Bradford opinion. [volume] (Bradford, Vt.) 1874-1881, 1877-02-24
INSURANCE WRICKING.


...IIow IN Insurance Agent Cheated III
Policy Holders IN the West aMd south Uu
der Imstructi0ns.-.Divld the Profits q
Fraud.
In tho Continental Life Insuranc
Company examination in New York, s
U. Hammond, of Cincinnati, Ohio
known among insurance men rs pro
fessional wrecker," gave some test
mony that excited mn"'' surprise an(
disgust. He said in la.G
I was engaged by L. W. Frost in May
1874, to buy policies for the company
and went to Nebraska, Kansas, Cali
fornia, and afterward to the Southern
States. Under what is known US Tho
Continental plan of insurance, certain
reserve is left with the insurance de-
partments of the States in which the
company does business This reserve
is increased in proportion to the amount
of the risks taken in the States. The
policies were for twenty years, and after
that time they were to be null and void,
but the "loading" of this class Of poll
cies was 30 high-from one hundred and
twenty-five to one hundred and thirty.
three and one-third per cent.-that they
came up almost Nh high rs the life pre-
miums, on which the "loading" was
only from twenty-five to thirty per cent.
BY "loading mean the amount allow
ed for expenses. etc. This plan of in
surauce | consider swindle on the
policy holders. l.. W. Frost was with
me in California from September, 1874,
to February, 1875. ! "ran off" from
800, 900 to 5000, 600 Of the California re-
serYe. / offered for the old policy n
policy on the Continental plan, but
often purchased the policy outright and
gave draft Oh the company for the
money. Ipaid so much in cash, and so
much in premiums in another company,
hut the amount never went beyond fifty
per cent. of the reserve, which ! could
"run off by purchasing the policy, and
this fifty per cent. also covered my ex-
penses. My opinion is that this Cont
mental is the same rs is known as the
New Jersey twenty-year plan.
"ran off" in Nebraska about $685.
600 or $50, 900 of the reserve. I ran off
between 50, 800, 900 and 80, 100000 in all
of the States l went to, and l under
stood from L. W. Frost that / was to
come back and do the same business for
him in New York, and the East gener-
ally. The contract l made to do this
work was signed by l.. w. Frost, MS
president of the Continental company.
I reinsured about $4,000 with the
Southern Life Insurance company. This
company failed n few months afterward.
| did not think this company was very
good, but my instructions from Mr..
Frost were to reinsure in the Southern
Life, and 1 reinsured everybody in this
company that was big enough fool to
be reinsured III it. Mr.. Frost had lit
tie book when we were in California, in
which he calculated how much he made
every day, and one day he told me that
he had made $1,000 or $1,000 that day
for the company. | asked him if the
company was very large. He said no;
it was composed of himself and his asso.
ciates. / had a salary, first at the rate
Of $500 per annum. This lasted only
ten days, when J was cut down to 5000
and ten per cent. on the amount of the
reserve that I ran off. My salary and
commissions in California alone amount
ell to $4,000. The way managed was
this: I would go to apalicy holder whom
l wanted to inti,nidate" and tell him
that the Continental was utterly bank
rupt, and work Oh his fears until he
would be willing to sell out his policy to
me on my own terms. which in no case
amounted to the amount Of the reserve
to be run off, including my expenses. I
knew perfectly well that according to the
law of the State OF New York Il married
woman could not dispose of her policy,
but l generally got the woman in whose
favor the policy was ma lie out t, write
her name across the face of it. This
was according to the written instructions
from Mr. Frost.
Nearly all the policies were made out
in favor Of married women, but I had
to do with this law, because I
was only the agent OF Mr. Frost. My
first agreement with Mr.. Frost to pur-
chase policies was i'll July, 1874. Before
that l was the company's general agent
in Cincinnati. knew at that time that
the company was pretending to be per-
fectly solvent here, and was inviting new
risks; but Mr.. Frost said that they had
certain amounts to meet Mt some future
time, and unless the liabilities Of the
company were materially lessened they
would be ruined. The professional
name that is given to this process of re-
dncing the Liabilities OF a company is
wrecking" There are other names
for it. such rs 'the sweating process"
" intmidating. and more lately, "bull-
DOING" l think this plan was pur-
sued by most of the New York companies
in regard to their Southern policy hold
CTS. -uf. EIoSt B I'la1s were, us IltlcI-
stood them, to continue the wrecking
process until there was not much liaEili-
ty left against the company, and then to
transfer everything to the New Jersey
Mutual. If the thing succeeded, WAS
to continue the beginning of this year
wrecking in New York and the East
My idea of the job was that it was to
make some money for the officers Of the
Continental. The company first carried
on the " freezing ont plan. This con-
sisted of stopping the notices that were
usually sent to the policy holders, and,
when they failed to pay promptly,
throwing up the risk and Withdrawing
the reserve This has been carried on
pretty extensively by all the companies
over the South
The idea of the wrecking' was to
buy off all the policies held by men in
poor health. Two or three persons died
n day or two after had got their release
On their policies remember particu-
larly one man, named Curran, who was
very i'll with rheumatism, and l had to