PROCEEDINGS OF THE SEVENTY-EIGHTH ANNUAL SESSION OF THE National ~ssociation of Insurance Commissioners

*

ADJOURNED MEETING NEW YORK, N. Y. December 8-11, 1946

ANNUAL MEETING ATLANTIC CITY, N. J. June 1-5, 1947 INDUSTRIAL PRINTING COMPANY

OKLA.HOMA CITY CONSTITUTION AND BY-LAWS

CONSTITUTION OF NATIONAL ASSOCIATION OF INSURANCE COMMISSIONERS

.Article 1. Name: This organization shall be known as the National Association of Insurance Commissioners.

Article 2. Object: The object of this Association shaJl be to pro­ mote uniformity in legislation affecting insurance; to encournge uni­ formity in departmental rulings unJer the insurance laws of the sl'veml states; to disseminate information of value to insurance supervisory officials in the performance of their duties and to ef::tablish ways and means of fully protecting the interests of insurance policyholders of the various states, territories and insular possessions of the United States.

Article 3. Membership: The membership of this Association slrnll consi:.;t of the commissioner, director, superintendent or other oflieial who by law is charged with the responsibility of supervising the business of insurance within each state, territory or insular posse:;:sion of the United States. Only members and their duly authorized representatives as de· fined in Article 4 hereof shall be eligible to hold office in the Association and. to serve on committees of the Association. Members of the Asso­ ciation of Superintendents of Insurance of the Provinees of Canada shall be eligible to participate in all meetings of this Association without the power to vote.

Article 4. Power to -vote: Each member of the Association sha1l have the power to ~ote either in per:-ou or if _absent by delegating such power in writing to a duly authorized representative who shall be some person officially corniected with his department, who is wholly or prin­ cipally emp?o~·ed by said department and who is a legal resident of the state, territory or insular possession \vherein the department is located. No state, territory or insular possession shall ha\"e more than one vote.

Article 5. Officers: Officers of the Association shall be a president, first vice-president and secretary-treasurer.

Article 6. Committees. Executive Committee: 'fhere shall be an executive committee of ten members, including a chairman thereof, and ex-officio the officers and the retiring president, who shall act as vice chairman. Six of the ten members shall consist of one member from each of the six zones, to be elected by the members of the respective zones annually prior to or during the Association's annual meeting.

Standing Committees: As soon as con\·enient after the annual meet­ ing, the president shall appoint the chairmen, the members of the fol. 4 CoNSTl'rUTION AND BY-LAWS lowing Standing Committees and such other special committees as may be necessary in the work of the Association:

Accident and Health Blanks Examinations Casualty and surety Fire and marine insurance Fraternal insurance Laws and legislation Life insurance Social security insurance Taxation Unauthorized insurance Valuation of securities Workmen's compensation

.J.rticle 7. Meetings: The Association shall hold an annual meet­ ing at such time and place as the Executive Committee may desig1rnte. Special meetings may be eaUed by any five memben of the Executive Committee by giving all members notice of such meeting at least ten days prior thereto or by any fifteen members of the Association upon thirty days notice to all members. Action at any special meeting shall he limited to the objects stated in the notice therefor. At each meeting of the Association, whether annue.I, adjourned or special, one or more of tbe sessions may be executive sessions, if directed by the Executive Com­ mittee and shall be so announced with attendance limited to members and representatives of the insurance departments specially designated by members . ..4.rticlB 8. Quorum: A quorum for the transaction of business shall eonsist of fifteen members qualified to vote.

Article 9. Elections: At the annual meeting there shall be elected by secret ballot: A president, a vice president, a seeretary-treasmer, a chairman and three members-at-large of the executive committee. Vacan­ cies in any of the offices or in the membership of the executive committee rnay be filled by the exeeutive committee for the remaining period until the next annual meeting. Whenever a va.eaney occurs in any of the offices of the Association or in the membership of the executive eommittee, the chairman of the executive committee or, in case of his inability to act from any cause, the vice chairman, or if he be unable, the president shall im­ mediately calJ a meeting of or conduct a mail ba11ot among the members of the executive committee to fill sueh vacancy.

.il.rticle 10. RevenuB: To provide for- expenses authorized by the Executive Committee, the secretary-treasurer shall solicit voluntary cou· tributions from the members; to provide for the expenses of the Commit• tee on Valuation of Securities the chairman thereof shall solicit volun· tary contributions from the members. CONSTITUTION AND BY-LAWS 5

&riicle 11. By-Laws: The by-laws of the Association may preacribe the powers and duties of the several officers and committees of the As· soeiation and such rules as may be needful for the work of the Associa­ tion provided they are in conformity with this constitution • ..tl.rticle 12. ..tl.mendments: This constitution may be altered or amend­ ed at any meeting of the Association by an affirmative vote of a ma· jority of the members qualified to vote provided that previous notice of the proposed amendment has been mailed to all members by the secre­ tary-treasurer or the chairman of the Executive Committee at lea.st fifteen days prior to the meeting.

BY-LAWS OF NATIONAL ASSOCIATION OF INSURANCE COMMISSIONERS Section 1. Duties of Officers: The duties of the several officers i:;hall be such as usually devolve upon those holding like positions. Section 2. Duties of Executive Committee: The regular meetings of the Executive Committee shall be held at such times and places as it may designate. Special meetings may be held when ca1led by the presi­ dent, by the chairman or by three members of the Executive Committee in writing; at least five (5) days' notice shall be given of nil S"!)ecial meetings. The Executive Committee shall have ihe management of a1l of the affairs of the Association unless otherwise provided for and may, with the concurrence of three-fourths of its membership, establish rules for ita own conduct that shall not conflict herewith, which rules may he chimged only by a like concurrence after twenty-four (24) hours' notice to mem­ bers of the Committee. It shall cause to be kept full and complete minutes of its meetings and have information of any action of a general character, taken by it, published to members qualified to vote. It shall make an annual report to the membership covering the busi­ ne8s of the preceding year, and such special reports from time tu time as may be agreed upon. It may, upon the recommendation of any standing or special commit­ tee, and after due notice to the membership, recommend rules, regulations and practices to be followed by the various administrath·e bodies in the administration of insurance Jaws. Section 3. Duties of Committee on ExamiMtions: The Committee on Examinations shall make arrangements for convention examinations of insurance companies and associations by representatives of two or more states at the request of the commissioner or other person in charge of the insurance department of the state in which the company or association to be examined is domiciled or at the request of three or more other members representing states in which such insuranct. company or asso­ ciation is duly authorized to transact business; provided however, that no such examination requested by commissioners of states other than the state in which the company or association is domiciled shall be arranged MRless the Committee on Examinations first obtains the consent of the 6 CONSTITUTION AND BY-LAWS

commissioner of the company's home state or in the event such consent is withheld tke Committee satisfies itself that the best interests of insur­ ance supervision would be served by conducting such examination without such consent. In the selection of states to participate in Convention ex­ aminations the Committee shall, insofar as is practicable, select states that will insure a fair geographical representation of all states in which the company does business. Copies of all reports on examination made under the sponsorship of the Committee on Examinations shall be kept on file in the office of the secretary-treasurer and shall be availab1e to members upon request.

Section 4. Duties of Committee on Val11ation of Securities: The Committee on Valuation of Securities shall prepare or arrange to have prepared immediately following the end of each calendar year a book eontain_ing the recommendations of the Association for the valuation of securities owned by insurance companies and associations in the prepara­ tion of their annual financial statements.

No valuations shall be published unless the basjs upon which they are predicated shall have been first approved and adopted by the As- sociation. ·

Section 5. Duties of Committee on Blanks: The Committee on Blanks shall hold one or more meetings annually at the call of the chairman for the purpose of considering amendments to the various Convention annual statement blanks. Following such meetings the Committee shall submit its report with recommendations to the Executive Committee and the Executive Committee shall consider such report and refer same, with such recommen­

dations as it deems necessary1 to the Association. It shall be the duty of the Committee on Blanks to prepare blanks in accord with the action taken by the Association and have them distributed to all members of the Association.

Section 6. General Duties of Standing and Special Committees: The meetings of Standing and Special Committees shall be held at such times and places as may be designated by their respective chairmen or mem­ berships. The committees shall consider such matters as may be referred to them by the Association and report to the Associntion their :fintlings, conclusions and recommendations thereon for action by the Association. The Committees may in the discretion of their respective memberships consider matters which have not been specifically assigned to them by the Association and may make such reports to the Association as they deem advisable on such matters.

Section 7. Procecfore: The Association shall be governed by the ordinary rules of parliamentary practice and procedure.

Section 8. Amendments: These By-Laws may be altered or amend­ ed at any meeting of the Association by an affirmative vote of a ma­ jority of the members qualified to vote provided that previous notice of the proposed amendment has been mailed to all members by the sec­ retary or the chairman of the Executive Committee at least fi..':teen da.ys prior to the meeting. Proceedings of the Sessions of the National ~ssociation of Insurance Commissioners

MONDAY MORXIXG SESSION

December 9, 1946

The first Plenary Section of tlte 18th meeting of tltc National Associa· tion of Insurance Commissioners conYened in the ,vest Ballroom of Hotel

Commodore, New York1 X. Y., at 11:15 .A.M., December 9, 1946, Pre,;,ident Robert E. Dim•en of New York presiding.

President Dineen: Will you gentlemen please :find :-eats and will the various Commissioners come up and sit here in the frc,nt so we can get a good look at yon. Counselor Butler, lrnuld you mind replacing the irre­ placeable Commissioner Holmes in acting as the SaTp.·cant-at·Arms for a brief tour of duty. I think you are a

All stand in silent prayer.

The next order of business is the proverbial welcoming g-reeting to the visiting Commissioners, their families, the members of their staffs and the representatives of the business, the public and the press. Last year I had occasion, in my capacity as the Vice-President, to respond tu the greetings which were extendetl to us out in Grand Rapids, and you gentlemen ,,,.110 were at that meeting will recall that the Mayor of Grand Rapids gave us a dissertation upon the Yery fine water that city had. I think it was pointed out then that most of the membel'S had been iu town for three days and learned for the first time at that point that there was any water in Grand Rapids. Now, I am not going to give you any di:::sertati0n today about the quality of the drinking water of the City of X ew York but I am told that we have some people in this audience today who are new to New York and I would like to take just a moment to tell you 1-omcthing about our state and city. 8 PROCEEDINGS

I will have to say to you at the outset that of course it isn't like California. I think that has been established. Of course, we don't have the :floods that they have in California and we certainly don't have the fogs that they have there, so that you will be able to rtlax; you don't encounter those things while you are here,

I won't tell you about the natural resources of our state because all you have to do is ride the subway for half an hour and you will be able to readily see that the state must have something to pack all these people into one place at one time.

And I won't have to tell you about the character of our citizens. The state has produced some very prominent citizens, who have succeeded not only in New York but even in those edific!;'ls in the District of Columbia. I know that Commissioner Johnson will bear me out in those sentiments.

The main thing that I wanted to say to you from the standpoint of a welcome is that the members of your Executive Committee picked the City of New York, knowing that it would give you an opportunity to see what is the greatest city in the world. When we hold meetings in other cities, th~ procedure has always been to have an entertainment committee and we had an entertainment com­ mittee here, but w~ have not mapped out any specific activities for those who are attending this meeting in the City of New York because, to be very frank about it, we figure that if you can't figure out for yourself what you want to do in the City of New York, you would better give yourselves up. We are very happy to have you all here, to extend our greetings and welcome to you, and, for the benefit of those visiting eom­ mission~rs who are here, we would like to say to you that insofar as the services and facilities of the New York Department are concerned, they are at your command. We have a number of our people here and if there is anything you would like to do in the way of visiting the Department or making use of any of our facilities, the invitation is extended to you. I am now going to call upon th~ Chairman of the Executive Committee, Commissioner Larson of Florida, to respond on behalf of this Association to the greetings which I have extended to you upon behalf of the State and the City of New York. (Applause)

Commissioner Larson (Florida): DistiiJ.guished President, ladies and gentlemen: In substituting for our Vice-President, Seth Thompson, who is unable to be here to respond to this magnificient address of welcome, I feel quite humble. In. fact, Mr. President, having been here now for a week compromising with you and with the Commissioner from Massachusetts and that rugged individualist from Minnesota, I am frank to admit that there is nothing left but a response. (Laughter) But on behalf of the various commonwealths and the states, both north and south of the Mason and Dixon Line, if I am permitted to say, I respond to this w~lcome on this occasion. We note that there sha.11 be MID-WINTER MEETING 9 no fog but plenty of water and, we trust and sincerely hope, all that goes with it.

Now, if this occasion were ever reversed-and while I have an oppor­ tunity to take advantage of this, Mr. President, I feel I should do so­ perhaps some day, if this Association ever decided to again have a meeting south of the Mason and Dixon Line, perhaps, I say, I might find myself in the position of extending a word of welcome and greetings, and then, my dear friend, I should love to have you respond. (Laughter)

I say in all sincerity, Mr. President, on behalf of all those assembled, that we always look forward to this trip to New York, and, I might add, when Mrs. Commissioner gets ready to outline the agenda of shopping, there is no change, THERE IS NO CHANGE, and the only change that I could think of would be a trip to Florida about this time of the year. I am very happy, Mr. President, to respond in behalf of all those present to your address of welcom~, and we know that under your able leadership and direction through which this Association has gone during the past six months, we have an additional six months in store for us, which will prove to be, under your able leadership, the most constructive and on,e of the best this Association has ever had, and I know that this meeting at New York will be crowned with achievement and success. Thank you very much. (Applause)

President Dineen: Before we go to the next order of business, Mr. Reporter, I would ask you to pause * * * The next order of business is one in which there will be for the first time in many years a new face. We all know that during the past year we lost our friend and crony, Commissioner Jess Read. Ever since I have been in the Association, I always looked forward to the occasions of our meetings when Jess, as only Jess could, called the roll of the states, and those of us who knevi' him and loYed him recall that in addition to his delightful character, he was able, upon occasion, to do some strange things with the English language, and he did it, of course, because he had a delightful sense of humor and that was his idea of injecting a little wit into our deliberations. I have had a consultation with our new Secretary who is about to call the roll. \Ve have reviewed some of the traditional pronunciations which we heard in our meetings in the past, and you will recall them - ' 1 Alabam.'' And you will recall another famous one that J e~s usetl to call off - ''I-dee-HO.'' I don't know ,vhat shape he is going to be in on those, but I will say this much to you; he is keenly cognizant of the responsibility thrust upon him in eonducting this roll call; he realizes that there are difficulties in pronunciation, but he has assured me that he is going to face this problem with a stout heart and a will to do what is right. Step forward to the slaughter. (Laughter)

Secretary Parkinson (Illinois): Mr. President and gentlemen of the convention: 10 PROCEEDINGS

I assure you I will make no attempt to follow in the footsteps of my illustrious predecessor. I would be sure to fail in the distinctive performance of the duty if I were to attempt to emulate him. I will make an e:ffort and I assure you the pronunciations will be the best I can d!=!vise, and I want to pay my respects to our former Secretary, because I know that it is sacred ground when we attempt to imitate or emulate the distinctiva contribution he has made to this Association. Before I begin the formal calling of the roll, I am going to call your attention to the procedure which has been customary and which we will follow today. As the name of each state is called, someone from that state will rise and iwJ.icate the members of the Departm~nt or the representatives who are in attendance here today representing that state. I would like to suggest one thing more. I have noticed that some of the names in the proceedings of former sessions have been recorded and improperly spelled and I would appreciate it very much if ~ach of you who report these names would prepare the names and titles on a slip of paper and hand them to our reporter so that the correct spellings and titles and names may be properly recorded. Ladies and gentlemen, the first state is:

Alabama-Miss Addie Lee Farish, Dir. of Commerce. A1aska- Arizona-A. A. Shepler, Examiner, substituting for Commissioner Rummage. Arkansas-Jack G. McKenzie, Commissioner. California-J. R. Maloney, Deputy; Maynard Garrison, Commissioner. Colorado-Luke J, Kavanaugh, Commissioner. Conn.ectiC'ut-Claude Goodwin, Deputy; Russell 0. Hooker, Actuary and Director of Examinations; Frank W. Wagner, Supervisor of Licenses; Samuel Pickett, Rating Supervisor; Edward Allen, Casualty Rate Analyst; W. Ellery Allyn, Commissioner. Delaware-William J. Swain, Commissioner. District of Columbia-Albert F. Jordan, Superintendent. Florida-Deputy Commissioners E. A. Faircloth, Hugh T. Christie and Thomas W. Shands, Speeial Counsel John K. Tilton and J. Edwin Larson, Commissioner. Georgia-William R. Mitchell, Commissioner. Hawaii- Idaho- Illinois-Carl A. Tiffany, Actuary; M. E. Holohan, Chief Deputy; and Deputies James Ross, E. F. Barnes, Roy C. Barr and Director Parkinson. In addition, we have at this meeting seven members of the Commission on Insurance Laws, appointed and authorized by our state legislature. Mm-WrnTER MEETrnG 11

Those persons are Harry L. Topping and .John M. Gorman of the House of Representativ~s; Arthur Bidwill and Thomas Keene of the State Senate, and Cha!le M. Smith and Paul F. Jones. Senator Bidwill is Chairman and Senator Keene is Secretary of the Commission. Indiana-Harry Wells, Chief Examiner; Everett Westbrook, Actuary; John D. P~arson, Commissioner.

Iowa-Ralph Knudsen, First Deputy; Charles R. Fischer, Commissioner.

Kansas-Charles F. Hobbs, Commissioner, and, Mr. President, I would like to take this opportunity in the convention to introduce to you my successor, :Mr. :Frank Sullivan. (Applause)

Kentucky-Vernon D. Roob, A,:sistant Director; Charles M. '\Vheeler,

Chief Examiner i Harry B. \Yilson1 Director. Louisiana-Victor Maynard, Member of Louisiana Insurance Com­ mission; G. }', Purvis, Deputy Commissioner; D. A. Guglielmo, Deputy; Wharton Brown, Chairman of Casualty Commission; G. S. E. Barnett, Secretary of the Casualty Commis,:ion; Louis Danie1, Rate Supervisor; Allen Kimbel nnd Frank Rainholt, 1Iembers of Insurance Commi:,ision; and \YaJ.e 0. ).J,utin, Jr., Commissioner. Maine-Guy R. \Yhitten, Deputy Commissioner; Abraham Breitbard, Deputy Attorney G~neral; Joseph A. P. Flynn, Director of Fire Prevention;

Alfred ·w. Perkim:1 Commissioner. Maryland-Hazelton Joyce, Deputy Commissioner; John Coppage, Chief Examiner; F. AU.dison Fowler, Chief of our Rating Bureau; Lavt'rcnce E. Ensor, Commissiouer. Massachusctts-Jos.eph S. 0 'Leary, Deputy Commissioner; Charles F. J. Harrington, Commissioner, and there are also, Mr. Secretary, the mem­ bers of our special Legislatirn Commission on reYiew of the S. E. U. A. case present, Massachusetts Legislative Committee on Insurance: Senator Charles J. Innes, Chairman, Senator Richard I. Furbush, Senator Robert L. Lee, Rep. Henry M. Duggan, Vice-Chairman, Rep. John \Vhittemore, Rep. Stanley Borsa, Rep. A. John Serino, Rep. Normal Wellen, Rep . .Jere~ miah Sullivan, Rep. Frank D. McCarthy, Rep. Everett Bowker, Rep. Matthew J, Capeless, Rep. Perlie Dyar Chase, Joseph A. Hwnphreys, Secretary. Michigan-L. II. Sanford, 2nd Deputy and Chief Examiner; David A. Forbes, Commissioner. Minnesota-Alh13rt Burger, Chief Examiner and J\'"ewell R. Johnson, Insurance Commissioner. Mississippi-Neville G. Allen, member of Insurance Commission; W. F. Lockland, Managing Director of the Insurance Commission; ·wa1ter C. Green, Actuary; ,Jesse L. \Yhite, Commissioner. Missouri-A. C. Good, Actuary; Glenn Evnns, Deputy, Owen G. .Jackson, Superintendent. 12 PROCEEDINGS

Montana- Nebraska--C. D. Spangler, ·Actuary; Donald R. Hodder, Director.

Nevada-E. C. Osborn, Deputy Commissioner. New Hampshire-Donald Knowlton, Commissioner.

New Jersey-Chris. A. Gough, Deputy; W. Harold Bittel, Actuary; Bernard Hamilton, Sp~cial Deputy and Chairman of the Compensation Ra.ting and Inspection Bureau; Paul J, Molnar and Stratford D. Mills, Chief Rate Analysts; Oliver T. Somerville, Deputy .Attorney General and Counsel to Department; Lawrence B. Carey, Commissioner.

New Mexico-- N_ew York-Walter Martineau, Deputy Superintendent in charge of personnel in the New York Office and the Rating Bureau; Alfred Bohlinger, Deputy Superintendent in charge of the Fire and Complaint Bureaus; Shelby C. Davis, Deputy Superintend~nt, Economist and Statistieian; Ray­ mond Harris, Department Counsel; Joseph Collins, Chief of the Ra.ting Bureau; Charles Dubuar, Aetuary; William Gould, Chief of Miscellaneous and Fraternal Bureau; Carl Typermass, Deputy Superintendent in charge of Lieensing; Julius Sackman, Chief of the Life Bureau; Vietor Cohen, Accident and Health Seeretary; Davis Shultes, Statistician; I. Siegel of Title Insurance Bureau; Edward Reilly, Chairman of the Audit Bureau; Thomas Morill, Assistant to the Superintendent; and I would like to say that we have the two people here who really run the Department, Miss Mitchley and Miss Keely, the two secretaries; and then the fellow that gets run by everybody, yours truly (Robert Dineen, Superintendent of Insurance). North Carolina-B. Russell Thomas, Actuary; William P. Hodges, Commissioner. North Dakota-Harold Hopton, Examiner, representing Otto Krueger, Commissioner. Ohio-Walter A. Robinson, Deputy Superintendent; Joseph H. Kolk­ meyer, Chief Accountant; Ralph Klapp, Assistant Attorney General; Walter Dressel, Superintendent.

Commissioner Dressel (Ohio): Mr. Secretary, while I am on my £~et, the newly-appointed Director of Commerce was in the hotel yesterday and if he is present, I would like to introduce him, the Hon. Dale Dunifon of Columbus. Oklahoma-Commissioner McKenzie (Arkansas): Mr. President, it is with pleasure that I present to this assembly, Donald F. Dickey, the new Commissioner of Oklahoma. Commissioner Dickey. (Applause)

Commissioner Diokey (Oklahoma): Mr. Secretary, Oklahoma is repre· eented by Mr. Joe Fred Gibson, Assistant Commissioner; C. 0. Bunt, MID-WINTER MEETI:sG 13

Secretary of the Board, and Mr. Twyman, Chairman of the Insurance Fund. Oregon- Pennsylvania---C. S. Lazarus, Chief of Division of Companies; George B. Elliott, Compensation Actuary; Oscar A. Kottler, Deputy; Ralph H. Alexander, Deputy; Ralph B. Umst.ed, Deputy Attorney Genera1; Gregg L. Neel, Commissioner.

Puerto Rico- Rhode Island-J, Austin Carroll, Commissioner. South Carolina-George B1;mjamin, Commissioner. South Dakota-W. A. Mueller, Commissioner. Tennessee-Edward Mashburn, Deputy; Richard M. Fenk~r, Actuary. Texas-Paul Benbrook, Casualty Actuary; J, D. Wheeler, Director ot Workmen's Compensation Section; J. P. Gibbs, Casualty Commissioner; Guy Y. Keetch, Actuary. Utah-Oscar W. Carlson, Commissioner. Vermont-Albert Pingree, Deputy Commissioner; Charles E. Burns, Commissioner. Virginia-George A. Bowles, Commissioner; Blake T. Newton, Jr., Counsel to th'3 State Corporation Commission; T. T. Moore, Chief Examin­ er; G. A. Peary, Casualty Statistician; C. W. Harris, Fll'e Statistician. Washington-George H. McAteer, Actuary; Robert D. Williams, First Deputy and Assistant Attorney General; W. A. Sullivan, Commissioner. West Virginia-Harlan .Justice, Chief Deputy; Edgar B. Sims, State Auditor and ex-officio Insurance Commissioner. Wisconsin-Lloyd J. Yaudes, Chief Casualty Examiner; J. J. Mc­ Cormick, Actuary; H. M. Persons, Assistant Attorney General ; Charles J. Timbers, Deputy Commissioner. Wyoming- ! will next ca.11 on Commission~r R. B. Whitehead to report for the Provinces of Canada.

Commissioner Whitehead (Ontario) : Canada is represented by the superintendents of the three provinces only. New Brunswick is represented by E. B. McLatchy, who is Deputy Attorney General and Superinteudent of Insurance; the Province of Qu~bec, by Georges Lafrance; and the Province of Ontario by myself, R. B. Whitehead.

Secretary Parkinson (Illinois): Mr. Chairman, there are 44 states represented and three provinces. 14 PROCEEDINGS

President Dineen: That means we have a quorum and we ma.y proceed. I would like to ask at this time to have all of the new Commissioners stand so that we can all get a good look at you. Will you do that, all of you, (Applause)

I want to say to you gentlemen who are new that there is one thing about this Commissioners I League; I think the statistics show that the life of the average Commissioner is 21h years. We have the highest turnover of any institution in the country with the exception of Macy 'a and Gimbel's. (Laughter) And don 1t feel a bit abashed, because you are new, because within the space of six months, you will be an old timer. Now, wholly aside from the pleasantries, I want to say this much to you, and that is that we are very happy to greet you here in our ranks. We want you to participate in the convention, to m~et your fellow com• missioners, because, in the final analysis, this institution serves the most important purpose of its kind, and that is to integrate the regulation of the insurance business in the United States. The Commissioners must function as one family or else state regulation won't function.

I repeat to you gentlemen, if there is anything that the New York Department can do for you whi1~ you are here, we will be very happy to do it, and I am sure that the officers of this Associatio11. are at yoUl' command. I hope you will enjoy your first meeting here and if you have any ideas, feel free to bring them forward.

I now come to the n!;lxt order of business, and I have an astounding piece of news for you, I am happy to report to you that some gentlemen in the industry contrived last week to keep the Committee on Rates and Rating Organizations working from Tuesday right straight through until Saturday night and, of cours,e, some of the Commissioners on the Com· mittee helped in that program, but as a result of that, the President of this Association found himself in the position where last Saturday night, when he intended to complet!;l his Presidential address, he hadn't even started. So we are now in the position where the President is able to report to you, and I am sure to your great relief, that there is no Presi­ dential address forthcoming at this moment. (Applause) Now, in that connection, I want to point out one thing to you. One of my favorite authors, although I guess he is in rather bad repute now, was P. G. Wodehouse, and you will recall that he always referr~d to his favorite character, Bertie Wooster, and after many of these numerous climaxes that Bertie was involved in, he used to use the favorite expression that '' Bertie tottered from the room a broken man.'' And I hope, as you people totter out of this room at the completion of our meeting, broken ~cause of the fact the Commissioner didn't deliver any speech, that you will just bear up to it as best you can, even though it is a staggering loss for all time. (Laughter) The next order of business is the report of the Secretary, and, with our permission, I would like to present Commissioner N. P. Parkinson of Illinois, our Secretary, and ask him to make his report. Mm-WINTER MEETIXG 15

Secretary Parkinson read his prepared financial report... ,

Secretary Parkinson (Illinois): Mr. Chairman, I move the report be ree43i.ed, subject to audit.

Commissioner Larson (Florida): I second the motion.

President Dineen: Are you ready for the question All in favor, signify by i;,aying ".Aye." "No." The "Ayes" have it and it is so ordered.

At this time I will appoint a committee on auditing, and for that purpo"e I will name Commissioner Garrison of California, Mr. Shelby Davis of the N cw York Department, and Commissioner Kavanaugh of Colorado, one of our bondctl employees. (Laughter) And, of course, you ;..;entlemcn untlerstand you must execute this task faithfully and report to us promptly.

There ure some announcements to be made and after the announce· ments, there will be an e:s:ecutfre session here, confined, as you gentlemen know, to commissioners and members of their official families. I have a single announcement to make. It is the i::ame announcement I made in executive ,cession yesterday and that is, will thof::e men who are chairmen of commi.ttee:-s please, as soon as their meetings are over, make use of the stenographic facilities and bring your report to the President so that we can dispose of them at the general sessions as we go along instead of waiting until the last day.

I will now call upon Commissioner Lar::.on fvr additional announce· men ts.

Commissioner Larson (Florida): As announced yesterday, there will be a change in the scheduled committee meetings on tomorrow morning, in this respect. The Committee on Examinations was scheduled to meet at 9:00 o'clock and irntead, it will meet at ~::;o P.~L

Commi;.;:t'ioner Benjamin, Chairman of the Committee on Unauthorized ln;;urnnee,. which was to meet tomorrow morning, has advised me this morn· in~ that there -will be no meeting of that Committee, as there has been no agenda prepared. I haV"e b)Oen requested to announce that Zone 3 will meet tomorrow morning for breflkfast at 8:30. The present meeting place is in the ma.in dining room un!e~s provision can be made for one of these rooms outside the ballroom. I have also been requ~sted to announce that there will be a short meeting of all Phi Psi',; present in Room 1500 immediately after the adjournment of this meeting. Mr. Butler, will you please come forward and make your announee­ ments. Gentlemen, I hope we will have profound silence while Mr. Butler 16 PRoCEEDINGS delivers his remarks. As you will notiee, he is having trouble with hia throat as he mounts the rostrum.

Mr. Butler: There is nothing scheduled in the way of a. luncheon today on the regular program. Everybody is free to pay his own check today.

For tomorrow's luncheon, the tickets have largely been distributed. Each ticket has a table number on it. We would like you to go to that particular table, of course. The luncheon should be over - it starts at l :00 P.M. in the Grand Ballroom and it should be over close to 2:00 o'clock, at which time General Spaatz, the Commander in Chief of the Army Air Forces, will deliver an address of about 20 or 25 minutes, and immediately following that we are going to put on a colored moving picture entitled, '' The Last Bomb,'' which is the bombing of the City of Nagasaki. I understand it is an excellent picture; it will take about 15 minutes. We would like for everybody to stay and see the picture. That should bring you down to about 2:30 at the lattist. That is the only announcement I have to make, Commissioner.

Secretary Parkinson (Illinois): I have been requested to announce that the members of Zone 4 will meet in Parlor B immediately following this meeting for a brief session.

Commissioner Larson (Florida): Commissioner Fischer has just ad­ vised that his Committee on Social Security, scheduled to meet this after­ noon at 4:00 o'clock, will meet tomorrow morning at 9:00 o'clock in the West Ballroom, where the Committee on Examinations was scheduled to meet; and this afternoon at 4:00 o'clock in Parlor D there will be an adjourned meeting of the Fraternal Committee.

President Dineen: I now wish to appoint a Committee on Resolutions to memorialize the death of Jess Read, and I will appoint as the Chairman of that Committee, Commissioner White of Mississippi, George Bowles, who probably knows more about drawing resolutions, - Jesse, I beg your pardon! George is always Chairman of that Committee, so I will reverse it, if I may, and make George the Chairman. I will ask you to be one of his faithful servants and, since this aggregation is strictly below the Mason and Dixon Line and we want to get it balanced, Donald Knowlton, will you furnish a Yankee touch for Senator Claghorn on this assignment. I hav~ one other announcement here and this, I hope that you gentlemen will all bear carefully in mind. I am about to call for an executive session and those of you who have been familiar with our proceedings are also familiar that the quaint habit indulged in by many of our people. As they get to the door, they eongr,egate in little groups near the door, carry on an animated conversation, and it takes about 20 minutes to clear the room, which just delays the meeting for 20 minutes more. We would love to have you carry on all the conversations you want, but just the other side of that door. Mm-WINTER MEETING 17

With that announcement, I deela.re the public session of the meeting adjourned and ask all commissioners to remain for the executive session.

. . . Executive session from here.

President Dineen; Gentlemen, the next order of business is the reading of the report of the Executive Committee covering the Syracuse meeting, and I will turn that responsibility over to the Chairman of the Executive Committee.

. . Commissioner Larson read th,:l report of the Committee as follows;

MINUTES OF EXECUTIVE COMMITTEE MEETING September 4, 1946 Syracuse, New York Chairman J, Edwin Larson opened the meeting at 10:20 A.M. with the following members present: J. Edwin Larson, Florida, Chairman Robert E. Dineen, New York Seth B. Thompson, Oregon Maynard Ganison, California N. P. Parkinson, Illinois William P. Hodges, North Carolina Oscar W. Carlson, Utah Wade 0. Martin, Jr., Louisiana Luke J, Kavanaugh, Colorado Gregg L. Neel, Pennsylvania David A. Forbes, Michigan Other commissioners present were: Chris A. Gough, New Jersey Charles F. J. Harrington, Massachusetts Newell R. Johnson, Minnesota J. Austin Carroll, Rhode Island William A. Sullivan, Washington, represented by Robert D. Williams The following departmental personnel werl:l also present: S. D. Mills, New Jersey E. A. Faircloth, Florida Joseph Kolkmeyer, Ohio Walter F. Martineau, New York Alfred :J. Bohlinger, New York Thomas C. Morrill, New York Joseph F. Collins, New York Mr. Morrill of the New York Department read a report on his visit to Oklahoma City, Oklahoma, at the request of Commissioner Dineen, to determine the status of the Secretary-Treasurer's office. A copy of the report was submitted to the committee and is attached. 18 PROCEEDINGS

The committee approved payment to Miss Lucy Conaway for services to date as acting secretary at the rate of $100 per month, plus such reasonable similar compensation for further strvices as the Secretary· Treasurer may determine. The committee discussed the resolution adopted at Louisville, Kentucky, in 19.21 which is recorded on pages 146 and 147 of th~ 1921 ''Proceedings" as follows: '' At 12 o'clock the Convention on motion of Commissioner Phillips, went into Executive Session. '' At 1 o'clock the regular session was resumed and the President announced that the only positive action tak~n therein was the adoption of a resolution appointing the Secretary-Treasmer of the Convention the permanent Chairman of the Committee on Examinations and increasing his salary $500 per ummm.'' It was considered that the resolution was at variance with the con­ stitution and by.laws. No action was taken but the view was expressed that Superintendent Dineen would be within his prerogath·e in app()info1,~ a Chairman of the Examinations Committee who was someone other than the S.enetary-Treasurer, in view of the authority conferred upon him by the constitution to appoint the Chairman of each Standing Committee. After discussion as to the order in which the committee should consider the subjects before it, the committee adjourned for lunch at 12:35 P.M. It reconvened at 3:00 P.M. and the first order of business was made the election of a Secretary-Treasurer. Commissioner Hodges nominated Commissioner Bowles (Virginia) and the nomination was second­ ed by Commissioner Neel. Commissioner Parkinson (Illinois) was nominated by Commissioner Thompson and seconded by Commissioner Garrison. It was moved by Commissioner Forbes, seconded by Commissioner Martin that the nominations be closed. Tellel'S were appointed aml a secret ballot was taken, which disclosed the election of Commission.er Pa1'kinson as Secretary­ Treasurer. Since the election of Commissioner Parkinson created a vacancy on the Executive Committee, nominations for that position were in order. Commissioner Hodges nominated Commissioner Bowles (Virginia) and the nomination was seconded by Commissioner Neel. The name of Commissioner Dr/3ssel (Ohio) was placed in nomination by Commissioner Dineen, seconded by Commissioner Garrison. Thereupon, nominations were duly closed. Aftei­ the appointment of tellers and a ~ecret ballot, the vote was announced and Commissioner Dressel was declared 13lected to the Executive Committee. In consiUeration of the 1921 Louisville resolution above-mentioned which increased the salary of the S_ecretary-Treasurer by $500 when he undertook the work of the Committee on Examinations, it was voted to restore the salary of the Secretary-Treasurer to $1,500, and to appropriate the sum of $50.00 per month for s13rvices and expense of the Chairman of the Committee on Examinations. The committee discussed the manner in which it should suitably, memorialize the death of· the late Jess G. Read. lt was ruled by Chairman Mm-,VINTER MEETING 19

Larson that a proper m_emorial should be made a part of the Seventy­ Eighth Proceeding of this Association. Commissioner Garrison moved that the Executive Committee should adjourn out of respect to the memory of Jess G. Read; that the Secretary·Treasurer inform Mrs. Read concerning this act, and that the Secretary-Treasurer endeavor to obtain adequate biographical data from Mrs. Read. The motion was seconded by Com­ missioner Thompson and duly pass/:ld.

Chairman Larson instructed the Secretary-Treasurer to pay any neces­ sary expenses in connection with moving the files of the Secretary-Treasur­ er 's office from Oklahoma City to th/:l new location.

It was moved by Commissioner Garrison, seconded by Commissioner Gough that the Secretary pay a florist's bill of $23.00.

Chairmun Larson read a communication from Commissioner Kavanaugh dated August 29, 1946, with reference to the Brotherhood of Railroad Trainmen and the Yardmasters of America. The matter was discussed at length, and further details concerning the problem were presented by CommisSioner KaYanaugh. After discm,sion, Commissioner Kavanaugh moved the adoption of his proposed resolution. There was no second to the motion. It was agreed that the resolution should bo redrafted and the ,matter considered on the following day.

The committee then returned to its discussion of the feasibility of a. central office. Commissioner Garrison made the following motion, which was seconded by Commissioner Forbes:

"I morn that it be the sense of this meeting that the central office idea should be explored and that the present administration should be urged to make available a definit.e plan for a central office and that the administration be urged to secure a proper committee to come to the December meeting with something clear-cut and definit~ so that we can have specific proposals to talk about.''

After discussion the motion was passed.

It was thereupon moved by Commissioner Dineen, seconded by Com­ missioner Garrison as follows: '' I move that the sub-committee of six on the feasibility of a. central office be discharged and that the Executive Committee appoint a. new , sub-committee of three to reconsider the problem and submit a report a.t the December meeting.'' This motion was passed unanimously. It was moved by Commissioner Forbes, seconded by Commissioner Carlson as follows: "I make a motion that the committe,e of three be named by the · Chairman of the Executive Committee a.nd the President jointly." This motion wa.s likewise passed unanimously. 20 PROCEEDINGS

At 5:40 P.M. the committee adjourned until 10:00 A.M., September 5, 1946.

On tb_e following day the committee reconvened at 10:40 A.M. at which time it considered a revised resolution with respect to the matter introduced by Commissioner Kavanaugh. Adoption of the resolution was duly moved, seconded and passed. A copy of this resolution is attached.

It was moved by Commissioner Garrison, seconded by Commissioner Dressel as follows:

'• I move, Mr. Chairman, that an appropriate resolution be drafted and executed by the Chairman of the Executive Committee or any other necessary officers for the purpose of closing the bank account in the First National Bank, Hobart, Oklahoma, and authorizing the Secretary-Treasurer to open a new bank account in the First National Bank, Springfield, Illinois, and authorizing him to draw checks on the same.'' The motion was passed unanimously and the resolution was thereupon drafted and executed as per copy attached. The committee adjourned at 11:00 A.M.

RESOLUTION OF THE EXECUTIVE COMMITTEE, NATIONAL ASSOCIATION OF INSURANCE COMMISSIONERS RELATING TO THE DEPOSIT OF ASSOCIATION FUNDS RESOLVED, That the funds of this Association may be deposited in the First National Bank of Springfield, Illinois, (hereinafter referred to as the Bank) and withdrawn upon the check, draft, note or order of this Association, signpd by the following: N. P. PARKINSON and the Bank is hereby authorized to pay such checks, drafts, notes or orders, and also to receive the same for the credit of or in payment from the payee or any other holder when so signpd, without inquiry aa to the circumstances of their issue or the disposition of their proceeds, whether drawn to the individual order of, or tendered in payment of individual obligations of, the officer above named, or other officers of this Association, or otherwise. RESOLVED, That the aforesaid officer is hereby authorized, on behalf of the Association to so sign or countersign checks, drafts, notes or orders of this Association payable to himself as payee and to endorse checks or oth~r negotiable instruments, payable to the Association, to himself or any other person or corporation as endorsee. RESOLVED, that each of the foregoing resolutions remains in full force and effect until written notice of its recision or modification be properly received by the Bank, and the President and Secretary-Treasurer of this Association be and they are hereby authorized and directed to certify to the Bank the foregoing resolutions and specimens of the respective signatures of the officers of this Association. Mm-Wrn'l'ER MEETING 21

RESOLUTION OF EXECUTIVE COMMITTEE OF NATIONAL ASSOCIATION OF INSURANCE COMMISSIONERS ADOPTED AT SYRACUSE, N. Y., SEPTEMBER 5, 1946

WHEREAS, it has come to the attention of this Committee that members of certain fraternal beneficiary societies have been expelled from membership in associations operated in conjunction with such societies, and by application of rules, by-laws or conditions of insurance have thereby been deprived of their insurance protection, and WHEREAS, such compulsory forfeiture of life insurance exposes members to irreparable Joss where by reason of adrnnced age or poor health the member cannot obtain new life insurance or must pay greatly increased rates of premium,

NOW, THEREFORE, BE IT RESOLVED, that the Executive Com­ mittee of the National Association of Insurance Commissioners hereby expresses its disapproval in principle of such rules, by.Jaws or conditions of insurance, and recommends to the Fraternal Committee of this Associa­ tion that the matter be earnestly considered by that Committee as a part of its efforts in connection with the drafting of a uniform code for the regulation of fraternal beneficiary societies.

REPORT OF THOMAS MORRILL August 23, 1946 To: Commis~doner Dineen From: Mr, Thomas Morril1 Subject: Status of Secretary-Treasurer's Office, N.A.I.C,

At your instruction I visited Oklahoma City August 12th to 14th inclusive and conferred with Miss Lucy Conaway, Acting Secretary, and Deputy Commissioner Joe F. Gibson of the Oklahoma Insurance Depart­ ment who is advising with Miss Conaway in connection with the affairs of the National Association of Insurance Commissioners. The following is a r!;;lsume of conditions as I found them. Financial As per attached statement by Miss Conaway the National Association of Insurance Commissioners had a bank balance of $776.86 on July 31, 1946. This account is maintained i:p. the First National Bank in Hobart, Oklahoma. Following Commissioner Read's death, all cheeks received had been held, and when I was there Miss Conaway was holding $327 in checks. After discussion it was agreed that she would deposit these at once. Unpaid bills were: L. W. Hoskins & Co. for reporting Proceedings at the Portland meeting $602.99; West~rn Union $1.86. In addition the Association is obligated to the Industrial Printing Company, Oklahoma City, Oklahoma., in an undetermined amount fur pri11ting of the current edition of the ''Proceedings.' 1 The last edition of the Proceedings cost $1,359.17 but it is expected that the new edition will be more co:.tly bernuse of the ext1msive matter which it will contain on the rate regulatory bills. 22 PROCEEDINGS

On August 5, 1946, Miss Conaway sent out the regular form letters calling for the 1946 contributions from the various states. This call rais"ed $7,125 in 1945 and should bring in a comparable amount this year. Com• missioner Read was the only one who had the right to sign checks against the N.A.I.C. bank account. Consideration should be given to adjusting this situation so that the financial obligations of the N.A.I.C. can be met. Preparation of the Proceedings I called at the office of the Industrial Printing Company at 623 North Harvey Stre~, Oklahoma City, Oklahoma, and discussed the present status of the current edition of the Proceedings with Mr. Shelby Lewis, publisher. It was his estimate that composition of the Proceedings will be :finished by the end of August and that they can be shipped by the middle of September. This firm has printed the Proceedings for about 15 yea.rs and would like to continue to do so. Mr. Lewis informed me that a. very large share of the editorial work in compilation of the volume had always been .entrusted to him by Commissioner Read. Physical Assets Physical property of the N.A.I.C., Oklahoma City, consists of one four-drawer steel file cabinet, and a considerable amount of correspondence, r.eports of examination and similar matter in cartons, plus about two cartons of back copies of the ''Proceedings.'' In bulk the contents of the files would approximate nine :file drawers of correspondence, ten cartons of the reports of examinations and related matt~rs and the two cartons of Proceedings, or a small truck load of material to be handled ll it is transferred to another location. Committee on Examinations Miss Conaway is efficiently carrying on the detail work in connection With the Zon!;l system of examinations. The procedure is well known to the various states. A home state Commissioner who calls a Zone examination of one of his domestic companies notifies the Chairman of the Committee on Examinations that the Zone examination is to be called and sends wjth the notice a list of the premium writings of the company for the latest available year broken down by zones and states within the zones. The home stat.e Commissioner frequently designates the zones which he would like to have participate in the examination and may even designate the particular states within the zones. The number of such zones and states requested ma.y be less than the total number eligible to participate. The premium information should be submitted in a sufficient number of copies to be sent to each of the zones and states asked to participate. Upon receipt of such a notice, the Chairman of the Examinations Committe.e transmits the notice to the zones designated who in turn seleet the states in their zones which will take part. Acceptance of the designation is sent to the home state Commissioner, to the Chairman of the Zone and to the Chairman of the Committe~ on Examinations. Occasionally where examinations of groups of companies are ea.lied the group may involve eoIDpanies of different states of domicile. Where MID·\VINTER MEETIXG 23 this occurs the practice is for a single Commissioner actually to call the examinations but the proceedings are adjusted to show in each case that the call was made by the Commissioner of the domiciliary state. A complete record of examinations call~d and of the states which participate is maintained by the Chairman of the Committee on Examina· tions and is published in the ''Proceedings.'' Some special arrangements are in effect. Both California and Arizona. request that copies of all Zone 6 calls be sent to their Departments. Zones 3 and 5 have reque:-ted that copies of all calls for examinations of companies doing business in their zones be sent to the Zone Chairman whether or not the Commissioner of the domiciliary state has designat,ed those zones as participants. Volume of Work It appears that the work of Secretary-Treasurer involves some detail in connection with the collection of contributions, payment of bills, editing of 1 'Proceedings' 1 and correspondence with Insurance Commissioners. It is probable however1 that this work is at least equaled and perhaps exceederJ. by the detail which accompanies the work of the Committee on Examinations. The latter would s~em to involve as much as one to two stenographic hours daily, varying from time to time according to the flow of calls for Convention examinations. Cornpensati-on of Miss Lucy Conaway It was the practice of Commissioner Read to turn over a portion of the detailed work of the Committee on Examinatioll8 to Miss Conaway. He did not turn over to her work of the N.A.I.C., but handled all of it personally. I understand that he compensated Miss Conaway for her assistance by paying her about $200 a year in addition to the salary which she receives from the State of Oklahoma. After consultation with Mr. Gibson who has been advising with Miss Conaway, I beli~ve that the N.A.I.C. should arrange to pay Miss Conaway for her services during the period that she serves as Acting Secretary. Mr. Gibson suggested that perhaps a lump sum payment of $200 would be adequate. On the other hand since th~ time which Miss Conaway will be requiretl to serve is now indeterminate, it would seem more reasonable to pay her by the month. It is ruy impression that she would consider $100 a month for such services as an adequate sum. Thomas C. Morrill

STATEMENT July 31, 1946 FIRST NATIONAL BANK, Hobart, Oklahoma Statement to National Association of Insurance Commissioners Jess G. Read, Treasurer Oklahoma City, Oklahoma Balance May 28, 1946 ...... •...... •...... •..... $1,449.86 24 PROCEEDINGS

No checks drawn against this account in June. Checks Nos. 576 to 584, inclusive, were drawn against account in July, 1946 - Total Amount ...... $ 673.00

L~aving Balance ----····················--··--·-··-·····--···-······-----·······················$ 776.86 Bills unpaid - Received to this date: July 31, 1946 L. W. Hoskins & Co. (Reporter of Proceedings N.A.I.C.) Chicago, Statement of account rendered July 10, 1946 ...... $ 602.99 Western Union ------·····-····-·-----······-·················································· 1.86 Industrial Printing Company (Mr. Shelby Lewis) Oklahoma. City, Oklahoma, For Publishing Proceedings 1945-46, 77th Session ...... $2,267.37

Commissioner Larson (Florida): Mr. Pr~sident, I move the adoption of the report.

