Harrisburg telegraph. [volume] (Harrisburg, Pa.) 1879-1948, 1916-06-22
INSURANCE BUSINESS FOR BANKS
COMPETITIVE
s---------@@nHalz
DISABILITY

any reasonable extent protected
against exploitation or the dangers at
tendant upon the operation of the
business by men inexperienced in the
technicalities and problems of liabil-
ity underwriting.
The officers of the operating COM
pany (attorney-in-f -fact) are three for
mer life insurance agents and an at
torney, none of whom has had pre-
vious experience in liability underwrit-
ing or claims management. To such
inexperienced hands is entrusted the
entire management of an insurance
enterprise involving the protection of
policyholders against the present and
deferred liability arising out of per-
sonal injury claims under automobile
policies, than which there is no more
technical or difficult branch in the
whole liability underwriting field I'm
der such circumstances the unlimited
assessment liability of policyholders is
an excellent feature for those claim
ing damages for personal injuries, but
1t Is likely to prove expensive for the
policyholders.
The impression is general that the
twenty-five per cent. paid to the at
torney-in-fact is the maximum which
may be charged to administration ex-
pense, but inasmuch as the remaining
seventy-five per cent. is, under the
NOiihl dCl Will lllc SuDSCTlDeTS DOL
icyholders. "chargeable with any
amount which may be properly
chargeable thereto" the administration
expense is not limited to twenty-five
per cent, nor is there any limit, ap-
parently, except in the Judgment of
the attorney-in-fact.
Obviously if the policyholders are
to be represented at all it must be by
some authority standing between
them and the attorney-in-fact in re-
spect to the custody of their funds and
their Interests generally; but here
again we find the poiicyholders enjoy
ing false security, for the Trustees
supposed to represent them and con-
troll and direct the use of the funds
of the association, are appointed, not
by the policyholders but by the attor-
ney-in-fact; the thing to be super-
vised, regulated and controlled creates
the thing which is to supervise, regu-
late and control it,
A general contingent fund (the
amount of which is not given in the
literature published by the Exchange).
Is also provided for; this, it would be
supposed, would be held strictly for
the use and benefit of the policyhold-
ers and carefully safeguarded as the
foundation of their future security,
unless actually necessary for the
liquidation of current losses: but sti1I
again the attorney-in- fact steps in and
assumes control for it is agreed that
this fund may be applied to any pur-
pose which the attorney deems proner
Trusteeship is created in one nara
graph of the contract and Withdrawn
or nullified in the next
throughout the entire contractuaI
relationship between the policyhoIders
and the ~attorney-in- fact there is no
ground on which the former may
stand so far as their having anv CON
troll or direction of the affairs of the
association Is concerned; everythine
reverts in the end to the attorney-in-
fact-collection of the funds. deter
mining the expenses, care, control and
disbursement of the assets. the eyer
else of underwriting and claim discre-
ton, all are in the control of the at
torney through the unlimited powers
conferred.
Without assets other than its cur-
rent premiums, and free from anv To-
gal requirements as to maintenance of
loss reserve, such underwriting might
be successful If confined to classes nf
insurance in which no deferred liabiI
ity accumulates but with the inclusion
of personal injury liability with its
certainty of a future undeterminad
loss cost, under a management on
| tirely inexperienced in liability under
writing, but one result NAV be antici
pated, loss to policyholders in the end
and another failure written against
experimental insurance.