The Washington herald., 1913-01-04
FIRE INSURANCE
TRUST BLAMED
Continued from Page One.

asked Mr.. Hoover by Attorney Douglas,
for the companies, indicated that an
other insurance company in Washing
ton had pursued course very similar
TO that Of the Commercial and First
National in the treatment Of real estate
values.
Mr.. Best yesterday testified indirectly
that other fire insurance companies had
made practice of this method OF In
creasing assets.
Poor Business Policy.
By Mr.. Hoover and Mr.. Best. as well
as other witnesses who preceded them.
the practice was severely condemned,
and Mr.. Best declared In effect that 1t
was poor business policy and liable to
result in disastrous results for a fire in
surance company TO carry any consider
able portion of Its surplus in. the form
OF real estate.
Mr.. Best's testimony dealt with more
than a year spent I'm efforts TO arrive at
the true financial condition OF the two
insurance companies, and with previ-
Gus knowledge OF the operations of Tut
tie. Wightman & Dudley. Inc, the un-
derwritinc firm which is handling the
organization of the First National.
Mr.. Best had printed in his monthly
publication 4 number of severe criti-
cisms of the literature which the COM
panies have sent broadcast in solicita-
ton OF stock subscriptions. These strtc-
lures the companies protested were un-
fair Best made a number OF efforts to
obtain from the companies statements
and information which would prove or
disprove his charges. Although. follow
ing a conference in this city last July.
the companies promised to send him all
the information he desired, the most
important part of this, according TO
Best. was not sent him. Best claimed
that the Information he sought-part of
which was to be regarded as confiden-
tial was such as he was in the habit OF
receiving regularly from other fire In
surance companies.
Operated mt Loss.
Other important features OF Best's tes-
tmOny were:
That the Commercial operated during
the last ten months OF 1912 at loss Of
sI97, 900.
That the ratio for fire losses in that
time was upward Of 80 per cent, though
the average ratio OF established COM
panies is between IS and s. per cent. In
the case OF a new company. this ratio
should be reduced to about - per cent.
because of continuing premium liabili-
ties. he said.
That this high loss ratio indicated an
inferior grade of risks taken by the COM
pany in placing business
That Tuttle. WEhtman & Dudley. Inc.
have contracts which assure them a
fee OF sl5O.O0O for placing the capital
stock OF the First National Fire Insur-
anCe Company
That this represents an eXorbitant fee
OF ~ per cent. ovc- and above expenses, |
nj, 90
That this cost of 20 per cent allowed |
for stock selling expenses is eXtravagant |
and should be reduced to 10 per cent at
the outside. |
That in placing stock Of the First Ma |
tional, the underwriters issued 10000 cir |
rular letters addressed to prospective |
throughout the United States; |
that they received 1000 inquiries from
these letters. and placed 2,5o0 subscrip-
tons from these inquiries.
Warned Insurance Companies.
That members Of the Tuttle. wightman |
& Dudley firm told him in October of
the plan to obtain an increased valua-
ton on the Southern Building and di-
OlUses of the two companies, and that
he warned them that such a move would |
have to be so transacted as to stand the
most microscopic examination If il eX-
oected to stand the test in other States
n which the companies expected to do
as this method OF increasing
assets had been done so much that II |
vas looked upon with suspicion.
That he had employed the customary
Methods of computation in arriving at
he amount of loss under which the Com
nercial had operated. and that he knew
" no possible legitimate method of COM
,utation which would indicate anything
,ut a heavy loss.
in partial eXtenuation of the high fire
oss ratio sustained by the Commercial
n the first ten months, Mr.. Carusi
aused Mr.. Best to read into the record
comparative statement OF total fire
Osses I'm the United States. for the first
tx months of 1910, 1911. and 1912. This
tatement. which Mr.. Best admitted
ould be depended upon, showed that the