Commissioner Forbes (Michigan): I second the motion.

President Dineen: Is there any discussion on the motion f Does anybody want to speak on itf Are you ready for the question7 All in favor, signify by saying "Aye." "No." Th~ "Ayes 11 have it and it is so ordered. Is there anything further to come before usf Does anybody here have any ideas that they would like to elaborate on or bring forward at this time! Maynard Garrison just called my attention to the fact that I messed up this resolutions matter. What I should have done was to have appointed the customary Resolutions Committee, and what I started to do was to appoint a special committee to draft a resolution on Jess Read, but now that my shortcoming as a President have been brought to my attention, it is obvious that what I should have done, and I ask your permission to do it, would be to appoint the customary Committee on Resolutions, with Commissioner Bowles as Chairman, and Commissioner White and Com­ missioner Knowlton as members, and have them, as a part of their nornial procedure, draft a resolution on th~ death of Commissioner Read. Will you gentlemen please charge that up to inexperience. Is there anything further f

Commissi-011er Larson (Florida): I know of nothing further.

President .Dineen: Commissioner Harrington, have you any announce­ ment regarding your Committee on Rates and Rating Organizations meeting for this afternoon T

Commissioner Harrington( Massachusetts): Nothing except that we will meet in this room as scheduled on the program, at 2:30.

Presid·ent Dineen: Is there anything further 7 If not, I will entertain a motion foi- adjournment. Mrn-\VIXTUt MEETIX-G 25

Commissioner Bowles (Virginia): ,vm you please announce a meeting of Zone 2 immediately on adjournment here where we are.

Commi.1sioner Larson (Florida) : I have just received word that the Zone 3 breakfast tomorrow morning will be held in Parlor F at 8:30. \Ve are making arrangements for 18 places, so please take note thereof nnd be prernnt at 8: :::o.

President Dineen: The meeting is recessed.

. . . Recessed ....

TUESDA"I; MORNING SESSION

The second general session, Tuesday morning, was called to order at 11: 25 o'clock, President Dineen presiding.

President Dineen: Gentlemen, will you please come forward and sit down so we can get started. Owen Jackson, would you replace our good friend, Commissioner Holmes, and tell them to come inside, because time is beginning to waste on us. As the first order of business, I will call upon the Chairman of the Bxecutive Committee, Commissioner Larson, to read the report of Sunday's meeting of the ExecutiYe Committee.

Commissioner Larson read the Committee report as follows:

REPORT OF EXECUTIVE COMMITTEE COMMODORE HOTEL, NEW YORK, N. Y. DECEMBER 8, 1946

The Executive Committee of the N.A.I.C. met in Parlors B and C &t 2:30 P.M. on Sunday afternoon, December 8, 1946, with the following members of the Committee present: Hon. Robert E. Din~cn, New York, President Hon. J. Edwin Larson, Florida, Chairman Hon. Maynard Garrh,on, California Hon. ·William P. Hodges, North Carolina Hon. W. Ellery Allyn, Connecticut Hon. Gregg L. Neel, Pennsylvania Hon. Wade 0. Martin, Jr., Louisiana Hon. Da\-id A. Forbes, Michigan Hon. Luke J. Kavanaugh, Colorado Hon, v;ralter Dressel, Ohio Hon. N. P. Parkinson, Illinois, Secretary-Treasurer A telegram was received from Commissioner Seth B. Thompson of Oregon, Vice-President, stating his inability to attend the meeting on 26 PROCEEDIJS"HS account of. illness, Also a. communication was received :from Commissioner ·James M. McCormack, Viee·Chairman, stating his inability to be present at the meeting of the Association and directing that Ed Mashburn, Deputy and Examiner, be authorized to act for him on all committees during the convention. A g:rElat many Superintendents and Commissioners and Departmental employees were also pres.ent,

The following agenda was considered by the Committee: 1. The Chairman stated that a letter had been sent to all Commis­ sioners over the signature of President Dineen and the Chairman reporting the action of the Executive Committee meeting held in Syracuse on Septem­ ber 4-5, 1946. A detailed report of the Syracuse meeting has alr,eady been approved by this Association. · 2. Commissioner W. Ellery Allyn of Connecticut submitted a report of Sub-Committee No. 2 of the Committee on Blanks of the N.A.I.C. on th.e meeting held in New York at the Insurance Department on November 14, 1946, a copy of which is hereto attached. This report was signed by Commissioner W. Ellery Allyn of Connecticut, Charles F . .T. Harrington Of Massachusetts and Commissioner Robert E. Dineen of New York (Alfred J. Bohlinger, Deputy Superintendi:mt). Several members of the industry _had expressed a desire to be heard and the report was submitted to the Life Committee for further consideration. 3. A communication under date of November 27, 1946, :from Mr. Bruce E. Shepherd, Manager of the Life Insurance Association of America, was read by the Chairman, who stated that Mr. Shepherd desired to discuss the contents of his letter in detail. Mr. Sh,epherd submitted a memorandum to the Committee and the Committee in turn, upon unanimous vote, referred the entire matter to the Li:f~ Committee for :further consideration. 4. The Chairman stated that a request had been received for a full discussion of non~admitted companies writing life insurance in army camps. "!'his request was lihwise, upon unanimous vote, referred to the Life .Committee for further consideration. 5. The Chairman stated that he had received several requests to discuss the subject of a central office for th,e N.A.I.C. but inasmuch as a special committee had previously been selected for the purpose of con­ sidering this important subject, the matter was unanimously ref~rred to the Committee on Central Office. Commissioner Forbes, Chairman of the Committee, stated that a meeting of his committee would be held at nine o'clock Monday morning, December 9th, in Parlor D. Chairman Forbes advised that he would report later on in the meeting regarding any reeommendations of his comm.ittee. 6. Commissioner Dressel of Ohio, to whom had been referred. the matter pertaining to a resolution passed at the Syracuse meeting with refer~nce to activities of the Railroad Brotherhood fraternals, gave a report which has been ineorporated in and will be made a part of the ,minutes of the Executive Committee. Commissioner Dressel reported that Mrn-\VINTER MEETING 27 the entire matter had been agreed to by Mr. \Vhitne.v, Pree1ident of the Brotherhood. 'i. The Chairman stated that an invitation had been received from the Chamber of Commerce anil the Hotel .Association of St. Petersburg, Floridu, to hold the mid-winter meeting of 194 7 in St. Pt:itersburg. At this point Commissioner Dineen :mggested that he had received invitations also for the June meeting and that the matter be referred to the ExecutiVe Committee for further consideration at this mt'eting, which was agreed to. 8. Final arrangements for the mid-winter me,eting, committee assign· ments and space for the holding of committee meetings were briefly dis­ cusFe

REPORT OF SUB-Cm!MITTEE NO. ~ OF THE COMMITTEE ON BLANKS ON MEETING HELD AT THE NEW YORK INSURANCE DEPARTMENT ON NOVEMBER 14, 1946 A meeti11g of Sub-Committee No. 2 of the Committee on Blanks was held at the 1JHice of the Xew York In,;nrancc Depar;:;ment 011 NoYember H, 19-!G. The purpose of the meeting was to consider suggested revision in the procedure followed by the Committee on Blanks in passing upon proposed amendments to the form of annual stat,ement. The following Commissioners were present: Hon. W. Ellery Allyn, Connecticut Hon. Charles F. J. Harrington, :t!assaehusetts Hon. Robert E. Dineen, New York, by Alfred J. Bohlinger, Deputy Superintendent In addition there were a number of re1)l'e:sentatirns of Insurance De· partments who attended the meeting. Commissioner Allyn acted as Chairman. In opening the meeting attention was directed to the fact that at the meeting of the Executive Committee of the National Association of In­ surance Commissioners at Portland, Oregon, on June 10, 1946, several letters, all identical in language, were presented in which request wa.s made to consider amendment of procedure. The Executfre Committee referred the entire subject to this Sub-Committee for consideration and 28 PROCEEDINGS report at the meeting of the Executive Committee of the National Associa­ tion of Insurance Commissioners to be held in December, 1946. Representa­ tives of various branches of the insurance industry attended the meeting. Spokesmen for the industry called attention to the following two major procedural amendments which they urged upon your Sub-Committ~ for consideration. (1) The industry called attention to the fact that under the pro­ cedure which has been followed in the past the agenda containing matters to be considered by the Blanks Committee at its annual meeting is received at a date too late for adequate consideration by the companies. At the present time under the procedure followed by the Committee on Blanks, proposed amendment are required to be filed with th!3 Secretary of the Committee on or before March 15th, It was suggested that the date for filing proposed amendments be advan~ed to an earlier date and that at least sixty dtiys be afforded to the industry to consider the agenda. Your Committee is of the opinion that the time heretofore allowed has been inadequate and believes that the date for :filing of proposed amendments should be advanc~d to January 1st in eaeh year. A suggestion was also ma.de that the meeting of the Blanks Committee which under present practice is held on or around April 30th be held at an earlier date and that the report of the Committee be sent out at a. time which will enable the various Insurance Departments, as well as members of the industry, to consider the same prior to the meeting of the Executive Committee at the annual meeting in June. The members of the industry also urged that following the m~eting of the Committee on Blanks the report of the Com· mittee should be considered at a subsequent date by Sub-Committee No. 2 and an opportunity afforded to the members of the industry to appear before the Sub-Committ,ee. Suggestions for amendment of the annual statement frequently involve questions of policy and your Sub-Committee is of the opinion that on sueh questions ample opportunity should be afforded not only to members of the industry but to repr!clsentatives of Insurance Departments to present their views for the guidance of the Sub-Committee. However, your Sub-Committee does not feel that ample time would be available to hold a meeting of the Committee on Blanks followed by a meeting of the Sub~Committee which in turn would have to bB followed by further consideration of the full Committee. It is the opinion of your Sub-Committee that at the annual meeting of the Committee on Blanks the Sub-Committees should also meet, at whieh time matters of poliey eould be established, The Sub-Committe~ could thereupon meet with the full Committee on Blanks and all matters could be disposed of at such meeting. After consideration your Suh-Committee has reached the conclusion and r~commends that proposed amendments ahould be :filed on or before January 1st in each year; that the Seeretary should send the agenda of the meeting to all Insurance Commissioner.,:, as well as to the members of the industry who have requested the same, on or before February 1st; that the Blanks Committee, together with Sub-Committees No. 1 and No. 2 should hold a meeting on or about April 1st in each year - in any event, not later than April 5th; that the report of the Committee on Blanks be sent out on or before May 1st in eaeh year. Mrn-WIXTER MEETrnG 29

In connection with proposed amendments to the form of annual state· ment your Sub-Committee gave consid~ration to the burden carried by the Secretary in preparing and sending out the agenda. Your Sub-Committee is of the opinion that where proposals for amendments are submitted, the Secretary should not be required to reproduce reports of Conference Committees, l~ngthy memoranda, special exhibits or schedules. It is felt that in such instances the proponents should submit 250 copies of such material to the Secretary for his use in attaching the same to the agenda..

(2) The remaining major recommendation urged by the industry concerned itself with the question of the time when amendments are to become effectiv1:1. Attention was called to the fact that in the past, amend­ ments to the form of annual statement have occasionally required major changes in accounting procedures retroactively to the beginning of the year. The Committee on Blanks has been cognizant of this difficulty and in the past has occa..•donally deferred the effective date of the changes in order to allow sufficient time for the companies to prepare therefor. As to amendments which do not entail material changes in aeeounting procedures it has been the usual practice of the Committee on Blanks to make :mch changes effective in the year in which the amendment is adopted. Your Committee considers that decision as to the effective date of any amendment is a matter whieh should be given careful attention and urges upon the Committee on Blanks that when changes involving major accounting procedures are adopted th~ Committee on Blanks should not make such changes effective in the year in which the amendment. is adopted.

The Committee recommends that the Executive Committee establish the following procedures to be employed by the Committee on BJanks.

(1) All suggested changes and amendments shall be :fi1~d with the Secretary of the Committee on or before January 15, 1947, and on or before January 1st of each year thereafter. Suggestions received after that date can be considered at the current year's meeting of the Com­ mittee on Blanks only with the unanimous consent of the members of the Committee.

(2) The suggested changes and amendments and reasons therefor shall be stated in a concise and complete form. (3) In the casf of reports of Conference Committees, lengthy mem­ oranda, special exhibits or special schedules, 250 copies thereof and the suggestions and reasons should be submitted to the Secretary of the Committee. In the case of brief suggestions a notification to the Secretary of the Committee will be sufficient. (4) The various classes of insurance companies should appoint com­ mittees to confer with Sub-Committees of the Committee on Blanks. (5) The Secretary shall prepare an agenda of all suggestions. Two copies of the agenda shall be sent to each Insurance Commissioner on or before February 10, 1947, and on or before February 1st in each year thereafter and copi~s of the agenda shall be sent to every industry Sub- 30 PROCEEDI:.,.os

Committee requesting the same. Not more than 25 copies of the agenda shall be sent to any industry committee. (6) The Committee on Blanks as well as any and all Sub-CommitteeS thereof shall meet on or about April 1st in each year ~ in no event, however, later than April 5th. (7) The report of the Committee on Blanks shall be sent out by the Secretary on or before May 1st in each year. Two copies of the rnport shall be sent to each Insurance Commission!?r, Copies of the report may also be sent to industry committees and other interesteU parties who may request the same. Respectfully submitted, W. Ellery AUyn, Connecticut Charles F. J, Harrington, Massachusetts Newell R. Johnson, Minne:;ota Robert E. Dineen, New York

Commissioner Larson (Florida) : I move the adoption of the report.

Commissioner Kavanaugh _(Colorado): I second the motion.

President· Dineen: The motion has been made and i,econded that the report be adopted. Is there any discussion f All in favor1 signify by saying ''Aye.'' Opposed. The ''Ayes'' have it and it is so ordered.

Have you any :further report, Ed 1

Commissioner Larson (Florida): I have no further report but I have one announcement. The Committee on Accident and Health has finished its deliberations and that makes available the assignment tomorrow morning at 10: 00 o'clock that was scheduled to be held in the East Ballroom. The Accident and Health Committee will not meet tomorrow at 10:00 o'clock, so if there is any other committee that desires to meet at that time to utilize the East Ballroom and will make it known, we will be very happy to announce it.

President Dineen: I have been requested to make another announce­ ment by Russell Hooker, that the working committee on Non-Forfeiture Values will meet this afternoon in the West Ballroom at 2:30 instead of 3:30. Is Commissioner Austin Carroll here f Does any member of the Fire and Marine Committee know whether Chairman Carroll is ready to report or nott

Is Commissioner Dave Forbes here T Commissioner Bill Hodges for the Committee on Workmen's Com­ pensation 1 Or Commissioner Donald Knowlton, are ;vou l'eady to report on the Aeeident and Health Committee yet! MID-WINTER MEETIKG 31

Is Commissioner Fischer ready to report for the Social Security Committee¥ Or is- Mr. Robinson or Mr. Dubuar ready to report for the Blanks Committee 1 Is Commissioner Gough ready to report on the Sub­ Committee on the Qualifications of Examiners¥

Is Commissioner Bowles ready to report on Casun.1ty and Surety, on the meeting this morning¥

Commissioner Bowles (Virginia) : We held a me13ting this morning, with a quorum present, but we haven't anything to report.

President Dineen: Let the record so show. Are there any other committee chairmen present who want to report f

Commissioner Gough (New Jersey): On that Sub-Committee - I was listening to my friend here instead of to you - on Qualifieations of Examiners, the Sub-Committee will report direct to its major committee this afternoon.

President D-ineen: Bi11 Hodges, is it too early for a committee report on your "'" orkmen 's Compensation Committee1

Commissioner IIod,acs (Michigan): We will prepare th!3 report follow­ ing the close of this meeting.

President Dineen: Al. Butler, have you any further report on your Iun('heon or is yesterday's announcement sufficienH

Mr. Butrcr: That is sufficient, ~Ir. Chairman.

I'resident Dineen: Is there any further husi.ness to come before the group, If not, I want to remind all commissioners and their ~ntourage that there is to be a meeting of the Examinations Committee at 2: 30. It is an importnnt meeting, so be there, please,, and be there on time if you don't mind.

We are ahout to hold an expi•utive se~Rion for commissioners and members of tlwi.r ofileial fami1v. Thfa luncheon is scheduled for 1:00 and there are seYeral matters of im'portam:e to be brought up at this executive session, so I will usk those who arc not going to remain to leave, and to leave promptly. * "" *

\Ye are going to strut the meeting here in a minute. I want to make one thing clear, and this is with no disposition to be discourteous to anyboU.y here. At thh: executfrc scs,::ion, we intend to di~cuss certain matters relating to departmental aU.ministration and therefore I must repeat that this meeting is confined exclusively to commissioners and to departmental personnel exclush-ely. ,ve will be happy to have you back as soon as we get this chore done. 32 PROCEEDINGS

... All discussion at the executive session was off the record, the session being adjourned for lunch following the ending of the Executive Session ..••

TUESDAY NOON SESSION Luncheon Session, December 10, President Din~en presiding.

Preaiqent n,neen: Ladies and gentlemen: We are here today to pay honor to some distinguished guests and to express our appreciation - and when I say ''we,'' the members of the insurance regulatory family - to the insurance fraternity of New York, who ar~ sponsoring this grand luncheon. To those of the insurance fraternity who want a message before we get started, I remind you that the Committee on Valuations will meet in the West Ballroom immediately after this program. Now, those of you who had the privilege of being here last year reeaII that we had some very distinguished gentlemen here, the chief speaker being Mr. Eddie Rickenbacker. Eddie was here last year because one of the members of the insurance fraternity was an old and trusted friend and contrived to persuade him to eome. The gentleman in the insurance fratern.itf who discharged that obligation for us is an old World War flier and is one of the key men in one o:f our leading aviation ent~rprisee in New York State and in New York City, and I would like to ask him to take a bow so that we can pay him our respects and our compliments - Reid Chambers. (Applause) And one nice thing about it, Reid, you remember Rickenbacker gave you quite a beating last year, but this year we are going to be kind to you. We have another gentl.eman here today who in one sense requires no introduction, but he is he,e today :for a special reason. He is not going to make a speech; we are simply going to present him to you, but it was necessary to do this because of a story which w,e think is being circulated throughout the entire world and is the cause of a great disservice to a section of this state that we feel is not getting sufficient recognition. I am ref~rring to Brooklyn. (Laughter) They can do these things to us but they can't do them to Brooklyn I The gentleman whom ! am about to present to you - and I am going to violate one of the rules of introducing people; I am going to tell you his name Ilrst; it is Rosy O'Donnell. As you people know, Rosy O'Donnell is a West Pointer. He had a. distinguished record, which included, among other things, coaching the football team at West Point. He was out in the Philippines when the war got under way and he seems to have devoted himself exclusively out there to harassing the Japs, Now, we have brought him here today for a special reason. Aside from the fact that we want to demonstrate that Brooklyn can produce real people, we brought him here today to subject th13 life insurance fTaternity here to great streB! and strain. As you know, General John, in the li:fe insurance business, there is a. continuing and unending search to fuid people of tenacity, MID-WINTER MEETING 33 people who, when they get rm id~a, won't let go, and who will sta.y with it until the bitter end, and the reason General O'Donnell is here toda.y is this. DuriD.g the early stages of the war, he was decorated for heroism in connection with one activity which, in my judgment, eminently qualifies him for the life insuranee business. It seems that when the Japs were ma.king their first landing in the Philippines, our inadequate air force went out to bomb them. The General was piloting a bomber and wound up over a. Japanese cruiser and got ready to drop the bomb and at that time the bomb latch or whatever they call it wouldn't work. Now, a less determined man would have said, "Well, what the helll the equipment isn't working," and be would have gone home. But the General stayed there, right over this Jap cruiser, with the anti-aircraft going, for 45 minutes. He made five runs over the targ.et, all the time juggling with the bomb release equipment, and :finally it let go. Now, boys, if you let him get out of this room today without taking him out of the Army and signing him up, you will ha,·e missed a bet. General O'Donnell. (Applause) The next speaker, of course, is a g.entleman who, like General O'Donnell, requires no introduction to any good American audience, because he is another patriotie American. I have had occasion today to review his record, which consists of accomplishments that are almost breath-taking in their scope. The next speaker - and onee again I am going to exercise the presiding officer's privilege of juggling the usual procedure by giving his name :first - General Spaatz - is also a West Pointer. Of course, we all know that his whole life has been identified with service in the Air Corps. His :flying hours I have been told are rather considerable, going back to 1919. Like our friend Reid Chambers, the General was an active fighting pilot in the first war, was decorated there for valor, went through a long course of training after that war, which was accompanied by successive promotions and advancement in rank, and :finally, when the Second World War began, his accomplishments were recognized, he was given positions of increasing responsibility, and, because of the necessity for accuracy, I would like to tell you the exact title which he held immediately prior to the conclusion of the war and at the conclusion. In 1942, he became commanding general of the 8th Air Force. In July of that year he was transferred to the European theater of operations in the same capacity until November of 1942, when he became commanding general of the Northwest African Air Force. He assumed command of all United States Army air forces in the North African theater of opera­ tions in November of 1943 and in .January of 1944 he had the high honor to become the eommanding general of the United States Strategic Air Forces in the European theater of operations. Now, Genera], I was always taught up in Syracuse where I come from that things must be taken in their relative importance, so anything I might say from now on would not amount to anything and will you please get up and tell us what the story is. (Applause as all stand)

General Spaat-z: Commissioner Dineen, ladies and gentlemen: 34 PROCEEDINGS

It is a distinct privilege to be before so distinguished a gathering, but in order to set your minds at rest about G_eneral O'Donnell, I just want to say you '11 get him away from the Air Force over my dead body. (Laughter) You here today represent every phase of American insurance. It has been said that insuranctc1 is the guardian of American economy. Our subject today is the kind of insurance that is absolutely essential to America and to every American, that is, insurance for national security. National security is of prime concern to every citizen. At times, we may seem to forget it for the moment, but we all know there can be no individual security without national security. An insurance policy can never be stronger than the company which issues it. An insurance company can never be safer than the public authority which charters it. As insurance executives, you study every detail of every enterprise in which you invest your policyholders' money. Even to a greater extent, you are concerned with, and you should study, every minute detail of national security. National security can be thr,eatened from within as well as from without. The economic chaos resulting from a spiraling inflation may be the greatest internal threat to national security. Solcliers don't pretend to know much about such matters. We do know, however, that forty years ago the national debt was about one billion dollars. Twenty years ago, it was nineteen billion plus. Ten years ago, it was nearly forty bilJion. At the beginning of this fiscal year, it was more than two hundred sixty-nine billion. We know that today a man or woman without dependents, who earns as little as forty dollars a week, pays approximately $260.00 a year

in direct federal taxes. In addition, there are :-tate1 municipal and indirect taxes. Something has to be done about it. That is why the President is bending every effort to balance the budget and reduce the debt. That is the l'eason for rigid economy in government at all levels. That, we know, is one way of insuring national security. Military expenditures are a large item in our national budget. They must and will be scrutinized very carefully. We must know exactly what we are buying with our military dollar. Only then will we be able to judge how much ·we actually need to spend on our military establishment. Military expenditures in peacetime are simply premium payments on insurance - of national security. The nation maintains armed forces, first

to prevent war1 second, to win wars we cannot prevent. ·we understand ,vell, from recent terrib1e experience, what it costs to win a war we cou1d not prevent. Vile won World War II. It cost us well over one million casualties. More than a quarter of a million Americans died. That loss, we cannot measure. But we can measure dollar loss. The total cost to the nation's capital structure has been estimated at four lmndr~d billion dollars. That amounts to approximately three thousand dollars for every man, woman and child in the United States. If America had followed the recommendations of General Billy Mitchell and General Hap Arnold back in. 1925 and had at that time bought an MID-WIXTER MEETING 35 insurance policy in the form of the world's most powerful air force, this loss could never have occurred. (Applause)

Our appropriations in 1925 for the Army Air Corpl' were Jess than fourteen million dollars. In the 14 years from 1925 to 1938, inclusive, the total appropriations made available to our Army Air :Forces were less than one-half billion dollars. That was an average of only thirty-five million dollars per annum.

An annual rate of only two-tenth of one per cent of the four hundred lii11ion dollar capital loss (the cost of ,Yol'ld War II) would have amounted to eight huntl1·ell million dollars total annual premium. However, if we ha

To put it another \n(:',', we couJ

If we ltwl had :,uch an insurance policy expressed in air power, HHler, Mu;:,,c'olini, and the ,fopnne:>e wou!J 11ernr have attempte(l to conquer the world. The one million American boys who were casualties would not have been eal!ed npun for the sacrifiees they made. Wr ('erbinl,v ,r:rnt e<·onomy in government; we want it now; but we tlo not ,ntHt false economy. \\'c ho1le thnt the United Nations will insure worlrl peace. The lJnited Nations is now in an int~rim stage. Its future success will depend largely upon the determination twJ firmness - including military determination anti firmness - of the support we give to it. The United Nations 8hou1d de,·elop into an cffectirn iustrument for world peare - a transcend.ent moral force, ll:wked hy armell force. The armC(l for('e mmt be strong cuon~h tJ <'ornmnm1 respect, if not fear, from pokntially aggressive powers. \\'hen, nntl oHly "·hen, the United Xations reaches that stage of

have been no Munich capitulation to Hitler, there would have been no World War II. Our people wa.nt peace. Let them remain strong and they will have peace. Now, this is a problem beyond the scope of action of the armed forces. Admirals and genera.ls are part of the pattern which our people would hKe to forget. You, on the other hand, are in a favored position, both to understand the probl~m and to do something about it. The future security of the nation, and the sound preparation :for peaee, may depend on you more than you know. Your profession makes you future-conscious, risk-conscious, danger­ conseious. The reasoning you apply to an individual life, you can apply to the nation's life. The percentages you work out for insuring a house against fire, you can also work out to insure our national structure. To our mind, the e8sential insurance consists of timely and adequate in,estment in the new instruments which promise to be decisive in war and peace. Only possession of the decisive instruments will insure a steady tranBition of our country into the new technical age. In terms of national security, the list of decisive instruments begins with the new developments in Air Power. And that's our story - insurance against war by investment in high quality defense against the only feasible form of attack - through the air. As professional experts, you cou]d do much to explain the situation. Insur· ance is not ot1ly the gua.xdian of American .economy but also of American security. We ask your support. (App]ause as all stand)

P-re.<:idewt Dineen: General Spaatz, in behalf of the insurance fraternity and on behalf of the National Association of Insurance Commissioners, I want to express our appreciation to you for the words you have uttered here today. I may 8ay, for the benefit of those here, that the General's message, of course, was of interest not only to us but to the whole country, and it will go out over the wires of the Associated Press, United Press and other news services, which were very much interested in what he had to say here today. At this stage of the procedure, I am about to inflict what is known as cruel and inhuman punishment on a member of the insurance fraternity, and you might just as well get ready to pick him up when ·he swoons. I am referring to Al. Butler, the gentleman who can be relied upon to arrange all of the~e details. Al arranged to have produced here today for your edification and approval, a moving picture which I am told laBts 15 minutes. It is the story of the atom bomb. I am told by people who have seen it that it is something that is breath-taking in its scope. I am also today told that the picture has just been released. Possihly some few in the audience may have seen it. Now, our problem is this. The Commissioners' Convention is here to resume work at 2:30. It is now 2:30 and I am therefore about to make a suggestion to you. In New York City, I am told that any ]uncheon that 38 PROCEEDINGS goes past 2:30 is a flop. It is 2:30 now. There are a lot of people in this audience who would like to see the picture. There are a lot of people in the audience who ought to b~ back at work. The Superintendent of Insurance has a very serious responsibility and that is to make su:re that high-priced executives are not looking at moving pictures when they ought to be on the job. I heard a man complain not long ago that our examiners came in to a company and were there too long and I don't want anybody to say the Superintendent kept a whole fleet of them here and blame me for it. So I am about to make a suggestion to you. Certainly, the wives should stay; certainly, those who have time should stay; but we won't be offended, I am sure Mr. Butler will not be offended if those people who have business to go to, or those people who are required at the meeting, return to their chores. Now, there is one thing that embarrasses me. I suppose you have a very polite way of saying to me, '' You can jump in the lake; we all want to stay here. 11 And if that is what you want to do, you are welcome .

. . . Recessed....

WEDNESDAY MORNING SESSION '.rhe Wednesday morning open session was called to order at 11 :15 o'clock, President Dineen presiding.

President Dineen: Gent1emen, we will call the meeting to order and the first order of business is to make an announcement that the All-Industry Committee will meet as soon as this meeting is over, in one of these rooms where our committees have b~en functioning. Are there any Chairmen here who are ready to report f Commissioner Knowlton, will you come up here and read your report, please1

. . • Commissioner Knowlton read the report of the Accident and Health Committee as follows:

REPORT OF THE ACCIDENT AND HEALTH COMMITTEE OF THE NATIONAL ASSOCIATION OF INSURANCE COMMISSIONERS The Committee met on Decemb,er 9, 1946, with the following members present: Lawrence E. Ensor, Maryland Jesse L. White, Mississippi Luke J. Kavanaugh, Colorado Alfred W. Perkins, Maine Donald Knowlton, New Hampshire George Goodwin for W. Ellery Ailyn, Connecticut T. W. Shands for J. Edwin Larson, Florida The Committee has had under consideration the revision of the so-called Standard Provisions Law and the standard provisions contained therein. Mm-WINTER MEETI~G 39

It is recognized that in view of important matters of policy in connection ther,ewith and the highly technical subject matter involved, progress can best be made through a sub-committee of this committee. Therefore such a sub-committee has been appointed comisting of Commissioner Ensor, Chairman, and Commissioners Allyn and Perkins to whom the matter will be referred with the request that the,Y hold hearings, give the questions study and report to the meeting next June. The Committee was invited to consider the relation between the Proposed Amendment to Law for Personal .Accident and Health Insurance known as Exhibit A in the Report of the Committee on Rates and Rating Organizations and Federal Legislation of its meeting held December 3-6, 1946, and the Standard Provisions Law. This matter is b,eing further considered by the Committee on Rates and Rating Organizations and :Federal Lcgisiation and will be treated in an addendum to their report. This Committee suggests that if any state whieh does not have the Standard Provi:;:ions Law proposes to enact such a law in connection with the proposal s~t :forth in Exhibit A that they enact the prC8<'nt Standard Provisions Law now in force in some twenty­ three ictates. This recommendation is made to prevent policy forms being subjeete

Commissioner Knowlton (Ne\Y Ham:pshire): I move the report be aceepted.

Commissioner Larson (Florida): I :;,.econd the motion.

President Dineen: Is there any debate f Are you ready for the question 7 All in favor, say 1 'Aye.'' Opposed. The '•Ayes'' barn it and it is so ordered. I will now read the report of the Committee on the Valuation of 40 PROCEEDINGS

Securities. The Committee met this morning. The following members were present, either in person or were repres~nted by nominees: Chairman Dineen, Chris Gough, William A. Sullivan, C. F. J. Harrington, Wade 0. Martin, Jr., Walter Dressel, .Tack McKenzie, Newell R. Johnson.

A resolution was adopted fixing for valuation purposes, the date of November 30, 1946, instead of December 1, December 1 having fallen on a Sunday.

One other miitter was referred to the Committee by Commissioner Harrington, and it was transmitted by our Committee to the Secretary for attention. I move the adoption of the report.

Commisaioner Larson (Florida): I seeond the motion.

President Dineen: Ia there any debateT All in favor, signify by saying ''Aye.'' Opposed. The ''Ayes'' have it and it is so ordered. Commissioner AI. Perkins, will you come up here n~xt, please.

Commissioner Perkins (Maine): Mr. President, I would like to substi· tute for Commissioner McKenzie, who is unable to be here. This is the report of th,e Committee on Fire Prevention.

REPORT OF COMMITTEE ON FIRE PREVENTION NEW YORK, N. Y., DECEMBER 10, 1946 Though a quorum of th'is Committee was not in attendance at this meeting, three members were present and an interesting discussion was had, with members of the industry participating.

Commissioner Wilson of Kentucky discussed the :fine response and effective results obtained by his Fire Marshal's department in its :fire prevention work, stating it had received national recognition.

Commissioner P~rkins of Maine opened a discussion on the benefits that would acerue to those responsible for :fire prevention work and the investigation of suspicious :fires, if a central agency was available for the collection and dissemination of data and information that would be of interest, especially to those state departments wherein the Fire Marshal's office is associated. A study of this matter will be made by Commissioner Wilson, Com· missioner Perkins and Commissioner-elect Cravey of Georgia. Respectfully submitted, Alfr~d W. Perkins H. B. Wilson J aek McKenzie, Chairman MID-WINTER MEETING 41

• • , After Commissioner Perkins read the Committee report, he interpolated the foUowing comments:

I would like to say there that though Commissioner-!3lect Cravey of Georgia was not a member of the Committee, he was there and showed so much interest that the Chairman felt and the r~st of the members felt that he should be on such a committee.

I move the adoption of this report.

President Dineen: And just to show you how fast this Association functions, he is appointed right now.

Do I hear a second T

Commissioner Larson (Florida); I '11 second it.

President Dineen; Is there any debateT All in favor, signify by saying ''Aye.'' All opposed, ''No.'' The ''Ayes'' have it.

Assistant Commissioner Morrill, will you make a separate note of the appointment of Commissioner Cravey to the Fire Prevention Committee, so we won't jimmy that up in our records. Gentlemen, one other announcement. The Insurance Section of the American Bar Association has done a grand job of summarizing in a very concise form the S.E.U.A. case and the McCarran Act of 1946, and the Commissioners' All·lndustry Committee, with a biography attached. It is boiled right down to the core. I hav.e only 35 copies here this morning, so it is available this morning only for commissioners, but Mr. Boyce of the Life Insurance Association of America, who did all the spade work, 15ays that there are more on the way and they will be available for distribution to the industry. I don't know any better way to get a quick education than by reading this precise memorandum. If I had known they were going to print this, I wouldn't have had to make that speech the other day. Is any other committee chairman ready to report1 Commissioner Joe Gibbs, Uniform Accounting. Come up, please .

• . • Commissioner Gibbs read the r~port of the Uniform Accounting Committee as follows:

. . , The Chairman stated that thi.s Report was only preliminary and recommended that since it was quite voluminous it not be incorporated in the Proceedings until adopted in final form ...•

Commissi01ter Gibbs (Texas): I move the adoption of the report.

Commissioner Larson (Florida): I second the motion. 42 PROn2BDIN"CS

President Dineen: The motion has been made by Commissioner Gibbs and seconded by Commissioner Larson. Is there any debatet Are you ready £or the questionT All in favor, signify by saying ''Aye.'' Opposed. Tho ''Ayes'' have it and it is so ordered. Are there any other Chairmen who are ready to reporU I will recognize Commission~r Bowles.

Commissioner Bowles (Virginia): Mr. President, I am going to ask Commissioner White to present the Resolutions, I am suffering with a severe cold.

President Dineen; The Chair will recognize Commission!;lr Jesse White of Mississippi .

. . . Commissioner \Yhite read the following resolution:

RESOLUTION NO. 1 Honorable Jess G. Read was born at Scottsville, Kentucky, on July 19, 1886, and departed this life on July 20, 1946. After att~nding Scottsville public schools, Ogden College and Vander­ bilt College he moved to Hobart, Oklahoma, in 1909.

At Hobart, Oklahoma, he was Editor of the daily paper for a period of four years and thereafter engaged. in the insurance business as a loea] life insurance agent.

In 1924 he was appointed Insurance Commissioner of the State of Oklahoma to :fill an unexpired term of a resigning Commissioner. He was thereafter elected on each successive election for five four-year terms, and at the time of his death had been renominated, without opposition, for the sixth time.

Throughout his twenty-two years as Insurance Commissioner of the State of Oklahoma he was one of the most loved, respected and active members of the National Association of Insurance Commissiontrs, His service to this organization included his serving as Vice-President in 1930, Presiaent in 1931 and Secretary and Treasurer for the years 1932 through 1946.

Through his untimely death this Association has lost a beloved friend, a wise counselor, a faithful officer, and an outstanding personality. We mourn his loss, and send sincere and heartfelt sympathy to his widow and the members of his family.

RESOLVED, that the National Association of Insurance Commissioners record its appreciation of and friendship for Commissioner .Jess G. Read as a beloved friend, good citizen, and as an able, unselfish public official, and further record his outstanding contribution to the cause of insurance supervision. i\lrn-\YIXTER 1\lr::ETIXG 43

RESOL'VED further, that the Secretary be instructed to send a copy of this Resolution to his wido\Y.

Commissioner Trllite (hli~sis:':ippi): I move the adoption of the resolu· tion .

. . . The motion was seconded by several.

President Di-necii: Are you ready for the questionf All in favor, signify by :-aying 11 .Aye.' 1 All opposed, ''Nu.'' The ' 1 Ayes'' have it and it is so ordereJ .

. Commissioner White read the following resolution:

RESOLUTION XO. :3

Bruce T. Bullion became In:-urance Commi:.:sioner of Arkansas in 1917, immediately after the Act creating a separnte Insurance Department went into effect.

Bruce Bu1lion :-erred his state and country with unstinted loyalty. \Vhile attending Hendrix College at Conwa:v, Arkan;-1as, the Spanish­ American "\Yar mi.:-:- declared and he was made Captain of his company. After his return from the war he ,.-as nar;1ed Secretary of the State Democratic Central Committee. In 1908 he bernme PriYate Se!!retarv to Governor Donaghey, also serving ns Adjutant General of the State. •

In 1912 he was appointed a member of the Str. te Tax Commi~sion which office he held until his appointment to the office of Insurance Commis:c:ioner and State Fire )Iarshal in Hll 7. He re:-igned in 19~5 when he opened his law office in Little Rode ''l)ccializing in insurance law. He was lowd and respected by f!11 who came in contact with him. He ga,e his time n-i1Iing-1y in an earne:-t ewleavor to h('lp his fellow Com­ missioners and all oth.ers as well. He is i::unfred h~· a daughter, ).Irs ..Tames IL BrwJre of Toledo, Ohio, a son, Bruce T. Bullion, Jr., of Little Rock, also thn•e brothe1·s, Earl of Boston. Yietor of 1Iemphis and Kenneth of El Dorado, Arkansas. We offer our sin,•ere and heartf.e1t symp:,thy to these children and brothers. RESOLYEJ), that a copy of this resolution be spread upon the minutes of the Xational Association of In.<:urance Commissioners, :ind copies be transmitte

Commissioner White (Mi.ssi:-sippi) : I move the adoption of the resolu· tion.

President Dineen: Yon ha·rn hean1 the motion. Do we lrnYe a sccondf 44 PROCEEDINGS

Commissioner Jackson, (Missouri): I second the motion.

Presidetllt Dineen.: Are you ready for the question! All in favor, signify by saying '' Ay~.'' Opposed, ''No.'' The ''Ayes'' have it and it is so o·rdered.

Commissioner White read the following resolution:

RESOLUTION NO. 3 WHEREAS the insurance business of the New York area and the Committee representing them, have b~en extremely gracious in extending their hospitality to the membership of the National Association of Insurance Commissioners and all those attending the adjourned meeting of its 78th Session, NOW THEREFORE BE IT RESOLVED THAT this Assoeiation tak~ this means of expressing its gratitude and appreciation to the insurance business of the New York area, the Committee representing them, and particularly to Mr. Albert N. Butler, Chairman of the Committee, Mr. Charles G. Taylor, Jr., Mr. Howard P. Dunham, Mr. Orville Davies, Mr. Jesse S. Phillips, Mr. Thomas A. Silver, Mr. Junius A. Powell, Mr. Reed M. Chambers, Mr. W, J, Graham and Mr. Ray Murphy, and BE IT FURTHER RESOLVED, that we extend our thanks to the Misses Matty Mitchley, Mary Keeley, Mildred O'Dea and Selma Weinstein of the New York Insurance Department, who have so capably acted &a secretaries for the Commfosioners.

Commissioner White (Mississippi): I move the adoption of this resolu­ tion.

President Dineen: Do I hear a second f

Commiseioner Larson (Florida): I second the motion.

Presidem Dineen: It has been seconded by Commissioner Larson. All in favor, signify by saying ".Aye." AU opposed, "No." The ''Ayes" have it and it is so ordered. Thank you very much Jesse, and thank you, Commissioner Bowl~s. Is anybody else ready to report f Now, gentlemen, we have a little procedural problem here and I am about to suggest a parliamentary short-cut. You remember I had an experience out in Grand Rapids which demonstrated that as a parliamen­ tarian, I was a bust, and maybe this one won't work either, but I am going to try it. Commissioner Forbes has a report on the Central Ofilce Committee. As I understand it, that report was undertaken at the direction of the Mm-WINTER MEETIKG 45

Executive Committee and therefore the report should be made to the Executive Committee first and thereafter to the convention. However, since it is a matter that affects the entire convention and in the interest of expediting the matter, I wonder if I could call the roll now of the Executive Committee and ask for a resolution or an authorization from the Executive Committee to transmit this report to the floor for consideration. That being so, there will be a roll call of the Executive Committee and, on the question I am about to present to you, the vote will be confined solely to members of the Executive Committee . . • . On the roll call, the following members of the Executive Com· mittee were present: Commissioners Larson, Mashburn (representing Com­ missioner McCormack), Garrison, Hodges, Neel, Forbes, Kavanaugh, Carl· son, and President Dineen. There is a quorum present. WilI the Chairman of the Executive Com· mittee call his Executive Committee tog_ether and give us authorization to transmit Commissioner Forbes' report to the convention for action, please.

Commissioner Larson (Florida): Gentlemen, by authority conferred on me by our President, I do now call an Executive meeting of our Executive Committee and report that this procedure is approved by the Executive Committ€e. (Laughter)

President Dineen: Thank you, sir. The vote is unanimous, I take it.

All right, Commissioner Forbes, will you step forward now and read the report. Let the record show that we had another meeting of the Ex.ecutive Committee and the report is transmitted to the full convention for action• . Commissioner Forbes read the report of the Committee on a Central Office as follows:

REPORT OF COMMITTEE ON CENTRAL OFFICE FOR THE NATIONAL ASSOCIATION OF INSURANCE COMMISSIONERS NEW YORK, N. Y., DECEMBER 9, 1946 Your Committee on a Central Office for the National Association of Insurance Commissioners wishes to submit the following report. Our Com· mitte.e was appointed for the purpose of considering and reporting on the feasibility of a central office for the N.A.I.C. to serve adequately the pressing needs of the Commissioners of this Association. Your Committee believes such an office should be established on the following basis: 1. The Secretary's office of this Association to be the '' central office.'' 2. Such an office to be permanently located in a city to be decided by a vote of this Association. 46 PROCEEDINGS

3. All records of this Association, except records pertaining to the valuation of securities, to be permanently filed in that office.

4. An assistant s.ecretary, whose title could be designated as '' execu­ tive secretary 1 ' be employed and also one stenographer to carry out the expanded functions of the office.

5. Such employees to work under the direction of the S~cretary and to be employed by him with the advice and consent of the Executive Committee.

