Evening star. [volume] (Washington, D.C.) 1854-1972, 1931-11-13
INSURANCE COSTS
CONTROL PLANNED
Casualty Companies Solu.
ton Of Problem May Be
Adopted by Other Firms.
BY ROLLIN VI. CLARK.

Definite control OF the cost OF acquir-
ing business by casualty companies. q
problem which for years has been en-
gaging the attention Of company execu-
tives. agents and State supervisory on
Gals, seems assured as a result Of action
Just taken by group Of 10 leading
companies. -
Through their conference on acquisi-
ton and field supervision cost they have
filed with the New York Insurance De-
partment, under the insurance laws Of
that State, schedule of maximum
commission allowances to various classes
OF agents and producers.
Commissions Largest Item.
This was done in recognition of the
fact that commissions represent the
largest single item in the amount al
lowed for expenses in the computation
OF premium rates, and that inasmuch
as rates are subject to regulation by the
State of New York, commission scales
likewise should be regulated. In taking
| this step the insurance carriers have
abandoned to some extent their previous
contention that control over ACQUISITIONS
costs was matter of self-regulatien of
the business itself, to be encoutaged
through cooperation of the State.
What they are now proposing in effect
Is this: We desire to determine for
| ourselves what commissions should be
paid to brokers and agents, recognizing.
OF course, that the amount must be
| reasonable and adequate, yet not so
high as to threaten insolvency of ariv of
the companies. Our difficulty in the
past has not been so much in agreeing
upon proper commission scales, but in
enforcing them. Therefore we are Will
ing to have commissions filed under the
1Awwr e.
rating structure. This will enable the
State superintendent of insurance to
punish violators, just as he may, pre-
scribe penalties for the writing of in
surance at improper rates"
The Inclusion Of commission costs as
part OF the rating structure Is certain
to be approved by George S. Van
Setback, the New York insurance
superintendent. Before the recent
meeting of the National Convention of
Insurance Commissioners at Portland.
Ore, he said, IF a company files Its
acquisition cost rules at the time it.vets
approval of its filed rates, there is rea-
sor !, say that adherence to those rules
becomes fixed and legal duty, that a
deviation therefrom is as much a rate
violation as direct rate-cutting itself"
Plan May Be Extended. s....,
While this solution applies only to
casualty insurance it Is likely to spread
to the surety business and fire inSIir-
ance. for New York's rating law. also
applies to these forms of coverage. -
Many other States have laws under
which insurance rates are regulated and
they may follow New York's lead in. de-
! claring that commissions also are sub
| ject to regulation because CT their fii-
| rect relationship to premium RATES.
This was ATTEMPTED in Texas last year
but was unsuccessful due to an adverse
ruling by the State Supreme Court.
The Supreme Court of the United
| States, however, at about the same time.
held that New Jersey law limiting
| agents commissions to a reasonable
amount not to exceed those paid To any
| other agent of the company in-the
State, was constitutional.
(Copyright. 1879