entire operating cost of the Fund.

Effective March 1, 1926, the Commission inaugurated a new merit-
rating system, the purpose of which is to reward and stimulate the
policyholders of the Fund in their work of accident prevention and to
measure the rate more closely to the individual hazard of the policy-
holder, preserving to the policyholder, of course, the basic principles
of insurance protection, so that any severe losses will still be distributed.
This merit-rating system is working out very satisfactorily, and is
offering an incentive to the policyholder to take a greater interest in
accident prevention in his plant.

There is no doubt that the State Accident Fund has saved, to the
employers insuring with the Fund many thousands of dollars, and at
the same time giving them full protection under the Workmen's Com-
pensation Law of Maryland.