Omaha daily bee., 1906-08-14
NATIONAL CONTROL FAVORED
Federal Supervision Of Insurance AdvO-
GATED By Bar Association Committee
BRECKENRIDGE SUBMITS HIS REPORT
Many Reforms Are Recommended,
Among Them Repeal of valued
Policy Laws and so-CaIIed
Reciprocal Tax Laws.

| OF the American Bar ASSOCIATION, 10 pe
read at the meeting Of the association
in St. Paul August %. 30 and 81, has Just
been made public by Ralph w. Brecken-
ridge, the chairman. The report is volumi-
nous and covers a number OF mooted ques-
! tions in the insurance world.
Besides Mr Breckenridge the members
OF the committee are Burton Smith Of
Atlanta, Ca; Rodney A. Mercer, Towanda,
Pa; Alfred Hemenway of Boston and w.
r. Vance OF Washington. d. c. Mr.. Vance
dlssents from the report and Mr.. Hemen-
way took no part In the report of the
| committee.
Briefly summarized these are the recon-
mendations made by the committee;
That the insurance committee be directed
eeanf Of the % bill thai sSs
sa saseguard the interests Of the life COM
panies and their policy holders. but which
policies to be bienhially apportioned, cred
tied and notified to the holders OF such
policies.
! or retaliatory tax laws.
The repeal of the valued policy laws.
The creation in each state Of the once
| of fire marshal.
stricter Incorporation laws in the several
states, with particular reference to the
| capital stock and stockholders obligations
| in insurance companies.
The enactment Of federal statute for
! bidding the use OF the mails to persons,
] associations, co-partnerships OF corpora
| tions conducting any kind OF insurance
| business in the United States, who are
! not licensed to transact such business by
| the states where such persons associa-
| tions, co-partnerships or corporations are
domciled. or under whose laws any such
| corporations are created.
| The enactment of a federal statute pro-
! viding for the supervision of Interstate
| transactions In insurance.
Recent Insurance Disclosures.
The report discusses the recent insurance
disclosures and deplores the loss of con-
| fldence in the companies by the American
public though the companies, II says, are
undoubtedly solvent. 1t criticses the Arm
strong committee and condemns the legis-
lation proposed by the committee in
efficient.
| The committee places the responsibility
for corruption by company and state off,
| cials with respect to life insurance COM
panies in "extravagance. manipulation OF
investments, excessive commissions or riot
Gus desire for bigness." which 1t says has
developed out of the failure to apportion
| frequently and account for the immense
surplus accumulated through the deferred
! dividend policy. 1t therefore recommends
a biennial apportionment Of these funds.
| The committee favors the supervision of
insurance companies in order to protect
policy holders against fraud or corruption
But a decided stand is taken against state
supervision and In favor of federal super
vision. The exactions OF state departments
are declared TO be oppressive. 1t is charged
that the states exact from the insurance
companies 100000 annually in one way
or another, and that this really constitutes
a tax upon the policy holders. Insurance
is declared to be in its essence a tax and
| thaaa he ata fax
a tax. The policy of certain states of tax
ing foreign companies at higher rate than
local companies Is condemned
Arraigns state Control
The report arraigns state supervision In
these terms:
The trouble is that the state insurance
departments are sinecures. They are po-
litical prizes. Knowledge of the insurance
business is the last thing required They
are mere collection agencies. They offer
the most seductive opportunities for fraud
and graft that exist in the United States.
Your committee do not wish to be under
stood as charging that all state insurance
commissioners are dishonest. nor that all OF
conviction expressed in our 1905 report:
There are In many states capable and effi-
Sent 10 b or who
| ance of their duties" But the dealings of
the state insurance departments with the
insurance companies OF America the details
OF which are within the reach OF any per-
son who seeks to inform himself with re-
spect thereto, show that the admnistra-
| states has been characterized either by
unbushing fraud mostly in the shape of
bl2ckmatl or by gross tncompetency.
| 1t is pointed out that the bulk of the
business done by the larger insurance COM
panies is transacted outside the state IN
which the company is domiciled. Figures
are presented showing that in the case OF
twenty leading life insurance companies
only 10 per cent OF their policies is held
In their home states. Seventeen of the
largest fire insurance companies in the
state OF New York wrote only 25 per cent
of their business and received only 1871
per cent OF their premiums from the home
state. The report continues:
The figures demonstrate that the bulk of
the insurance business of the United States
Is national and not local in its character.
| If the principle be conceded that only the
individual states have the right to regulate
the business Of insurance Corporations of
their creation, regardless of the interstate
character OF the transactions, then the cir
| cumstance that the state OF New York is
the home Of the pig Three" lite com.
and the Mutual Lifel, as well as OF a num-
ber of the lesser life companies and Of
casualty, accident and other kinds of in
| surance, commits to the legislature and the
| insurance department of that state virtual
control of the insurance business of the
| United States. -,.-
| Not the. Only Advocates.
The report denies the statement COM
| monty made that the insurance companies
are the only advocates of federal control
and presents figures showing a large per-
centaRe OF the membership OF the American
Bar association were favorable to IT, Con-
siderable space Is devoted TO a discussion
OF the constitutionality of federal control.
the conclusion being that 1t is constitu-
| tional.
Turning from the discussion OF the control
OF companies the report discusses wildcat
insurance organizations and recommends
the denial OF the mails to such companies
The report also recommends the repeal of
| valued policy acts in states where they
now exist. These laws are declared to be
productive OF arson. perjury and fraud.
Along this line Is recommendation for
state fire marshal laws. TO be copied after
| the Ohio law. Under the law. there Is a
rigid Investigation by the marshal OF all
fires to determine whether they were OF In
| cendiary origin or not.
The first six months under the law in
| Ohio forty persons were arrested for arson
and thirty-three were convicted. The fear
| OF detection. II Is asserted. has greatly re-
duced the number of. ineendiary fires In
that state. 1t is. estimated that one-third
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