New-York tribune., 1921-05-27
untermyer Says Exchange
is Despotic Monopoly;
Tells of 30 Million Near
Excess Cost to State
Concealed Profits
System Disclosed
Witness Asserts II. S. Paws
400 Million Annually
to Foreign Companies

Samuel Untermyer, chief counsel
to the Lockwood Committee. opened the
financial phase of the committees in.
quiry into the high cost of housing
construction yesterday, with general
survey of the insurance business of the
nation and a specific attack against the
New York Fire Insurance Exchange
which he characterized as "one of the
most despotic monopolies in the coun-
try"
MIR. Untermyer was himself amazed
to learn from the first witness called
Alfred Nj. Best, an insurance expert
that approximately as per cent of all
fire insurance premiums collected in
the United States goes to foreign com
panies. This gives these foreign
firms, mainly British, it was testified
something like $4oO,0oo0o0 a year of
AmericarNmoney.
"Unrevealed Profits" Practice
There were disclosures of huge Gun
revealed profits" distributed among
stockholders of fire insurance firms
and practice of writing down as
sets" among many concerns, the
manipulation in both instances being
resorted to, it was declared. to afford
the companies excuses for Keeping the
rates on high level. The ''unrevealed
profits" in the case of the ten leading
companies of the country are said to
have amounted to about $4,000. 600
annually.
In connection with the operations of
the New York Fire Insurance Exchange
in excluding mutual companes-those
distributing profits among their policy
hoidersI1trom rate and reinsurng
services, Mr.. Untermyer said the prac-
tlce is costing the people of the State
Of New York S3o,0o0,0o year more
than they should pay in premiums. 1t
was figured that if the mutual com
panies We're permitted to operate on
an equal basis with the stock COM
panles, the citizens of the entire coun-
try would effect q saving Of approx
mately $100,000,000 a year.
Mr.. Best qualified as an expert ON
ire insurance matters through his hay-
ing been compiler and publisher of
eight annual and monthly statistical
reports regarded as authoritative
throughout the country. He estimated
the total fire insurance premiums paid
IN annually in this country at $780,
100000, representing a property valua-
tlon of more than $4,000, 900 900. AS
insurance is written on about 80 per
cent of property value, the real value
is estimated at considerably more than
100000, 100000.
Business Done by Foreign Firms
Of this total he testified that stocE,
companies, as differentiated from mu-
tual companies, write more than $780,
100000 in premiums. approximately
40 per cent of the business is in the
hands Of foreign firms with agencies
here or who control American firms,
The majority of these are British, he
said, with number of large French
concerns.
Although there are 255 fire insux-
ance stock companies in the country,
he testified that ten of the leading
companies do almost half the nations
business. Among these arc the Home
Fire Insurance Company of New York,
with a total annual business of s45.-
100000; the Continental Company
with a total annual business of SIT
100000; the Hartford Company, with
$37,o0o,o0o; the Great American, SIS
100000, and the Aetna Fire Insurance
Company of Hartford, s2e,OOO,OOo.
1t was brought out that from 28 per
cent to 46 per cent of the total pre-
miums collected by the ten leading
firms was used for operating expenses,
including 20 per cent absorbed by
agents and brokers. Under the law so
per cent was set aside as a reserve
fund, out of which any losses during
the year were met. In reply to ques-
tions Mr.. Best said that this reserve
fund was~not carried as an asset any
where in the companies statements,
although it was found that only so
per cent of this reserve fund was re-
quired to pay annual losses. This left
balance which the companies invest
Aand from which they draw good in
comes.
This income, said Mr.. Best, does not
appear anywhere on the financial state
ments issued by the concerns. Mr.. Un-
termyer referred to it as Concealed
Continued page shrce)
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