6. Additional employees to b,e added to the staff from time to time as the functions and duties of that office expand, but only with the advice and consent of this Association. 7. That the office now occupied in New York by the Committee ou ValuatlOn of Securities be continued as a separate office until such time as this Association might determine that it would be feasible to consolidate the two offices. 8. The functions that th.e Secretary's office would perform in the future would be: (a) Usual duties prescribed by the constitution and by·laws. (b) A clearing house £or rulings of each Department. (c) A "contact" office for organizations such as the Interstate Underwriters Board and the N utional Council on Compensation In· surance. (d) A medium for preparing and assisting in reports of com­ mittees and the preparation of agenda for meetings of the Association. ( e) All convention examination details to be handled by this office under the direction of the Secretary. To carry out this function our constitution and by-laws shou1d be amended so that the Chairman of the :Examinations Committee in the future will not be appointed by the President but instead that the Secretary-Treasurer ex officio shall be Chairman of the Examinations Committee. The Committee believes that time will prove the necessity for additional functions to be. performed by this office particularly on matters pertaining to interstate rating and general actuarial problems. ·we are cognizant of the fact that every function that can and should be performed by this office cannot be accomplished in its inception. ,v!'l believe, however, that starting in a modest way the office and its services will grow and improve and will be of great Yalue and help to state insurance supervisory officials. \Ve recommend that the offic!') be empervised by a standing committee appointed by the President, with the President ex officio as a member of the Committee. To adequately finance such an office is the immediate problem facing us. At the present time our budget is approximately $8,000 a year, ruost all of which is co1Jected from contributions made by the various states. Mm-WINTER MEETIKG 47

We believe under the plan proposed m this report such an office could be operated on a budget of approximately $20,000 which would allow $7,500 for administrative expense, approximately $2,400 for a stenographer

and approximately $2,400 for rent, these items totaling $12 1300. This would leave approximately $8,000 for miscellaneous expense such as a public stenographer to record the proceedings of the N.A.I.C., stationery, stamps and other general expenses. Such a budget would necessitate approximately twice the amount from each state that is now being paid. The bale.nee which would be necessary could be derived from selling copies of the proceeJ.ings of the N.A.I.C. convention, as has been don.e in the past, and also bulletin service to insurance companies subscl'ibing to such service setting forth Departmental rulings as issued, legislation as submitted to each state legislatul'e and other activities of this Association that would be of value and interest to the industry. We further recommend that the proposed central office committee to be appointed if this report is adopted, give consideration to an equitable plan for the financing of the central office, giving weight to the importance of the office to the state and the amount of insurance transacted in that state. We further recommend that if this Teport h adopted, the President of the N.A.I.C. communicate with the Commissioner of each state advising him officially of the creation of the central office, some of the reasons for its creation and the amount of monev necessary from each state for its maintenance. ,ve believe such a letter .;ould be helpful to ~aeh Commissioner in securing the nec,essary amount in the budget of his Department. We also recommend that no salary be paid to the Secl'etary-Treasurer for the reason that we do not subscribe to the principle that an officer of this Association should receive remuneration for performing the duties of his office. Neither do ,ve f'Ubscribe to the principle that a chairman of any committee, such as the Examinations Committee, should receive remuneration. As a forward step to closer cooperation between the states that state regulation may be continued, we recommend that this Association adopt this report and by so doing authorize the Executive Committee and the President of this A:

Commissioner Forbes (Michigan): Mr. President, I move the adoption ef the report.

Presid.enrt Dineen: Do I hear a second T

Commissione1' Larson (Florida): I second the motion. 48 PROCEEDINGS

President Dineen: The motion has b~n made by Commissioner Forbes and seconded by Commissioner Larson that this report be adopted. The next order of business will be to hear from those who ca.re to express their views. I am recognizing our distinguished Commissioner from Virginia, Commissioner Bowles.

Commissioner Bowles (Virginia): Mr. President and gentl!;!men of the Convention:

As you can observe, I am not physically able long to stand on my feet by reason of a severe cold. I would be the last person in this conven­ tion to stand upon this floor and criticize the sincerity of the gentlemen who have worked so hard in order to bring to us a comprehensive report on this question. It is known by an of the older members of this Associa­ tion, and most of the new ones, my position on this thing. It was first pr.esented to this organization at Hot Springs, Arkansas, when the dis­ tinguished Ernie Palmer was President of the Association. At every subsequent meeting, I believe the question has come before the convention and each and every time it has been voted down, The National Association of Insuranc~ Commissioners has been actually openting for 78 years. We have been told all through the years that it has been doing a commendable and splendid work, a service that has been recognized throughout the nation by thti industry and by the insurance public generally. I know there is nothing that I can say here today to change your vote on this question, but I could not sit idly by here when we just stood upon this :floor and paid eloquent eulogy to .J~ss Read, one of the older members of this Convention, who has always consistently, and of course thoughtfully, opposed this central office idea. The same would be true of my old friend and your friend, Frank .Julian from Alabama. In fact, practically all of th~ older Commissioners.

Now, Dave Forbes expressed the hope that this would reeeive as unanimous a vote as did the preceding question here a while ago. I daresay it would have if he had wait13d about two years longer, when Chris Gough and George Bowles would have crossed over the River to the Great Beyond, as all the other pioneers in the Association have done.

I don't question the sincerity of these boys, but I want to ask them if they will state for the purpose of the record, categorically, if you will, what do you expect to accomplish that has not been accomplished through the years by commissioners serving faithfully and patriotically, giving to you the best they had, which has proven satisfactory up to th13 present hour t Why not suffer for a while the ills we have f Isn't it true that all through the years this office has been filled by competent, patriotic com­ missionerst What is the demand for this change! What is the demand for it! I want the record to show so far as I am concerned, and I am sure the same is true of other commissioners here, those who favor it and those who oppose it on a roll call, and I would like to, as I said a while ago, call on the Chairman or som13one else to get up on this :floor and to state Mm-WINTER MEETING 49

eategorically, if you will, what do you expect to accomplish by this cen­ tralized office that ha.sn 't been successfully handled before 7 I am sorry that I am really not able to stand up on my feet. I would like to talk for an hour. I would like to insist, however, on a roll call vote and ask the Chairman or someone to state to the convention cate­ gorically, what do you expect to do under the new regime that hasn't been done for the last 75 yearst (ApplaUBe)

President Dineen: Gentlemen, in what I am about to do, it is in no respect aDY effort to shut off the debate or the discussion, but we are in the same situation today as we were yesterday. There is going to be a very fine luncheon out there and once again we have a timing problem and if you gentlemen will just permit me for a moment, I would like to have Ed. Larson, who has looked after that detail, just tell you what the time schedule is. Just permit me to suspend the debate for a. moment. Will you do that, Ed., please 1

Commissioner Larson (Florida): It will just take a minute. All the Commissioners are requested to meet in Parlors B and C immediately upon adjournment. The tim eschedule for adjournment was 12:00 o'clock, which will give us 15 minutes to get to Parlors B and C, at which time the Commissioners and the executives of the companies of New York who have arranged this luncheon will proceed to the dias to be seated. So it will htlp if all of the Commissioners will go right to Parlors B and C, where they will receive their escort, the company executive, and proceed to the dining room.

President Dineen: In other words, we are going to recess at 12:00 o'clock. Now, I see that Commissioner White apparently. wanted to speak, but may I ask you something before you do f Commissioner Bowles, I am interested in deferring to what line of approach you would like to follow here, and I am thinking now of Commissioner \Vhite, who apparently wants to bl;) heard. You three gentlemen who prepared this report, do you have any spokesman who would like to answ~r the point raised by Commissioner Bowlesf

Commi.ssioner Harrington (Massachusetts): Mr. President, Dave Forbes bas been called out on an important call but will be back shortly. Probably not before we recess, however,

President Dineen: Have we got around to the point now where we have to leave our meetings in order to pay our respects to the United States Senate f

Commissioner Gough (New Jersey): You might ask more properly, Mr. President, have we got to the point where we must cut short our real work to go to have a drink and eat T I think there are a number who probably would like to be heard, 50 PROCEEDINGS either for or against this proposal, and I think it would be inadvisable to try to squeeze it in in five minutes.

President Dineen: I didn't contemplate that.

Commissioner Gough (New Jersey): I am going to suggest recessing now and taking it up after this lunch.

President Dineen: Wait just a minute before we do that. Let me ask something ~lse, then, if that is the case, because we have certain other reports here. First of all, I will say there is no disposition on my part to shut off tlie debate, and what we don't do now, we will do after lunch, so we will get that settled, and Chris' suggestion rather appeals to me. Are there any other chairmen here who have reports upon which they are ready to report 1'

Commissioner Hodges (North Carolina): I would like to make the report of the Workmen's Compensation Committee.

. . . Commissioner Hodges read the report of the Committee as follows:

REPORT OF WORKMEN'S COMPENSATION COMMITTEE NEW YORK, N. Y., DECEMBER 9, 1946 The Workmen's Compensation Committee met at 3:30 P.M., December 9, 1946, at the Commodore Hotel, New York, N. Y., with the following present:

William P. Hodges, North Carolina, Chairman Joe P. Gibbs, Texas, Vice-Chairman David A. Forbes, Michigan Lloyd Yaudes, representing Commissioner Duel, Wisconsin J. R. Maloney, representing Commissioner G:ar:rison, California Guy Whitten, representing Commissioner Perkins, Maine. At the Portland convention there was incorporated in the report of the Workmen's Compensation Committee a resolution calling upon the National Council to investigate the feasibility of incorporating a payroll limitation in the compensation rating structure, and to aggressively study alternative methods of improving the workmen's compensation premium base. The Committee had before it a copy of the report of Special Committee of the National Council dealing with this subject and reporting progress made thus far, a copy of which is hereto attached as '' Exhibit A.'' Your Committee voted to receive such r~port as a report of progress, but in so doing urged upon the Council :representatives the extreme necessity of an expeditious handling of the probl,em. The Council was requested to send copies of such report to the office of each Insurance Department. MID-WIXTER MEETI:SG 51

Representatives of the industry appeared before th~ Committee a.nd urged that the special committee of departmental experts be appointed at an early date to work with an industry con::unittee in order to devise a call for a tuore detailed breakdown of 1946 expense experience by size of risk. It was proposed that such :figures couJd be obtained as a supplement to the pres.ent Casualty Insurance Expense Exhibit, and would form the basis of a preliminary study of a justifiabl!3 expense gradation. Your Committee recognizes the importance of beginning such a. study, and feels that a committee of departmental experts should begin its work at the earliest possible time. As yet your Committee has been unable to obtain the services of a suffici!3nt number of departmental experts who are able to devote the necessary time to such stu

NATIONAL COUNCIL ON COMPENSATION INSl~RANCE REPORT Ol' SPECIAL COMMITTEE TO MEET WITH COMMITTEE OF N.A.I.C. TO WORKMEN'S COMPENSATION COMMITTEE OF N.A.I.C. December 9, 1946 Re: Premium Base For Workmen's Compensation Insurance At the June, 1946, session of the N.A.I.C. the following resolution was adopteU: "The Workmen's Compensation Comtriittee has considered the question of improved raternaking procedure for Workmen's Compensation Insurance at many of its meetings during the past four years or more. Studies and reports of Committees of the National Council on Compensation have been called for and considered. It has been the hope of the Committees con· sidering this question that a method or procedure might be devised and proposed which would reflect more accurately the rate and premium needs of the current p.eriod. It has been apparent that the use of the total payroll for rutemaking and premium computation has produced an excessively high premium when wage levels of the current period are materially higher than during the ,experience period employed for producing or indicating the rate. A large part of the wage level change is in that segment of the 52 PROCEEDINGS payroll in excess of the amount of wages necessary to produce maximum indemniti.es under various state laws, },urthermore, the increasing practice of supplementing wages by means of pro-fit sharing and bonus plans has tended to make the procedure now followed subject to more criticism. '' The reverse situation and an inadequate rat~ will result if and when wages are lowered materially. "While the question of the feasibility of the use of a limited payroll may hinge upon the ability of the employer to keep adequate records for reporting the proper adjusted wages and payroll, this Committee believes that the idea has sufficient merit to deserve thorough study and considera­ tion. ' 'BE IT THEREFORE RESOLVED that the National Council on Compensation be requested to continue and vigorously pursue: (1) its investigation of the feasibility and practicability of incor­ porating such limitation in the Workmen's Compensation rating structure, (2) consideration of alternative methods of improving the premium base, and report thereon to the Workmen's Compensation Committ13e at the December, 1946, meeting of the N.A.I.C. '' It is recognized that any limitation of payroll for premium compu­ tation will of necessity require an appropriat~ upward adjustment of manual rates, varying by individual classification, in order to reproduce the same over-all premium, and that the more limited the payroll the greater will b!;l the amount of the required rate increases. It is also recognized that, in order to determine the rate increases, it will be necessary to secure reliable statistical data, by manual classification, and th_e principle of payroll limitation cannot be introduced until such statistical data are available.'' Subsequent to that action Committees of the National Council have actively continued the study of the premium base which had been previously initiated, and the following meetings have been held: September 4, 1946-Joint Meeting of Special Committee on Overtime Wages and Payroll Audit Committee. September 5, 1946-Payroll Audit Committee. Sept~mber 5, 1946-Joint Meeting of Special Committee To Meet With Committee of N.A.I.C. and Special Committee on Overtime Wages. October 7, S, 9, 1946-Payroll Audit Committee. October 30, 1946-Joint Meeting of Special Committee To Meet With Committe13 of N.A.I.C. and Special Committee on Overtime Wages. At the first of these meetings it was pointed out that, up to date, the investigation had consisted primarily of an exploration of the problem on the basis of theoretical considerations and further progress in the study nj;lcessitated the making of audits on various bases to disclose from aetus.1 experience the problems that would be encountered under the various procedures so far considered. Accordingly, the following resolution was unanimously adopted: MID-WINTER MEETING 53

'' WHEREAS, the Special Committ~es of the National Council have been investigating for a period of approximately three years, on the basis of theoretical considerations, the question of improvement of the premium base for workmen's compensation insurance and WHEREAS, a Report on the results of this investigation must be made to the Workmen's Compensation Committee of the N.A.I.C. a.t the December, 1946, meeting of the Association and WHEREAS, the various possibilities considered by the Committees appear to present considerable difficulties both from a theoretical and practical standpoint and WHEREAS, it s~ems necessary, before proceeding further with this investigation and with the preparation of the required Report to the N.A.I.C., that there be available factual data with respect to the various matters involved, be it RESOLVED, That the member companies represented on the Special Committee to Meet With Committee of N.A.I.C., the Special Committee on Overtime Wages, and the Payroll Audit Committee be requested to make an actual audit on various bases of at least 10 representative risks for the purpose of obtaining necessary information to enable th~ Special Committees to continue their investigation on the basis of actual facts and actual experience in obtaining the required inform&· tion.'' Attached hereto is an outline of the instructions which have been issued to the payroll auditors for obtaining the desired information. It will be observed that the tests outlined are quite extensive. It is believed that when these tests have been completed and the results analyzed they will afford a most valuable contribution to the question of the feasibility and practicability of modification of the premium bas~ for workmen's compensation insurance. In this connection, it might be noted that 14 carriers are cooperating in this study and :field audits are now in progress. A limited number of reports containing a good deal of interesting informa­ tion have been received but extensive analysis of these reports and others to be received is necessary. Time has not permitted the completion of this phase of the study for formal presentation at the December session of the N.A.I.C. However, it is hoped that such presentation can be made at the June, 1947, session.

In the meantime, there is attached a copy of '' Report of Special Committee on Overtime Wages on the Question of a Revision of the Premium Base.'' It is str~ssed, as noted in the attached Report, that that Report is to be considered in the nature of an interim Report, pending completion of the tests which are now being conducted. In conclusion, it is pointed out that there has already been introduced in most states, effective October 1, 1946, a procedure for limiting the payro11 of ea.eh employee, for premium computation purposes, to an average of $100 per week for the total time employed during the policy period. In some respects that program can be viewed as being in the nature of a practical experiment to ascertain, by actual experienee, just what problems arise in the application of a payroll limitation program. If that experiment 54 PROCEEDINGS discloses serious difficulties, it is to be expected that a more drastic payroll limitation would greatly increase those difficulties. Respectfully submitted, Special Committee to M!,!et With Committee of N.A.I.C, National Council on Campen· sation Insurance W. F. Roeber, General Manager Enclosures: 1. Data to Be Obtained by Actual Audit for Test Purposes. Dated September 10, 1946. 2. Report of Special Committee on Overtime Wages on the Question of a Revision of the Premium Base. Dated November 1, 1946.

STUDY OF PREMIUM BASE FOR WORKMEN'S COMPENSATION INSURANCE DATA TO BE OBTAINED BY ACTUAL AUDIT FOR TEST PURPOSES September 10, 1946 (1) Total payroll for each manual classification. (2) The payroll eliminated by th.e present Executive Officers' Rule, for each manual classification. (3) The payroll eliminated by the present Overtime Rule, for eaeh manual classification. (4) The payroll that would have been eliminated by the $100 payroll limitation adopt~d to become effective October 1, 1946, had this elimination actually been in effect during the entire period covered by the audit. This information should be reported for each manual classification. (5) The payroll that would be eliminated by the $100 payroll limit&· tion if, for premium computation, the payroll for each employee were limited to a maximum of $100 per week rather than, as adopted, to an a'IJerage of $100 per week for the total time employed during the policy period. This information should be furnished for ~ach manual classification, and upon the principle of application as provided in item (4) above. (6) The payroll that would be eliminated if an average of $60 a week were substituted for $100 in the payroll limitation rule already adopted to become effective October 1, 1946. This is the same as item ( 4) above except that $60 is substituted for $100. The information should be obtained for each manual classificaton. (7) The payroll for each manual classification that would be elimi­ nated under a rule providing that, for premium computation, the MID-WINTER MEETING 55

payroll for each employee were limited to a maximum of $60 per week. This is the same as (5) above with $60 substituted for $100. (8) The number of man hours :for each manual classification. ( 9) The numb,er of man days for each manual classification. A part of a day worked is to be counted as a full day. (10) The number of man weeks for each manual classification. A part of a week worked is to be counted as a full week. (11) The over-all man count for each risk. (Note: This information is requir~d for the risk as a whole and not by manual dassifi. cation.) (12) The time spent by the Auditor in obtaining each of the above items. (13) The basic records used in obtaining each item of information and what checks or controls were available for the verification of the original rtcords. It is requested that each company participating in the test make the desired audit on at least 10 risks varying from medium size to large risks, and that the risks tested represent different types of operation. For multiple location risks one location may be considered a risk, and contracting risks may be considered on a job basis. The audit of each risk should cover a minimum period uf three months and preferably a year. The report on the results of each audit ~hould be accompanied by a narrative report from the Auditor commenting on the difficulties that were encount_ered in ascertaining each of the desired items o-f information. It is realizeJ that the making of the desired tests requires additional labor and expense by the Payroll Audit Departments of the companies concerned, but because of the importance of the questions involved, it is desirable that rnch tests be undertaken for tlie purpose of assembling all possible factual data bearing on the problem before preparation of the necessary Report to the N.A.I.C.

REPORT OF SPECIAL CO~!MITTEE ON OVERTIME WAGES ON THE QUESTION OF A REVISION OF THE PREMIUM BASE November 1, 1946

The Speefri.l Committee on Overtime Wages presents this report which is based on studies and reports of the Payroll Audit Committee. It is to be noted that 14 insurance ca.rriers are presently engaged in the preparation of special audits which are being undertaken for the purpose of disclosing actual facts and actual experience in obtaining information from assureds' books and records which is required in order to audit under the several changes in premium base which have been considered to date. Pending completion of this fact :finding study, any opinion of this 56 PROCEEDINGS

Committee as respects a chang,e in the premium base represents theorization based on past experience. This report is submitted, therefore, with the understanding that the conclusions are tentative only and may be subject to modification and revision in the light of the facts developed by this study. The conclusions outlined below do not constitute an endorsement of any change in the premium base as the Committee is not at this time ready to make any recommendation one way or the other. The tentative opinions expressed below represent the practical aspects of payroll auditing which will be encountered if any of the listed changes in premium base is instituted. 1. Payroll Limitation. - Maximum Per Week Payroll limitation may be accomplished by either A. the elimination of remuneration in excess of a stipulated ma.ximum weekly average, or B. the elimination of r~muneration in excess of a stipulated maximum amount per week. The following example iilustrates the difference in these two methods: An employee works 40 weeks during th!:l policy period earning $100 per week for the first 10 weeks, $125 per week for the next 20 weeks and $90 per week for thi, remaining 10 weeks. Assuming that the maximum per week is $100, under A above he has earned an average of $110 per week over the 40 weeks worked and thus, $400 is eliminated. Under B above a $25 per week excess over the maximum of $100 per week hRB been earned for each of 20 weeks an'd thus, $500 is eliminated. The following comments apply und~r either of these methods: (a) As the limitation is progressively reduced, more and more em· ployees will be affected thus tending toward individual man auditing. (b) If, in order to lessen the burden imposed on the carrier by individual man audits, employers ~re required to keep records so as to readily disclose the amount of remuneration to be eliminated, the burden on assureds becomes excessive and the cost of record keeping mounts. (c) The time element for items sueh as piecework, homework, work paid for in a flat sum, contra.et hauling, and commissions, cannot be determined in order to apply a limitation. (d) Th~ probiem of dividing individual employees time in construction risks as between two or more classifications is increased propor· tionately as the limitation is reduced. This problem has already been encountered in connection with the introduction of the present limitation rule. It has been found that the premium developed may vary considerably depending upon the procedure adopted for apportioning the amount to be eliminated as between Mm-WINTER MEETING 57

the several classincations applicab]!3. It is believed that the simple method adopted for resolving this difficulty will be satisfactory under the present limitation, because of the relative small amounts involved. However, as the limitation is reduced the premium involved increases proportionately and controversies as respects the method used will be intensified. ( e) Rate increases will be progressively greater as the limitation is reduced in the face of increased cost of record keeping and with no premium saving to assureds in the aggregate. In addition, some assureds would pay a greater premium than they do today, as an offset to the reduced premium that would be paid by other employers. (f) Rate changes occurring during policy periods require an arbitrary adjustment of payrolls on some formula basis. (g) Multiple location risks nre generally auditable at a single location through the use of control records. Control records will not suffice for verification of limited payroll since they consist of summaries of payrolls and do not indicate individual earnings or time worked. Thus, the number of audits will increase with a further increase in audit cost. (h) Limitation tends toward the use of calendar year policies to tie in with social security and withholding tax records as being simpler from the assureds standpoint. This will impose a peak load burden on carriers and rating organizations. Comment: The '' maximum per week'' basis will eliminate substantially more payroll than the '' maximum weekly average'' basis and, thus, require greater rate adjustment. However, the "maximum per week'' basis is easier of application from the standpoint of auditing, provided the insur,ed is required to keep adequate records. Assureds can keep running records of remuneration to be eliminated without the need of entirely separate analysis of payrolls and by means of relatively simple adjustments to present records. On the '' maximum ·weekly average'' basis it is not known until the end of the policy term which employee's remuneration is subject to limitation. The ,elimination of re· muneration above the stipulated maximum per week may be comparnd to the elimination of bonus overtime and should provide no greater problem than is now ,experienced under our overtime rule. However, under the "maximum per week" plan any re· muneration over and above wages, such as lump sum bonuses, and commissions, become difficult of inclusion as remuneration because the exact amount is not known currently throughout the policy period. This affects employees whose wages are below the maximum per w~ek. 58 PROCEEDINGS

2. Payroll Limitation - Maximum and Minimum Per Week The Committee has also considered the feasibility of combining the limitation of remuneration to a maximum amount per week, discussed in 1 above, with a minimum remuneration per week. All of the comments under 1 above apply with equal force to this procedure. In addition, further audit difficulties are encountered in the determination of the minimum remuneration per w.eek. a. Floor and Ceiling on Wages in Combination with "Head Couwt" by Classifications This plan was referred to and is outlined on Page 318, Item l(a), of the Proceedings of the N.A.I.C. - 75th Session - 1944. (a) Assuming that ''head count" is available and reliable, this plan would not require individual man auditing. The validity of this assumption is subject to verification by the test audits now in progress. (b) Assuming that "head count" is available and reliable, this plan would not require additional record keeping on the part 0£ assureds. The validity of this assumption is subject to verification by the test audits now in progress. (c) This plan eliminates many of the payroll audit difficulties now being· encountered in connection with overtime, bonuses, vacation and sick leaves, tip and gratuities, and other situations of a similar nature. (d) There are instances where head count is not available (such as homework, work paid for in a fiat sum, contract hauling and commissions), and where special treatment must be provided. (e) The head count method results in duplication in the instance of employees subject to two or more clas5ifications in a particular week in the construction trades. Audits of general contractors must, in practically all instances, be made from cost records for elassiffcation application. These cost records do not reveal numbers of employees. For the construction industry generally, the obtaining of a head count by classification is almost impos· sible unless reference is made to daily time records. (f) This plan can provide varying premiums for the same risk de­ pending upon the manner in which coverage is arranged. For example, a manufacturing risk may operate plants at two separate locations within a state covered by a single classification. One plant employs high paid skilled labor and the other low paid unskilled labor. If both plants are written under a single policy, a different premium will be obtained than will be obtained if each plant is separately insured. lndividual job billing of con­ tracting risks will also produce premium which will vary from the results produc~d on an overall policy billing. (g) The application of a floor and ceiling "with head count" to MID-'WIXTER MEETIXG 59

construction risks as respects employees subject to two or more classifications is more difficult than under payroll limitation since a minimum as well as a maximum remuneration must be considered. (h) Multiple location risks are gen~rally auditable at a single location through the use of control records. Control records will not suffice for the determination and verification of floor and ceiling '' with head count'' since they consist of summaries of payrolls and do not indicate individual earnings or time worked. Thus, th13 number of audits will increase with a further increase in audit cost. 4. Alternate Bases - Man-Hour, Man.Day, Man-Week (a) Any of these alternate bases would avoid the necessity of con­ sideration of such items as tips, board and lodging, vacation, holiday and sickness pay, bonuses, and overtime. (b) Of these three bases man-hour is the most difficult of accurate development from an audit standpoint. Man-weeks is the least difficult of these three bases from an audit standpoint. (c) Under any of these methods verification would be extremely difficult and there would be a complete lack of the accounting control which now exists· with respect to payrolls. (d) Certain piecework and contract work which occur in many industries are not ordinarily eom·ertible into man-hours, man­ days or man-weeks. Similarly, many industries (merchandising, and service fields) and classes of employees in all industries (salaried) are not recorded in the assureds' books on man-hour, man day, or man-week bases. (e) Audits of general contractors must, in practically all instances, be made from cost records for classification application. These cost records do not reveal man-hours, man-days or man-weeks. (£) Multiple location risks are generally auditable at a single location through the use of control records. Control records will not suffice for the determination and verification of man-hours, man-days and man-weeks since they do not contain this information. Thus, the number of auJits will increase with a further increase in audit cost. (g) Man-hour records are kept by individual employee in all indus· tries where ··wages are paid on an hourly basis. Such records, however, do not contain totals of hours worked by classifications of employees nor accumulate hours worked OYer periods of time corresponding with policy periods. Thus. even in those industries where man-hours are available, assureds would be required to institute and keep separate records which are not now necessary. Respectfully submitted, Special Committee on Overtime Wages ·Na• tional Council on Compensation Insurance W. F. Roeber, General Manager 60 PROCEEDINGS

EXHIBIT ''B'' REPORT OF THE ACTUARIAL COMMITTEE TO SPECIAL COMMITTEE TO MEET WITH COMMITTEE OF N.A.I.C. November 13, 1946 Re: Workmen's Compensation Imurance Ezpeme Ezperience by Size of Bis'k In a report regarding expenses by size of risk to the Special Committee to Meet With Committee of N.A.I.C., submitt.ed under date of October 19, 1944, the Acturial Committee expressed the following opinions and con­ clusions: "(1) Because of the nature of the investigation, such study could not be carried on continuously by an annual call for experience, for example, but would have to be undertaken as a specie.I study that might be subject to recheck, at intervals of a few years, if circumstances should indfoate the n~eessity of so doing. '' (2) By the very nature of the problem, complete and absolute ac­ curacy cannot be obtained. Even the general study of expenses by function and line of busin/;!SS necessariJy involves judgment in the formulation of definitions and procedures of allocation with respect to certain types of expenses. "(3) A close approach to accuracy would entail setting up an elaborate and comprehensive cost accounting system. This would prove to be extremely expensive and the improvement in the results obtained would not justify the increase in the ~penses involved. "(4) Due to the different methods of operation by various carriers, the results would show a large variation by type of carrier. It must, therefore, be r~cognized that the combined results would not be significant.'' Since making the above report the Actuarial Committee has continued its study of the question of expense experieneyl by size of risk and reaffirms its conclusions, as stated above. The Committee is of the opinion that the proper time has not yet arrived to undertake a detailed special study of this nature. In the :first place, the expenses being currently incurred still reflect war conditions to some extent. Furthermore, the carriers are still faced with war time personnel difficulties and are not in a favorable ~osition to undertake a comprehensive expense study. The Committee believes that the study of expenses by size of risk Ghoul!! be eon1ined to Administration and Pay RoU Audit expense as defined in the Casualty Insurance Expense Exhibit. These categories of expense, and Acquisition expens~, are the only ones which have been considered subject to graduation in rate :filings, and Acquisition expense is treated as a budgetary allowance reflecting the General Agency sea.le of commissiOns. The Casualty Insurance Expense Exhibit provides definitions of Administration and Payroll Audit expense. Whether or not the op.erating methods of different carriers are sufficiently uniform so that the functions contemplated by these definitions are comparable and can be mad~ subject MID-WINTER MEETING 61 to reasonably uniform allocation methods is a question which the Committee is investigating.

The Committee anticipates that considerable time will be required to explore the feasibility of methods for direct allocation of expense to size groups. For ultimate refinement in a direct allocation method the actual time and supplies expended on each risk size group would have to be recorded and assembled by the carrier making the inv~stigation. Ultimate reiinement is, of course, impossible, and the Committee intends to investi­ gate the degre~ of refinement requisite for satisfactory results and to determine whether this degree of refinement is a practical possibility for all carriers. More information on actual operating practices must be Gbtained by th~ Committee to answer these questions. This information would be essential to determine that drafted instructions would fit actual practices, if simplified direct allocation methods are found to be feasible. The anticipated time required to pr~pare simplified direct allocation methods, the fact that the carriers probably must have time to establish records for such methods, and the fad that such investigations must be made on current expens~s obviate the possibility of results from such methods for several years.

In the consideration of this subject by the Actuarial Committee the suggestion was advanced that additional light might be obtained from a study based upon a more detailed report of expense data than is included in the Casualty Insurance Expense Exhibit. It is proposed that a Jisting of certain general administration expenses in greater refinement would make each item susc~ptible to segregation into two parts, one part repre· senting expenses which are considered to vary with the number of policies, and the other part representing expenses which ar,e considered to vary with the premium volume. If such ~egregation of expenses were available it might be possible to ,estimate roughly the gradation of administration expense by premium size indicated as necessary for various groups of carriers. The suggestion would require a supplementary reporting of general administration exp~nse which, if not readily available, probably could be prepared by the carriers without unreasonable effort.

The Actuarial Committee is not confident that a study of this nature would be productive of conclusive results. The Committee further poiuts out that, sinc13 recent years aJ'e not typical peacetime years, the expense data of this period are not well suited for analysis to establish general deductions. However, the proposal is worthy of study and if it proves to be both practical and informative, the study could be repeated in later and more n13arly normal years. Therefore, the members of the Actuarial Committee intend to analyze their own 1945 calendar year :figures to l!etermine whether reasonable conclusions with regard to the per policy and per premium divisions of ~xpenses can be reached. Further, it is recommended that n Call be issued for 1946 expense data to be reported by all carriers by May 1, 1947, in order that the information so developed may be available to the Committee. It is proposed that this call provide: 62 PROCEEDINGS

1. An explanation of the objMtive of the study. 2. A scheduJe listing sub-divisions of General Administration Expense such as those items separately enumerat!,:ld in Pare A, Section llI of the '• Instructions for the Preparation of the Casualty Insure.nee Expense Exhibit.'' (a) Total administration expense for the item. (b) An exp1icite description to b!,:l reported by the carrier of all operations included in the item. 3. The number of Compensation policies issued during the year; gross, not taken, and net. 4. The data to agree with the corresponding figur!,:ls in the 1946 Cas­ ualty Insurance Expense Exhibit. It is noted·that the proposed call will, of necessity, produee data. on a per policy basis, whereas expense graduation is normally considered on a per risk basis. Wether or not there are substantial differences in company practices with regard to the number of policies iss_ued to a risk is not known at this time. It is recognized that in view of the differences in operating methods between carriers it is improbable that any single s~t of apportionment percentages can be determined which will be appropriate for all <>arriers, and that different sets of apportionment perc!;)ntages presumably wiil have to be established for different groups of earners. It is also recognized that consolidations of results wi11 have meaning only to the extent that the results consolidated are from carriers having simiJar operating methods and similar distributions of business by size of risk. The additional information secured from the call would be reviewed by the Actuarial Committee in connection with its continued study of the general subject of expenses by size of risk. In the meantime, attention will be directed toward preparing instmctions and procedures leading toward a more refined analysis of expenses by size of risk by the individual carriers. Respectfully submitted, Actuarial Committee, National Council on Compensation Insurance

Cammis81oMr Hodges (North Carolina): I move the adoption of the report.

Commissioner Larson (Florida): I second the motion.

President Dineen: The motion has been ma.de and seconded by Com­ missioner Larson. Is there any debate7 Are you ready for the questionf AH in favor, signify their approval by saying "Aye." Opposed, "No." The "Ayes" have it and it is so ordered. Mrn-W IN"TER MEETING 63

Commissioner Neel here read the report of the Special Committee on Real Estate as follows:

REPORT OF THE SPECIAL COMMITTEE ON RBAL ESTATE TO THE HONORABLE ROBBRT E. DINEEN, PRESIDENT, KATIONAL ASSOCIATION OF INSURANCE COMMISSIONERS, NEW YORK CITY The special committee on Real Estate, having met at the Hotel Commodore, on Tuesday, December 10, 1946, reports having adopted the following resolution: '' ,vhereas, after comiderable study it has been determined that appraisal forms for use by all insurance companies making loans and upon acquiring property in the forty·eight states and District of Columbia. would be impractical, and '' \Vherca:o, becaul,e of the many facts pertaining to real estate or real estate loans which some insurance companies are interested in but which may not or would not be of interest or desired by other insurance companiei,, and "'Vhereas, many insurance companies use apprai,al forms covering sereraJ pages, wherea.-,, other such companies use short forms which supply limited information only, and

'' ,vhereal,, it is necessary and desirable for examination purposes to tlotermine whether or not insurance companies are having such real estate appraised, the manner ln which such appraisals are made and the quali­ fications of the appraisals, "Be it resolved that the attached forms summarizing appraisal infor­ mation pertainin_g to real estate or real estate loans, which information may be obtained from apprai:::ers reports be adopted by the National A,csociation of Imuran<'e Commi"sioners and that with each appraisal made on and after ,Tanuary 1, 1948, whereYer feasible insurance companies be required to file a completed copy of such form in each mortgage or acquired property docket. 11 Respectfully submitted,

Gregg L. Neel1 chairman Edgar B. Sims .T. Austin Carroll John D. Pearson D.R. Hodder ,J, Edwin Larson A. D. Pingree for C. E. Burns Albert F. Jordan

COKDENSED APPRAISAL INFORMATION OK O ACQUIRED FARM 0 JIOHTGAGED Date of .d.cquisition and I!ow Acquired: Deed...... Foreclosure ...... Purchase Trade ...... ---········ Owner ...... _...... HccorJ of ).Iort!-2,age Rate of Dute of :Mortgage..... ·-······· Term .. Amount $. ... Interest .. --·---··% 64 PROCEEDINGS

Location and Description of Land: Road ...... Type of Road ...... Rural Route .•...... P. 0,---·······-···· County...... State...... Nearest Town ...... Miles from County SeaL...... N ear~st R. R ...... Legal Description: Total of Acres...... Type of 1<,arm ...... Acres in Cultivation...... Acres in Woods...... Acres in Pasture...... Unusable Acres...... Class of Soil ( describe fully) : Drainage: (Natural, open ditches, tiled, with condition of tiling and ditches) Buildings: (Describe each fully and as to size, age and condition) House Barn Other outbuildings Occu,pa'fl,C'JJ: ••••••••••••••....•...... •.••.....•.... Owner or tenant ...... _ If rented give terms of lease and/or rental: Condition of fences: General care taken of premises: Comparison with other farms in community: Value: Land$...... Improvements$...... Total$...... Assessed Value: Land $ ..•.••...... Improvements $...... Total $ ...... Present tax rate...... Total taxes $--·····························-······· Amount of insurance: Fire $ ...... ••...... ••...... Tornado $ ...... ••.•••••...... •.•• Sale Price under present market: $ ...... •....••...... ••...... ••••...... •.•...• Trend: Mineral rights: Gener.al remarks of appraiser: Appraisers' Names ......

Business of .Appraisers: ......

Addresses of Appraisers: ......

Qualificadions of Appraisers: Date of .Appraisal: ......

Signature of officer and/or employee copying this form

APPRAISAL INFORMATION AS TO RESIDENCE PROPERTY 0 ACQUIRED .0 MORTGAGED Date of .Acquisition and How Acquired: Deed...... Foreclosure ...... Purchase...... Trade...... Owner...... Record of Mortgage ...... Address of property...... Legal description of property......

City or town ...... County...... State...... Population...... Zoning r~strietions...... Street improvements...... ·-······· MID·WINTER MEETING 65

Alley improvements...... Lot size...... Topography...... Landscaping...... Neighborhood and trend ...... Distance to: Transportation...... '. .. Schools...... Churches...... Stores...... Center of City or Town ...... Type of residents in neighborhood (nationality or race) ...... Type of employment and average income of residents in neighborhood......

Building: Type...... Construction ...... Age ...... Condition ...... Stories ...... Foundation...... Siding...... Roof...... Porches...... Number of rooms ...... Number of baths...... Type of floors ...... Heating...... Walls...... Decorations...... Plumbing...... Utilities ...... Size of basement ...... Closets ...... Garage: ( size, age and condition) ......

Other improvements· ·····················-········---··········-··················-·········-··········-············ Conformity with {J"ther properties in neighborhood: Occupancy: Owner or tenant...... Terms of lease and rental...... Value: Land...... Improvements ...... Total...... Assessed Value: Land and improvements...... Total...... Tax rate ...... Taxes ...... Reproduction cost, improvements: $ ..•...•.•...... •...... Depreciation: Years...... Rate ...... Amount ...... Present reproduction cost $ ...... Rental value present...... N ormaL ...... Capitalization value $ ...... ••...... •...... •..... Justified rate ...... General care ta.ken of premises: Comparison with other properties in commu.,nity: Value: Land$ ...... ImprovementR $ ...... •...... Total$...... Assessed Value: $...... Improvements$ ...... Total$...... Present tax rate...... Total taxes $...... •••••...•••••••••••...•... Amount of im:urance: Fire$...... Tornatlo $ ...... ••...... •••• Sale pric~ under present market: $ ...... Trend: Mineral rights: General remarks of appraisers: Appraisers' Names ...... ··········································-····················-··········································--··--·····--················· Business of Appraisers...... ············-·········-······························-······························-····················--···········-·········-······· Addresses of Appraisers ...... ·······················································--- ············-·················································································-································-······· Quali:fications of Appraisers: ··········--··································································-· Date of Appraisal: ············--······························-- ...... Signature of officer and/or employee copying this form

Commissioner Neel (Pennsylvania): Mr. Chairman, I move the adoption of this report.

Commissioner Harrington (Massachusetts): I second the motion. 66 PROC~EDINGS

President Dineen: The motion has been made by Commissioner Neel and seconded by Commissioner Harrington. Is there any discussion 1 Are you ready for the questionf All in favor, signify by saying ''Aye.'' All opposed, ''No.'' Will the record show that Commissioner Dineen is not voting, because I haven't had an opportunity to peruse it. I don't know whether it is good, bad or indifferent. The motion is carried. Gentlemen, the fateful minute of 12: 00 o'clock has arrived, so we are about to recess, and I want to correct one announcement which I made earlier. I gave you the correct information at the time but the program has been changed. The All-Industry group will meet at 2:30 P.M. in Parlor A. And may I say one thing to the Commissionersf As soon as the luncheon is over, will you promptly return to this room, because we have a great many matters on ou:r hands and the hotel will probably want to use the Ballroom for somebody else tonight, so get back promptly.

. . . Recessed for lunch. . . .

WEDNESDAY NOON SESSION Luncheon session, Wednesday, Mr. William H. Lucas, President, In­ surance Fed~ration of New York, Inc., opening the session.

Chairman William H. Lucas: Ladies and gentlemen, honored guests, members of the reguiatory body of insurance - that is quoting from yesterday's speech - and members of the MacKenzi,e clan - where are theyi Over here some place. They are somewhere around here; th~re are two of them here. To all of you, I express a most hearty welcome. It is indeed gratifying - and I am sure that you will be pleased at this infor­ mation - this is the largest Federation luncheon in the history of the Federation in 32 years. It is indeed a tribute to the officers and the com· mittees for the work which they have donl:l during the past year, and we accept it, ladies and gentlemen, as a token of your appreciation of the work which has been done during this past year.

It would be idle for me to express \vords of welcome beyond that and, since we have been charged with the responsibility of returning you to your duties as early as possible, it is my pleasure to introduce the Toastmaster for the luncheon today, the Chairman of our Executive Com­ mittee, Mr. Gustave Michelsen. (Applause)

Mr. Michelsen: Thank you. Mr. President, Senn.tor Ferguson, Com­ missioner Dineen, Mr. Culver, honored guests, ladies and gentl,emen:

As our esteemed President informed you, this is our 32nd anniversary, and I would like to express the appreciation of our members to the earnest men who have served without compensation ns our officers and directors, and add an expression of my personal gratitude for the support I have Mrn-,VI!\TER MEETING 67 received from our entire membership, and especially from our eminent counsel, Mr. Everette Hunt. Mr. Hunt, will you please take a bow. (Ap· plause) Also, may I express our siucere thanks to the Chairmen and the Members of the Senate and Assembly Insurance Committee for their thoughtful mid considerate attention to our problems ·whenever consulted . .Many of them are present. Both chairmen are here. Senator Mahoney, will you please rise and take a bow. (Applause) Senator Mahoney is Chairman of the Senate Insurance Committee, ,ve are also fortunate to have our good friend, As.:emblyman MacKenzie, Chairman of the Assembly Insur­ :mre Committee . .,hsemblyman :MacKenzie, will you please take a bow. (Applause) 'l'hi.s recor1l-breaking attendance indicates the deep interet!it from Buffalo, ~Ir. Jam~s R., affectionately called Ray, La,vley. Ha:,·, will you please rise. (Applau:se) Your name, unfortunately, Ray, was ommitted from the program. Our business has a long aml honorable record of public service, which has c:wscl\l it to be eyed enviou:,ly by those who would climb over our prn'-'trat~ form:;; and destroy the private e11terprise sy,;tem under which we ~('r\"e the public :::o well) unless we are alert to such plans when they a11ppar. Your ofli('crs and directors will continue in the future as they have in the past to de,lie::i.te themselves to their responsibilities of protecting your bnsillcss from un-fnir attack. Fortunatdy, the c~ate of annual meeting- coincided with that of the ~ationnl Conve-n'ti(,n of Insurance Commissioners meeting under this very roof, nnd you will note from your program that our rfais is graeed by the prc:-enee D f ;i(i commissioners of insurance from the several states, hcadeU by their President, our mvn Commissioner of Insurance of the State (lf New York, ,vlwm I shrill ask to deliver a rnes.:;age of welcome to the Yisiting commissioners. It is ·with deep pleasure that I present to you the Honorable Robert E. Dineen. (Applause)

President Dineen: Distinguishe(l guests, ladies and gent!emen: I am ycry happy today to ham the opportunit.Y fo extend greetings to my fellow Commissioners and. Gus, if you don't miHd it, I am going to extend greetings to them on behalf of the InsurancC' Federation, even if I dou 't belong to it. The thing that plea.scs me so much is the relati011ship between the Insurance Fecle1·ation, the members of our Legislature and the Insurance Department. Last ~vear I think the Insuranee Department sponsored 22 68 P&oCEEDINGS or 23 bills. At the end of legislative session, we were unable to agree - and when I say we, I say the members of the legislature, the Insurance D~partment and the Insurance Federation ~ upon two bills. That is n record of which we can all be proud and it is a record that certainly, with all my fellow commissioners here, we need make no apologies for. It is certainly a grand institution to have a Federation of this kind which embraces the producers and the business and which can demonstrate that government and business can function together. My relationship up in Albany with the Federation and with its members, - I started to go do,rn through the list of them here and it is one of thes~ things - Phil. Lucas, Johnny Stott, Gus. Michelsen, Al. Diesseroth, Everette Hunt, and Bob this, and that is the way it works and that is, in my judgment, the way government and industry should work. (Applause) I am delighted to be here. I am just thrilled at this magnificent turnout and, Senator Ferguson, I am happy, indeed, as the representative of the Dewey administration, to pay my respects to this distinguished Senator who, thank God! is a- Republican. (Applause)

Mr. Michelsen: Thank you very much, Commissioner Dineen. If super­ vising insurance ever becomes monotonous, I think you all would agree with me that Bob would do very well in Hollywood. Membership in the Federation is voluntary and open to anyone engaged in the insuranc~ business under the private ente1·prise system, and consists of employees, executives, and principals of the agents, brokers, adjusters and companies of this state. It is a most convincing demonstration of the ability of management and labor to work together harmoniously for a common purpose, the prot,ection of private enterprise. Utopian though it may seem, it is real, it works, and it is here in this room. Your officers are earnestly seeking to increase the numerical member­ ship of the Federation and it would be a fitting reward to them, for their devotion to your welfare, if you would do your share in assisting the membership committee to reach its goal. This year your Committee decided to call upon the Chairman of th1:1 Board 0£ one of the most important property and casualty insurance groups to perform the pleasant duty of introducing our guest of honor. It is my high privilege to present to you Mr. Bernard M. Culver. (Applause)

Mr. Culver: Mr. President, Mr. Toastmaster and fellow members of the Federation: I think this is one 0£ the happiest gatherings that I have ever had the privilege of attending and, in a good many ways, the most important. I am just going to take the privilege of reading a little memorandum that I have that was put out by th!3 Federation and it gives the reasons why a person wishes to join. No. 1. To foster in the general public an understanding of the insur· a.nee busineSB and the integrity of its purpose. MID-WINTER MEETING 69

No. 2 To promulgate and support Ieg1slat1on favoTably affecting in­ surance m 1ts relation to public mterests. No. 3. To oppose any encroachment by state or federal government on the business of insurance. No. 4. To improve the opportunity of all persons affiliated with the insurance business by strengthening its position before the public. And I want to couple with that the membership qualifications: Mem­ bership is open to all interested in the promotion of legitimate insurance of any kind.

