New-York tribune., 1921-06-01
$ Laws $
On Insurance.
Aid Fn' allds
Lockwood Committee Is
Told Mutual Fire Com
panies Become Stock
Firms as Profits Grow

The inadequacy Of the New York
state laws dealing with the Are insur-
ance business and the fact that the
present statutes actually encouraged
fraud were revealed at yesterdays ses-
sion Of the Lockwood committee on
housing in City Hall.
1t YVES disclosed that when mutual
flre insurance companies-those return
ing their profits to their polcyholders
| in the form Of dividends-become suc-
cessfui and prosperous through the i'm
mense reserves and surplus piled up
by the policyholders, many Of them are
| converted into stock companies, to the
great profit OF those "on the inside"
herman L. Ekorn, an insurance ex-
pert. said there was a law In this state
which encourages this fraud" and
that Section 125 Of The state insurance
laws did the trick" enabling few on
serve funds. and good will of the COM
! pany as their own property.
Efforts at Amendment Fail
1t was further revealed that all
eHorts TO have the laws amended so as
u permit mutual companies to com
pete with the stock concerns ALWAYS
! have been defeated, ostensiblv tbroueb
the influence of powerful lobbies. The
latest laws placed on the records with
respect to the organization of new
mutual companies have been so strin-
gent as practically to prohibit their
organization.
IN this connection testimony was
offered showing that wherever a mutual
company came in competition with a
stock company 1t invariably effected q
reduction in insurance rates.
1t developed also that despite the
1act tnat this city has the best fire
prevention organization and finest fire
nshtins apparatus in the country, it's
insurance rates always have been as
high as less protected communities.
1t was said, too, that the average
rate Of sixty-seyen cents a. s100 in
l917 was boosted to seventy-seven In
1919. One witness testified that when
the government placed one per cent
TAX on insurance premiums, the vari-
.ous stock companies Immediately
boosted the rates ten per cent to
policyholders, "to add to the gayety
of the war taxes" There was evil
dence tending to show that local ex-
changes had frequent conferences with
committees of the National Firs
Underwriters Association, and that
these resulted in general uniformity
of rates throughout the country.
May Go to Grand Jury
There is possibility that the testi-
mony in connection with the operation
of the New York Insurance Exchange
will be handed over to the grand jury
for investigation. Samuel Untermyer,
,h col IN
ferring to certain phases of the ex-
changes activities, remarked to Chair
man Lockwood in the course of yester-
days examination: 81 do not think the
members of the committee who are
lawyers, nor counsel to the committee,
have any doubt that this is criminal
conspiracy"
The story of the conversion of mu-
tual companies into stock companies
and the consequent loss to the policy
holders was told by Herman L. Ekern,
. counsel to four national associations
of mutual insurance companies and one
of the leading insurance experts Of the
country Ekern declared this state was
without any protection at all against
extortionate rate charges by members
of the fire insurance exchange and that
all efforts to bring about some regula-
tion of rate making have been futile.
Inc proposed pllIS eiIHer uleu III COIn-
mittee or were so amended as to leave
matters In as bad way as they for
merly were.
"The State of New York." he said,
''has no regulations whatever of the
rates as to their reasonableness, or just
ness. There is no power Of review ex-
cept to order the removal of dis
elimination where there are unequal
rates for the, same class of risks. But
if the risks are equally oppressive, or
extortionate there is no power of re-
view. The public has never been
aroused to the fact that it does not
have any protection"
Mr.. Ekern then named thirteen states
that have regulations over rate max
ing. After pointing out how beneficial
it would be to have mutuals admitted
to the exchange here and given the
rate and reinsuring services equally
(Contlaucd on next pasee