The Waterbury Democrat., 1941-02-28


 federal monopoly committee must be taken now before 'public clarnor'' forces pall-iiaclusive federal reeuiation." He was joined in his statement by Gerhard A. !Geseil, SEC attorney, and both said their recommendation were not the formal views of the commission.
 Recommendations
 The recornmendat for com panies operating in more than one state, were based partly on a study of the insurance industry prepared by Gesell and Ernest J. Howe, also of the SEC. They were summarized as follows:
 IL Strengthening of the exist ing state machinery for regulating life insurance companies. Ten technical recommendation were set forth for consideration of the states.
 2. Creation of federal agency to assist the states by giving advice, examining interstate companies, iS- suing reports and exercising some slight supervision over certain pri- marily interstate aspects of the business"
 3. Federal encouragement of the gradual elimination of industrial in- surance by substituting lump sum death benefits under the social security program or selling low-cost insurance through the postal system.
 generally speaking, statutes in the principal insurance states are adequate,," Pike told the committee. such inadequacies of regulation as do arise result either because of weakness in the existing adminis- trative machinery or because of the interstate character of the problem with which state regulation must conetnd."
 Phantom Insurance Cos.
 He stressed the role of phantom insurance companies" as major problem faced by state regulatory bodies. These companies, he ex- plained, sell insurance in states where they are not licensed by using the mails, telephone, radio or tele- graph.
 This is really bootlegging busi- ness" he said.
 The federal agency, which should not be the already Overburdened 5EC," should have the power to bar these companies from the mails and from other communication facih- ties" he said.
 Any legal reserve life insurance company doing business in more than one state, he said, should be compelled to notify the federal agenGy of its dealings. The agency, he continued, should have the pow CT tc visit and examine these com parliGs. Y,
 Could Prevent Failures
 'tOne need only review the testi- mony concerning the 19 largest con- pany failures to find many instances where failures might have been pre- vented and losses to policy-holders lessened through closer scrutiny of the companies involved" he said.
 The federal government should not supplant the states, nor should it interfere with their regulatory powers. The basis upon which the federal government might best par ticipate in the field of insurance su- pervision would seem to be pri- marily as an advisor and as a col- lector and distributor of informa- tion.'
 Problems of Policy
 Besides the 10 technical recom- mendations for strengthening state regulation. Pike presented three problems of policy which could be considered by the local bodies:
 1. Liberalization of present laws to permit insurance companies to invest . relatively small percentage of their funds" in sound common stocks. At present, most states for bid any but investments in bond is- sues.
 2. Policing of "inter-company agreements restricting competition" by state authorities. The report by GeSell and Howe charged that the principal companies had regulated their rates through such agreements for several years.
 3. Passage of laws guaranteeing policy holders greater voice in the selection of insurance directors.
 Big Business Only
 Geseli and Howe said that the laws forbidding investment of in- surance funds in anything but high grade bonds had "Sterilized" their capital and made it available to big business only. They asserted that small business suffered. as a result.
 Pike said he did not wish to make an recommendation as to restricting the size of insurance companies but that he would like to indicate" sev- eral possible approaches" if the com rnittee desired to consider the prob lem. These included limiting the amount of new business that can be written, tax legislation discuor- aging growth beyond a certain point and encouraging the growth of smaller companies.
 He pointed out that the 26 largest companies had nearly $28, 900. 900 900 in assets and that certainly the size of these companies has been con- tributory factor as far as certain of nm. s,nos1O-r,tr r,raI,Ioyne ara nOS1.