I don 1t think there is in this country, let alone in the State of New York, an organization that comprises every branch of the insurance business such as this. We have organizations of the fire business, the life business, the casualty business, but this is the only organization tha.t I know of that encompasses every line of insurance. And, incidentally, the gentleman at my right commented to me that this was the poorest gathering of men that he knew of to find a prospect in. I think it is also wry fortunate and very much to the point that i.t happens that this annual meeting of the Federation is coincidental with the semi-annunl meeting of the Insurance Commissioners, who are repre­ sentea in large numbers here, and I am speaking for the organization, I am sure, in saying we are very glad to have them. The gentleman who I have had the honor of being asked to introduce, I do not kno\v much about his personal affairs, but I will ventul'e the statement that he is probably not hugely financially interested in the insurance business or that he has family affiliations that would lead him in that direction, but I am sure that he hns bn.sica1ly, and much more important, an interest in the insurance business in this respect, and that is his firm belief in the theory of state's rights. Now, state's rights, tramlated into our language, means the opportunity for each state to regulate its own business in the way that they deem best. Our guest of honor has demonstrated that he is basically and funda­ mentally of that opinion and his whole course in Congr~ss has been in that direction and I take pleasure in introducing to you the Honorablo Homer Ferguson of Michigan. (Applause)

Senator Ferguson: Thank you very much, Mr. Cuker. Honored guests and feUow citizens: I am happy that th~ previous speakers who greeted you here today told you that I was a Republican, because you may detect in what I say here today that I am a Republican and you might as well know it from the beginning. (Applause) And I am glad to welcome the Democrats here today, because I believe in the two-party system and I believe that we should have breeding stock for the future. (Applause) I realize that there are few insurance prospects here but I know there ar.e a great many American citizens here - all of you are - and 70 PROCEEDINGS

the Supreme Court has declared that insurance is a business and that insurance is interstate commerce if you carry it on along state lines.

Now, we have a business down in Washington and that business is government, and I am not coming up here today to attempt to tell you how you should operate your insurance business, became jm:t recently it looked as if you were going to come down to Washington and a:::k us how you should operate it. I think there have been too many people coming down to Washington; too many roads have been leading down to Wash­ ington for the good of this nation. I am not going to imy that all in government is bad, nor can I say that all is good, but I do want to say this to you, that I think we have the greatest form of government on the face of the earth. (Applause) And I want to say to you that it is not the form but it is the administration that we might :find fault with.

Oh, yes, I realize that there are many people who will say that it is in the form and that we should change our form. They will tell us that it is too slow, the Republician form of government fa too slow, it is not efficient, and I have seen other governments function much more speedily and, in their own thought. much more efficiently than we operate here in America. For instance·, in May of 1945 I was over in Europe as a member of th~ War Investjgating Committee. I went do"'tl through Marsei11es. I met th~ general in charge there and he told me that they had a displaced prison camp outside of Mar!

He advised the general that he J-iacl Rh0t one anil incar<'ernted 20. Yes, that is speedy. In the minds of some: that is efficiency. But not as we see it here. No. We believe in a goYernment that is, yes, less efficient, not so speedy, but we believe in a iovernment that represents the ideals of all of our people and that when we pass a law. it should be a crystalli· zation of the ideals of the people. And then we believe that these funda­ mental principles in this government of ours should protect individual rightR. We do not believe here in what they call common responsibility, that if one does wrong, as the Germans did under Hitler, they would wipe out the whole town rather than give up the idea of punishing the one because they couldn't locate that one.

Some centuries ago in Eng1 ancl under our eommon Jaw we had an idea along that line, because we made a vi1lage or a ec;mmunity pay for the damages to the king of the crime of one man. And remember when they put out the hue and cry so that they could discover who committed th,e crime rather than to pay the fine 7

We don't believe in common responsibility. We believe here in America in the individual. Mrn-\YIXTER °MEFTI::-.G 71

And then we also believe in equal justice und!'lr a law rather than under a man. I ne,:er pass that Supreme Court .Building in \Vashington that I don't read those word2 on that marble face, ''EQUAL .JUSTICE UNDER LA \V,'' rind that is what we belieTe in here in .\merica.

Now, the difficulty is that we h::ise certain trends going on down in Washington and I am going to try to ana1yze some of those trends for yoU today, because I believe that they affect your business of insurance just the same as they affect the business of other people in the community, for if other Lusiness does not surviYe, then the business of insurance will not survive, because all business in America must furvive if we are to have the great America that we, as Ameriean peopl<', are ,entitled to. I i,;aid there were certain trends away from some of these fundamentals, and ·that is the domination of the executh·e, firPt let me say over the judiciary, that is something to fear, be('ause if we are to have e1ual justice under a law, we must have the interi1retation of that law by unbiaJ'ed, unpr('judieed men. ~·es, by just Americans, and that is why it was a great thii1g in America that the packing of the Supreme Court failed. And it is just as bad, fellow citizem, to try to unpack a court now as it would have been to have packed it originally. "'e have got to go along. (Applause) ,Ye have g-ot to go along with the hlea that our courts must be independent, that they are not to be mimed bc·cause they believe in the political philosophy of any particular group. \Ve have got to believe in the idea that no minority should be harassed or embarrassed just bec:::.use they are a minority. And I say that the thing that ,Ye must be careful of in J\meriea is to get away from the domination of the judiciary lJy the executive; anrl that applies in each and every state just the same as it applies in the National Government. And then something else is equally bad, and that is the domination of bureaus over the executive and the legislatfre. \-Vhy do I say that is bad1 Be('ausc the very full{1amentals of our gm·emment were based upon the ideals and the ideas that we would allow 1=ove1·eignty to remain back in the states nnd that we would give to the fedf'ra1 government only certain powC'l'S. And this next week we are going to c.elebrnte. I believe, I saw it in the paper todny or yesterday, the Bill of Rights. \Veil. you know, I think that is a rhisnomer. Thnt isn't the Bill of Rights. The government is not g-iving to you, as citi~ens, anything under that. The first ten Amendments to the Constitution, do you know what you are really doing in those first ten amendments7 You are reserving to yourself c~rtain rights and y<1u are rnying to the politicians, the public office ho1Uers of America. ' 1 Thou shalt not do rertain things.'' They are prohibitions on the offic~ holders rather than the politicians giving yon anything. Let me analyze, for instance, just the first amendment to the Consti­ tution. It starts out by saying that the government 1~annot estabfoth a religion. It doesn't say that YOU cannot establif'h a religion. The govern­ ment cannot establish a religion or interfere in your religion, The second provision of that first article is that they shall not interfere with freedom of speech. The government shall not. And if it wasn't :for 72 PROCEEDINGS that first provision of that Constitution, in the first Amendment, you couldn't assemble here today, because it says there that the United States Government cannot interfere with your lawful assembly. And then it goes on and says, in the fourth part of that first amend­ ment, that the government cannot interfere with your right to petition the government for redress of gri13vances. And that same Constitution, those Amendments, say that the lndividual cannot be denied a jury trial. They can't deny, except in certain cases, the right of habeas corpus.

The government cannot put or house in your home, soldiers. It cannot take from you your property without due process of law and just com­ pensation.

So it has been the government that the people f!;'ared rather than the individual. Let us keep that in mind, that back home in the stat9s we have the power to do things back there.

The Chairman said that I believe in state's rights. Yes, and I am going to tell you why I believe in it, because I believe that if you are to be governed by men, you will have a better government from those men if they walk on the same side of the street in the towns in which you live. That is why I am glad that this Chairman referred to the fact that he called these men that he is working with, Bob and Bill and Dan and so on, and you applauded it. Why f Because that is one of the very funda­ mentals of our institutions here, that if you are to be governed by men who call you by your first name and must walk down the same side of the street, yOu are going to have a better government out of those people than you will if you have to have them all crowded into Washington, D. C., and not be elected by or known to you. (Applause)

So when we said down in Wasllington that insurance was business, that it could be interstate business, that it was to be regulated, the Congress of the United States said, iJt their wisdom at that time, that they believed the state laws should be applicable to that regu]ation and to that taxation, and now my State of Michigan receives between five and six million dollars in fees from insurance companies. They receive some $320,000 license fees from insurance companies. They have been regulating this business for years in one way or another and the question was presented to tho Congress of the United States as to whether or not, after the Supreme Court had spoken, we would take upon ourselves the right to regulate the business of insurance and establish a new bureaucracy in Washington and regulate it out over the 48 states, and, in their wisdom, they said not, at the present time, and they allowed certain times to expire during which the states may act. Now, that is really state's rights. And as to what Congress will do in the future, I haven't any idea, because I happen to be only one member of that body and, as they say, anything can happen in Congress and, unfortunately, it usually does. {Laughter) But I am n<;>t going to try to tell you what Congress is going to do. MID-WINTER MEETING 73

You have got a great business. You have got 38 Insurance Commis­ sioners here today. You are discussing your problems with them and I am hoping, yes, and I think we ought to pray that they will be able to solve the problems back in the states so that it will not be necessary to eome back into Washington and build up a new bureaucracy to prevent monoply in the insurance business, (Applause) because when they are trying to prevent monopoly down in Washington, we are often building bureaucracy, and there comes a time when it is very difficult to tel1 whether or not the building of bureaucracy is not as evil to the nation as the building of monopoly. Those are the things that we must face as citizens, and I want to say that I am absolutely opposed to monopoly in any form, because that monopoly ·will build up and sooner or later it will believe that it is bigger than the government and the people themselves, and when it does and can take over in one form or another, then there is no government. I said that these bureaucracies were dictating to Congress and to the Executive, and I want to give you some examples, if I can, to prove what is going on, You can't expect your chief executive, the President of the United States, to manage and to operate some 1100 bureaus and agencies and therefore you are building up these agencies ail(l these bureaus to such an extent, with so many employees that they are taking over, and they imprison not only the chief executive but your Congress, because it is impossible to do all this work down in ,vashington. And there are several reasons why that is true. One of them is civil service. Now, I am a great advocate of civil service, but at times it has its evils. because as it gets :-o large, your civil servire means that they are adding to it and promotions are brought about by virtue of the fact that the more people you have under you, the better rating you get and the better salary you get, and therefore we are adding to this large bureaucracy; and if I could take you down and let you see the bills that come through the hopper, who are they prepared byT They are prepared by the bureaus and the agencies to foster bigger and better government in "~ashington. Hundreds of them coming through the milli not sponsored by the executive himself, but out of the bureaus. And when I realize that you have on the payroll, 23,009 full-time propaganda agents for the federal government and 22, iOO some part-time, meaning more than a week and less than a year, spending better than $73,000,000 of your taxpayers' money, telling you how good the United States Government is and how they can do your busine!"s better than ;vou can do it yourself, you re~lize that there is danger in bureaucracy and propagan

And I said that these bureaus are sending up these bills. Yes1 that is what they do. Why do you know after the war in England, if I might 74 PROCEIWI:'

Those are just warnings, because I see trends down in \Vashington and I see them all over the nation, and I see it much stronger in other nations of the wudil where everybody wants to control everybody else's business awl do very little in relation to his ovm bu~iness.

Now, gentlemen, these are serious days . .As we were, as it is now, we are just coming out from a great war. We have these problems pre· sented to us. America must survfre1 Amerien. n·ill survive, but let me say that it all depends upon wli~ther or not you rnrvive. If you ,vill do your business well at home1 so that it does not affect the general welfare and is only good for the general ·welfare of the .Amcriean people, then every­ thing will Le well. But our difficulty is, we say "Pass a law! Pass a law!" if things don't suit us. '!'hat is another thing that is ,rrong. ,,~e have got too nu:uy laws. If we, under this form of goycrnment of ours, cannot survfre by self-aistipline, :;:elf-governmc11t, ,ve are not going to survive. If we have to ltarn C(Jcrcion of government in e,·erything ,ve do, we can't survive as a nation, and I am going to ::my it is up to :rnu and all of the American pcop:c to decide that we mu:-t have se\f.governrnent among our people rather th::n a law to govern every ad that they may do from the time they get up in the morning tmtil the time tht>y go to bed. (Ap· plause)

"\"Ve know what the feileral government can do. ;_>cople say that it didn't affed them. Why, it affected t!1em from the tinw they got out of bed in the mnrning and tried to pull on the ,:;Jippcrs, if they could buy slippers. u11til they ·went to bed at 11ight and. pulle

And then ]et me say that ,vhen we rinss a law, it ought to be enforced, arid just as so011 a.-, it doesn't repreFent the if1cnls of the American people, it shoulrl be repeale!l arnl not allo,,-cd to die l1P('a11se of inaction or picked up here and there a111J. exerci,:;e,1 n~ni,c,,t the fellow that ;',--'OU don't like or isn't on the same sir1e of the poli.tical fence that the administration that iF enford11g the law might be (lll. That is not Arneri('a. Let's have lnw ,rhen "·c need law nrnl let':-; haYe se)f.cJiseipline lin<'k at home, arn1 unle:c-;: we 11ce11 Ian·, don't Jet's pas.':! them just for the fun o-£ passing them. Those are the things that we faC'e here in America. Regimentation isn't over; there are still peopfo in ,\.meriea who belieY1l in regimentation, a11~l it all depends upon what the people do back home a:- to how much regimentation there ,vill be coming out of Vi.'ashington nn,i \Jut of your re:::pecti,e .states. 76 PROCEEDINGS

So I just want to say, in closing, that everything depends upon the citizens. You are not going to get a better government down in Washington than you demand back home. You get just about the government that you are going to demand. The remedy lies in the people, that is, providing their government is out on top of the table; and it is up to the American people to see that the government is always up on the top of the table so that they see what is going on; and wh~n they see what is going on, we have had in the last few weeks, I think, a very good example of public opinion - PUBLIC OPINION - the one place on the face of the earth wh,ere it can still function. And it CAN function if you will just keep it functioning. Oh, I could go on and show examples here in America, for instance, in the labor movement. I think one of the greatest things that has been wrong for the American working man and the American people in the labor movement is this, that we have had no machinery with which to carry out the laws Or the ideals of the American people, And what happened t The first thing we knew was that they started to rap on the front door of 1600 Pennsylvania. Avenue; and when you do that, and you have the President of the United States solve your labor relations, then you are going to have them solved in a political way and you are going to make them purely political and not economic or social, as they really are. (Applause) I think today what we have got to do here in America is to establish some machinery, a forum, if you pleas"', where you can solve some of these labor relations and, as I view it today, I think they can be divided into two parts. And why do I say labor relations when I speak to insurance men T Because if the labor relations of America are not good and America sound, you will have no business, or you will have less business. But you have got to· divide these relations into two parts, First, the negotiation or the collective bargaining contract, the making of the contract. And you have got to go further; you have got to get machinery to solve those problems, so that you are not fighting them out in an economie war that America may survive. And then, after you get th~ contract, you have got to have labor courts, speedy, with justice and equity to all, to take care of the breaches or the interpretation of the contra.ct, because if you don't, we don't know where we are going with these labor relations. We have had it demonstrat~d that in America, where our great industries cover the entire country, that we can paralyze the nation and we can interfere with the welfare of the American peopl!;!. Those are not only political questions; they are economic and social problems, and we must solve them, and if they are not solved, then God help America! It is up to you as citizens; it is up to me a.s a citizen and as your public official, to try to do this job in the best way, under the American traditions, not going back but going ahead, that we may have a greater America. Thank You. (Prolonged applause as all stand)

Chairman Culver: Thank you very much.

. . . Session recessed. . , . MID·WIN"TER MEETIXG 77

WEDNESDAY AFTERNOON SESSION The Final Plenary Session, Wednesday afternoon, was called to order at 2: 50 o'clock, President Dineen presiding.

Presidewt Dineen: Gentlemen, the meeting will please come to order. Before we resume the debate on the subject of this morning, I hope you gentlemen will permit me to exercise the prerogative of your President by getting rid of a few more committe,e reports.

Are there any other committee chairmen who are ready to reportf What about Commissioner Sullivan of the Fraternal Committee7

COmmissioner Frank Harrington, are you ready to reportf What about the Chairman of the Blanks Committeef Is he ready to report f

Commissioner Fischer (Iowa): I will report on Social Security.

. . . Commissioner Fischer read the report of the Social Security Committe.e as follows:

REPORT OF THE COMMITTEE ON SOCIAL SECURITY NEW YORK, N. Y., DECEMBER 10, 1946 The Committee on Social Security met at 9 A.M. in Parlor D on Tuesday morning, December IO, 1946. Charles R. Fischer presided. Rather lengthy discussions were held r,elative to social security pro­ grams engaged in by governmental agencies. Also numerous reports came to the Committee of the activities of various unauthorized organizations in the social security field. It was unanimously voted to recommend to the Association that a special committee be appointed to study and investigate th~ several plans for social security including pensions, group accident and health, hospitali­ zation and life insurance which are being promoted by labor organizations, welfare associations and other kindred organizations and that this Com­ mittee report to the Association on the relation of these plans to State supervision and also the effect of these plans and operations on th~ in­ surance business.

Commi.ssicmer Fischer (Iowa): I move the adoption of the report.

President Dineen: Do I htiar a second t

Commissioner Larson (Florida): I second the motion.

President Dineen: It has been seconded by Commissioner Larson. Is there any discussion t Are you ready for the question f All in favor, signify 78 PROCEEDINGS

by saying ''Aye.'' Opposed, ''No.'' The ''Ayes'' have it and it will be so ordered. Commissioner Don Hodder, the report of the Committee on Taxation.

. Commissioner Hodder read the report of the Committee as follows:

REPORT OF THE TAXATION COMMITTEE Honorable Robert E. Dineen President of the National Association of Insurance Commissioners Sir: The Taxation Committee met on December 10, 1946, at the Commodore Hot,el, New York. The Committee discussed the advisability of conducting a study of the taxation problem ·which arose as a result of the SEUA decision. It was decided that such a study be made and that a comprehensive report be prepared for submission to the National Association of Insurance Com­ missioners' June, 1947, meeting. Respectfully submitted, D. R. Hodder, Chairman Otto Kruger by Harold Hopton Oscar 'W. Carlson C. E. Burns by A. D. Pingree Wm. P. Hodgj:.ls

Commissioner Hodder (Nebraska): I move the adoption of this report.

Commi.~sioner La.rson (Florida): I second the motion.

President Dineen: The motion has bj:.len made and seconded that this report be adopted. Is there any discussion 'f Are you ready for the question f All in favor, signify by saying "Aye." All opposed, ''No." The "Ayes" have it and it is so ordered.

Commissioner Carroll (Rhode Island): I have the report of the Fire and Ma1'ine Committee .

. Commissioner Carroll read the report as follows:

REPORT OF THE FIRE AND MARINE COMMITTEE Hon. Robert E. Dineen, President National Association of Insurance Commissioners The :fire and Marine Committee met on Decj:.lmber 9th and December 11th, at the Hotel CommoUore, New York City. The Special Sub-Committee, appointed at the June, 1945, meeting in St. Paul, to develop a uniform statistical plan for Classified Fire Experience Mm-\YINTER J-IEETING

reported that their work had been completed and that their final report was being printed and would soon be ready for distribution to all states. The plan has been accepted for use by th~ members of the National Board of Fire Underwriters and the Federation of Mutual Fire Insurance Com­ panies. The Committee recommends that all states aliopt this uniform method of classiiication without change where possible under existing statutes and to work for the amendment of conflicting laws. In the completion of this project the Committee wishes to recognize the efforts of all who contributed to this work and feels that it augurs well for the successful outcome of the remaining items on the special :mb-committee .,s agenda. The Committee received and adopted the interim report of the special sub-committee re underwriting profit or loss and the Commissioners' 1921 StanJard Profit Formula. Superintendent Robert E. Dineen, chairman of the special sub-committee, announced that the research on this subject haJ been untlertaken for the sub-committee by Thomas C. ).forrill, Assistant to the Superintendent of New York. A copy of the report is attached (Exhibit A) and rnatle a part hereof. In accordance with the recommenda­ tion of the sub-committee, representatives of the industry and other interested parties are invited to submit briefs on the subject,- and the sub-committee will set a time and place for hearings early in 1947. The Pr~llminary Report on the Uniform Accounting Investigation, undertaken by the New York Department, and concerned with fire and marine insurance companies, was received by the Committee and referred to the e niform Accounting Committee. The Committee on Interpretation and Complaint reported progr~ss in the development of the Plan to Create Standard Definitions of Fire, Marine and Casualty Insurance. This committee should now be supplemented by the appointment of three members of the Casualty and Surety Com­ mittee as previously authorized by the Association. The customary report of the Joint Committ_ee on Interpretation and Complaint is attached (Exhibit D). Respectfully submitted J. Austin Carroll, Chairman Albert F. Jordan Jesse L. White Owen G, .Jack son Robert E. Dineen Chs. }'. Hobbs W. Ellery Allyn ,vade 0. Martin, Jr. Charles F. J. Harrington

EXHIBIT ''A'' REPORT OF THE SPECIAL SUB-COMMITTEE OF THE NATIONAL ASSOCIATION OF INSURANCE COMMISSIONERS RE UNDER· WRITING PROFIT OR LOSS AND THE COMMISSIONERS' 1921 STANDARD PROFIT FORMULA November 22, 1946 Hon. J. Austin Carroll Chairman, Fire and Marine Committee National Association of Insurance Commissioners 80 PROCEEDINGS

Sta.te House Providence, R. I. My dear Chairman Carroll: As chairman of the special sub-committee of the Fire and Marine Committee appointed to study the determination of und~rwriting pro.fit or loss and the Commissioners' 1921 formula on profit, I enclose the report of the sub-committee dated November 22, 1946. Copies of this report are b.eing sent to all members of your Committee and to ell other members of the National Association of Insurance Com­ missioners; they are likewise being released to the industry and the public. Sincerely yours, Robert E. Dineen, Chairman, Special Sub-Commi,t

REPORT OF SPECIAL SUB-COMMITTEE OF THE COMMITTEE ON FIRE AND MARINE INSURANCE The sub-committee has held three meetings at which it has considered the problem which results from the lack of agreement between the AU­ Industry Conference Committee and the National Association of Insurance Commissioners as to the proper standard for profit in the making of insurance rates. This is the single portion of the All-Industry-Commis­ sioners Rate Regulatory Bills in which a conflict of opinions between the All-Industry Committee and the Committee on Rates and Rating Organiza­ tions was not resolved, and both the Casualty and Surety Rate Regulatoiy Bill and the Fire, MariDe and Inland Marine Rate Regulatory Bill, in the drafts approved at the Portland meeting of the National Association of Insurance Commissioners, June, 1946, contained a footnote to Section 3- Making of Rates, reading as follows: ''The All-Industry Conference Committee believes the word 'under­ writing' should precede the word 'profit.' The National Association of Insurance Commissioners is giving further study to this matter.'' The footnote as quoted applies to the following portions of the respective bills at the point indicated by the asterisk(*). Casualty and Surety Bate Regulatory Bill-Section (3) "(a) All rates shall be made in accordance with the following pro­ visions: '' 1. Due consideration shall be given to past and prospective loss experience within and outside this state, to catastrophe hazards, if any, to a reasonable margin for * profit and contingencies, to dividends, savings or unabsorbed premium deposits allowed or returned by insurers to their policyholders, members or subscribers, to past and prospective expenses both countrywide and those specially applicable to this state, and to all other relevant factors within and outside this stat~.'' Fire, Marine an.d ]11,land Marine Bate Regulatory Bill-Beot,on (3) '' (a) Rates she.11 be made in accordance with the following pro­ visions: Mm-WINTER MEETING 81

'' 3. Due consideration shall be given to past and prospective loss ,experience within and outside this state, to the conflagration and c&tastrophe hazards, to a reasonable margin for * profit and contingencies, to dividends, savings or unabsorbed premium deposits allowed or 1eturned by insUl'ers to their policyholders, members or subscribers, to past and prospective expens_es both countrywide and those specially applicable to this state, a.nd to all other relevant factors within and outside this state; and in the case of :fire insurance rates, consideration shall be given to the experience of the fire insurance business during a.. period of not less than the most recent five year period for which such experience is available.''

The primary point at issue is the propriety of including all or part of the investment earnings of an insurance company in the profit factor allowed in the making of rates. The All-Industry Conference Committee, it appears, would restrict the element of profit in ratemaking to that derived from insurance underwriting operations, while the Commissioners preferred to reexamine the entire problem. Considerable research has been undertaken at the direction of this sub-committee, to aid it in its con­ sideration of the problem.

The profits of an insurance company are derived from two sources: (1) From insurance or "underwriting" transactions, and (2) from the investment of capital funds and moneys accumulated as a part of the insurance operations.1 The contention of the industry that only '' under­ writing profit'' be considered in the making and regulating of rates has required a careful study of the method of determining underwriting profit. Such a study is also required if ''profit'' alone is to be established as the standard, for ''profit'' necessarily would include profit from under­ writing.

.Actions by the National .Association of Irisurance Commissioners

The ''Convention'' form annual statement blank adopted by the Na­ tional Association of Insurance Commissioners has long contained an Under· writing and Investment Exhibit which provides a method of calculating underwriting profit or loss. This exhibit, simply described, calls for the deduction of incurred losses and incurr!;ld expenses from earned premiums, tile remainder being the underwriting profit, or, if there is a deficit, the underwriting loss. This method has been staunchly defended by the :fire insurance industry throughout the history of rate regulation. It was given authority by the National Convention of Insurance Commissioners in December, 1921, when th~ Convention by a roll-call vote of 18 to 2 adopted a majority report of the Committee on Fire Insurance which set forth 1 'what constitutes a reasonable underwriting profit and a proper and 1 uniform method of arriving at same.' 2 The principles set forth in that r_eport follow:

"l. Underwriting profit (or loss) is arrived at by deducting from earned premiums, all incurred losses and incurred expenses.

1. See Best's Insurance Reports-Fire and Marine, ( 1946), page VI. 2. Proceedings of the National Convention of Insurance Commissioners, 1922, page 20. 82 PROCEEDINGS

"2. No part of the so-c~llled banking profit (or loss) should be considered in arriving at the underwriting profit (or loss). '' 3. Five years is the minimum period over which a. dependable experience can be established. '' 4. A conflagration is any Joss in excess of a million dollars. "5. The first million dollars of loss is chargeable to the State in which it originates, the balance being pro rated to all th~ States (including the one in which it originates), in proportion to the premium income of each State. "6. A reasonable underwriting profit is 5 per cent. plus 3 per cent. for conflagrations. The 3 p~r cent. allowance for conflagrations is subject to revision if and when the records of conflagrations to be collected by the National Board show that such 3 per cent. is excessive or inadequate." The majority report stated that the committee had met in frequent and lengthy conferences for the preceding two years with a committee of the National Board of Fire Underwriters, and that the principles set forth were agreed to by the committees at a final joint meeting. The fact that these principles constituted a voluntary agreement between the regu­ lators and the regulated was emphasized in the concluding paragraphs of the report1 reading in part as follows: '' This committee should not close its report without a reference to the fine spirit with which the companies have entered into the discussion and settlement of the many perpl'3xing questions involved. '' We are of the opinion that the voluntary agreement herein effected is equitable both to the insurance compani~s and to the buyers of fire insurance * * * this new voluntary agreement for a limitation of profits on their underwriting operations, in our judgment establishes the system on a sound and defensible basis * * *.' 1a A minority report was presented at the same time by Commissioner Bruce T. Bullion of Arkansas, differing with the majority on practically every feature, and recommending, in brief, that the rule for calculating underwriting profit or loss be '' the difference between net premiums re­ ceived and actual paid losses plus actual paid expenses.''~ The 1921 formula was attacked in a lengthy paper and resolution present~d by Superintendent Ben C. Hyde of Missouri to the National Convention of Insurance Commissioners meeting at Minneapolis in August, 1923.5 The resolution asked that the 1921 action be rescinded and the matter referred to the Committee on Fire Insurance for further study. That committee considered Superintendent Hyde's views in the course of the meeting, and on the next day submitt'3d a majority report to the effect that Superintendent Hyde should submit his views to the individual mem­ bers of the Convention, and that the matter should be considered at the D_ecember meeting. A minority report, signed by Superintendent Hyde and

S. Ibid., pa~e 21, 4. Ibid., page 22. 5. "Proceedings," 1923, page 115, et seq. 83

Commissioner Bullion, asked instead for immediate action. The minority report was supported during this discussion by Conunissioner J, J. McMahan of South Carolina, who, after identifying himself as one of the two who had voted against the 1921 formula in order that he might become better informed on the subject, said:

'' I feel now that I voted more wisely than I knew * * * because * * * since then, to my utter astonishment, I have been told by one, or more members, of that majority that he joined in the recommendation without due consideration and thereafter felt ashamed of himself when he read the record and saw what he had subscribed to. Upon inquiry o.f othen,;, he was told by one or more of them that they had not duly con­ sidered all the matters involved and really con!U not fully justify the action taken.

'' I then

6. Ibid., page 131. 7. Ibid., page 152. 8. Ibid., page 152, et seq. 84 PROCEEDINGS

At the Deeember, 1923, meeting the Fire Insurance Committee repor~d9 that it had defeated the Hyde resolution by a vote of eight to two, and after deliberation had appointed a sub-committee of three to investigate the 3 per cent. allowance for conflagrations and a sub-committee of 1i.ve to '' look into the matter at length and whether there were any other weaknesses in th~. formula..'' A minority report, signed by Messrs. Bullion and Hyde concurred in the appointment of the sub-committee of five, but asked that the 1921 resolution be rescinded at once. The minority report was rejected by a roll call vote of 26 to 5, and the majority report adopted. At the December, 1928, meeting of the National Association of In­ surance Commissioners in New York City, the Committee on Fire Insurance a.sked to be discharged :from further consid,eration of underwriting profit. In putting the motion, Superintendent James A. Beha, New York, who was acting as chairman of the meeting;said: "You are adopting something that has been discussed for a long time, this underwriting profits and :fire insurance. I don't think it has ever been settled.' 110 The motion carried, and no further action on this subject has been taken by the National Association of Insurance Commission~rs. Legal .A uthorit'\es Commissioner Bullion, at the time of the 1921 resolution, was engaged in litigation with the fire insurance companies as to the propriety of a fire insurance rate reduction order which he had issued on May 13, 1920. The opinion of the court was handed down January 30, 1922, Bullion 11 • .Aetna Insurance Company, 151 Ark. 519, 523, 237 S.W. 716, in what is described as the :first insurance rate case.11 The majority opinion states '' We think the undisputed evidence shows that the term 'underwriting profit' has long had a definite, certain and well-known. meaning in insurance circles * * underwriting profit is arrived at by deducting from earned premiums all incurred losses and incurred expenses.'' In reaching this conclusion the court relied upon the 1921 action of the National Convention of Insurance Commissioners and upon the fact that the underwriting exhibit constructed upon this basis had been in us~ in Arkansas for more than ten years. The court also made clear that in so holding it was construing the language of the particular Arkansas statute from which the Com­ missioner derived his rate regulatory powers and upon the acc~pted canon of construction that '' where a word which has a known legal meaning is used in a statute, it must be assumed that the term is used in its legal sense in the absence of an indication of a contrary intent." S6 .A.. 4' E. Eno. cf Law (Snd Edition) 607. From this it may fairly be assumed that the approval of the earned premium less losse~ and expenses incurred formula was based upon a legal construction of a particular statute relying, in turn, upon actions of the National Conv.ention of Insurance Commis­ sioners, and was not based upon an original consideration of the funda.­ mental merit of the formula.

9. "Proceedings," 1924, page 46, et seq. 10, "Proceedings," 1929, page 20. 11. Reply Brief of Respondent Fire Insurance Companies, psge 7, Commisssion· er of Virginia eJC rel Aetna Insurance Co., before the State Corporation Commission, 1929. MID-WINTER MEETING 85

In the same month that the Bullion 11 • .detoo decision was rendered (January, 1922) Superintendent of Insurance Ben C. Hyde of Missouri issued the :fire insurance rate reduction order which, after much litigation in the state courts of Missouri, the Federal District Court and the U. S. Supreme Court, led to the impounding of millions of dollars of excess premiums and, eventually, to a bribery scandal of far-reaching effects. The litigation is cited here, because it led the Supreme Court of Missouri to consider the methods of determining underwriting profit, In a lengthy and studied opinion, the court, using vigorous language, approved the method contended for by Superintendent Hyde, by which losses and expenses paid are subtracted from premiums actually received. .detna Insurance Co. ti. Hyde, 315 Mo. 113, 285, S. W. 65 (1926). A writ of certiorari was granted by the U. S. Supreme Court, but after hearing the writ was dismissed on the ground that no federal question was presented. 275 U. S. 440, 72 L. Ed. 357 (1928). During the pendency of this litigation, the stock :fire insurance com­ panies sought to enjoin enforcement of the Superintendent's rate reduction order through an action brought in the Federal District Court. This court also upheld the premiums received Jess losses and expenses paid basis. Aetna Insurance Co. ti. Hyde, 34 F. (2d) 185 (D.C. Mo. 1929). On appeal, the U. S. Suprlclme Court considered only procedural questions. National Fire Insurance Co. v. Thompson, 281 U. S. 331, 74, L. Ed. 881 (1930). The earned-incurred formula was also held to be erroneous in a Kansas rate action. Aetna lrn;u.rance Co. v. Travis, 124 K&n. 350, 259 Pac 1068 (1927), but the opinion of the Kansas Supreme Court reveals a misconception of insurance accounting principles so great as to invalidate any authority that it might otherwise have had. For example: '' Plaintiffs contend that in determining underwriting profits earned premiums only, less incurred losses and expenses, should be considered. This contention is erroneous as to both items. '' Incurred losses and expenses are losses and expenses as originally claimed, and average from year to year from 10 per cent to 12.:lh per cent more than losses and expenses actually paid. In· determining the profit of any business there can be no reason for computing the outgo greater than it actually is. This error alone goes far toward requiring a reversal in this case. ' ' The definition of incurred los:;:es and expenses will be considered later in this report, but that given by the Court is wholly erroneous. A wealth of reasoning and argument as to rate regulation is to be found in the briefs, opinions and orders in the Virginia State Corporation Commission Fire Insurance Rate Case, which resulted from an order entered June 18, 1928, by the Commission withholding its approval of rates, etc., :filed by the Virginia Inspection and Rating Bureau. The Com­ mission eventua11y was upheld by the Supreme Court of Appeals. .Aetna Insurance Co. "· Commonwealth, 169 S.E. 859 (Va. 1933). In this litigation, the Commission found it necessary to modify the earnecl-incurred formula in a manner which is clearly described by counsel for the stock :fire insur· anc.e companies as follows: 12 12. llrief for the Appellants, Supreme Coun of Appea111 of Virginia, Attna Inaunsnce Co. 1.1. Oommonwealth, pages 121·24. 86 PROCEEDINGS

''The National Convention of Insurance Commissioners, a body com­ posed of state officials having charge o:f the regulation and control of insurance companies, adopted in 1921 as a result of years of consideration, a report of its Fire Insurance Committee as to the m!;!thod for determining a reasonable underwriting profit for fire insurance companies. * * * The 'Earned and Incurred' method was approved by tlte Convention and a formula adopted for det~rmining underwriting profit, and Section 1 of the formula - which is the only section with which we are concerned at present - is as follows:

" 'l. Underwriting profit (or loss) is arrived at by deducting from earned premiums all incurred losses and incurred expenses. '

'' This formula is known in the insurance world as the Standard Profit Formula and is in general use by tl1e companies, and it is the con­ tention of the appellants that it is the proper formula for ascertaining underwriting profit, or profits from rates charged under the Virginia statue. '' It will be seen that under this formula three factors enter into the calculation of underwriting profit, viz: earned premiums, incurred losses and incurred expenses, and, therefore, in turn the definitions of these three terms must be considered, and the formula for ascertaining each of them followed in applying the formula for ascertaining und~rwriting profit. To the terms 'incurred losses' and 'incurred expenses' we will devote no discus:,ion, because Commissioner Epes in the formula adopted by him for determining profits from the premium income only has incorporated losses and expenses, which are substantially the technical 'incurred losses' and 'incurred expenses' of the companies. But the factor in the formula, which he has radically changed, is the factor of 'earned premiums.' The companies' formula for ascertaining earned premiums for any year ( and the formula could of course be made applicable to any period by sub· stituting the word 'period' for the word 'year') is as follows* * *: "'Earned Premiums-From the amount of gross premiums written on insurance contracts during the year, deduct return premiums and premi~ ums pajd for reinsurance. To the result so obtained add Unearned Premi­ ums on outstanding business at the end of the preceding year and deduct Unearned Premiums on outstanding business at the end of the year.' "Therefore the convention proftt formula - the Standard Profit Formula - used by the companies can be expressed as follows: '' 1. Net premiums written during the period. '' 2. Add aggregate unearned premiums at the beginning of the period. '' 3. Deduct aggregate unearned premiums at the end of the period.

1 ' 4. Deduct losses incurred during the period. '' 5. Deduct expenses incurred

'' l. Net premiums written during the period. "2. Add-Aggregate 'Liability and Unexpired Policies' at the be­ ginning of the period_ '' 3. Deduct-Aggregate 'Liability on Unexpired Policies' at the end of the period. '' 4. Deduct-Losses incurred by fires oeeurring during period. '' 5. Deduct-Expenses incurred during period. '' It is therefore f':een that the radical chang-e made by the State Corporation Commission in the formula is the substitution of 'Liability on Unexpired Policies' for 'Unearned Premiums' at both the beginning and the end of the period in order to arrive at the 'earned premiums,' from ·which the incurred losses and incurred expenses for the period are to be dedueted to ascertain the resulting profit.'' The Commission found that "Liability on Unexpired Policies" was only 55 % of '' U nenrned Premiums,'' Because of the substantial growth of unearned premiums during the period un

In a rel'ent Di,:trict of Columbia rate case, American Eagle ti. Jordan, ioners' 1921 formula for determining underwriting p:ro:fit or loss is accepted in certain fire insurance texts as t"he proper method. Crobaugh, Ilandbook of ln.surance, (1931) page 1:32~\ says: '' In :fire insurance, 'Underwriting profit or loss, a~ the case may be, is the difference between earned premiums and losses incurred, plus ex­ penses incurred." (Italics in original). The method is often referred to as the ~tatutory formula, and the resultant profit or loss figure as the statutory underwriting profit or loss, presumably because of the statutes or other legal authority supporting the conyention statement blank, which contains the underwriting exhibit on the earned-incurred basis. Such expert authorities, however) appear to be devoid of arguments 88 PRoCEEDINGS in support of the ea.rned-ineurred formula, accepting it, in e:ft'eet, as an established principle in insurance accounting, The authorities which take issue with the earned-incurred formula, however, contain more comprehensive statements as to their reasoning. The publications of Alfred M. Best Company, Inc., have long carried statements as to the necessity for correcting the statutory underwriting profit or loss figures reported by companies in order to arrive at the "true" profit. Alfred M. Best, in a pamphlet entitl~d "Facts and Falla­ cies Concerning the Analysis of Insurance Company Statements,'' published in 1938 said: ts '' The insurance companies have no choice in preparing these figures; although they give an incomplete picture of underwriting results, they must be filed in this form, '' Two very important items must be considered in connection 'With the statutory underwriting profit or loss in order to arrive at the true result, which may be better or worse than the statutory figure indicates. '' The first of these is the increase or decrease in the equity , in the unearned premiums * * *. In periods when premium writings are increas· ing, the amount added to unearned premium liability, (based upon the enlire premium, with no allowance for expenses of operation), frequently results in showing a statutory underwriting loss; but the incr,ease of the equity in unearned premiums reduces the apparent loss, or turns it into a profit. On the other hand, when premium volume is decreasing, unearned premium liability also decreases, and this usually results in showing ab· normally large statutory underwriting profits. To reach the true result, the decrease in the equity must be deducted from the statutory underwriting profit or added to the statutory underwriting loss, if one is shown, '' The importance of this procedure may readily be demonstrated. Let us first consider the situation of a ii.re insurance company whose annual premium writings are rapidly increasing. In five yea.ts, premiums written increased from $600,000 to $7,700,000; unearned premiums in· creased from $750,000 to $8,400,000, and a statutory underwriting loss of $3,000;000 was r~ported. On the basis of its ratio of losses incurred to premiums earned, (loaded 15% for a 'safety factor' as explained in Chapter III.), the increase in the equity in the unearned premiums ex­ ceeded the statutory underwriting loss by over $250,000. '' In times of d~ereasing premium volume the distortion is quite as great. The premium writings of insurance companies decreased rapidly during the five years ending with 1933. One excellently managed fire company reported a statutory underwriting profit of $5,000,000; but its equity in unearned premiums decreased $3,800,000. '' Both illustrations serve to emphasize the importance of correcting the statutory underwriting results by taking into account the increase or decrease of equity in unearned premiums. The examples are actual, and all companies are affected similarly, in varying degr~es. '' 13. Page 88, et seq. MID-WINTER MEETING 89

The same principle is stated in more detail in '' Explanation of Sta­ tistical Exhibits," Best's Insurance Reports, Ftre and Martne, (1946), page XII, et seq., quoted in part as follows: ''Underwriting Gain or Loss: "'Statutory Underwriting Profit or Losa' is taken from the annual statements except for adjustments to reflect uniform treatment of Federal income and excess profit taxes, and represents a comparison of losses and expenses incurred with premiums earned, adjusted with minor profit and loss items. This statutory figure does not completely disclose the under­ writing results. We, therefore, also show our estimate of the gain or loss in the equity in unearned premiums. This equity exists because the laws require that the calculation of the unearned premium liability shall be based upon the full amount of the premiums on all policies in force, less reinsurall.ce, without considering the expense of operation. '' The annual statements are prepared in accordance with the laws of the various states, hence the insurance companies should not be criticised because the statements do not reveal fully the results of the underwriting operations. This situation is due primarily to two items: '' Equity in Reserves: '' First, the fact that the law requires unearned premiums to be set up at a figure in excess of the amount which experience shows to be necessary in the practical operation of insurance companies. This corre­ spondingly reduces apparent profit or increases the apparent loss from underwriting, except where the volume of business written is decreasing. These unearned premiums are calculated upon the entire amount of the premiums under all policies in force at the statement date with no allowance for the nece:::sary expense of operation. They represent the estimated aggregate amount which the insurance company would be obliged to tender to its policyholders as return premiums for the unexpired terms should it wish to cancel every policy in force. Since the prflmiums are sufficient to absorb both losses and expenses, it follows that every well-managed company has an equity in unearned premiums roughly equal to the per· centage of the premiums written consumed by the expenses of operation. If such a company desires to reinsure its business and retire, another company may be found which will assume all the outstanding policy liability for a payment much smaller than the amount of the unearned premiums shown by the statement of the retiring company. This discount or com· mission is allowed by the company assuming the business because if it wrote, through its own agents, business on which the premiums would equal the unearned premiums of the company taken over, it would pay to those agents and in other operating expenses practically the same percentage of the premiums written as it allows to the r~tiring company on its unearned premiums. Therefore, in attempting to arrive at the true under· writing results, the increase or decrease of this equity in the unearned premiums must be taken into account, and adjusted with the underwriting profit or loss shown by the annual statement * * *.'' A similar explanation is contained in '' The Specta.tor Insurance Year Book,'' 1946, page XXII. 90 PROCEEDIXGS

"The 'trade profit' (which fa not shown in the underwriting exhibit of the different companies but is discussed in the comment on underwritlllg operations) has been included became it is felt that no true d!;ltermination of the underwriting results of any company can be made on the statutory basis. The statutory requirements penalize the surplus of a company showing a sizable increase in premium writings, and conversely the surplus is favored where a reduction of premium writings occurs. In other words, a oompany increasing its premium volume substantially might show an underwriting loss because of the necessity of increasing the unearned premium reserve, and on the other hand, a company reducing its premium '\'olume might show a sizable underwriting profit because of the releasing of unearned premium reserves.''

The Hon. Clarence W. Hobbs, who before his death was Special Representative of the National Association of Insurance Commissioners in the National Council on Compensation Insurance, dealt with the subject in the chapter ''State Supervision'' which he contributed to Casualty In­ su-rance Principles by G. F. Michelb~cher, (1942). Referring to :fire insnr· ance rating· laws he said: ·

'' Some of these laws have led to a great deal of litigation in recent years * * * the following questions have been raised * * * and * * * are by no means conclusively determined:

'' 1. 1Yhether underwriting profit ::!hall be determined by a comparison of premiums received and losses and expenses paid over the experience period, or by a comparison of premiums earned and losses and expenses incurred * * *

'' It may be seen that, with so many important points to be settled, rate making and rate supervision are sciences still far from exact.

( ( The National Association of Insurance Commissioners has endeavored to fix a ratemaking formula for fire insurance involving the use of premi· urns earnell and losi-:es and expenses incurred, us the basis, with loading of 5 per cent. for underwriting profit, and an additional loading for the conflagration hazard. While this is the prevailing practice, it is not uni­ versally recognized.'' "ln8urance, Its Theory a·nd Practice in the United States," by Albert H. :Mo,vbray, (1946), presents a discussion of earned and unearned pre· miums and of investment aspects, beginning at page 418. In a footnote to this discussion Mowbray says, "It is also difficult to estimate what is the real umlerwriting profit or loss since the full unearned premium teserve is not required under normal conditions for the future loss and expense payments on existing policies.'' Consideration of these quotations demonstrates that, although twenty­ :five years have elapsed since the Commi~sionen,' 1921 formula was adopted, expert authorities are either unpersuaded as to its accuracy or state un· qualifiedly that it does not produce the true answer. The legal and expert authorities appear to afford far gr~ater support to the points of view opposed to the 1921 formula than to those which favor it. 91

Analysis of Principles After consideration of these diverse opinions, this sub-committee deemed it esRentiu1 to study afresh the basic principles in,olved, to approach de noro the entire pTOblem of a standard for the determination of under­ writing profit. The autho:ritie;;; cited and the (;ommissioners' 19~1 formula deal with the prohlcm of determining underwriting profit for a past period of time. It is necessary to distingufa.h this problem from that pre:-ented by the pertinent subdfrisions of the '' }faking of Rates'' sedions of the All­ Industry-Commissioners' Bills. The A.I.C. Bills require due com:ideration of past and prospective loss experience_. pai,t and prospective expenses, to a margin for (U11derwriting) profit and contingencies, to policyholder dividends and all other re1evant factors within and out3ide the state. To the extent that the loss and expense :factors used in rate making involve estimates of prospective experience, they are of course, approximate, and after these factors are determi11ed, it would be mathematically simple to add a reasonable percentage for profit and contingencies. In other words, if the loss, expense, dividend and other relerant factors of a rate are calculated, all that is needed to fix the :final rate is addition of the profit factor. No attempt has been made by this sub-committee to explore the statistical or acturial methods by which pro!'ipective experience may be calculated. It has, however, endeavored to stud:-,· the means by which the true underwriting profit of companies may be determined for past periods of time. It is pertinent to note the additional lang·uage in Section 3(a), subdivision 3 of the Fire, Marine :md Inland Marine Rate Reg-ulatory Bill: '' nnd in tho case of fire im,urance rates consideration shall be given to the exphience of the fire insurance bm,iness during a period of not less than the mo~t recent five year period for which .:uch experience is available.'' A determination of fire insurance experience is therefore exprmif'ly required, nnd the value of an accurate dete,mination will be equally great in other lines both for the as.certainment of past and esti · mation of prospective experience. A part of the sub-committee's research was devoted to a study of commercial accounting authorities on profit, which in general business, is customari1y termed '' net income.'' Robert H. Montgomery, a leading authority on accounting says:u "If a public accountant were asked to define the term 'net income,' he would probably reply: 'The net income of a business is the remainder of the earnings and profits from a11 sources after providing for all costs, expenses and allowances for accrued or probable losses.' '' Rules laid down by this commercial accounting authority as to the determination of net income are to be found in the same text, where in part he says: 15 '' Good Accounting Practice Relating to the Statement of Income.­ A reliable statement of income must be predicted on accounts which reflect

14. "Auditing Theory and Practice," Robert H. :Montgomery, Sixth Edition (1940), pae:e 421. 15. Ibid., page 407. 92 PROCEEDINGS good accounting practice if such statement is to present fairly the results of operations of a concern for a specified period. '' When expenses are incurred and benefits are received in a given accounting period, good accounting practice requires that the resulting liabilities be set up in the same period - as actual liabilities if the amounts have b~en determined definitely, -or in the form of estimated accruals or provisions if the exact amounts of the liabilities are not then known. When items of income arise or are collected in one period, and part thereof belongs to another period, good accounting practice requires that accrued or deferred accounts be set up so that the first period may not benefit by the inclusion of unrealized or uneam~d income. ''Good accounting practice requires that current income be reduced by provisions for losses or expenses which are probable, even though not yet actually incurred. When losses or expenses are mere possibilities, the facts can usually be displayed as a footnote to the financial statements. When it becomes apparent that the loss or incurrenee of expense is

probable1 the situation should be reflected in the accounts. Experi~nced judgment is required for determination of the appropriate treatment in borderline eases.'' Applying these quotations to the determination of underwriting profit or loss the items of income to be considered would be those from premiums ( excluding investment items for this portion of this discussion), and the deductions therefrom would be for losses and expenses, although the word "loss" must of course, be given the insurance rather than the commercial meaning intended by Mr, Montgomery. This approach, therefore, suggests that the problem of determining underwriting profit or loss for a specified past period of time requires determination of the premiums, losses and expenses which are applicable to that period of time. These factors will be considered in that order. Premiums Only two methods of establishing premiums in the computation of underwriting pn.1fit or loss are to be found in the authorities - premiums received ( often termed '' premiums written'') and premiums earned. These terms are well understood in the business. Satisfactory short definitions are found in Best's Insure.nee Reports, Fire and Marin~,16 which, modified by substituting the word "period" for "year" may be restated as follows: Net premiums written represents the aggregate net amount of the premiums upon all policies issued during the period, whether collected or not, and after deducting all return and reinsurance premiums. Net premiums earned represents the adjustment 0£ the net premiums written with the increase or decrease during th~ period of the liability of the company for unearned premiums. The word ''net,'' of course, refers to the deduction from gross

16. 1946 Edition, page XII. MID-WINTER MEETING 93

premiums written of all return and remsuranee premmms Smee both re­ turn prenuums and remsurance premmms ceded are direct dtmmutions of income, the propriety of ''net' ' premiums as the basis for discussion seems obvious. The terms are also defined in the Commissioners' 1921 formula11 in the same sense, except that the manner of calculating earned premiums is more exactly stated as: '' From the amount of gross premiums written on insurance contracts during the year deduct return premiums and premiums paid for rein­ surance. To the result so obtained add unearned premiums on outstanding business at the end of the preceding year and deduct unearned premiums on outstanding business at the end of the year.'' A textbook explanation of earned premiums is found in Mowbray:tB "Premiums Not Earned until Service Performed.-Premiums paid in advance, though legally the property of the company, have not been earned, for no service has been rendered * * *. '' It is then, fair to say of that part of the premium designed to pay current losses that it is earned pro rata as the term of the policy passes, and the part corresponding to the unexpired portion of the current term, and all amounts charged in anticipation of losses to occur after the expiration of the current term, are unearned.'' As this quotation implies, the protection which an insurance policy affords is rendered continuously over the term of the contract. The insurer earns the premium day by day as it provides the protection. The company must establish a liability for the aggregate portions of all net premiums received for which it must render insurance in the future, and which, therefore, are unearned premiums. The unearned premium concept has a parallel in commercial accounting, as indicated in the following quotation from Montgomery:19 "When items of income arise or are collected in one period, and part thereof belongs to another period, good accounting practice requires that accrued or deferred accounts be set up so that the ilrst period may not benefit by the inclusion of unrealized or unearned income.'' This reasoning directly supports the earned premium basis of allocating income to the period for which underwriting profit or loss is to be determined. The incidence of premiums written, under this theory, has no relation to the amount of insurance protection rendered in a specified period. The directly relevant factor is premiums earned, which are measured by that part of aggregate premiums on contracts written before and during the period which is applicable to protection rendered during the period. The formula - premiums written plus unearne(l premiums at the beginning of the period and less unearned premiums at the end of period is a simple statement of the method of determining earned premiums.

17. "Proceedings," 1922, page 21. 18. Mowbray, op. cit. page 418, et seq. 19. Montgomery, op. cit., page 407 94 PROCEEDINGS

The Virginia Corporation Commission case cited earlier is thJ3 only source which adopts a different earned premium formula. As stated in the reference above, the Commission substituted "Liability on Unexpired Policies'' for ''Unearned Premiums'' in the formula. While the Com­ mission's argument is exhaustive, it may be generalized as based on the premise that policies in force may be carried to expiration or reinsured in another carrier for not over 55% of the actual pro rata unearned portion of the pr!c)miums on such policies. This assumes a profit factor, a loss factor to expiration, and a low expense factor because acquisition costs have been expended at inception of the policies. It must be considered whether this confuses the problem of determining the premiums income which is applicable to a specified period of time, since the profit factor relates to profit to be earned in a future period, and the problem is to calculate profits in a past period. On the same basis, factors of future loss and expense have no place in the determination of income for a past period. The reasoning in this ease is akin to the "equity in unearned premiums'' theory of Best,20 except that Best applies the correction 1 directly to '' statutory underwriting profit, ' rather than to the computation of earned premiums.

Aetna v. Hyde and Aetna 'ti'. Travis, cited above, substitute ''pre. miums received'' for '' premiums earned.'' These decisions appear to be opposed to the weight of authority, which holds, in effect, that income applicable to a specified period of time should not be measured by the accident of when the income was received, but rather by whether the service purchased was performed in that period. In any such length of time for which underwriting profit is to be established, insurance companies furnish coverage £or which premiums were '' receiv~d'' in a prior year or years, and receive premiums for insurance which must be rendered in the future, so that there is no direct relationship between the premiums received and the insurance coverage rendered.

A quotation from a recent paper by Ralph H. Blallchard, Professor of Insurance in the School of Business, Columbia. University, defines earned premiums precisely, and in language which is appropriate to the approach here adopted: The earned premium on a given policy contract is the part of the total premium for the policy which is applicable to a given period.' '21

This quotation, as wen as the previous discussion, may be directly related to the theory that a sound underwriting profit or loss formula will be based on earned premiums as the measure of income applicable to a past period of tim~. Losses

Determination of the losses which are applicable to a specified past period of time requires, as in the discussion of premiums, consideration

20. Sllpra, 21, "Survey of Acoident and Health Insurance," Bureau memo No. 62, Federal Security Agency, Social Security Administration, Bureau of Research and Statistics, August, 1946, pg, 1. Mrn-\Vl'.\TER 11:EETING 95

of two methods suggested in the authoritLes - losses paid and losses incurred. Professor Blanchard says:

"Incurred losses are the losses paid and to be puid on account of particular events.' '22

Therefore, using fire insurance as an example, a fire which occurs during the period of time for which experience is computed repre~ents an 1 ' incurred'' loss, whether or not the claim is actually paid in that period or later. Paid losses in any period will include those which occurred. in prior periods.

The occurrence of a loss is, of course, fixed and definite in point of time; it can be allocated to a period of time with accuracy and can be related directly to the earned premiums on the insurance covering the loss. The payment of a loss, however, may be at almost any time after the vent, as in third party liability claims, ·which are often litigated, and final settlement may be postponed for years. Substantial sums are frequently paid out long after liability policies have expired and all premiums to which the losses were related have been earned. Referring once again to the Commissioners' 1921 formula, the method of calculating losses incurred is there stated as:

1 ' To losses paid during the year, add sakage and reinsurance re­ cornrable outstanding at the end of the preceding year, and deduct salvage rrnd reinsurance recoverable outstanding at the end of the year. To the result so obtained alld all unpaid losses outstanding at the end of the year anU deduct unpaid losses outst:mdi11g at the end of the preceding year.' 123 The salrnge and reinsurance items directly reduce losses, and may be disreg-ardeU for this discussion. The f!ounrlness of the formula may be teP:ted by logic. Insurance companies always have claims in process 0£ aU;justmcnt. and at eaeh statement date mu;,t establish a liahi1ity for unpaid claims. For any specified pNioU of time, if unpaid losses are exactl~· the same amount at the end of the period as at the beginning, los::ces incurred must hnxe exactly equal1ec1 losses paid. However, if unpaid los1-es arc greater at the end than at the beginning, then more losses must Jiavc been incurred than were paid, and the reverse is true. Rc;;crves for unpai1l losses :ne 11cC'esrnrily estimated, and any inac­ curacy in the estimates would prorluc~ a corresponding inaccuracy in losses incurred, except to the extent that errors at the beginning and end of the periotl mig)1t be offsetting. Thi,: fact. it mny be argued, does not relate to the sounrlness o-f the formuln. but simply indicates the necessity for en.re in appl;dng it. There are \Yell-deYoloped methods of testing the accurncy of unpaid claim estimate.~. The use of ''losses paid'' instead of ' 1 losses incurred'' is supported by Aetna v. Hyde and ..detna, i·. Travis, but other authorities suggest that the use of ''losses incurred'' permitl'! the establishment of a direct relation· ship with premiums earned in any specified period of time.

22. Ibid., page 1. 23. "Proceedings," 1921, page 21. 96 PROCEEDINGS

Expenaes The Commissioners' 1921 formula defines the method of ascertaining expenses incurred as: '' To all expenses' paid during the year add expenses unpaid at the end of the year and deduct expenses unpaid at the end of the preceding year." The logic of this formula is the same as that underlying the com· putation of losses incurred, previously discussed.

The "expenses paid" method is contended for only in Aetna -ti. Hyde and Aetna v. Travis, in each case as a part of a "premiums received less losses and expenses paid'' formula. It is not found in other authorities. Nearly all expenses in the insurance business can be paid with little delay, so that unpaid f;!xpenses are not large in proportion to paid expenses for any reasonable length of time. Therefore, there is little difference, ordi­ narily, between expenses incurred and ~xpenses paid. Nevertheless, the expense element in the calculation of underwriting profit or loss is, judging from a study of the legal and other authorities, the most troublesome of all. As was extensively argued in the Virginia case (Aetna v. Commonwealth), insurance companies incur a large part of their total expense on each policy at the tim~ the policy is written, yet must at the same time establish a liability for the entire pro rata unearned portion of the premium. Expenses at inception of the policy may be as much as 35%, 40% or more of the total premium, and much more than the remainder will be set up as unearned. Since there are not enough dollars in the premium to do both, the difference is taken from surplus. The companies have contended that it is the balance of unearned premiums which is established out of surplus; presumably it might also be argued that unearned premiums are set up out of premiums, and that acquisition costs are met out of surplus. This method of doing business, which is a matter of common knowledge in the insurance field, led the Virginia Corporation Commission to hold that unearned premiums include '' a pro rata part of those items of the expense element which have been included in the premium for expenses already paid or incurred.' '24 For this and other reasons, the Commission held that unearned premiums were an overstatement of the companies' '' Liability on Unexpired Policies,'' and substituted the latter term therefor in ealcula.ting premiums earned, as previously discussed. The practical effect of this change was, through reducing unearned premiums by 45 % at statement dates, to correspondingly increase earned premiums for the period by 45 % of the increase in unearned premiums. Since the Com­ mission did not ehange materially losses or expenses incurred, the net result was an equal increase in underwriting profit for the period. As was discussed, a comparable correction is mad~ by Best through calculating the increase or decrease in unearned premium equity, except that Beat ea.leulates the equity as a separa~ statistical problem, and applies it directly to the statutory underwriting profit or loss.

2-i. Order and Opinion, op. cit., page 58. MID-WINTER MEETING 97

This sub-committee has considered the merits of both of these sug­ gested methods of modifying the statutory profit formula in the light of the suggested approach that '' determining underwriting profit or loss for a specified past period of time requires determination of the premiums, losses or expenses which are applicable to that period of time.' 12li The corrective measures urged by Best and in the Virginia case both involve consideration of loss and profit elements in the unearned premium, or, in other words, losses which will be sustained and profits which will be realized in future periods of time. The pr~mium and loss phases have already been discussed and this portion of the report is devoted to con­ sideration of the suggested correction in treatm,ent of expenses. In opposition to the Commission's Order and Opinion in the Virginia case, the stock fire companies argued this phai:;e of the problem at length, as indicated in the following quotations:2s "As to the holding that the Unearned Premium includes an element for expenses already paid or incurred, we respectfully submit that no such element can be curried for reimbursement out of the Unearned Premium. Certainly an expense already paid may not properly be suspended pending the termination of the liability on the contract. The Unearned Premium Reserve cannot be treated as containing any amount representing such expenses, certainly unless such expenses are accrued, or distributed, over the life of the policy. Obviously this would require these expense items to be capitalized and carried by the company as an asset in order to balance its books. * * * But it is not permissible to carry in the company's statement as an asset an item of expense which has been paid and is not recoverable, and, of course, it is not the practice of the companies to do so. Such an item would not be treated as an 'admitted asset' by the authorities by any Stat~ for solvency purposes. "Nor can a valid contention be made that, while it is not proper to accrue paid expenses for solvency purposes, yet it is proper to do so for rate making purposes. * * * ''Until the legislature sees fit to chang_e the solvency standard, profits for rate-making purposes must stand or fall as judged by that criterion. "If a paid expense is not definitely recoverable, it has no place in the assets of any company. Assets representing paid unrecoverable expenses do not pay the policyholder whose property has been destroyed by ftre. • • • '' There is no prepayment of expense in any just sense, but expenses are paid only for debts due and owing at the time when incurred and paid and are not debts relating to some other or futur~ period but debts owing and payable for completed service or obligation during the period calculated. "The testimony of Mr. Doscher (R. pp. 849-850, inclusive), illustrates very clearly that it is not practicable to distribute expenses paid over the life of the policy, that it is not practicable to have different financial

25. Supra. 26. Brief for the Appellants, Aetna v. Commonwealth, Supreme Court of Appea1s of Virginia, page 150 et seq. 98 PROCEEDINGS set-ups for solvency and profit purposes and that no recognized form of accounting permits the setting up of an expense as an ass~t incurred or paid that is not recoverable. "'Q. Now, Mr. Doscher, it has been said in this case at various times and the question was raised with respect to the distribution of the ~xpenses of companies over the life of the policy. Will you state whether or not1 in your opinion as an accountant, that expense can be properly distributed over the life of the policy in a recognized and proper account­ ing method 'f '' 'A. Expenses that are paid and not recoverable, under good ac­ counting practic!3 and good general business practice, cannot be allocated over a given period. They are chargeable in the period when they are paid, or when they are incurred, because of the fact that they are not recoverable. Under existing regulations of the State of Virginia and also all the States of the United States, no insurance company is permitted to carry as an asset for the purpose of determining its solvency, an accrued expense, or a deferred cliarg.e, whatever you call it. Those regulations specifically prohibit setting up any earnings of that nature by a company and including them as admissible assets. General business practice would preclude a company doing that. It would, no doubt, have a serious effect on the financial condition of the company, I know that, if I personally, were offered a policy of an insurance company that had a large sum of money set up as assets, representing expenses actually paid or incurred which were not recoverable, I would be inclined not to accept the policy, as the financial set-up would not be sound on that basis. * * * " 'Q. As an accountant, Mr. Doscher, do you know of any recognized or proper form of accounting, in which you can set up as an asset in your statement any expense which has actually been paid, or incurred, and which cannot be recovered 'i' '' 'A. I do not know of any good, sound accounting practice or principle that would permit the setting up as an ass.et of an expense incurred or paid that is not reeoverable.' '' It is not sound to capitalize an expenditme whieh has been made and the money paid out, without right to recover, because it is in no sense an asset. All that can be said to exist is a contingently possible recoupmeut of it, not as of legal right, but by a custom in some cases, contrary to legal obligation. This custom, of course, relates solely to the agent's commission. 'l'he agent is in no case bound to reimburse any part of this expense, whatever the future eontingeneies may be. If he does so in excepted cases, he does so as a voluntary act and not because he is under legal obligation to do so. The unanswerable fact in these considerations is that it is violative of every conception of sound account­ ancy to treat as an asset a sum which may or may not be recoverable, which has been expended for a complete se1·vice which has been paid for and the recoupment of which is exc~ptional, contingent and not resting in legal right. While there is a possibility- of recovery of a part of the agent's commission, in some cases, there is not ever a possibility of recovery of any portion of other ,expenses which have been paid or in­ curred. * * * MID-WIXTER MEETING 99

'' There is a marked distinction between amortizing the discount in the sale price of a bond and spreading expenses which have been already paid or incurred over the term of a fire insurance policy. In the former case the bond has a definit~ period to run and it is a simple matter to pro rate the amount of the discount over the term of the bond, but a fire insurance policy being subject to cancellation at any time, there is no logical basis on which the spread of the expenses could be pro rated. '' In support of his claim that a large element of the I Unearned Premium' represents expenses already paid or incurred, the Commissioner cites the testimony of three of 'the companies' own witnesses, Messrs. Doscher, Hess and '\Vitt, extracts of which are given in Appendices 4, 5 and 6, respectively. \Ve respectfully submit that this evidence does not substantiate this claim. This evidence was introduced for the purpose of showinJ:!:, and does show, that approximately 40% of the amount carried in the 'Unearned P1·emium Reserve' at any time has been contributed from the paid in or accumulated ,:urplus of the company. This is occa.­ sione'et would be inarlmi,c:,c:ihle in a statPment of condition. (b) A paid expem;e is not definitely recoverable, and to treat it as an asset is violative of sound accountancy. (3) There is no real prepayment of expense, because aU such expense i:< for debts owing and payable for completed :::.ervice or obligation. ( 4) There is no logical method on which the expenses could be pro rated O\-er the term of the policy. As to point (1), it is well understood, of course, that the establish­ ment of unearned premiums is prescribed by law, and it follows that any correction for expense factors could, as stated, be accomplished only by accruing such items in an asset account. Point (2a) is well taken, because such an asset would be inadmissible (see, for example, Section 71(2) New York Insurance Laws). While it may be true as claimed in point (2b) that such paid expenses 100 PROCEEDINGS are not always recoverable, the question as to whether setting up such an asset is sound accountancy is dealt with in the text by Montgomery pre· viously cited; on page 245, ~t seq., Montgomery says: "Prepaid expenses * * * represent the residual amount of an expenditure * * * made prior to the balance sheet date, with respect to which a portion should be charged to income in subsequent periods * * *. "It is a generally accepted principle. of accounting that, where prae· ticable, expenses and costs which are a charge against earnings of more than one period should be apportioned equitably to the specific periods which derive the benefit • * *. '' From the standpoint of good accormting practice, there is no option as to how items should be charged when the benefits therefrom clearly aid or are reasonably expected to aid subsequent periods. If expenses are incurred in a single year, or during a few years, and if those expenses are incurred wholly for the purpose of increasing profits of future years, such expenditures are clearly in the nature of an investment and should be apportioned to income over the periods which are expected to benefit therefrom.' ' Montgomery also notes (page 260) that "Deferred Charges" accounts are required in Uniform Systems of Accounts for Telephone Companies prescribed by the Federal Communications Commission, and that prescribed by the Securities and Exchange Commission for Public Utility Holding Companies. Similar requirements by other authorities were found in ad­ ditional Uniform Systems of Accounts examined as a part of the sub­ committee's research. This authority, obviously, is in conflict with the assertion in the Brief that such treatment is ''violative of sound accountancy.'' Montgomery, in faet, holds that sound accountancy demands the accrual of prepaid expenses. Studies by this sub-committee of accounting procedures which would reconcile the establishment of a prepaid expense account for und~rwritiDg exhibit purposes and yet disallow it as an asset for solvency purposes indicates that there are parallel techniques in use for other items. The treatment of unauthorized reinsurance in those states which disallow such reinsurance is an example. The underwriting exhibit is not affected by such disallowance, but the effect on surplus is handled by a separate entry through the ''miscellaneous'' or change in surplus exhibit. This could be done £or prepaid expenses, if such a procedure were decided upon, by setting up the account for underwriting exhibit purposes, charging it off as a non-admitt~d asset, and carrying the a

Year Fire Premi'lmis 1945 $663,000,00-0 1944 621,000,000 1943 583,000,000 1942 546,000/000 1941 508,000,000 1940 467,000,000 1939 448,000,000 1938 458,000,000 1937 4'73,000.000 1936 461,000,000 1935 473,000,000 1934 473,ooo,.ooo 1933 453,000,000 1932 501,000,000 1931 567,000,000 1930 645,000,000 1929 723,000,000 1928 700,000,000 1927 706,000,000 1926 732,000,000 1925 699,000,000 1924 652,000,000 1923 673,000,000

2'f. Supra. 28. Best's Insurance Reports-Fire and Marine, 1946, page VII. 102 PROCEEDJNGS

1922 595,000,000 1921 571,000,000 1920 685,000,000 The great up and down trends a.re clearJy shown, and it will be observed that in 1920, 1923 and 1925-1929, inclusive, peaks were reached that exceed the 1945 Ilgure. lMJestment Profits At the beginning of this report it was stated that the primary point at issue is the propriety of including all or part of the investment earnings of an insurance company in the profit factor allowed in the making of rates. The foregoing discussion was considered essential to consideration of an underwriting profit formula; with this as a basis, consideration must also be given to the investment aspects. The subject of investment profits was referred to in 1917 by Com­ missioner McMaster of South Carolina, who expressed doubt that invest• ment operations of fire insurance companies were charged with their ful] share of expense,29 In 1918, Commissioner Button implied tha.t profits on investment of unearned premiums should be considered.so The Commissioners' 1921 formula provides that "No pa.rt of the so-called banking profit (or loss) should be considered in arriving at the underwriting profit ( or loss). ' ' The resolution presented by Commissioner Hyde of Missouri in 1923,st which was defeated by the Convention took a dual position - that al] activities of insurance companies must be considered in rate making, al] earnings "charged 11 to profit, yet he added "It is preposterous that the policyholders should be charged rates to cover losses occasioned by extrav­ agant methods or unsafe or speculative investment of funds.'' In ..4.etna. -v. Hyde, previously discussed, the Supreme Court of Missouri, after extensive reasoning, but relying in the end on statutory language (Section 6281, R.S.1919, Insurance Laws of Missouri) found that "interest on unearned premiums is an underwriting profit.'' However, in the con­ current Federal Court case, .Aetna v. Hyde, 34 F (2d) 185 (D.C. Mo. 1929), this court held that interest on unearned premiums should not be included in calculating underwriting income. In Aetna -v. Travis, 124 Kan. 350, 259 Pac. 1068 (1927), the Supreme Court of Kansas debated whether investment earnings should be considered. The trial court had decided in the negative and the Supreme Court split equally, so that the point was left undetermined. In the Virginia case, Aetna v. Commonwealth, 169 S.E. 859 (Va. 1933), the Supreme Court of Appeals upheld the findings of the Virginia Corpora· tion Commission, which included a determination that '' income from the investment of premium income which is being held to meet presently existing but future payable liabilities'' is income produced by rates, and

29. "Proceedings," 1917, page 291. 30. "Proceedings," 1919, page 167, Sl. "Proceedings," 1923, page 115 et seq. MID WIXTER MEETI:-.G 103

should be included in profits produced by rates. In its brief in this case, the companies argued, in part:

(1) The a.mount of unearn13d premiums is a bookkeeping figure; the corresponding assets are the property of the company, not of the poliry­ holders.

(2) That such assets are not impressed with a trust in favor of the policyholders.

(3) Unearned premiums change each day and exi~t only as of given dates and not as of periods of time.

( 4) Term policies allow a reduction in rates for prepayment of premiums.

Gephart, in II Principles of Insurance," Volume II, page 236, states in de-fining '' trade profit,'' that it includes '' interest earned during the year at the average rate received during the time on the unearned pre• mium fund, first deducting from it the unpaid premium;;.''

The subject was considered in a paper "Financial Analysis of Ameri­ can Stock Fire Insurance Companies from 1926 to 1936 Inclusive'' by Robert Baker Mitchell, 1939. Quoting from pages 26 and 27:

'' Some analysts maintain that a share of investment income should be allocated to the underwriting end of the business. The argument £or the inclusion of a share of investment income in underwriting income usually centers on the contribution to earnings of premiums collected in advance an

'' While there may be some basis for believing that a portion of investment proti.t should go to underwriting profit, the difficulties of pre­ senting anything more than an arbitrary apportionment makes the ad­ justment inadvisable.''

For many years the publications of Alfred M. Best emphasized the necessity for crediting underwriting earnings with interest on reserves, but more recently has considered the adjustment to be of trifling im· portance, as indicated by the following excerpt from Best's Insurance Reports-Fire and Marine, 1946, page XIII: '' * * * insure.nee institutions hold in their posseision funds repre­ senting (a) the unearned portion of premiums paid at the beginning of the term for insurance running for a stipulated period, (b) loss claims in process of adjustment. Since the companies hold these funds solely because they transact an insurance business, and since such funds, in the main, do not represent contributions by the stockholder, but, on the contrary, have their origin principally in the premiums collected, at least a part of the interest earned by the companies upon the invested portion of these unearned premium and loss reserves should be considered, from the economic standpoint, to be part of the underwriting income, and adjusted with the underwriting profit or loss as usually computed. How much of the interest earned upon such reserves is properly a credit to the underwriting account is a question involving the consideration of many details of the operations of insurance companies. To iJiustrate, the unearned premium Jiability is computed from the date policies take effect, whereas the insurance com­ panies cannot collect from their agents the premium due until from forty-five to ninety days later; and the agents retain their commission when remitting to the companies, so that the latter do not receive all of the premiums reported in their statements, but only the net percentage remitted by the agents. Moreover, fire insurance companies must carry large cash balances, so that claims may be paid without delay, which :further tends to reduce the investment earnings. Therefore, it would be a. gra.ve error to assume that the underwriting accounts should be credited with interest upon the reserves, computed at the average rate earned by the companies. Years ago we thought an assumed interest rate of 3% was reasonable. This was reduced to 1% % in 1942. Beginning with the 1944 edition this item was omitted :from our statistical exhibits because careful study proved that the calculation is now of relatively trifling importance as only a portion of such reserves are invested and earning interest; and interest rates are now very low.''

Mr. Best gave similar testimony in the recent District of Columbia ease, where he estimated that the correct rate at that time for :figuring investment return on reserves was .49%, too slight to be recognized. In arguing this case, the companies relied upon the provision in the 1921 formula that investment income on reserves should not be considered, and on the fact that the problem is under study by this committee. They also argu'3d that the use of such a factor does not take into account the effect of depressions on investments and the need for maintaining large cash balances; that most :fire policies are written for terms, on whieh a. MID-WINTER MEETING 105 diseount is given; that underwriting has nothing to do with the movement of monies.

The foregoing is a review of opm10n and authorities as to the pro· priety of including investment earnings in underwriting profits, and pre­ sumably would merit the consideration of the Assoeiation whether the rate­ making standard is established as either '' underwriting profit'' or ''profit.'' Consideration should also be given to other phases that would merit attention only if '' profit 11 is the standard. Some attention was given in the Virginia case to a proposal that the return to which an insurer is entitled should be based upon capital, surplus and undivided profits. The Commission's Order and Opinion states (page 40), "Capital and surplus plus any other undivided profits constitute the only basis upon which the company may justly be deemed to be entitled to any sum in compensation for the general hazard of the business or the .extra hazard of a con­ flagration.'' Later, the opinion adds, '' The insurer is clearly entitled to some profit from the insurance business in whieh it is engaged in addition to what it may be able to make by the conservative investment of its capital and surplus without subjecting them to the hazard of the insurance business. ' ' It may be argued that establishing a rate of profit in relation to capital funds would induee the investment or retention in the business of capital beyond all proper requirements i also, that such a standard would remove the incentive to provide Ullderwriting capacity, for a guarantee of a return based on capital funds would remove the incentive to increase premium volume, and would in fact lead compani~s to reduce their ex­ posure to underwriting loss. The reverse of this argument would be that a return based on premiums leads to over-expansioni and that capital is attracted only by the competitive necessity of maintaining an adequate financial position. Su,mmary

This sub-committee has found the entire subject of the determination of underwriting profit, or of profit alone, to be complex and replete with conflicting theories. This report makes clear, however, that the Com­ missioners 7 1921 Standard Profit Formula has not gained full acceptance either in the courts or in the authorities. Full opportunity should be afforded for further exploration of its basic principles, including the use of earned premiums, incurred losses and incurred expenses, as well as the propriety of its exclusion of "banking" profit. In particular, it is sug· gested that methods of correcting statutory underwriting profit or loss which are reviewed herein be e:xaminerl, including the establishment of an accrual account for prepaid expense. This report is offered for the consideration of all concerned, and no inf~enee should be drawn that the sub committee has made a determination upon any aspect of the matter. It is suggested that representatives of 106 PROCEEDINGS the industry and all other interested parties be invited to submit briefs 011 the subject and that an opportunity for hearings be given. Respectfully submitted, (Signed) W. Ellery Allyn, Connecticut (Signed) C. F. J, Harrington, Massachusetts (Signed) Robert E. Dineen, New York, Chairman November 22, 1946.

EXHIBIT ''B'' REPORT TO THE COMMITTEE FOR THE DEFINITION AND INTERPRETATION OF UNDERWRITING POWERS OF THE NATIONAL ASSOCIATION OF INSURANCE COMMIS­ SIONERS OF THE UNITED STATES JOINT COMMITTEE ON INTERPRETATION AND COMPLAINT December 3, 1946 To: The Committee for the Definition and Interpretation of Underwriting Powers of the National Association of Insurance Commissioners of the United States Honorable ,v. Ellery Allyn (Connecticut) Chairman Honorable Albert F .•Tordan (District of Columbia) Honorable J. Austin Carro11 (Rhode Island) Commencing with its organization and in the performance o:f its functions, the Joint Committee on Interpretation and Complaint has re­ ported to the appropriate C'Ommittee of the National Association of Insur­ ance Commil"sioners, usually at the Association's Summer and Winter Meetings. Smh reports have mainly covered the statm, of the Definition as of the date of each report and the Joint Committee's work for the periods elapsed between reports. It may be well at this time to review the general status and progress of the Nation-Wide Marine Definition, and to this end the following report is rendered. The National Association of Insurance Commissioners of the United States in session at Chicago, Illinois, on the second of June, 1933, unani­ mously adopted the following Resolution: "WHEREAS, th'e National Convention of Insurance Commissioners of the United States, did, in December, 1922, approve a definition of Marine Underwriting Powers; and "WHEREAS, in the intervening years questions of interpretations and application of said definition have aris~n and produced certain eontro­ versies among the Fire, Marine and Casualty Underwriter!'! as to Writing Powers, ,vhich have been matters of concern in this Convention; and "WHEREAS, Marine and Transportation Insurance renders important services to and partakes closely of foreign and domestic eommerce, and its subject matters are not confined to any one state or territory but are Mm-\VINT ER 1\IEETI~G 107 of mobile nature, and therefore a nation·wide definition and interpretation of Underwriting POlvers is important; and "\YHEREAS, at the meeting of this Convention, held in New York m December, 193:2, a committee was appointed to consider the definition and intm·pretation of Marine Underwriting PO\vers and the desirability of nation-wide action in re,;.pcct thereto; and '''YHEREAS, with the cooperation of saiJ Committee, an agreement as to 11arine arnl Trarn,portatiun "'riting Powers has been arrived at Ulllong· the Fire, .Marine anJ. Casualty Insurers, pursuant to which there has been prepared and submitted to said Committee a proposed nation-wide detinitio11 and interpretation of l\Iarine and Trausportation Underwriting Po,rers; and

1 ' '\VHEREAS, a proposed agTeement for carrying out said definition and interpretation ha,; been agreed upon and it is ahout to be entered into among Fire, )Larine antl Cnsualty Insurers throughout the United States; and "\YIIERE.\S, said Special Committee of this Convention with the approval of the Fire Insurance Committee now reports recommending the approval antl atluption by this Convention of sai1l propo:::ed definition and interpretation for general acceptance in the l'nited ::3-tates, a.nd the ap· prnniJ in principle of said prope,setl AgrcC'ment among Insurers; BE IT THEREFORE ''RESOLYED, That the National Conwution accept and approve of this report of the Special Committee i and be it further

'' HESOL \'ED, That thi;; Conyeuti1m accept and promulg-ate the nation· witle {1efinition awl interp1·etation rci'dnrn1cnded Ly iis Committee; and be it further

"RESOLYF:D, That this Conwdion apprnve in principle the afore· said ~\greemc11t among :Fire, ).farirn' ;1!1,l Casualty I11surcrs; and be it fmther

••HE SOLVED, That the National Convention hereby creates a standing committee of thil' Cournntion, to be ]mown as 'The Committee for the Definition and Interpretation of Un,lenvriting Pmrer~' to collsist of three member:, to be l)f this Conn•ntinn interested in or n.ffeclcll by tlic plan herein np11rove11. '' Copy uf the Agreement i1s to ~farine anJ. Tra'lsportation Under· writing Powers, refened to in the Resolution (as amended to date) is hereto annexed, made n, part hereof an1l marked Exhibit ••A.''

Copy of the Definition oi 1larine and Transportation Fnderwriting Pmyers accepted by the saiU Re:::olution is also hereto annexed, made a. part Jiereof and marked Exhil1it • 'B.' 1 108 PROCEEDINGS

As of this date there are 233 Fire, Marine and Casualty Company signatories to the Agreement referred to above. List of such signatories is annexed hereto, made a part hereof and marked Exhibit "C." During the years there have been some additions to and withdrawals from the original list of signatories to the Agreement. Four Company Groups have availed themselves of the right to withdraw from the Agreement in accordance with Article X thereof. Other changes in the list of signatories are accounted for by reason of consolidations, mergers, dissolutions and formation of new companies. Following the action of the National Association of Insuranee Com­ missioners and subscription to the Agreement by a substantial number of insurers, the Joint Committee on Interpretation and Complaint was or­ ganized and commenced its functions, and the States listed below adopted and promulgated the Nation-Wide Definition on the dates set forth, the said Definition continuing in effect as of this date, unless otherwise indicated: State .Adopted Alabama ------·-··------···--····------·-·····------·· September 1, 1934 Arizona ···----···------·------·····------·------· November 2, 1939 Arkansas ---·····-····------···------··········-----·········-·------·- January 19, 1934 California ······------···----····------····------·-······ Jannary 19, 1934 rescinded ...... Septemb,er 28, 1934 re· adopted -··-·-·---·-----·--·-·-·------····----··-·------·-·---· June 6, 1938 Connecticut ···-·-······------···------······--····-·······--··------·-··· January 19, 1934 Delaware ·······-----···-----·-····················------·-····------·-······- January 19, 1934 District of Columbia -·-······························-·········-······· January 19, 1934 Florida ·················-····------·-----····------···--····-······ March 1, 1934 rescinded ------·------···--·-·-·-·---·------···-····----······ November 1, 1936 re-adopted ------·-·------·····-··------· November 4, 1936 Georgia --······--·------········----····------········--···-····-····· June 1, 1934 Idaho ------····-·-·-·-····------·····--··--·-·---·-············-----··· January 19, 1934 rescinded ·--·-·-·····--···------···-·------·------··-· October 10, 1938 re-adopted -·····------···---······-··········-·····················-·-·· May 3, 1939 Illinois ·········-··-···--······------·····------····------····--···---·--·- J anuo.ry 19, 1934 Indiana ········---······------······------··------············ January 19, 1934 Kentucky ···--···----·--·····-·------···--······-···················-----····---- January 19, 1934 Louisiana····--·-···-··········----·---·------··-·-·--·-········------······· September 17, 1934 Maine --··········-·-········-·····················-···-·······--·······-········- January 19, 1934 Maryland ·····-···········------·---···-·······-··-······------·-····-····-· January 19, 1934 Massachusetts ------·······················--··························--··· January 19, 1934 Michigan ······································-····--·····-····-········-·· January 19, 1934 Minnesota ··-······················-····················-··-········-·--····---· February 1, 1935 Mississippi --····················------·-·········--···---·········-····--· May 15, 1934 Missouri ----·················--·--···-·-······-----·······-······-··---·--···--··· June 1, 1940 Nebraska ----··············-··········--··-·····-·········-·····-···----·-····· November 14, 1933 rescinded ·········------····-·············---····-·····--····--·········· December 4, 1934 New Hampshire ···-···-···-··-···-········--···-·····-····-----·····--···-- January 19, 1934 New Jersey ··················-······-·-······--·····················-········ July 16, 1934 New York -----··-···---·······--·-··-·······-·--·················-········· January 19, 1934 North Carolina ----····-·--··------··-······-----·····-·-·-···--·-·-·-····· January 19, 1934 MID-WINTER MEETING 109

North Dakota ·············································-········-······· January 19, 1934 rescinded ...... December 31, 1936 Oklahoma ...... March 1, 1934 rescinded ...... March 20, 1934 Oregon ...... February 1, 1937 Pennsylvania ...... June 13, 1934 Rhode Island ...... January 19, 1934 South Carolina ···············································-············· May 1, 1934 South Dakota ...... December 31, 1935 Texas** ··················································-·····-·············· September 11, 1934 Vermont ...... January 19, 1934 Virginia ...... •...... July 2i, 1934 Washington ·······-·············································-····---······ January 19, 1934 rescinded ·············-··················----·························- December 21, 1934 re-adopted ...... July 25, 1935 West Virginia -··················-··········································· January 19, 1934 Wyoming ...... January 19, 1934 **Note: Texas adopted its own Definition September 11, 1934. Joint Com­ mittee has no jurisdiction. The Definition, therefore, is not in force and effect as of this date in the following States either became it was never adopted or b~cause, after adoption, it was rescinded: Colorado Nebraska Oklahoma Iowa Nevada Tennessee Kansas New Mexico "Utah Montana North Dakota Wisconsin Ohio Pursuant to Article X of the Agreement, whenever a State adopted

the Nation-"\Vide Defiinition1 the .Toint Committee on Interpretation and Complaint declared that Ag1·eement operative, effective and binding upon subscribers in such State. ·when a State rescinded its adoption, the Agreement was declared inoperative in that State. Some States originally adopted and promulgated the Definition with amendments. Over the years and subsequent to adoption, all States have made some amendments of the Definition. Whenever the supervisory official of any State appraised the Joint Committee of any Ruling which amended the Nation~Wide Definition, the Committee, in turn, promulgated the amendment to signatories. The amendments* made by each Stat~ to date are: * (See General BuUetins listed for amendatory rulings. Copies of all Gen­ eral Bulletins ·have b~en transmitted to all State Insurance Departments.) Joint Committee's General Bulleti-11, is­ Definition .A mended sued to Signatoriea State ,to permit Date No. ALABAMA Furriers and/or Fur Storers' Customers Policies eliminating 110 PROCEEDINGS

Joint Committee's General Bulletin is­ Definition .Amended sued to Signatories State ,to permit Date No. '' but only while in custody of

furrier and/or fur storer" .... June 291 1938 Personal Property Floater (Householders' Comprehen- sive) ...... Aug. 29, 1939 48 Marine or Inland Marine Poli- cies covering Contents Frozen Food Lockers ...... •..• Oct. 17, 1944 113 Silverware Floaters to include coverage at permanent resi- dence of Assured ...... • Aug. 21, 1946 133 ARIZONA Tourists and/or Personal Ef- fects Floater to include cover- age in permanent residence of Assured ...... ------··········· Jan. 10, 1940 Furriers and/or Fur Storers' Customers Policies eliminating "but only while in custody of furrier and/or fur storer" ··- Jan. 10, 1940 Silverware Floaters to include coverage at permanent resi- dence of Assured ------.fan_ 10, 1940 Personal Property Floaters (Householders' Comprehen- sive) ···------··--·------·-----·····--·· ,Jan. 10, 1940 Marine or Inland Marine poli­ ei~s covering merchandise in Cold Storage Lockers ---··------·· Feb. 29, 1944 98 Inland Marine Form covering Floor Plan Merchandise ·-----·-·· Oct. 7, 1946 134 Personal Property Floaters (By Casualty Companies) ______Nov. 26, 1946 136 ARKANSAS l)ersonal Property Floaters (Householders' Comprehen- sive) --····------May 31, 1934 8 Ancient or lli.o;toric Buildings to be covered under a Marine Form --····------··-··------···-- Oct. 25, 1940 53 Furriers and/or }'ur Starers' Customers Policies eliminating "but only while in custody of

Furrier aml/or Fur storer" .. Oct. 25 1 1940 53 Silverware Floaters to include coverage at permanent resi- dence of Assured ·······-···------Oct_ 25, 1943 84 MID-WINTER ;',fF.El'lXG 111

Joint Committee's General Bulletin is- Definition Amended 1wetl to Signatories State io permit Dote No. Marine or Inland l\farine poli­ cies covering merchandise in Cold Storage Lot'kers ·----·-······· ,fan. 3, 1944 92 CALIFORNIA Pcn=onal Property Floaters (Householders' Comprehen­ .Tune 22, 1934 12 sive) ------·······---·--·--·········-·········· f .Jnne 21, 1938 42 Silverware Floaters to include coverag·e at permanent resi- dence of Assurer} __ ,Tune 21, 1938 42 Inland Marine Policies covering Merchandise in Cold Storage Lockers --··········--···········--·······---- ~oY. 13, 1944 115 CONNECTICUT Marine or Inland Marine Form to cover Merchandi,;e in Cold Storage or Freezing Lockers____ Feb. 28, 1944 97 Personal Property Floater (Householders' CompTehen- sive) __ -··-·····-----·······------··-----··· Aug. 15, 1944 11:.! Personal Property Floater (By Casualty Companies) .. Aug. 9, 1946 132 DELAWARE Inland Marine Form to cover Merchandise in Cold Storage Lockers -·········-----·-·-·······-·-·······-- Jan, 25, 1944 94 Tourists and/or Personal Ef- fects Floater Policies to in- clude coverage in permanent residence of Assured -···-······--··· ::\fay 8, 19-14 100 Furriers and/or Fur Starers' Customers Policies eliminating "but only while in custody of furrier and/or fur storer"--···· ~fay 8, 1944 100 Silverware Floaters to include coverage at permanent resi- dence of Assured -·-···-----·······---· May 8, 1944 100 P_ersonal Property Floaters (Householders' Comprehen- sive) ······--·---······--· May 8, 1944 100 Personal Property Floaters by any company --·----········-----······---- June 20, 1946 129 DISTRICT OF Tourist and/or Personal Effects COLUMBIA Floater Policies to include coverage in permanent resi- dence of Assured ---····------···-··· Dec. 16, 1940 55 112 PROCEEDINGS

Joint Commiife• '4 Genef'al Bulletffl. ti­ Definition Amended .wed to Signatoriu State

JOfflt Commt'.ttee'a General Bulletffl is­ Definition .& mended B1Jed to Signator~, Btate

Joint Committee's General Bitlletin is­ Definition Amended ,'fued to Signato1ie11 State ,to permit Date No. Marine or Inland Marine Form to cover Merchandise in Cold Storage or Freezing Lockers.... May 31, 1944 102 Whiskey stored in B on de d Whiskey Warehouses - Tem- porary - May be written in Marine Departments ······----····-· Nov. 22, 1946 135 LOUISIANA Personal Property Floaters (Householders' Comprehen- sive) ·------···--·-·····-·······-----···------·-- Feb. 21, 1941 58 Marine or Inland Marine Form to Cover Merchandise in Cold Storage or Freezing Lockers.--- June 5, 1944 103 Inland Marine Policy covering Accounhi Receivable and De· struction of Records and Val- uable Papers ·······----·········-········· Mar. 11, 1946 126 MAINE Marine or Inland Marine Form to cover Merchandise in Cold Storage or Fre.ezing Lockers.--. Dec. 9, 1943 89 Personal Property Floaters (Householders 1 Comprehen- sive) ······----······------··----·------···---·· May 6, 1946 128 Personal Property Floaters by any Company ·-·------··------···--- tTune 27, 1946 130 MARYLAND Pei·sonal Property Floaters (Householders' Comprehen- sive) ·-··------··············· Dec. 8, 1941 63 Tourist and/or Personal Ef- fects Floater Policies to in- clude coverage in permanent residence of Assured ---···--·---·--- June 19, 1942 70 Silverware Floaters to include coverage at permanent resi- dence of Assured ······------·······-·· June 19, 1942 70 Army, Navy, Marine Corps and Diplomatic Service Policy to cover in permanent residence of Assured and elsewhere ----·--- Jan. 22, 1943 74 Marine or Inland Marine poli- cies cov_ering Merchandise in Cold Storage Lockers ...... Oct. 2, 1943 81 MASSACHUSETTS Marine or Inland Marine Form to cover Merchandise in Cold Storage or Freezing Lockers---- June 12, 1944 105 1\1ID ,fn;-TER MEE'lIXG 115

,Toint Committee's General Bulletin is­ Definition Ll. mended sued to SignatorietJ ,Ptate t_o permit Date No. Marine or Inland Marine Form covering Live Cattle from stockyards until Beef delivered to warehouse ...... June 22, 1944 108 Personal Property _Floater (Householders' Comprehen· sive) ...... rice. 3, 1945 123 MICHIGAN Cornrage of certain property of Michigan War Production Ass 'n certified by VYar rxo­ duction Board ··-·········· .. ·······--· Sept. 18, 1942 71 Personal Property Floaters (Householders' Comprehen- sive) ...... Tune 23, 1943 76 Marine or Inland :\farine Form to cover Merchandise in Cold Stomge or Freezing Lockers .... Kov. 6, 1944 114 MINNESOTA Si1renrn1·e :Floaters to include coverage at permanent resi-

dence of Assured ...... Jan. 21 1935 25 Furriers and/or Fur Starers' .Customers Policies eliminating 1 'but only while in custody of :furrier and/or fur storer''...... Jan. -,9 1935 25 Personal Property Floaters (Householders' Comprehen- sive) ...... Jan. 2, 1935 25 Marin,e or Inland l\Iarine poli­ cies covering Merchandise in Cold Storage Lockers ...... St!pt. 22, 1943 80 MISSISSIPPI Furriers and/or Fur Starers' Customers Policies eliminating "but only while in custody of furrier and/or fur storer"...... July 27, 1937 39 Personal Property Floaters ex Fire and Wind . Dee. 2, 1938 45 Personal Property Floaters (Householders' Comprehen- sive) ············-················· Feb, 3, 1941 56 Marine or Inland Marine poli- cies covering Merchandise in Cold Storage Lockers ...... Aug. 30, 1943 79 (Amended Definition to specffi· cally prohibit marine coverage of Cotton Gin Machinery, 116 PROCEEDINGS

Joi,a.t Committee'• GeMrol Bvllettft. it­ Dejl'Mtion .A.mended ned to Signatori-e, a,.~ to permit* Date No. Cotton Beed Oil Mill Machin· ery and other machinery and/ or engines after inetalltion) .... Dec. 20, 1938. (United States Navy-Ship 'a Service Activities-Ashore and A:0.oat. Interpretative Bulletin No. 105 dl'aling with this sub· jeet not accepted for use in Mislll88ippi unless amended to exclude such goods u have taken definite situs) ·····-········· Oct. 26, 1943 85 MI8BOUBI Tourists and/or Personal Ef- fects Floater Policies to in- clude coverage in permanent rffldenee of Asaured ·····--······ May 28, 1940 52 Silverware Floaters to include coverage at permanent re1i· den~ of Assured ...... ••... May 28, 1940 52 Personal Property Floaters (Householders' Comprehen- sive) ···········-·················-············ May 28, 1940 52 Furriers and Fur Storers' Cus- tomers Policies covering speei­ ft.ed garments, the propert1 of customers ...... _ Apr. 11, 1941 59 Multiple Peril Coverages on Property of Quartermaaten Corpa of United Statel!I Army in public storage warehouaea and in trarudt ·-····-·····-·-······ Nov. 10, 1941 61 Writing of Warehouaemen.'s Legal Liability Insurance, ac- eeptabli, to the various circuit courts licensing public ware· housemen ---·························-···· Nov. 2, 1942 73 Marine or Inland Marine poli- cies covering Merchandise in Cold Storage Locken ···--···· Aug. 3, 1943 77 Marine or Inland Marine Cover­ age of Personal Property of 13very kind of Transcontinental and Western Air, Ine., and/or New Mexico Airport Corpora­ tion, Kansas City, Mo. (with certain exceptions) ···············-· Feb. 4, 1944 95 •except where otherwise indicated MID-WINTER MEETING 117 Joilll c.,,,...,,., .• General B•lletffl i,­ Defi'Mt10n A memfed aued to Signatoriu Blot,

Joint Commflttee's General Bulletin i&­ Definition .A.mended .ffled to Signatories State to permit Date No. elude coverage in permanent resii1:ence of Assured ...... Feb. 9, 1940 Furriers' and/or Fur Storers' Customers Policies eliminating "but only while in custoc:ly of furrier and/or fur storer"...... Feb. 9, 1940 Silverware Floaters to include coverage at permanent resi- -~ence of Assured --·--·------·· Feb. 9, 1940 Personal Property Floaters (Householders I Comprehen- sive) ------····------······················ Feb. 9, 1940 Marine Form to cover Mer- chandise in Cold Storage Lockers ------·······------Feb. 9, 1944 96 OREGON Tourists and/or Personal Ef- fects Floater Policies to in- clude coverage in permanent residence of Assured ------Feb. 8, 1937 36 Furriers' and/or Fur Storers' Customers Policies eliminating '' but only while in custody of furrier and/or fur storer"-·---- Feb. 8, 1937 36 Silverware Floaters to include coverage at permanent resi- dence of Assured -·············--·-···· Feb. 8, 1937 ·36 Personal Property Floaters (Householders' Comprehen· sive) ·------··------··- Feb. 8, 1937 36 Under Marine Form, Accounts Receivable Policies, Destruc- tion of Records and/or Valu- able Papers Policies, Oil Burn· er Property Damage Policy, Residence Damage Policies

(glass breakage1 aircraft or motor vehicle damage, water damage, burglary damage) .... Aug. 16, 1943 78 PENNSYLVANIA Tourists and/or Personal Ef­ fects FIClater Policies to in­ clude coverage in permanent residence of Assured ...... July 5, 1945 )20 Furriers and/or Fur Starers' Customers Policies eliminating ''but only while in custody of f;ur:r~er and/or fur storer"...... July 5, 1945 12') MID-WINTER MEETIN"G 119

Joint CommUtee's General Bulletin is­ Definition Lhnended :med to Signatories State to permit Date No. Silverware Floaters to include coverage at permanent resi·

dence of Assured ...... ruly 51 1945 120 Personal Property Floaters (Householders' Comprehen· sive) ...... ~Tuly G, 1945 120

RHODE ISLAND Silverware Floaters to include coverage at permanent resi- dence of Assured ...... Oct. 22, 1941 60 Personal Property Floaters (Householders' Comprehen· sive) ...... Oct. 22, 1941 60 Inland Marine policies covering Merchandise in Cold Storage Lockers ...... ).far. 28, 1945 116 SOUTH CAROLINA Per\,'onal Property Floaters {,1uly Ii, 19. 34 13 (Householders' Comprehen- Sept. 27, 1934 17 sive) ...... Oct. rn, 1938 44 l\[ur. 18, 19.40 51 June 16, 1942 68 Fmriers and/or Fur Starers' Customers Policies subject to certain conditions and finally eliminating '' but only while in the custody of the furrier ( J un.e 9, 1998 and/or fur storer"······-··-········) June 16, 1942 68 Silverware Floaters to include coverage at permanent resi­ dence of Assured J uue 16, 1942 68 Tourists and/or Personal Ef­ fects Floater Policies to in­ clude coverage in permanent resitlence of Assured ...... June 16, 1942 68 Marine or Inland Marine Form to cover Merchandise in Cold Storage or Freezing Lockers.... July 10, 1944 110

SOUTH DAKOTA Silverware Floaters. to include coverage at permanent resi- dence of Assured ...... Nov. 8, 1935 29 Furriers and/or Fur Starers' Customers Policies eliminating ·"but only while in custody of furrier and/or fur storer"...... Nov. 8, 1935 29 Personal Property Floaters 120 PltoOEEI>INGS

JOttlt Coffl'ffl.ittee's G...... al B..u.ffn i,. D•jimtio1' .d,..llded sued to Bignatorin to pmnit Date No. (Householders' Comprehen- sive) ·····-····--·······--·-·····-·- Nov. 8, 1935 29 Marine or Inland Marine Form to cover Merchandise in Cold Storage or Freezing Lockers.... Oct. 1, 1943 82

VERMONT Tourists and/or Personal Ef. fects Floater Policies to in- clude coverage in permanent residence of .Assured ...... Feb. 6, 1942 65 Silverware Floaters to include coverage at permanent resi.- dence of Assured ...... Feb. 6, 1942 65 Personal Property Floateu (Householders' Comprehen- sive) ·······································-· Feb. 6, 1942 65 Marine or Inland Marine Form to cover Merchandise in Cold Storage or Freezing Lockers.... Dee. 14, 1943 90

VIRGINIA Personal Property Floaten (Householders' Coniprehen· sive) ·····-··································-- June 17, 1942 69 Marine Form to cover Mer• chandise in Cold Storage Lockers...... Mar. 8, 1946 125 WASHINGTON Personal Property Floaters (Householders' Comprehen- sive) ······-················---··--·······-· Nov. 16, 1935 30 Tourists and/or Personal Ef· fects Floater Policies to in· elude eoverage in permanent residence of Assured ·······-······· Nov. 16, 1935 30 Silverware Floaters to include coverage at permanent resi- dence of Assured ...... Nov. 16, 1935 30 Furriers and/or Fur Storers' Customers Policies eliminating '' but only while in custody of :furrier and/or fur storer"...... Nov. 16, 1935 30 Inland Marine Form to cover Surplus Commodity Stamps including Money and/or Cur- rency from sale of such Stamps ...... May 11, 1942 67 Marine or Inland Marine Form 121

J Offlt Com.m;Jtn '• GeMral Bullem, il­ Definition Amnded ,ued to SigMtoriea State to permit Date No. to cover Merchandise in Cold Storage or Freezing Lockers.... Jan. 24, 1944 93 WEST vmGINIA Tourists and/or Personal Ef­ fects Floater Policies to in• elude coverage in permanent residence of Assured ...... Mar. 22, 1937 37 Silverware Floaters to · include coverage at permanent resi- dence of Assured ·········-··········· Mar. 22, 1937 37 Personal Property Floaters (Householders' Comprehen- sive) ·······································-··· Mar. 22, 1937 37 Marine or Inland Marine Form to cover Merchandise in Cold Storage or Freezing Lookers.... Oet. 8, 1943 83 WYOMING Coverage under an Inland Ma- rine Form of the Union Pa- cific Ra.i1road open 1torage risk, Union Pacific Depot, Cheyenne, Wyoming ...... Oct. 6, 1942 72 Marine or Inland Marine Form to cover Merchandise in Cold Storage or Freezing Lockers .... Jun~ 5, 1944 104 Furriers and/or Fur Storers' Customers Policies eliminating '' but only while in custody of furrier and/or fur storer"...... Aug. 2, 1944 111 Silverware Floaters to include coverage at permanent resi- dence of Assured ···················-· Aug. 2, 1944: 111 Personal Property Floaters (Householders' Comprehen- sive) ·········································-· Aug. 2, 1944 111 It will be noted that in the Resolution set forth above, it is provided that the National Association of Insurance Commissioners create a standing committee of the Convention to be known as the Committee for the Definition and Interpretation of Underwriting Powers. Accordingly for some years the President of the Commissioners' Association appointed such eommitt.ee to which the Joint Committee on Interpretation and Complaint made its reports, usually twice yearly. For the past several years, however, a sub-committee of the Fire-Marine Committee has been designated as thi, Committee for the Definition and Interpretation of UndenrTiting Powen, and reports have been me.de to that oommittee. The Joint Committee on Interpretation and Complaint has studied, 122 PROCEEDINGS

coD.sidered and decided, from date of origin, 1607 cases involving inter­ pr!;:tations of or .complaints under the Definition and Agreement. All current submissions have been determined with .the exception of a few which arose subsequent to the date of the last Committee Meeting. The Committee has iss:ued 119 Interpretative Bulletins arising out of submitted cases. Copies of such Interpretative Bulletins, when and as issued, were sent to all State Insurance Departments. Since inception, only two ~p.peals hq,ve been taken to the Commissioners' Committee and only one issue has been pr~sented to that Committee by the Joint ·Committee for formal decision. The Joint Committee was sustained in each of these matters. Presently the fol1owing duly appointed representatives constitute the Joint Committee: Mr. E . .r. Perrin, Jr., Vice-President Automobile Insurance Company Hartford, Connecticut, Chairma11, Mr. D. C. Bowersock, President Boston Insurance Company Boston, Massachusetts Mr. Hawley T. Chester, Partner Chubb and Son 90 John Street, New York .City Mr. H. B. DeGray, Presid,:mt Appleton and Cox, Inc. 111 John Street, New York City Mr. Ivan Escott, Vice-President Home Insurance Company 59 Maiden Lane, New York City Mr. C. J. Haugh, Secretary '1:'ravelers Insurance Company Hartford, Connecticut Mr . .r. Victor Herd, Vic"'·President Continental Insurance Company 80 Maiden L~n~, New York City Mr. F. W. Koeckert, United States Manager Commercial Union .Assurance Company, Ltd. 1 Park Avenue, New York City Mr. F. D. Layto.n, President National Fire Insurance Company Hartford, Connecticut Mr. C. .A. Nottingham, Assistant Unit~d States Manager Royal-Liverpool Group _150 William Street, New York ,city 123

Mr. J. C. Onderdonk, Vice-President Bankers Indemnity Insurance Company 15 Washington Street, Newark, Ne\Y Jersey Mr. George G. Quirk, Vice-President Aetna Insurance Company Hartford, Connecticut The Committee has had the general support, advice and cooperation of the supervisory officials of the Stf'..tes which have adopted the Nation­ Wide Definition, which has assisted very materially in the successful administration of its functions. Respectfully submitted, JOINT COMMITTEE ON INTERPRETA­ TION AND COMPLAINT E. J. Perrin, ,Jr., Cha-irman Joseph G. Bill, Executive Secretary NOTE: Because it would appear that the Directors, Commissioners, or Superintendents o:f the States might be interested in the synopsis of the status of the Definition in all States, the Joint Committee has prepared a copy of this report for each State In~urance Supervisory Official.

''EXHIBIT ''A'' JOINT COMMITTEE ON INTERPRETATION AND COMPLAINT NATION-WIDE DEFINITION AND INTERPRETATION OF THE INSURING POWERS OF MARINE AND TRANSPORTATION UNDERWRITERS ADOPTED BY NATIONAL CONVEN­ TION OF INSURANCE COMMISSIONERS OF THE UNITED STATES JUNE 2, 1933

ARTICLES OF AGREEMENT A1fONG FIRE, MARINE AND CASUALTY INSURERS OCTOBER 1, 1933

JOINT COMMITTEE Fire Casualty Mari'll,e Ivan Escott C. J. Haugh D. C'. Bowersock J. Victor Herd J. C. Onderdonk Hawley T. Chester F. W. Koeckert H.B. DeGray F. D. Layton E. J. Perrin, Jr. C. A. Nottingham George G. Quirk

Offices: 99 John Street, New York 7, New York Executive Secretary: Joseph G. Bill ARTICLES OF AGREEMENT AMONG FIRE, MARINE AND CASUALTY INSURERS WHEREAS, the National Convention of Insurance Commissioners o:t the United States in session at Chicago, Illinois, on the 2nd day o:t June,

1933 1 unanimously adopted the following resolution: 124 PROCEEDINGS

"WHEREAS, the National Convention of Iruraran~ Commissioners o:t the United States, did, in December, 1922, approve a definition of Marine Underwriting Powers; and WHEREAS, in the intervening years questions of interpretation and application of said definition have arisen and produced certain controversies among the Fire, Marine a.nd Casualty Undel'writers as to Writing Powers, whieh have been matters of concern in this Convention; and WHEREAS, Marine and Transportation Insurance renders important ee:rviees to and partakes closely of for~ign and domestic commerce, and its subject matters are not confined to any one state or territory but are of mobile nature, and therefore a nation•wide de1inition and interpretation of Und~rwriting Powers is important; and WHEREAS, at the meeting of this Convention, held in New York in December, 1932, a committee was appointed to consider the definition and interpretation of Marine Underwriting Powers a.nd the desirability of nation-wide action in respect thereto; and WHEREAS, with the cooperation of said Committee, an agreement as to Marine and Transportation Writing Powers has been arrived at among the Fire, Marine and Casualty Insurers, pursuant to which there has been prepared and submitted to said Committee a proposed nation-wide definition and interpretation of Marine and Transportation Underwriting Powers; and WHEREAS, a proposed agreement for carrying out said definition and interpretation, has been agreed upon and it is about to be entered into among Fire, Marine and Casualty Insuri,rs throughout the United Btate11j and WHEREAS, said Specia] Committee of this Convention with the approval of the Fire Insure.nee Committee :now reports recommending the BJlproval and adoption by this Convention of said proposed definition and lD.terpr_etation for general acceptance in the United States, and the approval in principle of said proposed Agreement among Insurers; BE IT THEREFORE RESOLVED, That the National Convention accept and approve of this report of the Special Committee; and be it further RESOLVED, That this Convention accept and promulgate th~ nation­ wide definition and interpretation recommended by its Committee; and be it further RESOLVED, That this Convention approve in principle the aforesaid Agreem!;'nt amoi:Lg Fire, Marine and Casualty Insurers; and be it further RES0L'V£D, 'l'.'hat the National Convention hereby creates a standing committee of this Convention, to be known as 'The Committee for the Definition and Interpretation of Underwriting Powers' to consist of three members to be designated by the President of this National Convention for the purpose of considering such questions of the interpretation, d,rlinition and application of underwriting powers as may be referred to it by MID-WINTER MEETING 125

eompanies, associa.tions or members of this Convention inter~ in or atI~ted by the plan herein approved.'' NOW, THEREFORE, in consideration of the premises and of the mutual promises and undertakings of the parties hereto, the undersigned insura.nee corporations undertake and agree with ea.eh of the other mb­ seriber! hereto and do hereby make the following agreement:

ARTICLE I. NATION-WIDE DEFINITION OF MARINE UNDERWRITING POWEBS SECTION 1. For the purpose of securing nation-wide definition and interpretation of the underwriting powers of Marine and Transportation Insurers, eaeh of the companies subscribing to this Agreement stipulates and agrees to recogniz~, accept and be bound by the terms and provisions of the annexed nation-wide de:finition and interpretation, marked 4Me:at 1 ~~x, • hereto attached and ma.de part of this Agreement. Sti:CTION 2. Eaeh of the companies subscribing to this Agreement further stipulates and agrees that the Joint Committee on Interpretation and Complaint (hereinafter created under this Agreement) shall aeeept as an aid in the construction and interpretation of SECTIONS A and B of the aforesaid nation-wide definition the HJnterpretive Note" h~reto at­ tached, marked .Linnex '' Y'' and made a part of this Agreement. ARTICLE II. SUBSCRIBERS TO THE AGREEMENT SECTION 1. This Agreement is made among individual companies and not among associations of companies. SEarION 2, AU insurance companies transacting a. Fire, Marine o:r Casualty insurance business in the United States may (upon acceptance by the Committee, hereinafter created) become subscribers to this Agree· ment and subject to its terms, obligations and privileges. SECTION 3. Subscription of a company to this Agreement shall also obligate all affiliated companies and an ind~pendent companies under the general control or management of the subscribing company and its affiliated companies and all independent companies under the general control o:r management of the subscribing company and its offi.liations, including Underwriters' Departments, within the territory described herein. ARTICLE III. JURISDICTION The geographical scope of the Agreement and the jurisdiction of the Joint Committee on Interpretation and Complaint shall be continental United States, the District of Columbia and the Territories of Alaska and Hawaii, excepting only where the same is unlawful.

ARTICLE IV. PURPOSES SECTION 1. The purposes of the Agreement, among others, are: (a) To agree upon secure uniformity in the definition and inter­ pretation of the underwriting powers of Marine Insurers in cooperation with the National Convention of Insurance Com­ missioners of the United States and the Commissioners and 126 PROCEEDINGS

Superintendents of the several States, Territories and the District of Columbia.* (b) To promote good underwriting practices. ( c) To serve as a medium for the acquisition and exchange of in­ formation and to secure a uniform statutory de:finition of Marino and Transportation Insurance in accord with the annexed Nation­ wide Definition and Interpretation. SECTION 2. Every provision of this Agreement or any action pursuant thereto shall be binding on each subscriber except in any state where the same is unlawful.

ARTICLE V. OFFICERS SECTION 1. There shall be a Chairman and one Vice-Chairman of the Joint Committee on Interpretation and Complaint, each of whom shall be appointed by and from among the members of that Committee to serve for a period of one year or until their successor or successors are similarly appointed, each of whom shall be entitled to one vote.

SECTION 2. There shaU be a salaried Executive Secretary and a

Treasurer1 who shall be chosen by the Joint Committee on Interpretation and Complaint and whose salaries and terms of services shall be determined by said Committee. The position of Executive Secretary and Treasurer may1 in the discretion of the aforesaid Committee, be held by the same person.

ARTICLE VI. JOINT COMMITTEE ON INTERPRETATION AND COMPLAINT

SECTION 1. There shall be a Joint Committee on Interpretation and Complaint to consist of twelve (12) persons, five (5) of whom sha11 be appointed by the American Institute of Marine Underwriters, five (5) by the National Board of Fire Underwriters, and two (2) by the National Bureau of Ca,malty and Surety Underwriters. Vacancies, if any, occurring among the appointees shall be filled for their respective unexpired terms by the organizations which made the original appointments.

SECTION 2. All the members of said Committee shall be senior execu· tives of inimrance companies or t=enior officers of insurance company or­ ganizations or senior executives of managerial insurance agencies.

SECTION 3. The members of said Committee shall be appointed fo:r a period of one year, but shail continue as members of said Committee until their suecessors are appointed; provided, however, that the first ap· pointees to membership in said Committee shall continue as such from the date uf their appointment until 31 December, 1934, and thereafter, until their successors are appointed.

*It is not the purpose of the Agreement nor shall the Joint Committee on Interpretation and Complaint possess any power over rates or com· missions of agents, brokers or others, or the adjustment of losses, but shall be limited to matters directly related to the definition and inter­ pretation of underwriting powers. Mm-WINTER MEETING 127

SECTION 4. The members of said Committee may be represented at meetings by substitutes, but such substitutes shall have no power to vote unless such substitute would have been eligible for membership in said Committee.

SECTION 5. Seven members of said Committee shall constitute a quorum and the concurrence of seven members of the Committee shall be necessary for any action binding upon the Companies subscribing to this Agreement.

SECTION 6. Said Committee shall have power to: (a) Elect from among their own number a Chairman and one Viee­ Chairman; (b) Appoint, as provided in Article V of this Agreement, an Execu­ tive Secretary and Treasurer for such periods and at such salaries as to the Committee may seem proper; ( c) Execute the functions and carry out the purposes of this Agree-. ment; construe, adjudicate and enforce said Agreement and the attached Nation-wide Definition and Interpretation; provided procedure therefor, including the hearing and adjudication of interpretations, complaints and charges with respect thereto; initiate investigations, including examination of all records, com­ pany or otherwise, and (when contrary to this Agreement and/or the attached Definition) impose fines and penalties for infractions thereof; all subject to the provisions and limitations and rights of appeal hereinafter provided; (d) Hold such hearings at such time:3 and places, and on such notice as said Committee may determine; (e) Employ such examiners, investigators and others in connection with requests for interpretation, complaints, charges and generally for the purpose of making effective its various interpretations, decisions and rulings, as said Committee may, from time to time, by resolution, determine; ( f) Employ counsel and incur such other legal expen:-;es as to said Committee may seem necessary; (g) Incur such other expenses as to said Committee may seem neces­ sary.

SECTION 7. In the case of a complaint being made against any subscriber or employee of any subscriber, if such subscriber or the com­ plainant sha11 happen at the time of such complaint to be a member of the ,Joint Committee, such member shall not serve on said Committee while the case is being adjudicated. If any member of the Committee is thus disqualified to serve. a substitute member may be appointed by the re· maining members of his clasR (i. e., :fire, marine or casirnlty) to serve as a. member of the Committee for the consideration of such case only.

SECTION 8. Any subscriber to this Agreement desiring to file complaint without disclosure of identity to the Joint Committee may present the 128 PROCEEDINGS same to the Executive Seeretary of the ·Joint Committee to be held by him confidential as to source. SECTION. 9. Said Committee shall promptly, after the rendition by it of any decision, interpretation and/or adjudication as in this Agreement provided, :file a copy thereof in each instance with '' The Committee for the Definition and Interpretation of Underwriting Powers" of the National Convention of Insure.nee Commissioners of the United States.

ARTICLE VII. DUES AND ASSESSMENTS Each company subscribing to this Agreement shall pay such assessments as the aforesaid Joint Committee on Interpretation and Complaint may, from time to time, determine as necessary for the proper conduct, functions and operations of this Agreement and for the work of said Committee. Such assessmezits shall be levied and collected on a pro rata basis upon the total net amount of (a) ocean and inland marine insurance premiums, (b) burglary and theft insurance premiums, and ( c) twelve and one-half per centum (12lh % ) of :fire insurance premiums all as reported in the last annual statements of the subscribing companies.

ARTICLE VIII. PENALTIES

SECTION 1. It is a purpose and intent of this Agreement to establish the principle that no insurer which violates the aforesaid Nation-wide Definition and Interpretation and/or this Agreement nor any of its agents shall profit or be advantaged thereby.

SECTION 2. In the event that any insur.er is adjudged by the aforesaid Joint Committee on Inte:rpretation and Complaiut to have violated the annexed Nation-wide Definition and Interpretation and/or this Agreement (unless the decision of said Committee be reversed or modified as provided in Article IX of this Agreement), said Committee is hereby empowered to impose a fine not to exceed One Thousand Dollars ($1,000.00) for each such violation, and such :fine shall be paid to the Treasurer under this Agreement within twenty (20) days of its imposition, (unless an appeal, as hereinafter provided, be taken within such period) to be applied to the expenses of the operation and function of this Agreement.

SECTION 3. Any offender, its affiliates and/or agents, may be ordered and required by the decision of said Committee to cancel any policy of insurance or reinsurance, or any certificate, binder, covering note, memo· randum, cablegram, letter or other instrument by whatever name called whereby insurance is made or renewed, which may be so adjudged to be in violation of this Agreement and/or of the aforesaid Nation-wide De:fini. tion and Interpretation, and to remain off such risk or risks as may be involved for such period of time from the effective date of the aforesaid adjudged cancellation, as the Committee may determine, and/or to re:insure said risk as the Committee may direct. The fact and bona fides of such cancellations and/or reinsurance shall be established to the satisfaction of said Committee.

SECTION 4. Each subscriber agrees to submit to, carry out and abide by the determinations and orders of said Committee and to pay any :fine MID-WINTER MEETING 129 imposed upon it by said Committee, in accordance with the terms and provisions of this Agreement, ARTICLE IX. APPEALS SECTION 1. Any insurer, claiming to be aggrieved, may within twenty (20) days of the date of an interpretation or ruling of the Joint Com­ mittee on Interpretation and Complaint appeal therefrom as hereinafter provided. SECTION 2. Such appeal shall lie to '' The Committee for the Defuli­ tion and Interpretation of Underwriting Powers'' of the National Con­ vention of Insurance Commissioners of the United States. Such notice of appeal, together with a statement of the grounds thereof, shall be :filed in writing with the Chairman of the aforesaid Committee of the Convention, and a copy shall at the same time be delivered to the Executive Seeretary of the Joint Committee on Interpretation and Complaint under this Agree­ ment. Upon the hearing of such appeal, the appellant and the representatives of said Joint Committee, designated by it, may appear and be heard before said Committee of the Convention. SECTION 3. The Joint Committee shall, upon the filing of a notice of appeal with the Executive Secretary of said Committee, promptly pre­ pare and certify to '' The Committee for the Definition and Interpretation of Underwriting Powers" of the National Convention of Insurance Com­ missioners a statement and findings of fact, decision, interpretation and/or ruling thereon.

ARTICLE X. EFFECTIVE DATE AND WITHDRAWAL This Agreement shall become operative, effective and binding upon the subscribers, where and with such exceptions, and a8 and from such date as shall be named by the Joint Committee, by two-thirds vote of all the members of said Committee, but such date shall not be prior to 1 October, 1933. Any subscriber may terminate his subscription to this Agreement as of the last day of any calendar year after the year 1933, by giving written notice to the Executive Secretary, not less than ninety (90) days preceding such 31 December, provided, however, that upon termination of such sub­ scription on 31 December, any other subscriber having given at least :five (5) days ,vritten notice to the Executive Secretary of his intention, may terminate his subscription at the same time. Any such subscriber shall, however, be liable for its pro rata l

ARTICLE XI. COUNTERPARTS OF AGREEMENT This Agreement shall be printed and may be executed in as ma.:oy 130 PROCEEDINGS counterparts as shall be convenient, and all such counterparts shall be taken and considered together as the agreement of the parties executing such several counterparts and as constituting one original instrument.

ARTICLE XII. AMENllMENTS This Agreement may be amended by an affirmative vote of two-thirds ( VJ ) of the Subscribing Companies taken by mail, ( each Subscribing Company to have one vote) provided that not less than twenty (20) days written notice of the text of a proposed amendment, approved by three­ fourths (%,) of the Members of the Joint Committee, at a Regular or Special Meeting, has been mailed to each Subscriber.

IN WITNESS WHEREOF the Subscribers hereto have caused these presents to be duly executed by their officers or agents hereunto duly authorized as of the :first day of October, nineteen hundred and thirty-three.

EXHIBIT ''B'' ANNEX X NATIONAL CONVENTION OF INSURANCE COMMISSIONERS OF THE UNITED STATES NATION-WIDE DEFINITION AND INTERPRETATION OF THE INSURING POWERS OF MARINE AND TRANSPORTATION UNDERWRITERS CHICAGO, 2 JUNE, 1933 The following Definition and Interpretation do not include or attempt to define all of the powers which may be exercised by insurers authorized by various State Insurance Laws to transact Marine, Inland Marine or Transportation Insurance in such States. The purpose and scope of this nation~wide definition and interpretation are to clarify, in respect to the kinds of insurance hereinafter mentioned, the meaning and application of State Insurance Laws with particular respect to questions of overlapping powers of various kinds of insurers and also of certain insurance cov.erages as ta which there has been misapprehension or dispute among the Fire, Marine and Casualty Insurers, The following Nation-wide Definition and Interpretation have b_een adopted and promulgated by the National Con­ vention of Insurance Commissioners of the United States to remove doubts as to the kinds of risks and coverages hereinafter mentioned and to de­ termine what kinds of insurance coverages may and may not be written in the United States. Uniformity of understanding and practice as to insuring powers, frequently closely related to domestic and foreign com­ merce, both justify and require, in the judgment of the Convention, uniform arnl nation.wjde definition. I. MARINE AND/OR 'fRANSPORTATION POLICIES MAY COVER UNDER THE FOLLOWING CONDITIONS: A. lmpor

A shipment '' on consignment'' shall mean property consigned and intrusted to a factor or agent to be held in his care, or under his control for sale for account of another or for exhibit or trial or approval or auction, and if not disposed of, to be returned. 2. Imports not on consignment in such places of storage as are usually employed by importers, provided the coverage of the issuing com­ panies includes hazards of transportation. Such policies may also include the same coverage in respect to property purchased on C. I. F. terms or ''spot'' purchases for inclusion with or in substitution for bona TI.de importations. An import, as a proper subject of marine or transportation insurance, shall be deemed to maintain its character as such so long as the property remains segregated in the original form or package in such a way that it can be identified and has not become incorporated and mixed with the general mass of property in the United States, and sha11 be deemed to have been completed when such property has been: (a) Sold a11d delivered by the importer, factor or consignee; or (b) Removed from place of storage as described in paragraph ' 1 2'' above and placed on sale as part of importer's stock in bade at a point of sale-distribution; or ( c) Delivered for manufacture, processing or change in form to premises of the importer or of another used for any of such purposes.

B. Exports 1. Exports may be cover~d wherever the property may be without restriction as to time, provided the coverage of the issuing com­ panies includes hazards of tra11sportation. An export, as a proper subject of marine or transportation insurance, shall be deemed to aequire its character as such when designated or while being prepared -for export and retain that character unless diverted for domestic trade, and when so diverted, the provisions of this Ruling respecting domestic shipments shall apply, provided, however, that this provision shall not apply to long established methods of insuring certain commodities, e. g., cotton.

C. Domestic Shipments 1. Domestic shipments on consignment, provided the coverage of the issuing companies includes hazards of transportation. (a) Property shipped on consignment for sale or distribution, while in transit, and not exceeding thirty (30) days after arrival at consignee's premises or other place of storage or deposit; and (b) Property shipped on consignment for exhibit, or trial, or 132 PROCEEDINGS

approval, or auction, while in transit, while in the custody of others and while being returned. 2. Domestic shipments not on consignm~nt, provided the coverage of the issuing companies includes hazards of transportation, beginning and ending within the United States, provided that such shipments shall not be covered at points of sale-distribution or manufacturing premises nor after arrival at such points or at premises owned, leased or controlled by assured or purchaser, nor for more than thirty (30) days at other place of storage or deposit, except in premises of transporation companies or freight forwar~rs, when such storage is incident to transportation. D. Bri.dges, tunnels and other instrumentalities of transportation and oom­ munication ( excluding buildings, their furniture and furnishings, fixed contents and supplies held in storage) unless fire, tornado, sprinkler leakage, hail, explosion, earthquake, riot and/or civil commotion are the only hazards to be covered. Piers, wharves, docks and slips, ex­ cluding the risks of fire, tornado, sprinkJ~r leakage, hail, explosion, earthquake, riot and/or civil commotion. Other aids to navigation and transportation, including dry docks and marine railways, against all risks. E . . Personal Property Floater :Risks }. COVERING INDIVIDUALS. (a) Tourist and/or Personal Effects Floater Policies, which poli­ cies shall exclude hazards while in a permanent residence of the assured. (b) Personal Fur Floater. (c) Personal Jewelry Floaters.

2. CoVERING INDIVIDUALS AND/OR GENERALLY. (a) Fine Arts Floaters. To cover objects of art such as pictures, statuary, bronz~s and antiques, rare manuscripts and books, articles of virtu, etc., but excluding stained glass windows and carved glass used for commercial purposes. (b) Musical Instrument Floaters, excluding household instruments not customarily moved from the assured 's premises. (c) Radium Floaters. ( d) Physicians' and Surgeons' Instrument Floacylrs. Such policies shall not cover instruments and professional equipment not commonly carried with the assured, nor furniture and/or fixtures. ( e) Pattern Floaters, excluding coverage on the assured 's prem­ ises. (f) Theatrical Floaters, excluding buildings and their improve­ ments and betterments and furniture and fixtures that do not travel about with theatrical troupes. (g) Film Floaters, including builders' risk during the production and coverage on completed negatives and positives and sound records. (h) Salesmen's Samples Floaters, excl1,1ding coverage on the as­ sured 's premises. Mm-WINTER MEETING 133

(i) Wedding Present Floaters for not excfleding ninety (90) days after the date of the wedding. (j) Jewelers' Block Policies, excluding improvements and better· ments of buildings, furniture, fixtur~s, tools and machinery of the assured. (k) Exhibition Policies on property while on exhibition and in transit to and/or from such exhibitions. (I) Horses and Wagon Policies covering wherever horses or other animals, wagons and equipment may be. (m) Installation Risks covering loss to seller on account of physical damage to the property. Such policies shall cover articles of machinery or equipment only during the period of installation and testing. (n) Movable Equipment Floaters, e. g., contractors' equipment, mechanical sales devic,es, storage batteries; stevedores', div· ers' and undertakers' equipment and other property of a mobile or floating nature, not on sale or consignment, or in the course of manufacture, which has come into the custody and/or control of parties who intend to use such property for the purpose for which it was manufactured or created. Such policies shall not include coverage of storage risks at premises controlled or leased by the assured, except where purely incidental to the regular or frequent use of the equipment or property. (o) Miscellaneous Movable Articles Floaters, e. g., outboard motors, parachutes and balloons, scientific and surveyors' instruments, harvesters; articles for sport and recreation, musical scores and orchestrations and other similar property of a mobile or floating nature, not on sale or consignment, or in the course of manufacture, which has come into the custody and/or control of parties who intend to use such property for the purpose for which it was manufa.ctured or created, such policies to contain an itemized list of articles insured, with description and amount or value of each. (p) Property in transit to and/or from and while waiting for or undergoing processing in bleacheries or fumigatories or on premises of dyesters, throwsters and other similar processors until delivered to storage warehouses or final place of d13Iivery contemplated at the time the shipment was made. Provided, however, that such policies shall not cover bailee's property at his premise8. (q) Installment Sales and Leased Property. Policies covering property sold under conditional contract of sale, partial pay· ment contract, insta11ment sales contract, or leased. Such policies must cover in transit but shall not extend beyond the termination of the seller's or lessor's interest. Provided, however, that property not mobile in character, under lease or leased on a royalty basis, may not be so insured although title remains in the lessor. (r) Bailee's Customers Policies covering personal property of customers. Such polici~s shall cover in transit and during 134 PROCEEDINGS

process at e. g., laundrymen's, dyers' and cleaners' prem· ises, provided, however, that such policies shall not cover bailee's property at his premises. (s) Furriers and/or Fur Storer's Custom.er's Policies (i. e., policies under whieh certificates and/or receipts are issued by furriers and/or fur storers) covering specified garments the property of customers, but only while in the custody of the furrier and/or fur storer. (t) Silverware :floaters, excluding the permanent residence of the assured. II. MARINE AND/OR TRANSPORTATION POLICIES SHALL NOT COVER PROPERTY UNDER THE FOLLOWING CONDITIONS: A. Storage of assured 's merchandise, except as hereinbefore provided. B. Merchandise in course of manufacture, the property of and on the premises of the manufacturer. C. Furniture and fixtures in use, or improvements to buildings except as provided above. D. Fire risk on all building materials while in course of erection after seller's interest ceases. E. Fire or other risks on merchandise in permanent location, sold under partial payment, contract of sale, or installment sales con­ tract, which involves protection of the purchaser's interest after seller's interest ceases. F. Risks on monies and/or securities in safes, vaults, safety deposit vaults, bank or assured 's premises, except while in course of transportation. G. Any policy substantiaily the equivalent of '' The Personal Property Floater,'' sometimes referred to as '' The Householder's Com· prehensive. '' H. Risks of fire, tornado, sprinkler leakage, earthquake, hail, explosion, riot, and/or civil commotion on buildings, structures, wharves, piers, docks, bulkheads and sheds and other :fixed real property on land and/or over water, except as Provided in Section I. D. ANNEX Y INTERPRETIVE NOTE AGREED TO BY FIRE, MARINE AND CASUALTY INSURERS as an aid to the Joint Committee on Interpretation and Complaint in their construction of the Nation-Wide Definition and Inte-rpretation of the National Convention of Insurance Commissione-rs of the United States.

1. In the interpretation of the provisions of SECTIONS A and B of of the Definition and Interpretation as applied to any particular business or policy, due weight shall be given to the spirit of the said Definition, which is, that in order to make the storage risk on the property insured a proper subject for coverage under a marine policy, the storage risk must be incidental to the transportation risk. Where the transportation risk is incidental to the storage risk, then it is not a. proper subject for coverage under a marine contract. Among the tests by which the foregoing may be judged are: MID-WINTER MEETING 135

(a) Where the premium charged on an entire policy is Jess or only equal to what would have been received on the storage portion at the :filed rates for :fire insurance. This fact shall be considered as prima facie evidence that the transportation risk is incidental to the storage risk and that the policy does not come within the spirit of the Definition, unless this factor is outweighed by other considerations. (b) Where the rate of premium charged under the policy for the storage portion of the risk is less or only equal to what would have been charged under the rates promulgated by recognized fire rating organizations, this fact shall be considered as prima facie evid~nce that the policy does not come within the spirit of the Definition, unless this fact is outweighed by other con­ siderations. 2. In the consideration of specific cases, due weight should be given to all surrounding circumstances, including, among others, the el.ements of premium, rate and time in storage.

EXHIBIT "C" NATION-WIDE DEFINITION AND INTERPRETATION OF INSURING POWERS OF MARINE AND TRANSPORTATION UNDERWRITERS (Adopted by the National Conven,tion of Insurance Commissioners of the United States, Ju·ne 2, 1933) COMPANIES SIGNATORY TO THE ARTICLES OF AGREEM~:NT AMONG FIRE, MARINE AND CASUALTY INSURERS Aetna Casualty and Surety Company Aetna Fire Und~rwriters Aetna Insurance Company Agricultural Insurance Company Albany Insurance Company Allemannia Fire Insurance Company Alliance Assurance Company, Ltd. Alliance Insurance Company of Philadelphia American Alliance Insurance Company American Central Insurance Company American Eagle Fire Insmance Company American Equitable Assurance Company American and Foreign Insurance Company American Insurance Company of Newark American National Fire Insurance Company American Surety Company of New York American Union Insurance Company Anchor Insurane~ Company Atlas Assurance Company, Ltd. Automobile Insurance Company Bankers Fire & Marine Insuranc.e Company Bankers Indemnity Insurance Company 136 PROCEEDfNGS

Baltimore American Insurance Company Birmingham Fire Insurance Company of Ala.ha.ma Birmingham Fire Insurance Company of Pennsylvania Boston Insurance Company British America Assurance Company British and Foreign Marine Insurance Company, Ltd, British General Insurance Company, Ltd. Caledonian-American Insurance Company Caledonian Insurance Company of Scotland California Insurance Company Camden Fire Insurance Association Capital Fire Insurance Company of California. Car and General Insurance Corporation Carolina Insurance Company Central Union Insurance Company Century Ind~mnity Company Century Insurance Company, Ltd. of Edinburgh Charter Oak Fire Insurance Company Citizens Insurance Company of New Jersey City of New York Insurance Company Columbia Casualty Company Columbia Fire Insurance Company Columbia Insurance Company of New York Commerce Insurance Company Commercial Casualty Insurance Company Commercial Union Assurance Company, Ltd. Commercial Union Fire Insurance Company Commonwealth Insurance Company· of New York Concordia Fire Insurance Company Connecticut Indemnity Company Continental Casualty Company Continental Insurance Company County Fire Insurance Company Detroit Fire & Marine Insurance Company Detroit National Fire Insurance Company Dixie Fire Insurance Company Eagle Fire Company of New York Eagle Indemnity Company Eagle Star Insurance Company, Ltd. East and West Insurance Company Eastern Underwriters of the Camden Fire Insurance Ass 'n. Empire State Insurance Company Eureka-Security Fire & Marine Insurance Company Excelsior Insurance Company of New York Export Insurance Company Farmers Fire Insurance Company Federal Insurance Company F~deral Union Insurance Company Fidelity & Casualty Company of New York Fidelity & Guaranty Fire Corporation Fidelity Phoenix Fire Insurance Company MID-WINTER MEETING 137

Firemen's Insurance Company of Newark Franklin Fire Insurance Company Franklin National Insurance Company of New York Fulton Fire Insurance Company General Accident Fire & Life Assurance Corporation Georgia Home Insurance Company Gibraltar Fire & Marine Insurauce Company Girard Fire & Marine Insurance Company Glens Falls Indemnity Company Glens Falls Insurance Company Globe Indemnity Company Globe & Republic Insurance Company Granite State Fire Insurance Company Great American Indemnity Company Great American Insurance Company Great Eastern Fire Insurance Company Hanover Fire Insurance Company Hartford Accident & Indemnity Company Hartford Fire Insurance Company Hartford General Agency Company Home Ind,emnity Company Home Insurance Company Home Insurance Company of Hawaii, Ltd. Homeland Insurance Company of America Homestead Fire Insurance Company Imperial Assurance Company of New York Indemnity Marine Assurance Company, Ltd. Indemnity Insurance Company of North America Insurance Company of North America Lafayette Fire Insurance Company Law Union & Rock Insurance Company, Ltd. Liverpool & London & Globe Insurance Company, Ltd. London Assurance London Guarantee & Aceident Company London & Lancashire Indemnity Company London & Lancashire Insurance Company, Ltd. London & Provincial Marine and General Insurance Co., Ltd. London & Scottish Assurance Corporation, Ltd. Manhattan Fire & Marine Insurance Company Marine Insurance Company, Ltd. Maritime Insurance Company, Ltd. Maryland Casualty Company Ma~sachusetts Bonding & Insurance Company Ma:3.$achusetts Fire & Marine In:,mrance Company Mechanics and Traders Insuranee Company Memphis Fire Insurance Company Mercantile Insurance Company of America Merchants Fi1·e .Assurance Corporation of New York Merchants Indemnity Company Merchants & Manufacturers Fire Insurance Company Metropolitan Casualty Insurance Company of New York 138 PROCEEDINGR

Michigan Fire & Marine Insuranc~ Company Milwaukee Mechanics Insurance Company Monarch Fire Insurance Company National Ben Franklin Fire Insurance Company National Fire Insurance Company of Hartford National Liberty Fire Insurance Company National Retailers Mutual Insurance Company of Chicago National Surety Corporation National Surety Marine Insurance Corporation National Union Fire Insurance Company National Union Indemnity Company Netherlands Insurance Company of The Hague New Amsterdam Casualty Company Newark Fire Insurance Company New Brunswick Fire Insurance Company New England Casualty Company New England Fire Immrance Company New Hampshire Fire Insurance Company New York Casualty Company New Y 01·k Fire Insurance Company New York Underwriters Insurance Company New Zealand Insurance Company, Ltd. Niagara Fire Insurance Company North British & Mercantile Insurance Company, Ltd. North Carolina Home Insurance Company Northern Assurance Company, Ltd. North River Insurance Company Northwestern Fire & Marine Insurance Company Norwich Union Fire Insurance Society, Ltd. Norwich Union Indemnity Company Ocean Accident & Guarante-e Corporation Ocean Marine Insurance Company, Ltd. Ohio Insurance Company Old Colony Insurance Company Old Dominion Fire Insurance Company Orient Insurance Company Pacific Coast Fire Insurance Company Palatine Insurance Company, Ltd. Patriotic Insurance Company Paul Revere Fire Insurance Company Pearl Assurance Company, Ltd. Pennsylvania Fire Insurance Company Philadelphia Fire & Marine Insurance Company Phoenix Assuranc/1' Company, Ltd. of London Phoenix Indemnity Company Piedmont Fire Insurance Company Potomac Insurance Company of the District of Columbia Preferred Aeeident Insurance Company of New York Protective Indemnity Company Providence Washington Insurance Company Provident Fire Insurance Company Mm-WINTER MEETING 139

Quaker City Fire & Marine Insurance Company Queen Insurance Company Reliable Fire Insurance Company of Dayton, Ohio Reliance Marine Insurance Company, Ltd. Republic Insurance Company Rhode Island Insurane~ Company Richmond Insurance Company Rochester·American Insurance Company Royal Exchange Assurance Royal Indemnity Company Royal Insurance Company, Ltd. Safeguard Insurance Company of New York Scottish Union & National Insurance Company Seaboard Fire & Marine Insurance Company Seaboard Insurance Company of Baltimore Sea Insurance Company, Ltd. Security Insurance Company of New Haven Sentinel Fire Insurance Company Southern Fire Insurance Company of North Carolina Springfield Fire and Marine Insurance Company Standard Accident Insurance Company Standard Fire Insurance Company of New Jersey Standard Fire Insurance Company of New York Standard Fire Insurance Company, Hartford Standard Marine Insurance Company, Ltd. Standard Surety & Casualty Company of New York Star Insurance Company of America State Assurance Company, Ltd. Sun Indemnity Company of New York Sun Insurance Office, Ltd., of London Sun Underwriters Insuranc'°' Company Surety Fire Insurance Company Switzerland General Insurance Company of Zurich Thames & Mersey Marine Insurance Company, Ltd. Transcontinental Insurance Company of New York Transportation Insurance Company Travelers Fir'°' Insurance Company Travelers Indemnity Company Twin City Fire Insurance Company Union Assurance Society, Ltd.

Union Insurance Society of Canton1 Ltd. Union Marine & General In::urance Company, Ltd., Liverpool United Firemen's Insuranee Company of Philadelpl1ia United National Indemnity Company United States Casualty Company United States Fidelity & Guaranty Company United States Fire Insurance Company United States Gi.iarantee Company Universal Insurance Company Vigilant Insurance Company Virginia Fire & Marine Insurance Company 140 PROCEEDlNGS

Washington Assurance Corporation of New York Westchester Fire Insurance Company Western Assurance Company Western Fire Insurance Company World Fire & Marine Insurance Company Yorkshire Indemnity Company Yorkshire Insurance Company, Ltd. November 1, 1946.

Commissioner Carroll (Rhode Island): I move the adoption of the report.

President Dineen: Do I hear a second 'I

Commissioner Larson (Florida): I second the motion.

President Dineen: The motion has been made and seconded that the report of the Fire and Marine Committee be adopted. Is there any dis­ cussion f All in favor, signify by saying "Aye." All opposed, "No." The ''Ayes'' have it and it is so ordered. The Chair will recognize Commissioner Harrington on Laws and Legis­ lation.

Commissioner Harrington (Massachusetts): Mr. President and members of the Assoeiation: This Committee has maintained a documentary report ·of all of the committee hearings, with the exhibits attached and all of the committee reports, and we have had three committee reports since our last session. I don't believe it is necessary to read them all, because every Commissioner has received them at his home office and has had an opportunity to look them over. I will just recite them and unless there is objection, they will be referred to th~ stenographer to be included in the Proceedings. The report of the Committee on Rates and Rating Organizations e.nd Federal Legislation to the National Association of Insurance Commissioners at Syracuse, N. Y., September 5·7, 1946. That report indicated the scope of the studies that were undertaken there and discussed the various schools of thought for meeting the impact of the Robinson-Patman Act and the F,ederal Trade Commission Act upon the business of insurance, e.nd the last two paragraphs I believe summarize the work of the Committee at that session and they are as follows. (Reads, beginning: '' Considerable diseussion also took place in connection with the treatment, ete.' ') Commissioner McCor'inaek took no part in the proceedings of this session. And then are attached aeveral exhibits that are dealt with in the report, one being Public Law 404 of the 79th Congress entitled, Th~ Ad­ ministrative Procedure Aet, which was discussed in connection with the Federal Trade Commission Act, and the All-Industry Committee reported on th.e Federal Trade Commission Act and the All-Industry report on the Robinson-Patman Act. Mm-WINTER MEETING 141

Mr. Chairman, in order that there -may be an opportunity for any objections to this method of procedure, I move that this report be adopted at this session and made a part of the record.

President Dineen: Do I hear a second t

Commissioner Larson (Florida): I second it.

President Dineen: Is there any debateT All in favor, signify by saying ''Aye.'' All opposed, ''No.'' The ''Ayes'' have it and it is so ordered.

COMMITTEE ON RATES AND RATING ORGANIZATIONS COMMITTEE ON FEDERAL LEGISLATION N.A.I.C. Syracuse, N. Y., September 5-7, 1946 The Committee on Rates and Rating Organizations and the Committee on Federal Legislation of the National Association of Insuran~ Com· missioners met at the Hotel Syracuse, Syracuse, New York, on September 5, 6 and 7, 1946, following a meeting of the Executive Committee at the same place on September 4 and 5. The subcommittee on devising a method for the examination of rating bureaus, consisting of Commissioners Gough of New Jersey, chairman, Forbes of Michigan and Thompson of Oregon, were also in session conducting hearings and meetings on September 5 and 6. The following members of the Committee on Rates and Rating Or· ganizations and Federal Legislation were present at the Syracuse meeting:

Charles F. J. Harrington, Massachusetts, Chairman; Newell R. Johnson1 Minnesota; Robert E. Dineen, New York; J. Edwin Larson, Florida; Seth B. Thompson, Oregon, and Maynard Garrison, California. The seventh member of the committee, Commissioner MeCormaek of Tennessee, was not present, having pre't'iously notified the Committee of his inability to attend. In addition to the committee members enumerated above, there were also pref'.ent at the meetings the following Commissioners, some of whom are members of the Executive Committee: N. P. Parkinson, Illinois* William P. Hodges, North Carolina* Oscar W. Carlson, Utah* Wade 0. Martin, Jr., Louisiana* Luke J. Kavanaugh, Colorado* Gregg L. Neel, Pennsylvania* Walter Dressel, Ohio* J. Austin Carroll, Rhode Island W'illin.m A. Sullivan, Washington represented by Robert D. Williams (*:member of Executive Committee) The following departmental personnel were also present at the meet• ings: S. D. Mills, New Jersey E. A. Faircloth, Florida Joseph Kolkmeyer, Ohio Walter F. Martineau, New York 142 PROCEEDINGS

Alfred J. Bohlinger, New York Thomas C. Morrill, New York Joseph F. Collins, New York The All-Industry Committee was in session at the same hotel on the same dates and there were a series of conferenc.es between representatives of the All-Industry Committee and the Commissioners' committees as weU as an interchange of ideas. Th.e All-Industry Committee submitted its report on the Federal Trade Commission Act to the Committee on Federal Legislation, advising that the report was not final and was due to receive further consideration by the members of the All-Industry Committee. The All-Industry Committ~ also submitted to the Committee on Federal Legislation the report of the Subcommittee on the Robinson-Patman Act, stating that this report had been unanimously adopted by the members of the Committee. Copies of both of these reports are attached hereto. The All-Industry Committee did not submit at this meeting a report on the treatment of the Clayton Act and the Committee on F~deral Legis· lation requested the submission of a report covering tying-in contraets so that the same would be available for consideration at the next meeting of the Committee on Federal Legislation. The All-Industry Committee likewise did not submit a report on the propos~d treatment of the accident and health companies but the Com· mittee on Federal Legislation was advised that a special subcommittee of the All-Industry Committee dealing with the accident and health problem requested a confer~nee with the Committees on Federal Legislation and Rates and Rating Organizations at the next scheduled meeting. No consideration was given at this meeting to the question of under­ writing profit since that problem is now being 13xplored by a subcommittee of the Fire and Marine Committee, consisting of Commissioners W. Ellery Allyn, Connecticut; Charles F . .T. Harrington, Massachusetts, and Robert E. Dineen, New York. Time did not permit the consideration at this mi?eting of the treatment of such related problems as compulsory insurance, aviation insurance, reinsurance, etc. Commissioner Garrison of California submitted a memorandum dis­ cussing principles applicable to rating bills. By unanimous consent this memorandum was received and made a part of the records of the Com­ mittee. A substantial amount of time was devoted to a discussion of the basic philosophy as to the proposed treatment of the Federal Trade Commission Act on a state level during which ideas advanced by the industry and by the Commissioners were considered. In order to keep this report within reasonable limits it will not be possible to discuss in detail all of the 'i'arying views advanced in connection with this phase of the discussion and it must be kept in mind that no :final conclusions were reached. Among the ideas expressed was the view that it would be impraetical to enact s'o-called individual federal trade commission acts giving each Commission~r the power to determine what constituted unfair trade prac­ tices. It was contended that the adoption of such a plan would lead to MID WINTER MEETING 143

lack of uniformity in administration and conflicting interpretations of the same practices in different jurisdictions. On the other hand, it was asserted that if individual federal trade commission acts were not ~nacted in each state, the tield would not be covered completely, thereby creating dual jurisdiction with its attendant problems and that as a consequence state supervision would be impaired. Proponents of the individual federal trade commission acts approach called attention to the wide discretionary powers now vested in Insuranc~ Commissioners under existing laws and asserted that the dangers of conflicting state rulings inherent in the adoption of such a policy were overemphasized. There was another school of thought which suggested that the insurance business should know what constituted unfair trade practices and that the prohibition against such practices should be impoo1ed in the law. As against this argument it was contended that if an potential unfair practiees were enumerated, any statute co-.ering them would be carried to unreasonable am] unworkable lengths or conceivably might be incomplete. It should again be emphasized that no effort is made her~in to enumerate all of the arguments pro and con which were advanced in connection with this problem. During the colloquy an alternative approach to the problem pre:iented itself. It was suggested that individual federal trade commission acts paralleling the Federal Trade Commission Act be enacted in each state but with this difference, namely, that the Commis­ sioner should be empow,ered to promulgate rules and regulations covering unfair trade practices, ·with the proviso, however, that such rules and regulations could not be adopted except upon notice and after full hearing to all interested parties and with an appropriat_e provision for judicial review. It was pointed out that Congress itself has recently approved this v'11ry procedure in connection with administrative acts by passing the Ad· ministrative Procedure Act*, which was signed by President Truman on

* PUBLIC LAW 404, 79th CONGRESS~ADMINISTRATIVE PROCEDURE ACT "Sec. 4. Except to the extent. that there is involved (1) any military, naval, or foreign function of the United States or (2) any matter relating to agency manage,, ment or personnel or to pub1ic property, loans, grants, benefits, or contracts - ''(a) NOTICE. - General notice of proposed rule making shall be published in the Federal Registe:r and shall include (1) a statement of the time, place, and nature of public rule making proceedings; (2) reference to the authority under which the rule is proposed; and ( 3) either the terms or substance of the propooed :rule or a description d the subjects anti illsues involved. Except where notice or hearing is ret1uired by statute, this subsection shall not appl)' to interpretative rules, general statements of policy, rules of agency organization, procedure, or practice, or in any sit.uation in which the agency tor good cause finds (and incorporates the :li.ndi.ng and a brief statement of the reasons therefor in the rules issued) that notice and public procedure thereon are imJ)racticable, unnecessary, or contrary to the public interest. "(b} PROCEDURES. - After notice required by this section, the agency shall afford interested persons an opportunity to participate in the rule making through submission of written data, views, or argument with or without opportunity to present the same orally in any manner; and, after consideration of all relevant matter presented, the agency shall incorporate in any rules adopted a concise general statement of their basis and purpose. ,vhere rules are required by law to be made upon the record after opportunity for or upon an agency hearing, the requirements of sections 7 and 8 sha11 apply in place of the provisions in this subsection. "(c) EFFECTIVE DATES. - The required publication or service of any sub3tantiYe rule (other than one granting or recognizin$' exemption or relieving restriction or interpretat-ive rules and statements of policy) shall be made not lesa than thirty days prior to the effective date thereof except as otherwise provided by the agency upon good cause found and published with the ntle. "(d) PETITIONS. - Every agency shall accord any interested person the right to petition for the issuance, amendent, or repeal of a rnle." Approved June 11, 1946, 144 J>RoCEEDINGS

June 11, 1946, This Committee felt that this idea was well worth :further exploration and is to conduct further studies along this line in the hope that it will be able to report at the next m~eting of the Committee whieh has been tentatively scheduled for October in Chicago. Considerable discussion also took place in oonnection with the proposed treatment of the Robinson-Patman Act on a state level. It was pointed out that the common anti-discrimination statute in use in most states today went even further than the prohibitions of the Robinson-Patman Act whieh are more limited in their application. While no conclusion was reached at this m~ting on the general problem, it was felt that the sug· gestions advanced in the report of the Robinson-Patman Act Subcommittee might furnish a working basis for the solution of this partieular phase of the problem and it is hoped that final deeision will be reaehed at the forthcoming Chieago meeting. The Committee unanimously designated Commissioners Harrington, Johnson and Dineen, with Commissioner Harrington as Chairman, to serve as a Conference Committee representing the Committ/36 in any consultations and discussions with the Industry on the subjects now under joint con­ sideration by the All-Industry Committee and the Committee on Rates and Rating Organizations and th,e Federal Legislation Committee. All members of the National Association of Insurance Commissioners will, of eourse, be weleome to attend all meetings of the Subeommittee as well as the full Committee. (Commissioner McCormack took no part in this meeting.) Resp.ectfully submitted, Charles F. J. Harrington, Chairman, Mass. Robert E. Dineen, New York Newell R. Johnson, Minnesota J, Edwin Larson, Florida James M. McCorma.ek, Tennessee Seth B. Thompson, Oregon Maynard Garrison, California

REPORTS OF .ALL-INDUSTRY SUBCOMMITTEE ON FEDERAL TRADE COMMISSION ACT Report submitted at March 11-15, 1946, meeting of All-Industry Com· mittee, incorporating following earlier reports: 1. Report submitted at September 19-20, 1945, meeting of All-In­ dustry Committee; 2. Report submitted at October 18-19, 1945, meeting of All~Industry Committee.

REPORT OF SUBCOMMITTEE ON FEDERAL TRADE COMMISSION ACT French Lick, Mar~h 11-15 The first report of this Subcommittee, eopy of which is attached, was submitted at the meeting held in New York City ·on September 19th and MID-WINTER MEETING 145

20th. It was adopted by the All-Industry Committee at that meeting by a motion which also directed the Subcommittee to proceed with its studies and draft a pattern or structure of legislation to be submitted to the entire Committee at its meeting in Chicago on Octobel' 18th and 19th. Pursuant to such instruction the Subcommittee continued its study and completed a draft of a pattern of legislation for the strengthening of the state laws bearing on unfair trade practices. The draft was made a part of the Subcommittee's second report which was submitted at the Chicago meeting on October 18th and 19th. A copy of that report is also attached. Following presentation of the report, the following motion was ma.de and adopted:

11 That it is the sense of the All-Industry Committee that it approve the type of approach recommended in the bill if it is the pleasure of the Committee to attempt to cover the field through state legis­ lation with respect to matters covered by Section 5 of the Federal Trade Commission Act.'' The full Committee then proceeded to hear the reports of the Robinson­ Patman and Clayton Act subcommittees, with the result that the following motion was made and adopted and made applicable to the reports of a11 subcommittees: "That the report be approved and submitteB to the Imurance Com­ missioners, it l::ieing stated that the Legislative recommendations therein are tentative and have not been ratified or approved in detail by the constituent organizations, that further consideration will be given to these recommendations by the constituent organiza­ tions, and if revisions are to be suggested they will be submitted to this Committee.'' At the meeting in Chicago on Nevember 26 and 27, the Subcommittee distributed to the members of the All-Industry Committee a pattern bill embodying refinements over the bill submitted on October 19. However, debate upon and adoption of a motion to the effect that the full committee would report to the insurance commissioners at Grand Rapids, Michigan, on the rating question only precluded any considemtion of the report of the Federal Trade Commission Subcommittee at that meeting, The Subcommittee has redrafted the draft of biH submitted with its report of October 19, 1945. A copy of the bill as so redrafted is hereto attached. The Subcommittee again directs attention to the fact that through its further stu"dies a much more comprehensive picture of unfair trade practices covered by both Federal and State enactments has been developed since the submission of the first draft at the October 19 meeting. In the opinion of the Subcommittee, existing state laws must be strengthened if the business is to be in a position to demonstrate that the states are adequately covering the field, and in this connection unfair trade practices recognized as such and already dealt with by the Federal Trade Commission must be considered in the drafting of an effective bill. On the other hand, it must be recognized that no statute· of this character can specify every act, method or practice within the :field occupied by the Federal Trade Commission Act since the limits of that :field are :fixed by the Commission's 146 PROCEEDINGS own concept of what is unfair and deceptive. All that can be expected is a reasonably adequate coverage of sufficient extent to reflect a considered exercise of legislative judgment and declaration of policy for the respective states. The Subcommittee is of the opinion that the draft of bill hereto annexed accomplishes that objective. The following unfair trade practices have been included in the bill: Misrepresentations and False Advertising of Policy Contracts :False Information and Advertising Generally Defamation Boycott, Coercion and Intimidation J<-,alse Financial Statements Stock Operations and Advisory Board Contracts Discrimination Rebates A number of other subjects were discussed by the Subcommittee but after eonsideration were excluded. Fraud, barratry, bribery, commercial bribery and the making of political contributions have been excluded for the very good reason that they should be dealt with under general state statutes appJicabl,e to business generally and not as unfair trade practices confined to the insurance business. These offenses are presently dealt with in several states by general statutes not applying specifically to the business of insurance and additional similar statutes can be enacted where necessary. Another example of a possible .exclusion would be the '' alteration of applications'' which is covered by statute in some states. Obviously, how­ ever, these enactments are for the protection of the companies and are not d~signed to protect prospective policyholders and the public generally. A practice recognized by the Federal Trade Commission as an unfair trade practice is that of '' Advantage of dealing with seller.'' This has not been included for the reason that if any misrepresentation is involved, it would be covered by paragraph (a) in the pattern bill dealing with misrepresentations. There are other ittms which have been dealt with under the Federal Trade Commission Act or through State laws, such as '' elimination of competition,' ' ' ' sales below cost, ' ' and '' rate wars'' but it seemed to the Subcommittee that these three subj_ects would be covered in connection with the rating bills. It is the judgment of this Subcommittee that the draft of bill here submitted is sufficient in its coverage of the field of unfair trade practices. The Subcommittee further believes that its content, taken together with the declaration of legislative intent and policy, is more than ample to convince Congress that the states, in their considered exercise of legislative judgment and in direct :response to the invitation in Public La.w 15, have provided a basis for adequate and effective regulation of unfair or deceptive trade practices. Respectfully submitted, SUBCOMMITTEE ON THE FEDERAL TRADE COMMISSION ACT Mrn-WJ:-.'I'ER MEETe.lG 147

REPORT OF SUBCOMMITTEE ON FEDERAL TRADE COMMISSION ACT (Submitted at September 18-19, 1945, meeting of All·Industry Committee) A review of the various alternatives available to the insurance industry in relation to Public Law 15 and the power of the Federal Trade Com­ mission over insurance suggests that a real possibility of unanimous support may be found under the program here outlined. There seems to be general agreement as to the practical dangers and difficulties which might result from an attempted solution of this problem through the paralleling of the Federal Trad~ Commission Act by legislation in each state. Clearly there is doubt whether existi.itg state statutes would sustain the argument that the insurance business is now subject to state control in the field of fair trade practices reasonably co-extensive with the control which might be exercised by the Fed~ral Trade Commission after January 1, 1948. The determination of whether or not this is so and if not so in what respects state laws may have to be strengthened will entail extensive research as to (1) The extent of present state insurance laws bearing on insur­ ance trade practices in all branches of the business; and (2) The types of unfair trade practices which might be subject to qu,estion by the Federal Trade Commission which are not now covered by state law. In view of the possibility of a solution which might be acceptable to all branches of the insurance industry, the Subcommittee on the Federal Trade Act recommends to the All-Industry Committ~e such a prompt and complete survey. In order that this necessary research may be effectively pursued, your Subcommittee recommends that _each group represented on the All-Industry Committee designate an individual to work on this researdt in cooperation with your Subcommittee. It is understood that the agreement of any member of the All-Industry Committee to assist with the recommended research will not constitute commit~ent in any way to support tbe program ·which may be developed from that research. Also it is understood any determination on or com­ mitment to such a program of state legislation by the 1ire and casualty branches of the industry is depentleut on their finding a solution under state legislation on their rating problem. It seems agreed that complete and permanent exemption from S~ctions 5 and 6 of the Itederal Trade Commission Act and Section 11 of the Clayton Act affords the only possible trny in which insurance companies may be relieved from some degree of control by the }.,etleral Trade Commission. The determination on and reasonable consummation of a program such as has been suggested for the strengthening of the state statutes in the :field of insurance trade practices might establish the n"ecessary Congressional justification for complete and permanent exemption by congress of the insurance industry from the provisions of Sections 5 and 6 of the Federal 148 PROCEEDINGS

Trade Commission Act and Section 11 of the Clayton Act, if the industry should agree that such exemption were necessary.

REPORT OF SUBCOMMITTEE ON FEDERAL TRADE COMMISSION ACT At Chicago, on October 18, 1945 In the :first report of this Subcommittee, it was recommended that research be continued as to (1) the extent of the present State Insurance Laws bearing on unfair insurance trade practices, and (2) the type of unfair trade practices which might be subject to question by the Federal Trade Commission and which are not covered by state law. The All. Industry Committee at the meeting held on September 19th and 20th in New York City, directed the Subcommittee to proceed with this study and to draft a pattern or structure of legislation to be submitted to the entire Committee at its next meeting. Pursuant to such instruction the .Subcommittee has continued its study and has completed a draft of a pattern of legislation for strengthening the state laws bearing on unfair trade practices. Th~ structure of the draft of the legislation hereto attached is im­ portant. Section 1-3 are the key sections and are substantially self-explana­ tory. On its face, this draft is a declaration on the part of the enacting state of the state Legislature's intention to cover the :field now occupied by the Federal Trade Commission. It is believed that this type of legis­ lation follows logically from Public Law 15 and serves as an answer to the invitation by Congress for the States to act if Federal laws are not to apply. It may wen be of both legal and practical importance to unmis­ takably establish the intention of state legislatures to act under Public Law 15 and to occupy a field comparable to that occupied by the Federal Trade Commission under Section 5. In t~ draft presented herewith, the Subcommittee has not attempted to define the many types of unfair or deceptive methods and practices. It is believed that insofar as any such methods or practices are presently prohibited in any state, it would generaUy be preferable to retain the prohibitions in their familiar form. Where no prohibitions exist, it ia contemplated that definitions should be formulated to cover methods and practices which in the light of legislation in other states and decisions of th~ Federal Trade Commission earned condemnation. If this general approach is pursued further, the All-Industry Com­ mittee must determine to what extent the definition of unfair trade practiee should be expanded to cover ( 1) unfair or improper practices now covered by the insurance laws of some states and (2) unfair m~thods or practices not now covered in the insurance laws of any state but which have hereto­ fore been declared by the Federal Trade Commission to be unfair. Through the cooperation of some of the members of the AU-Industry Committee a comprehensive study has b13en made of the insurance laws bearing on unfair trade practices in all states. Without going into detail, it may be said that these statutes present a very spotty pattern. In no MID-WINTER MEETING 149 state were there found to be statutes covering the entire field and but one statute (rebating) was found to be m effect m all states. This Sub­ committee feels that the further survey of existing statutes confirms its prior report as to the need for strengthening existing state laws, if the business is to be in a position to demonstrate that the states are adequately covering the :field. It must be recognized that no statute of thia character can specify every act, method or practice within the field occupied by the Federal Trade Commission Act, since the limits of that :field arc fixed by the Com­ mission's own concept of what is unfair or deceptive. All that can be expected is a reasonably adequate coverage of sufficitmt extent to reflect a considered exercise of legislative judgment and declaration of policy. Sections 4-9 inclusive of the draft bill set up procedure for enforcement of its prohibitions similar to the procedure prescribed by the Federal Trade Commission Act. The remedy is the issuance of a cease and desist order which if subsequently violated would subject the violator to a fine. The Subcommittee does not intend this legislation to depriv,e the states of any po,,·ers which they now have or to eliminate any penalties now provided for specific violations. In submitting the draft of the bill, the Subcommittee assumes that it is only for consideration as part and parcel of an overall program. AN ACT Relating to Unfair Practices in the Business of Insurance Section 1-Purpose. The purpose of this Act is (1) to regulate the business of insurance as contemplated by Public Law 15, 79th Congress and (2) to define all acts, methods, and practices by any and all persons engaged in the business of insurance which constitute unfair methods of competition and unfair or deceptive acts or practic~s. Section 2-Unfair Methods and Unfair or Deceptive Acts or Practices Pro­ hibited. No person, partnership or corporation engaged in the business of insurance shall ,engage in unfair methods of competition or in unfair or deceptive acts or practices in the conduct of such business. Such prohibitions are defined and declared to consist of the following: (a) MisrepresentatioM and False .Advertising of Policy Contracts. No person, partnership or corporation engaged in the business of insurance in this state shall make, issue, or circulate, or cause to be made, issued or circulated, any estimate, illustration, circular, or statement of any sort misrepresenting the terms of any policy issued or to be issued or the benefits or advantages promised thereby, or the dividends or share of the surplus to be received thereon, or shall use any name or title of any policy or class of policies misrepresenting the true nature thereof. Nor shall any such person, partnership or corporation make any misrepresentation to any person insured in any company for the purpose of inducing or tending to induce a policyholder in any company to lapse, forfeit, or surrender his insurance. 150 PROCEEDINGS

(b) False Information and .Ad1Jerti8ing Generally. No person, partner­ ship or corporation engaged in the business of insurance in this state shall make, publish, disseminat~, circulate, or place before the public, or eause, directly or indirectly, to be made, published, disseminated, circulated, or placed before the public, in a newspaper or other publication, or in the form of a notice, circular, pamphlet, letter or poster, or over any radio station, or in any other way, an advertisement, announcement or statement of any sort containing any assertion, representation or statement with respect to the business of insurance or with respect to any person, partner· ship, or corporation in the conduct of his or its insurance business, which is untrue, deceptive or misleading, (c) Defamation. No person, partnership or corporation engaged in the business of insurance in this state shall make, publish, disseminate, or circulate, directly or indirectly, or aid, abet or encourage the making, publishing, disseminating or circulating of any oral or written statement or any pamphlet, circular, article or literature which is false or maliciously critical and which is calculated to injure any other such person, partnership or corporation. (d) Boycott, Coercion and Intimidation. No person, partnership or corporation engaged in the business of insurance in this state shall enter into any agreement to commit, or by any concerted action, commit, any act of boycott, coercion or intimidation resulting or tending to result in unreasonable restraint of, or a monopoly in, trade or commerce. ( e) False Financial Statements. No person, partnership, or corpora· tion engaged in the business of insurance in this state shall :file with any supervisory or other public official, or shall make, publish, disseminate, circulate or deliver to any p~rson, or place before the public, or cause directly or indirectly, to be made, published, disseminated, circulated, de­ livered to any person, or placed before the public, any financial statement of an insurer which does not accurately state its true financial condition. (f) Stock Operations and ..4.dvisory Board Contracts. No insurance company doing business in this state shall issue, nor permit its agents, officers, or employees to i;:sue or deliver, agency company stock or other capital stock, or benefit certificates or shares in any common-law corpora~ tion, or s~curities or any special or advisory board or other contracts of any kind promising returns and profits as an inducement to insurance; and no corporatio11 or stock company acting as agent of an insurance company nor any of its agents, officers, or employees shall be permitted to sell, agree or offer to sell, or give or offer to give, directly or indirectly, in any manner whatsoever, any share of stock, securities, bonds, or agree­ ment of any fol'm or nature promising returns and profits as an inducement to insurance or in connection therewith. (g) Discrimination*. No life insurance company doing bmiiness in this state shall make or permit any distinction or discrimination in favor of individuals between those of the same class and equal expectation of life in the rates charged for contracts of insurance or of life annuity or in the dividends or other benefits payable thereon, or in any other of the terms and conditions of the contracts it makes, nor shall it discriminate Mm-WINTER MEETING 151

unfairly betw~n other risks involving essentiaUy the fiame hazards and expense elements or between risks in the application of like rates and credits.

(h) Rebates*. (1) Except as otherwise expressly provided by law, no life insurance company or its agent shall make any contract of insurance or agreement as to such contract, other than as plainly expressed in the policy issued thereon; nor shall any such company or agent pay or allow, or offer to pay or allow, as inducement to insurance, any rebat~ or premiums payable on the policy, or any special favor or advantage in the dividends or other benefits thereon, or any valuable consideration or indueement not specifi.ed in the policy contract of insurance; or give, or sell, or purchase or offer to give, sell, or purchase as inducement to insurance or in connection therewith, any stocks, bonds, or other securities of any insurance company or other corporation, association, or partnership, or any dividends or profits accrued thereon, or anything of value whatsoever not specified in the policy,

(2) Nothing in this or the preceding subsection shall be so construed as to prohibit any company issuing non-participating life insurance from paying bonuses to policyholders or otherwise abating their premiums in whole or in part out of surplus accumulated from non-participating insur­ ance; nor to prohibit any company tranf3acting industrial insuranc.e from returning to policyholders who have made premium payments for a period of at least one year directly to the company at its home or district offices, a percentage of the premium which the company would have paid for the collection of such premiums; nor to prohibit the readjustment of the rate of premium for a group life insurance policy based on the loss or expense experience thereunder, at the end of the first year or of any subsequent year of insurance thereunder, such readjustment to be made retroactive only for such policy year**.

Section 3-Power of Commissioner. The Insurance Commissioner shall ha\'e power to examine and investi· gate into the affairs of every person, partnership or corporation engaged in the business of insurance in order to determine wh/;!ther such person, partnership or corporation has been or is engaged in any of the acts, methods, and practices prohibited by this Act.

Section 4-Notice of Hearing. When the Commissioner shall haw reason to believe that any person, partnership or corporation has been or is engaged in any of such prohibited acts, methods or practices, and that action is called for, he shall issue and serve upon such person, partnership or corporation, a statement of the charges and a notice of a hearing thereon to be held at a time and place

*This 1mbsection is restricted to life insurance companie~ nn the assumption that the problem of discrimination and rebate as it relates to other types of carriers will fall within the province of other subcommittees of the All·Industry Committee. **lm•orporation by reforenee of definitions contained in existing statutes of any oi the prohibited acts may be utilized in lieu of setting forth the definitions at length con· tained herein. 152 PROCEEDINGS fixed in the notice, which shall not be less than ...... da.ya from the date of service thereof. Section 5--,Hearing, Witnesses, Produotton of Books. At the time and place fixed :for the h,earing, 8Uch person, partnership or corporation shall have an opportunity to be heard and to show eause why an order should not be made by the Commissioner requiring such person, partnership or corporation to cease and desist from the acts, m~thods or practices constituting the alleged violation. The Commissioner upon such hearing may administer oaths, examine and cross-examine witnesses, receive oral and documentary evidence, and shall have the power to subpoena witnesses, compel their attendance, and require the production of books, papers, records, correspondence, or other documents which he deems releva.~i to the inquiry. The Commissioner, upon such hearing may, and upon the r~quest of any party shall, cause to be made a written record of all the evidence offered or introduced and proceedings had at such hearing.

Nothing in this Act contained shall require the observance at any hearing of formal rules of pleading or evidence. Section 6-.tl.ppearances. Upon good cause shown, the Commissioner may permit any person, partnership or corporation to intervene, appear and be heard at such hearing.

Section 7-Cease and Desist Order. If, after hearing, the Commission~r shall determine that the acts, methods or practices which are the subject of the inquiry are prohibited under this Act, he shall reduce his findings to writing and shall issue and serve upon the person, partnership or corporation, charg_ed with the viola­ tion, an order requiring such person, partnership or corporation to cease and desist from such acts, methods or practices.

Section 8-Penalties. Any person, partnership or corporation who violates an order of the Commissioner to cease and desist after it has become final and while it is in effect, shall forfeit to the people of the State a sum not to exceed ...... dollars for each violation, which may be recovered by a civil action.

Section 9-Procedure .Additional. The powers vested in th~ Commissioner by this Act, and the forfeiture provided for violation of an order to cease and desist made pursuant thereto shall be in addition to any other procedures, penalties, fines or forfeitures authoriz~d by law with respect to the methods, acts and practices hereby declared to be unfair or deceptive*.

*In states having a general penalty provision for any violation of the insurance law, this section should be amplified to eliminate the application of that general penalty section to the acts, methods, and practices defined at length by this bill but not those defined by reference to existing laws. Mm-WINTER MEETING 153

Section IO-Judicial Bev~ew. Any person, partnership or corporation required by an order of the Commissioner to cease and desist from engaging in any of the prohibited acts, methods or practices, may obtain a review which shall be on the basis of the record of the proceedings before the [ commissioner J and shall not be limited to questions of law, by (appeal] [writ of certiorari] to [the ················································ court]. The court shall determine whether the filing of the [appeal] [petition for such writ] shall operate as a stay of any such order of the [com­ missioner]. The court may, in disposing of the issue before it, modify, affirm or rev~rse the order of the [commissione1] in whole or in part.

REPORTS OF ALL-INDUSTRY COMMITTEE ON ROBINSON-PATMAN ACT (Adopted by AU-Industry Committee at September 4-6, 1946, meeting)

1. Report submitted at September 19 20, 1945, meeting of All-In­ dustry Committee.

2. Report originally submitted at October 18-19, 1945, meeting of All-Industry Committee and amended at November 26-27, 1945, and at March 11-15, 1946, meetings of All-Industry Committee.

3. Report submitted at September 4-6, 1946, meeting of All-Industry Committe~.

EXHIBIT ''A'' REPORT OF THE SUBCOMMITTEE ON THE ROBINSON-PATMAN ACT TO THE ALL-INDUSTRY COMMITTEE

(Submitted at September 19-20, 19451 meeting of All-Industry Committee)

A. NATURE OF ROBINSON-PATMAN ACT At the time the Sherman Act was adopted, in 1890, the country had witnessed phenomenal growth of producer (seller) enterprises and it was believed that the unrestricted d,evelopment of such enterprises would result in such concentration of power in comparatively few corporations as to make impossible the continuance of competitive enterprises. The Sherman Act approached the problem by prohibiting combinations in restraint of trade, and further prohibited th~ setting up of a monopoly through the dealings of a single corporation or individual. The Sherman Act was later foUI1d to be inadequate to deal with the problem for the reason that the purposes of the Act were fr!;lquently circum· vented by indirect means which were held by the Courts not to be within the specific prohibitions of the Act. As a result, in 1914, the Clayton Act was adopted. This Act continued the Sherman Act approach by way of prescribing certain activities in the producer (seller) field, and attempted 154 PROCEEDINGS to prohibit the indirect methods of "committing" monopoly by making ill~gal certain price discrimination practices and the acquisition, under certain circumstances, of stock in competing companies, and by limiting the growth of interlocking directorates. By 1936 it had become apparent that the attempts which Congress had made to deal with the problem of maintaining free trade and eommeree were still inadequate, because, being designed to control the activities of sellers primarily, they did not prevent the development of monopolistic practices on the part of buyer organizations in the consumer goods :field. These buyer organizations were typified by the chain stores.1 It was felt that while the Clayton Act contained a prohibition against price discrimina­ tions, the prohibition was largely ineffective because it permitted quantity discounts which were not based on actual cost differentials and because it permitted indireet discriminations through brokerage and advertising allow­ ances. The Robinson-Patman .Aet attempted to deal with the evils still per­ mitted under the Clayton .Act by requiring quantity discounts to be based on actual costs and by prohibiting, subject to certain exceptions, brokerage, advertising and other allowances for services and facilities. An examination of the specific provisions of the Act is necessary to an understanding of its position in the body of anti-trust legislation and its eff!;let on the insurance business. Section 1 of the Act amends the Clayton Act by striking out Section 2 of the Clayton Act and by substituting for the stricken section six new paragraphs. The first of the new paragraphs (Section 2(a) of the Clayton Act) prohibits certain pric'3 discriminations and quantity discounts.2 The ex-

1. See Patman, "The Robinson-Patman Act," Pages 3-5. 2. Section 2(a) reads as follows: "That it shall be unlawful for any person engaged in commerce, in the course of such commerce, either directly or indirectly, to discriminate in price between different purchasers of commodities of like grade and quality, where either or any of the purchasers involved in such discrimination are in commerce, where such commodities are sold for use, consumption, or resale within the United States or any Territory thereof or the District of Columbia or any insular possession or other place under the jurisdiction of the United States, and where the effect of such discrimination may be substantially to lessen competition or tend to create a monoply in any line of commerce. or to injure, destroy, or prevent competition with any person who either grants or knowingly receives the benefit of such discrimination, or with customers of either of them: Provided, That nothing herein contained shall prevent differentfals which make only due allowance for differences in the cost of manufacture, sale, or de\h'ery resulting from the differing methods or quantities in which such commodities are to such purchasers sold or delivered: Provided, however, That the Federal Trade Commission may, after due investigation and hearing to all interested parties, fix and establish quantity limits, and revise the same as it :finds necessary, as to particular commodities or classes of commodities, where it finds that available purchasers in greater quan• tities are so few as to render dift'erentials on account thereof unjustly discrimi· natory or promotive of monopoly in any line of commerce; and the foregoing shall then not be construed to pe1·mit differentials based on differences in quantities greater than those so fixed and established: And provided further, That nothing herein contained shall prevent persons engaged in selling goods, wares, or merchandise in commerce from selecting their own customers in bona fide trans­ actions a.nd not in restraint of trade: And provided further, That nothing herein contained shall prevent price changes from time to time where in response to changing conditions affecting the market for or the marketability of the good!!. concerned, such as but not limited to actual or imminent deterioration of perish­ able goods, absolescence of seasonal goods, distress sales under court process, o:r sales in good faith in discontinuance of business in the goods concerned." USCA See. 1S(a). MID ,,·rxU.l{ MrETIK(, 155 eeptions to the prohibition o.f quantity discounts are o.f considerable im­ portance. Quantity discounts or differentials are permitted provided they make due allowance for differences in cost of manufacture1 sale or delivery resulting from differing methods or quantities in whirh the c.ommodities are sold or delivered. Therefore, discounts which reflect actual and provable differences in cost of manufacture, sale, or delivery are permitted.3

Also, discounts Which do not substantially lessen competition or tend to the creation of a monopoly are permitted e\·en though they may not be based upon actual difference in cost. If, in the event a complaint fa filed a11eging violation of this Section and it is proved that a price discrimination exists, the burden is on the seller to justify the discriminatory discount or differential. Section 2 (b) of the Clayton Act as amended makes this clear.'

Section 2(c) of the Clayton Act as amended by Robinson-Patman prohibits the allowanc"°' of brokerage, except for services rendered, to the other party to the transaction or to an agent of the other party.s It will be noted that this prohibition does not carry the usual qualification to the effect that it ~pplies only where the acts prohibited may substantially

S. Three types of discounts are defined as follows: "Quantity discounts (non-cumulative discounts based upon the dollar amount bought at a single time, and usually

4. Section 2(b) reads as follows: "Upon proof being made at any hearing on a complaint under this section, that there has been discrimination in price or services or facilities furnished, the burden of rebutting the prima-facie case thus made b~· showing justification shall be upon the person charged wjth a violation of this section, and unless justification shall be affirmatively shown, the Commission is authorized to issue an order terminating the discrimination: Provided, however, That nothing herein contained shall prevent a seller rebutting the prima-fR.C'ie case thus made by showing that his lower price or the furnishing of serviees or facilitie8 to any purchai-er or purchasers was made in good faith to meet an equally low price of a competitor, or the services or facilities furnished by a competitor." PSCA Sec. 13(h)

5. Section 2(c) reads as follows: ''That it shall be unlawful for any person engaged in commerce, in the course of such commerce, to pay or grant, or to receive or accept, anything of Yalue as a commission, brokerage, or other compensation, or any allowance or discount in lieu thereof, except for services rendered in connel'tion with the sale or purchase of goods, wares, or merchandise, either to the other party to such transaction or to an agent, representative, or other intermediary therein where such intermedia17 ill actinir in fact for or in behalf, or is subjel',t to the direct or indirect control, of any party to such transaction other than the person by whom such cornpensa· tion is 110 granted or paid." USCA Sec. 13(c) 156 PROCEEDINGS lessen competition or tend to create a monopoly. Thl;l prohibition is absolute to the extent that it applies.a Under the 1anguage of the Section, payment of brokerage to a repre­ sentative of the buyer is condemned even though the allowance may never reach the buyer. It is for this reason that this Section has an important bearing upon insurance in view of long established practices. While brokers in the insurance businf:lSS do represent the buyer, they_ receive commissions from the seller, which commissions are not passed on to the buyer but are retained by the broker as payment for service rendered. In the insurance business brokers are independent contractors and are not a part of the staff of a buyer's organization. This fact argues for a di:ff~rent application of Section 2(e) in the insurance business than to industry generally. Section 2(d) prohibits payment to or for the benefit of a customer in consideration for services or facilities furnished by or through the customer in eonn~etion with the sale, etc., of products or commodities. The prohibition does not apply where the payments are available on proportion­ ally equal terms to all customers. 7 This Section is designed to eliminate the practice of large buyers of demanding allowane~s which purport to com­ pensate the buyer for advertising and other sales promotional services. Section 2 ( e) prohibits discriminations between purchasers of eommodi-

6, Federal Trade Commission rulings are summarized as follows in Supplement 3 to Volume VII, N.A.M. Law Digest (May, 1945): 1. Direct or indirect brokerage payments by a seller to a buyer are unlawful regardless of the effect on competition. 2. A brokerage house, even though independently owned and managed, is the agent of the buyer in purchasing transa.etions. 3, Price discrimination is a burden on commerce and brokerage to buyers often hides price discrimination. In l'egulating commerce by making certain broker­ age payments illegal, the Congress did not violate the prescriptions of the Fifth Amendment. 4. A brQker, servjng the buyer, ofUn renders servjces to the seller but fo1: this he cannot be paid by the seller, !or such service is merely incidental to his service for the buyer. 5. 'ro come withi_n the language "except for services rendered," a seller's payment to a buyer or his agent must be for services which the seller wa11 bound to render in connection with the sale. 6. The prohibition against brokerage or allowances in lieu thereof to buyers i• absolute, 7. The defense allowed for "meeting competition'' (Section 2(b)) Telatas to price and ser.vice discrimination by a seller and does not l'elate to brokerage Ol' pay for a buyer's services. 8. The brokerage section (2(c)) applies only to trcansactions in interstate com• merce, while price discriminations are covered if either of the purchases is in interstate commerce. (Biddle Purchasing Co. v. FTC (2nd Circuit), 96 F. (2d) 687; Oliver Bros. Inc. v. FTC (4th Circuit). 102 F. (2d) 768; The Great A & l' Tea Co. v. FTC (3rd Circuit), 106 F. (2d) 667; Webb-Crawford Co. v. FTC (5th Circuit), 109 F. (2d) 268; Quality Bakers of America v. FTC (1st Circuit), 114 F. (2d) 898; Fitch & Kentucky v. Tennessee Light & Power Co., 136 F. (2d) 12. 7. Section 2 ( d) reads as follows: "That it shall be unlawful for any person engaged in commerce to pay or con­ tract for the payment of anything of value to or for the benefit of a customer of such person in the course of such commerce as compensation or in considera­ tion for any services or facilities furnished by or through such customer in connection with the proeessing, handllng, sale, or off'ering for sale of any products or commodities manufactured, sold, or offered .for sale by such person, unleH such payment or consideration is available on proportionally equal terms to aJI other customers competing in the distribution of such products or commodities." USCA Sec. I3(d). Mm-WINTER MEETING 157

ties bought for resa.lf'. Since insurance is not bought for resale it appears to have no applieation to insurance.a Section 2(f) provides that it is unlawful for any person engaged in commeree to receive a prohibited price discrimination." Section 2 of the Robinson-Patman Act applied only to litigation pend· ing at the tim!3 of enactment. Section 3 of the Robinson·Patman Act is not amendatory of the Clayton Act. It is frequently referred to as the eriminal seetion. This section has not been invoked by the Department of Justice. Inasmuch as it relates to price discriminations, its applicability to the business of insurance will presumably be governed by principles similar to those hereinafter referred to in connection with Section 2(a) of the Clayton Act as amended by Robinson-Patman. However, Section 3 differs considerably from Section 2(a).to Section 3 does not contain the limiting language of Section 2(a) which requires that the discrimination must be such that it may '' sub­ stantially ..• lessen competition or tend to create a monopoly.'' It makes the discrimination itself unlawful provided that the goods are '' of like grade, quality, and quantity.'' The omission of the qualifying ]anguag"' contained in Section 2 (a) may raise interesting questions as to the en­ forceability of Section 3 under the Due Process amendment. On the other hand, the Janguage of Section 3 may require such an interpretation of '' like quantity' ' as to render the Act innocuous. Section 4 of the Act expressly eliminates from the prohibitions of the Act the return of a portion of the net earnings or surplus to members by cooperative associations.11 It is believed that this Section requires no special examination.

8. "That it shall be unlawful for any person UJ. discriminate in favor of one pur­ chaser against another purchaser or purchaser of a commodity bought for resale, with or without processing, by contracting to furnish or furnishing, or b)" eon· tributing to the furnllihing of, 1my services or facilities connected with the processing, handling, sale, or offering for sale of such commodity so purchased upon terms not accorded to all purchasers on proportione.lly eque.l terms." USC.A. Sec. 13(e). 9. Section 2(f) reads as follows: "That it shall be unlawful for any person engaged in commerce, in the course of such commerce, knowingly to induce or receive a discrimination in price which ia prohibited by this section." USCA Sec. 13 (f). 10. Section 3 reads as follows: "It shall be unlawful for any person engaged in commerce, in the course of such commerce, to be a party to, or assist in, any ~ransaction of sale, or eontract to sell, which discriminates to his knowledge agamst competitors of the purchaser, in that any discount, rebate, allowance, or advertising service charge is granted to the purchaser over and above any discount, rebate, allowance, or advertising service charge available at the time of such tr&ni

B. APPLICABILITY OF ROBINSON-PATMAN ACT TO INSURANCE Irrespective of the treatment of the Robinson-Patman Act in Publie Law 15, hereinafter discussed, it is necessary to determine whether a.nd to what ,extent Robinson-Patman applies to the insurance business. The Act was aimed at specific practices in the consumer goods field. These practices had to do with the sale in commerce of ''commodities'' (Section 2(a)), "goods, wares or commodities" (Section Z(c)), "products or commodities" (Section 2(d)), and "goods" (S~ction 3). With reference to the varying language in the different sections, it will be noted that each of the sections contains either the word ''commodity' 1 or the word ''goods.''

It is necessary, therefor,e, to determine whether the words '' com­ modity'' and ''goods'' include insurance. The word ''commodity,'' is now generally understood in its commercial sense in which it denotes that which affords advantage or profit, that which affords convenience or ad· vantage, especially in commerce, including everythinf: movable which is bought or sold, an article of trade or commerce, something that is produced or used and is the subject of barter and sale, something movable and tangible, almost any description of article called movable or personal estate, goods, wares, and merchandise of any kind, property, In referring to commerce, it may comprehend everything movable, that is bought or sold, except animals,12

The caliea construing ''commodity'' as related to insurance are not in agreement, In Palatine Insurance Company v. Griffen, (T~x. Civi App. 1918) 202 S. W. 1014, insurance was held not to be a commodity under a statute prohibiting any agreement to refuse to buy from or sell to any person an article of merchandise, produce, or commodity. A similar decision was made in Duggan Abstracting Company v. Moore, (Tex. Civ. App. 1940) 139 S. W. (2d) 198, where the business of compiling abstracts of title was held not to be an article of merchandise, produce or commodity. The case most frequently referred to as holding ''commodity'' not to include insurance is Queen Insurance Co. v. State Attorney General, (Tex. 1893) 24 S. W. 397, 22 L.R.A. 483. The Court held that the statute which prohibited making or performing '' any agreem.ent not to sell or dispose of any article or commodity of trade, use, merchandise, commerce, or con­ sumption below a common standard so as to prevent free competition' 7 did not apply to a combination of Fire Insurance companies to use uniform rat_es of insurance and agents' commissions throughout the state. The Court stated that the word •'commodity'' is '' ordinarily used in the commercial sense as any movable or tangible thing that is ordinarily produced or used as the subject of barter or sale.'' Insurance was held to be a "commodity" in Beechley v. Mulville (1897) 102 Ia. 602, 70 N. W. 107. In this case, a group of insurance agents were charged with violating a statute which prohibited '' combina­ tions to fix the price of oil, lumber, coal, grain, flour, provisions or any other commodity or article whatever.'' The Court referred to Anderson's H. Bee 12 Oorpua Jurla, Page 153. Mrn-WI~TEH. MEf7l'I~G 139

Law Dictionary, which defined the word ''commodity'' as ''convenience, privilege, profit or gain.'' In State ex rel. Taylor v. Ross (1906) 4 Ohio N. P. N. S. :337, an indictment under the antitrust law again!lit insura.nee companies for un­ lawfully combining to fix prices, etc., was sustained on the ground that insurance was a commodity, and insurance companies were engaged in barter and trade within the meaning of this law. The Court refused to follow the earlier Ohio case of Runck v. Cloud (1901) 8 Ohio N. P. 448. Two subsequent nisi prius cases have refused to follow Taylor v. Ross. See State v. Beovee (1917) 6 Ohio N. P. N. S. 337, and Foster v. Anken Bauel' (1913) 14 Ohio N. P. N. S. 637.

The fact that the United States Supreme Court l1a._,; now taken the position that insurance is commerce may have a tendency to encourage state courts as Well as Federal courts to construe the word '' commoditv'' more broadly.rn • The applicability of Section 2(c) to the insurance business involves a construction of the words '' goods, wares or merchandise.'' Many of the cases construing th~se words aro:i.e in connection with the Statutes of Frauds of the various states, and are not particularly helpful as to insur· anr.e. The word ' 1 goods'' has been held to be limited to property which has an intrinsic value. On the other hand, it ha~ been held to include mo,·ables not having any intrinsic value iu themselves i-uch as choses in action ar:1 well as those in possession, evidence of debt, bank bills and notes, bonds, mortgages, etc.14 While it is possible to argue rather effectively that Section 2 ( c) relating to brokerage does not apply to the insurance business for the reason that the word ''commodity'' is not used and that the words '' goods, wares or merchandise'' do not apply to insurance, there nrrnrthe1ess remains a possibility that they might be considered to include -insurn.nce. There is little uniformity in the decisions interpreting these wordF-. They are various­ ly interpreted according to the context and subject matter. Those decisions holding the word 1 ' goods'' to be limite'1. in meaning to property which has an intrinsic value may be used in support of the argument that the broker­ age section does not apply to insurance. On the other hand, the decisions holding that the word II goods" includes things which haxe no intrinsic value in themselves such as choses in action, etc., may be construed to afford the ground work for decisions specifically holding the brokerage section applicable to insurance. C. TIIE ROBINSON-PATJIAN ACT AND PUBLIC LI W Jii (In:a:urance Anti-Trust Moratorium .Act of the 79th Congress, fir:>t session, approv­ ed March 9, 1945.) It may be argued that Congres,; intended, by adopti11g Public Low 15, that the Robinsnn.Patman Act is to apply to the business of inJ--urance

13. See 21 A.L.R. at Page 551. 14. See Kevser v. Sunapee School District No. 8, 35 N. II. 477, 4~3. See a\sO U. 8. v. Moulton 27 F. Cas. No. l'>, 827, 5 1lason 537, ~,44; Gillb1> v. Usher, 10 F. Cas. No. 5387, Holmes 348. 351; Epping v. Robinson, 21 Fla. ::rn, 52. 160 PROCEEDINGS after January 1, 1948. Section 3(a) of Public Law 15 provides in part:

"Until January 1, 19481 • , • the Act of June 19, 1936, known as the Robinson-Patman Anti-Discrimination Act, shall not apply to the business of insuranc~ or to acts in the conduct thereof. ' ' This language implies that after January 1, 1948, the Robinson-Patman Act will apply to the business of insurance to the extent that other sections of the Act fail to limit such application. It is necessary, therefore, to examine other sections of Public Law 15 to determine how and to what extent the Robinson­ Patman Act will apply to insurance after January 1, 1948. Section 2(b) reads in part as follows: "No Act of Congress shall be construed to invalidate, impair or supersede any law enacted by any state for the purpose of regulating the business of insurance or shall impo~ a fee or tax upon such business, unless such Act specifically relates to the business of insurance; provided, that after January 1, 1948, . , • the Act of October 15, 1914, as amend~d, known as the Clayton Act ... shall be applicable to the business of insurance to the extent that such business is not regulated by state law.,, Nowhere in this section is there a specific reference to the Robinson· Patman Act. However, the proviso specifically refers to the Clayton Act '' as amended.' ' The amendments to the Clayton Act necessarily include those amendments contained in the Robinson~Patman Act. It seems, there­ fore, that Section 1 of the Robinson-Patman Act, which amends Section 2 of the Clayton Act, and which includ13s the price discrimination and broker­ age subsections and the subsections referring to other allowances, is in­ cluded within the specific language of the proviso. Accordingly, after January 1, 1948, Section 1 of the Robinson-Patman Act will apply to the business of insurance only "to the ~xtent that such business is not regu· lated by state law.'' This fails to dispose of Sections 2, 3 and 4 of Robinson-Patman. Section 2 is completely inapplicable to insurance and Section 4 is believed to be unimportant from the standpoint of our present discussion. Section 3, however, must be considered. It may be argued that by reason of the failure of Congress to include a. specific reference to Robinson-Patman in the proviso of Section 2(b) of Public Law 15, it' was intended that the sections of Robinson.Patman which are not amendatory of the Clayton Act should not apply in any manner to the business of insurance aft_er January 1, 1948. It may, on the other hand, be argued that since Section 3(a) of Public Law 15 implies that after January 1, 1948, the Robinson·Patman Act shall apply to the business of insurance, and since the application of Robinson.Patman to insurance after January 1, 1948, is not limited by specific reference in Section 2(b), Section 3 of Robinson-Patman will apply to insurance after January 1, 1948, irrespective of any regulatory laws enacted by the states. It is believed that neither of these alternative interpretations is sound. Effect must be given to that portion of Section 2 (b) of Public Law 15 which precedes the proviso. Since the Robinson-Patman Act does not specifically relate to the business of insurance, it cannot be eonstrued to invalidate or to impair or to supersede any law enacted by a state for the purpose of regulating the business of insurance. In other words, assuming a state law exists MID-WINTER MEETING 161

which regulates the business of insurance, Section 3 of Robinson-Patman would not affect the operation of the state law because it could not be construed to invalidate, impair or supersede the state lMv. However, the state law must be such that it affects activities comprehended within· Section 3 of Robinson-Patman, otherwise there ,vould be no occasion to consider whether Section 3 invalidates, impairs or supersedes it. Our conclusion is that since Section I of Robinson-Patman amends the Clayton Law, it is included within the proviso of Section 2 (b) of Public Law 15. Being Within the proviso, the price discrimination, brokerage and other allowances subsections apply to insurance '' to the extent'' that there is no state law regulating the specific activities prohibite\1 by these sections. With reference to Section 3 of Robinson-Patman, while it is not included within the proviso, it is included within the language of Section 2(b) preceding the proviso from the standpoint that it may not invalidate any state law which regulates activities included under Section 3. D. THE IMP.ACT OF THE ROBINSON-P.ATMAN .ACT ON INSUR­ .ANGE Since Public Law 15 may make the Robinson-Patman Act generally applicable to insurance transactions, after January 1, 1948, the question arises whether there are practices in the insurance bmdne~s which might be considered vulnerable under some one of the Sections of that Act. Con­ sidering first the price discrimination sections (Section 2(a) of Clayton as amend_ed by Robinson-Patman and Section 3 of Robinson-Patman), it should be noted that the Act applies to individual sellers and does not require any combination as between companies. In this respect it must be distinguished from the Sherman Act.t5

The activities of individual companies may violate any one of the

15. Sect-ion 1 of the Sherman Anti-Trust Act (Act of July 2, 1890, Chapter 647, 26 St!lt 209, as amended; 15 U.S. Code. Section 1 et seq.) read:, in part as foUows: "Every contract, combination in the form of trust or otherwise, or conapiracy, in restraint of trade or commerce among the several states or with foreign nations, is hereby declared to be illegal , .." (Emphasis ours). The reference to com­ binations and conspiracies necessarily includes more than one person or more than one corporation. Section 2 of the Sherman Act reads in part as follows: "Every person who shall monopolize or attempt to monopolize or combine or con· spire with any other person or persons to monopolize ..." This section applie11 to the activities of an individual person or corporation and to the activities of persons or corporatiins acting in combination. Section 2 (a) of the Clayton Act as amended by Robinson-Patman reads in part as follows: ''That it shall be unlawful for any person engaged in commerce . . ." The reference is to "person" and not to a combination of persons or a conspiracy participated in by more than one person. Section 2(c) of the Clayton Act as amended by Robinson-Patman reatb in part as follows: "That it. shall be nnlawful for any person enga.ged in commerce , ." It will be noted that this language does not refer to combinations of persons or to conspiracies. Sections 2(d) and 2(e) of Clayton as amended by Robinson-Patman also refer to "any person'' and thus do not include combinations of persons or conspiracies between persons. Section S of Robinson-Patman also refers to "persons engaged in commerce" and does not include combill.ations or conspiracies. )ij:! PROCEEDINGS

Sections of the Robinson-Patman Act. Various practices in the insurance field should be considered in this connection. Among these practices are: ( 1) charging varying rates by size of risk (2) retrospective rating available to risks of certain size (3) graduated expense by size of risk ( 4) fleet rates available to risks covering a specified number of cars (5) expense constants applied to risks of certain size ( 6) loss constants applied to risks of certain size (7) experience rating and other adjustments by size of risk (8) policy forms (comprehensive) restricted to risks of certain size (9) minimum premium by size of risk (10) ' 1 equity" (competitive) rating These practices might be questioned under Paragraph 2(a) or under Section 3 of Robinson-Patman. Additional activities might be questioned under Section 3, For example (1) territorial classifications, (2) general reductions in rates by territory, (3) differences in rates between states when considered in the Jight of the fact that the Robinson-Patman Act applies on a national leveL As to the test of legality, there are differences between Section 2(a) of Clayton as amend!:'!d by Robinson-Patman, and Section 3 of Robinson• Patman. Under Section 2(a) the basic question which must first be passed upon is whether in fact a discrimination exists. On this point retrospective rating may be cited as an illustration. Assuming that retrospective rating is available to risks where the premium is $1,000 or more, it may be argued that such a plan does discriminate against a risk with a premium of $990 in favor of a risk with a premium of $1,010. If discrimination is present, the burden of defending the discriminatory practice is on the accused and the defense may b.e either that the effect of the retrospective rating plan eannot be to substantially lessen competition or to tend to the creation of monopoly, or that due allowance for costs of manufacture, sale or delivery resulting from differing methods or quantities has been made in the plan. A further defense [ contained in section 2 (b)] is that the price waH set in good faith to meet that of a competitor. With refer~nce to Section 3 of Robin,::on-Patman, it has been pointed out that the burden on the govemment or other complainant is greatly increased. "Intent" must be shown. It also must be shown affirmatfrely that the goods were of like grade, quality and quantity. Thus, while Section 3 may seem somewhat broader than Section 2 (a) in its prohibitions, it would seem that the obligation on the complainant under Section 3 is eon­ sitlerably greater and the obligation on the respondent correspondingly less. Another section which must be considered is Section 2(e) of Clayton ns amended by Robinson-Patman, which deals with brokerage. For con­ venience, this section will be referred to as 2 ( c). It is difficult to arrive at any definite conclusion as to whether or· not n·11 influrance broker woulrl come under Section 2 ( c) of the Act or whether Mm-WINTER :MEETJ::>.G 16.1

he would be exempted as a legitimate interme,diary. It hi true that in the insurance business brokers are considered to represent the buyer. In some im;,tances, the state statutes speci:fieal1y contemplate that the broker shall reprefent the buyer. For example, Section 6015. Missouri Insurance Laws, reads in part as follows: '' \Vhoever for ('Ompensation, acts or aids in any manner in nl;')gotiating contracts of insuran<'e or reinsurance, or placing risks or effecting insurance or reinsuranee for any person other than him­ ~elf, and not being the appointed agent or officer of the company in which insuranee or reinsurance is effected, shall be

Sedion 2 ( d) may be construed to affect practices in the insurance buf"i11ess which have to do with price allowances made to specific risks for serviees performed by the insured which would otherwise be performed by the insurer. It is believed that these practices are not numerous or of serious consequen('e to the businese. It may be considered practicable and proper to eliminate them. On the otlwr hanU, it may be well to proceed on the basis of adopting state legi:

16. See cases cited under footnote 6. 164 PROCEEDINGS states may accomplish the ouster of this section of the Robinson-Patman Act and at the same time permit the insurance business to operate effectively and in the public interest is through the passage of rat~ regulatory laws. It is believed that there should be included in such laws 8.nti-rebate and anti-discrimination sections. Section 2(c) of Clayton Act as amended by Robinson-Patman is the brokerage section. It is believed that state regulation sufficient to protect the companies and brokers against prosecution under this section should provide for the licensing of brokers and for the revocation of license, should specifically authorize the payment of commissions to licensed brokers and should specify the conditions under which brokerage may be paid to out.of-state brokers. It may be questioned whether state regulation which goes only to the extent indicated is adequate for the reason that even though the state law specifically authorizes payment of brokerage, it does not protect the public against the harmful effects of improper rebates by brokers. It would seem however, that the adoption of anti-rebate pro­ visions applicable to companies, agents and brokers would certainly ac­ eomplU!h the desired result. Section 2(d) of Clayton Act as amended by Robinson-Patman Act is the section designed to eliminate allowances which purport to compensate the buyer for advertising and other sales promotional services. A broad anti-rebate provision will render this section inoperative. The comment mad~ with reference to Section 2(d) of the Clayton Act as amended by Robinson·Patman is believed also to apply to Section 2 ( e) which prohibits discrimination in favor of one purchaser against another in connection with services or facilities having to do with the sale of a commodity bought for resale. Th.e section probably has no direct bearing on insurance practices. Section 3 of Robinson-Patman prohibits certain price discriminations and is commonly referred to as the criminal section. There is considerable question as to the meaning and enforceability of its provisions. A rating law such as that herein recommended together with an anti-rebate section would constitute a valid ouster. The remaining sections of the Robinson-Patman Act are unimportant from an insurance standpoint.

RECOMMENDATIONS 1. The ena-Otment in each State of rating laws that meet the require­ ments of Public Law 15.

2. The enactment in each State - either as an im.tegral part of the rating law or independently - of statwtes (a) prohibiting unfair rate discriminations and (b) prohibiting rebates. Typical !"tatutory provisions prohibiting rate discrimination and rebat· ing are found in the New York Insurance Law, Sections 183(c), 188 and 209. MID-WINTER MEETING 165

3. In the absence of a statutory regulaticm of rates, the in.surer af· fected, for protection against the impact of the RobiMon-Patman .Act, must rely exclusively upon State laws prohibiting discrimination and rebates. l1t such case our recommendation is the enactment, if it is possible, of necessary exceptions to the discrimination and rebating S'tatutes to enable the insurer to operate effect-ively.

For example, without the aid of rating laws and in the face of severe discrimination and rebating statutes, life insurers have relied upon express statutory provisions to enable the issuing of gToup policies at rates less than the usual rates and to ,enable the granting of other differentials:

Maine Insurance Laws, Sect-ion 140 ''Nothing in the three preceding sections sha ;J be so construed as to prohibit any company issuing non-participating life insurance from paying bonuses to policy-holders or otherwise abating their premiums in whole or in part, out of surplus accumulated from non· participating insurance; nor to prohibit any company transacting in­ dustrial insurance on the weekly payment plan from returning to policy-holders who have made premium payments for a period of at least one year directly to the company at its home or branch offices, a percentage of the premium which the company w,mld have paid for the weekly collection of such premiums; nor to prohibit any life insurance company doing business in this state from issuing policies of life or endowment insurance with or without annuities at rates less than the usual rates of premiums for such poli('.ies, insuring mem­ bers of organizations or employees of any employer who through their secretary or employer may take out insurance in an aggregate of not less than fifty members and pay their premiums through such secre­ tary or employer; nor to prohibit an agent from receiving commit;sions from his company for insurance on himself.''

New York Ins·urance Law, Section 204 (2)

1 ' No domestic, foreign or alien life insurance company ~hall be permitted to do business in this state if it hereafter issues, within or y,·ithout this state, any policy of group life insurance on which the premium shall be less than the net premium based on the American :Men Ultimate Table of Mortality, with interest at three and one-half per centum per annum, plus a loading computed in accordance with a formula which shall be determined by the superintendent. Anything in this chapter to the contrary notwithstanding, any group life insur­ ance policy issued or delivered in this state may provide for readjust­ ment of the rate of premium based on the experience thereurider, at the end of the first year or of any subsequent year of insurance thereunder, and such readjustment may be made retroactive only for such policy year,'' 4. The enactment in each State cf statutes recognizing insurance brokers and delineating the right and duties thereof, specifically authorizing the payment of co-mmissions to licensed brokers and specifying the con­ di,tions under which brokerage may be paid to ou.t-of-State brokers. 166 PROCEEDINGS

Because, as pointed out in the foregoing analysis, the applicability of the Robinson Patman Act to insurance is uncertain and because the intent of Congress, as expressed in Public Law 15, is by no means clear, our recommendation is that the applicability of the Robinson-Patman Act be included in any discussion that may be held with the Insurance Sub· committees appointed by the Senate Judiciary Committee and by the House Judiciary Committee. RespectfuJiy submitted, John M. McFall, Chairman Felix Hebert Joseph B. Bea.ch Robert L. Hogg Harry E. Moore John R. Cooney W. Ray Thomas September 19, 1945

EXHIBIT ''B'' SUPPLEMENTARY REPORT OF THE SUBCOMMITTEE ON THE ROBINSON-PATMAN ACT (Submitted at October 18-19, 1945, meeting of All-Industry Committee and ame.nded at November 26-27, 1945, and at March 11-15, 1946, meetings of All-Industry Committee) LEGISLATIVE PROPOSALS 1. RATING LAWS The subject of rating laws that meet the requirements of Public Law 15 is not discussed herein, because it is a matter for consideration in connection with the Sherman Act. 2. PROVISIONS TO ACCOMPANY STATE RATING LAW (a) A.nti-discriminartion Rating laws usually contain appropriate anti-discrimination pro­ visions as essential parts of rate making. The following, adapted from existing statutes, are recommended as a basis for anti-discrimination pro­ visions to accompany State rating laws! (1) Casualty and St1.. rety Rating Law: '' Rates shall be reasonable, adequate and not unfairly discriminatory.'' (2) Fire Bating Law: "No insurer, nor any rating bureau, shall 'fix or change any rate which discriminates unfairly between risks in the ap­ plication of like charges and credits, or which discriminates unfairly between risks of essentially the same hazard, ter­ ritorial classification, and having substantially the same d_egree of protection.'' (b) Anti-Rebate The following, adapted from existing statutes, are recommended as a basis for anti-rebate provisions to accompany state rating laws: "No insurer or employee thereof, and no broker or agent shall pay, MID \\TIXTER MFE'fl!\G 167

allow, or give, or offer to pay, allow, or give, directly or indireetly as an inducement to insurance, or after insurance has been effected, any rebate, discount, abatement, credit, or reduction of the premium named in a policy of insurance, or any special favor or advantage in the dividends or other benefits to accrue thereon, or any valuable con­ sideration or inducement whatever, not specified in the policy of insur­ ance, except to thlcl extent that such rebate, discount, abatement, credit, reduction, favor, advantage or consideration may lie provided for in rating systems--·--··--···········--·······--·--·-(*). No insured named in a policy of insurance, nor any employee of such insured shall knowingly receive or accept, directly or indirectly, any such rebate, discount, abatement, or reduction of premium, or any special favor or advantage or valuable consideration or inducement. Nothing herein contained shall be con­ strued as prohibiting the payment of commissions or other compensa­ tion to regularly appointed and licensed agents and to brokers duly licensed by this State, nor as prohibiting any participating insurer from distributing to its policyholders dividends, sadug·s or the unused or unabsorbed portion of premiums and premium deposits.''

3. STATUTES IN THE ABSENCE OF RATING LAWS ( a) .Anti-discrimination The following are recommended as a basis for appropriate inde· pendent anti-discrimination statutes:

(l) Fire "No insurer doing in this State the business specified in Section .... shal1 promulgate or use any schedule of rates, any form or any underwriting rule or classification ::.ystem which discriminates unfairly between risks of es­ sentially the same hazard, territorial classification. and hav. ing substantially the same degree of protection.'' (2) Casualty and Surety ''No insurer doing in this State the business specified in Sections ...... shall promulgate or me any schedule of rates, any underwriting ru!e or classification system which discriminates unfairly between risks or c-lasses of risks.'' (A specific Statute for Workmen's Compensation is not included for the reason that Workmen's Compensation in­ surance is so completely regulated as to rates that it seems unnecessary to suggest a provision to be med independently of a rating Jaw.) (3) Life "No insurer doing in this State the business specified in Section ...... shall promulgate or me any rate or system of rating which discriminates unfairly hetween insurants of the same class and equal expectation of life in the amount or payment of premiums or in any return of premium, dividends, or other advantages.''

(•)Insert appropriate words to describe authorized rating :<1ystem under the terms of the Rating Law. 168 PROCEEDINGS

(4) .Accident and Health ''No insurer doing in this State the business specified in Section ...... shall make or permit any unfair discrimina- tion between individuals of the same class in the amount of premiums, policy fees, or rates charged for any policy or contract of insurance, or in the benefits payable there· under.'' (b) .dnti-rebate The following is recommended as a basis for an appropriate independent anti.rebate statute: "No insurer or employee thereof, and no broker or agent shall pay, allow, or give, or offer to pay, allow, or give, directly or indirectly, as an inducement to insurance, or after insurance has been effected, any rebate, discount, abatement, credit or reduction of the premium named in a policy of insurance, or any special favor or advantage in the dividends or other benefits to accrue thereon, or any valuable consideration or inducement whatever, not specified in the· policy of insurance. No insured named in a policy of insurance, nor any employee of such insured shall knowingly receive or accept, directly or indirectly, any such rebate, discount, abatement, or reduction of premium, or any special favor or advantage or valuable consideration or induce· ment. Nothing herein contained shall be construed as prohibiting the payment of commissions or other compensation to regularly appointed and licensed agents and to brokers duly licensed by this State; nor as prohibiting any participating insurer from distributing to its policyholders dividends, savings or the unused or unabsorbed portion of premiums and premium deposits.'' ( c) Necessary Exceptions In the absence of a statutory rating law, the anti·diserimination and anti-rebate statutes must contain specific exceptions to enable the insurer affected to operate efficiently. Uniform exceptions cannot be set forth in the statutes because different classes of insurance require different exceptions. In the case of life insurance, the foHowing statute prohibits discrimination and rebates and contains typical exceptions for Life In­ surance Companies: "No Life Insurance company doing business in this State shall make or permit any distinction or discrimination in favor of individuals between insurants of the same class and equal expectation of life in the amount or payment of premiums or rates charged for policies of insurance, or in the dividends or other benefits payable thereon, or in any other of the terms and conditions of the contracts it makes; nor, except as otherwise expressly provided by Jaw, shall any such company or any agent thereof make any contract of insurance or agreement as to such contract, other than as plainly expressed in the policy issued thereon; nor shall any company or agent pay or allow, or offer to pay or allow, as inducement to insurance, any rebate of premium payable on the policy, or any special favor or advantage in the dividends or other benefits thereon, or any valuable consideration or inducement not Mm-WINTER MEETING 169

specified in the policy contract of insurance; or give, or sell, or purchase or offer to give, sell or purchase, as inducement to insurance or in connection therewith, any stocks, bonds, or other securities of any insurance company or other corporation, association, or partnership, or any dividends or profits accrued thereon, or anything of value what· soever not specified in the policy." "No person shall receive or accept from any company or agent, sub· agent, broker, or any other person any such rebate or premium payable on the policy, or any special favor or advantage in the dividend or other benefits to accrue thereon, or any valuable consideration or inducement not specified in the policy of insurance.'' ' 'Nothing in this section shall be so construed as to prohibit any company issuing 'non·participating life insurance, from paying bonuses to policyholders or otherwise abating their premiums in whole or in part out of surplus accumulated from non-partiripating insurance, nor to prohibit any company transacting industrial insurance from returning to policyholders who have made premium payments for a period of at least one year directly to the company at its home or district offices, a percentage of the premium which the company would have paid for the collection. of such premiums; nor shall anything in this section be construed as prohibiting the delivery of any group life insurance policy in this State which provides for the readjustment of the rate of premium based on the claim and expense experience there­ under, at the end of the first year or of any_ subsequent year of insurance thereunder, provided such readjustment is made retroaeti.e only for such policy year.' '

4. BROKERS ACT The following, adapted from existing statutes, is recommended as a basis fur appropriate Brokers Act: See. 1. This Act shall apply to all brokers as defined herein. Sec. 2. The term "broker" as used in this Act, means any person, partnership, association or corporation, who or which, for money, com· mission, brokerage, or anything of value, acts or aids in any manner in the solicitation or negotiation, on behalf of the assured, of con· tracts for insurance of any of the following kinds as specified in See...... , namely: Life, Accident, H,ealth, Casualty, Fidelity, Surety, Fire and Mal'ine. Sec. 3. No person, partnership, association or corporation :-hnll act as a broker without first procuring a license so to act from the ( Com· missionet). See. 4. Application for a broker's licem•e thall be filed with the (Com· missioner) in writing and in the form prescribed by him. Sec. 5. The (Commissioner) sha:1 issue a broker's license to an ap· plicant when (a) an application provided for in Sec. 4 has been filed with and approved by the (Commissioner) and the (Commissioner) shall have determined the applicant to be competent and trustworthy, 170 PROCEEDl~GS

(b) the applicant has paid an annual fee as follows: If the applicant is a resident of this State, ·············"···· dollars; if the applicant is a non~resident of this State, ...... dollars.

Sec. 6. Whenever the (Commissioner) upon notice and hearing is satisfied that any applicant for license or any broker acting under his supervision and holding a license from him is violating or has violated any provision of the insurance laws of thjs State, or that he is incompetent or untrustworthy, he shaI1 proceeJ. to issue an order denying or revoking the 1icense of such broker.

Sec. 7, An insurance company or agent thereof may pay money, commission or brokerage, or give or allow nnything of value, for or on account of the f!.olicitation 01· negotiation of contracts for insurance of the kind or kinds enumerated in Sec. 2 of this Act, to a duly licensed broker. (Detailed provisions for notice, beal'ings and review of orders and finding should be integrated wjth the g·eneral state statutes.)

EXHIBIT ''C'' SUPPLEMENTAL REPORT (Submitted by John. M. McFall, Chairman, in behalf of Robinson-Patman Act Subcommittee, at September 4-6, 1946, meeting of All-Industry Committee)

As requei.ted, I have reviewed ·with the members of the Subcommittee on the Robiuson-Patman Act the Legislative Proposals heretofore sub· mitted to the All-Industry Committee.

There is still some question as to the app1icability of the Robinson­ Patman Act to insurance beeam;e of the content of the Robinson-Patman Act and because of the uncertain terms of Public Law 15. But our opinion is that inimrance cannot afford to proceed on the assumption that the Robinson-Patman Act is inapplicable and run the risk of the federal penalties, namely, action by the Federal Trade Commission, suits for treble damages, and in some cases criminal prosecution.

Our problem is to determine the State legislative program that wil1 protect the insurance industry from the impact of the Robinson-Patman Act.

1. Payment of commission to brokers

We recommend that a Brokers Act in substantially the form submitted in our Legislative Proposals be passed in each State whose laws recognize insurance brokers but which do not specifically authorize the insurer to pay commissions to such brokers. For example, in Arizona, brokers are defined by statute and are licensed but the law does not authorize the insurer to pay commissions to brokers. From our preliminary examination we believe that legislation (in m&Dy l\IID·WINTER MEETUW 171 cases simply an additional provision authorizing pa~·ment of <'Ommissions) is required in the following States: 1 Arizona. Massachusetts Pennsylvania V{ashington Idaho Missouri Rlwde Island West Virginia Indiana Nebraska Tennessee Wyoming Louisiana New Hampshire Utah .AJa~ka Maine Oregon Vermont Puerto Rico 2. Proi1isions 1o accompany State Rating Law ( a) Anti-discrimination The provisions of the Casualtv and Fire Rate Regulatory Bills ("Rates shall not be excessiv;, inadequate or unfairly dis· criminatory'') are recommended. (b) Anti-rebate Th~ anti-rebate section attached to the Rate Regulatory Bills is recommended.

3. .Absence of Rati-ng La-w ( a) Anti-discrimination Independent anti discrimination statutes as suggested in Legislative Proposals are recommended for each kind of insurance unregulated as to rate::.. (b) Anti-rebate The anti-rebate section attaehed to the Fi.re and Casualty Rate Bills is recommended as a basis for appropriate independent anti-rebate statute. (c) Necessary exceptions The independent anti-discrimination and :rnti-rebate statutes must contain exceptions as suggested in Le;.{islative Proposals. Commissioner Harrington (Massachusetts): The next report was the report of the sessions at the Hotel Commodore of the same two committees on October 23 to 26, copies of which, with their exhibits, have been sent to all memb~rs of the Association and to representatives of the industry, and that report covers some nine pages and the subjech! discussed in that report were the Robinson-Patman Act and, in that connection, the Com· mittee voted unanimously to accept the reports of tlw industry dealing with the Robinson-Patman Act. It v..as the opinion of tl1e Committee that the suggested legislative procedure provided an adequate and satisfactory method of dealing with the Robinson-Patman Act on a state le,·el and that the Committee recommends for u,:e in the states the propo:-als contained therein. The E'ederal TraUe Commission A('t ,vas di~t'U~HJtl hut no decision was reached at that meeting. Several 1:ispects of it ,vere discussed and several drafts were also considered hy the Committee.

1. In Florida, Georgia, Hawaii, Iowa, K11nsas, Kentuc-ky. Michigan, Minnesota, Montana. N. Dakota. Oklah0nrn. S. D:1kota. Texas and ,\·j,;1·onsin hrokers 1tre not recognized. In Alahama, Arkan~as, California, Colorado. Co1rne("tfrut, Delaware, District of Columbia, Illinois, :!llaryland, Mi~sissippi, :New Mexico, New York, Nevada, New Jers1:!y, N. Carolina, Ohio, S. Carolina an

The Regulation -0f the accident and health business was discussed and a reported bill for futurf} consideration accompanied the report. Title insurance was discussed and left for further consideration. The Clayton Act was discussed by the industry and a memorandUlll submitted at the close of the meeting, but time didn't permit its con­ sideration. The Risk Research Institute expressed certain views in a letter concerning the rating bills, which was received by the Committee and filed. The exhibits attached to these reports are A, B and C, dealing with the Robinson-Patman Act, various reports of the Industry Committee; Exhibit D, dealing with the Federal Trade Commission Act, and under the title, ' 'An Act Relating to Unfair Practices in the Insurance Business,'' - and Exhibit E, which was another approach to the Federal Trade Com· mission Act; and Exhibit F, which was a filing and a rate approval bill for the accident and health business. As I said, the only action that was recommended was on the Robinson· Patman Act. Mr. Chairman, I move the adoption of this report.

President Dineen: Do I hear a second 'l

Commissionei" Larson (Florida): I second the motion.

President Dineen: We have a motion, made and seconded, that this report be adopted. All in favor, signify by saying ''Aye.'' AU opposed, "No." The "Ayes" have it and it is so ordered.

JOlliT REPORT OF COMMITTEE ON RATES AND RATING OR­ GANIZATIONS AND FEDERAL LEGISLATION OF NATIONAL ASSOCIATION OF INSURANCE COMMISSIONERS ON MEETING HELD AT HOTEL COMMODORE, NEW YORK, OCTOBER 23-26, 1946 The following members of the committees were present at this meeting: Charles F. J. Harrington, Massachusetts, Chairman Maynard Garrison, California J. Edwin Larson, Florida Newell R. Johnson, Minnesota Robert E. Dineen, New York Seth B. Thompson, Or.egon The :following Commissioners were also present: W. Ellery Allyn, Connecticut David A. Forbes, Michigan Walter Dressel, Ohio j. Austin Carroll, Rhode Island The following departmental personnel also attended: E. A. Faircloth, Florida Mm-WINTER MEETING

Alfred J. Bohlinger, New York Thomas C. Morrill, New York Victor Cohen, New York George McAteer, W'ashington William C. Green, Assistant Attorney General of the State of Minne­ sota, was also in attendance. The All-Industry Committee was in session at th~ same time and a number of consultations were held between that group and this committee. The subjects considered by this committee were as follows: 1. Treatment of the Robinson-Patman Act on a state level. 2. Treatment of the Federal Trade Commission Act on a state level. 3. Proposals for the regulation of the accident and health business. The committee was also asked to consider the regulation of the title insurance business but the pressure of other business prevented that par­ ticular problem from being considered at this meeting. Other aspects of the rating problem were likewise not considered for the same reason. Robinson-Paftman A.ct The committee had before it and gave consideration to the reports of the Robinson Patman Act Subcommittee of the All-Industry Committee dated September 19, 1945, October 19, 1945, and September 7, 1946. Copies of thes_e reports are attached hereto, made a part hereof and marked Exhibits ''A,'' '' B'' and '' C.'' These reports were unanimously approved by the All-Industry Committee and for the purpose of this report are treated as the reports of the All-Industry Committee. The committee voted unanimously to accept thesce reports. It was the opinion of the committee that the suggested legislative procedure provided an adequate and satisfactory method of dealing with the Robinson.Patman Act on a state level and the committee recommends for use in the states the proposals therein contained. Federal Trade Commission .ti.ct Numerous proposals as to how this problem should be treated were considered. In general and in brief, the following proposals were submitted to your committee: (1) No legislation on a sta.te level should be enacted and the regu· lation of unfair practices should be left to the Federal Trade Commission. (2) Each state should enact a so-calJed "baby federal trade com· mission act'' paralleling the language, in general, of the Federal Trade Commission Act. (3) Each state should enact a ''baby federal trade commission act'' with the exception that all prohibited practices should be promulgated by the Commissioner in the form of rules, following notice and hearing to all interested parties. This suggested modification is along the lines of the 17 4 PROCEEDINGS procedure contained in the Federal Administrative Procedure Act (Public Law 404, 79th Congress).

( 4) Each state should pass an act giving the Commissioner the power to restrain and enjoin unfair practices by the use of cease and desist orders. To the extent possible, the legislature should set forth in definitive form the prohibited acts or practices. To the extent that it was not possible for the legislature to do this, the Commissioner should be entrusted with the power to de:fine the additional prohibited acts and practices under the procedure set forth in (3) above.

(5) The Commissioner should be entrusted with the power to issue cease and desist orders in connection with unfair acts and practices. How­ ever, all unfair acts and practices are defined by rules promulgated by the Commissioner following notice and bearing, along the lines of the Federal Administrative Procedure Act. This is a so-called "baby federal trade commission act.'' It becomes a definitive plan, in effect, upon promulgation of rules by the Commissioner. (6) Under this plan all unfair act.s and practices are prohibited. The statute itself contains a list of prohibited acts or practices. Since this list is not all-inclusive, the Commissioner is empowered in all other cases to conduct hearings as to wh,ether or not an act or practice complained of constitutes an unfair act or practice. If it does, the Commissioner makes a report in writing stating his findings. Thereafter the Commissioner may, through the Attorney General, file a petition in court to restrain the vio­ lation. If the court adopts the Commissioner's contention, a cease and desist order is issued by the court. The Commissioner has no power under this proposal to do more than make a finding as to whether or not an act or practice is unfair and he may not issue the cease and desist order himself. With the exception of. those prohibited acts or practices specifically enumerated in the statute, the actual definition of an unfair act or practice is by judicial rather than administrative determination, and the issuance of all cease and desist orders, whether or not the practices are enumerated, ls entrusted to the courts. (7) This plan is similar to (6) ~xcept that the authority to determine the unenumerated unfair practices and to issue cease and desist orders in all cases is entrusted in the first instance to the Commissioner rather than to the courts. A refinement of plans (6) and (7) contemplated that the Commissioner should have the power to issue cease and d~sist orders as to the acts and practices specifically enumerated in the act hut not as to those of which he was the arbitrator. All of the plans considered contained provisions for judicial -re\·iew. The merits and demerits of these plans were exhaustively explored and discussed by members of your committee and by other interested parties. Your committee was unanimous upon the proposition that the regulation of unfair acts and practices should not be left to the Federal Trade Com­ mission in Washington. Its views on this subject have been outlined in Mm-WIXTEr: MEr:11ING 175

previous reports and in the supporting memoranda of the Commissioners' legislative proposal submitted to the Congress in 1944. The committee looked with favor upon two alternative methods of dealing with this problem, copies of which are atta('hed and marked Exhibits "D" and "E." In both alternatives unfair methods of com­ petition and unfair or deceptive acts and practices are prohibited. The general idea of these two proposals is based upon the ~o-called definitive approach, namely, to enumerate specific unfair acts and practices in the business which are generally known. The committee recognized, however, that the enumeration of specific acts and practices would not completely occupy the field and that therefore proyision had to he made for an omnibus section to cover unenumerated acts and practir('s. The proposals differ, however, in the following respects. One plan (Exhibit "D") follows the procedure outlined in the Federal Trade Com­ mis:,:;ion Act arnl empowers the Commissioner, after hearing, to determine unfair acts and practices other than those specifica11y enumerated and to issue cease and desist orders as to all unfair practices whether enumerated or not. Under the alternative proposal (Exhibit '' E • ') the power to make adjudications as to unfair acts and practices and to issue cease and desist orders in connection therewith is given to the courts through the medium of the Attorney General. These bills are receiving additional study hy the memberR of the committee and ,vill be the subject of further consideration at the com­ mittee's next meeting, which will be held some time before the December meeting of the Association in New York. Accident and Ilealth Certain conditions in the accident and health busiuess have been a som·ce of grave concern to the members of the National Association of Insurance Commissioners mid to the members of this. committee. For years many states have passed upon the forms used in the aceident and health field. It has been suggeste

Clayton .ti.ct At the conclusion of its labors a memorandum was submitted to the committee dealing with this subject, a copy of which is annexed hereto and marked Exhibit '' G.'' The contents of this memorandum will be considered by the committee at its next meeting. The .tJ._ I. c_ Bills A communication was received from the Risk Research Institute ex­ pressing certain views with respect to the legislative proposals previously adopted by the National Association of Insurance Commissioners. While the views contained in the letter and memorandum have not been formally approved by the membership of the Risk Research Institute, it was never­ theless read and considered by the Committee and filed in its records. Respectfully submitted, Charles F. J. Harrington, Massachusetts, Chm. Robert E. Dineen, New York Newell R. Johnson, Minnesota Seth B. Thompson, Oregon J. Edwin Larson, Florida Maynard Garrison, California

EXHIBITS ''A,'' ''B'' AND ''C'' REPORTS OF ALL-INDUSTRY SUBCOMMITTEE ON ROBINSON-PATMAN ACT (Adopted by All-Industry Committee at September 4-6, 1946, meeting) 1. Report submitted at September 19-20, 1945, meeting of AU-In­ dustry Committee. 2. Report originally submitted at October 18·19, 1945, meeting of

All-Industry Committee and amended at November 26-27, 19451 nnd at March 11-15, 1946, meetings of All-Indm;try Committee. 3. Report submitted at September 4-6, 1946, meeting of All-Industry Committee.

REPORT OF THE SUBCOMMITTEE ON THE ROBINSON-PATMAN ACT TO THE ALL-INDUSTRY COMMITTEE

(Submitted at September 19-201 1945, meeting of All-Industry Committee) A_ NATURE OF ROBINSON-PATMAN ACT At the time the Sherman Act was adopted, in 1890,. the country had witnessed phenomenal growth of producer (seller) enterprises and it was believed that the unrestricted development of such enterprises would result in such concentration of power in comparatfrely few rorporations as to make impossible the continuance of competitive enterpri,;es. The Sherman Act approached the problem by prohibiting combinations in restraint of trade, and further prohibited the setting up of a monopoly through the dealings of a single corporation or individual. The Sherman Act was later found to be inadequate to deal with the problem for the reason that the purposes of the Act were frequently circumvented by indirect means which were held by the Courts not to be within the specific prohibitions of the Act. As a result, in 1914, the Clayton 178 PttOCEEDIKGS

Act was adopted. This Act continued the Sherman Act approach by way of prescribing certain activities in the producer (seller) :field, and attempted to prohibit the indirect methods of ''committing'' monopoly by making illegal certain price discrimination practices and the i:u'.quisition1 under certain circumstances, of stock in competing companies, and by limiting the growth of interlocking directorates. By 1936 it had become apparent that the attempt,i which Congress had made to deal with the problem of maintaining :free trade and commerce were still inadequate, because, being designed to control the activities of sellers primarily, they did not prevent the development of monopolistic practices on the part of buyer organizations in the consumer goods field. These buyer organizations were typified by the chain stores1, It was :felt that while the Clayton Act contained a prohibition against price discrimina­ tions, the prohibition was largely ineffective because it permitted quantity discounts which were not based on actual cost differentials and became it permitted indirect discriminations through brokerage and advertising al· lowances. The Robinson-Patman Act attempted to deal with the evils still per­ mitted under the Clayton Act by requiring quantity discounts to be based on actual costs and by proh:ibHing, subject to certain exceptions, brokerage, advertising and other allowances for services and facilities. An examination of the specific provisions of the Act is necessary to an understanding of its position in the body of anti-trust legislation and its effect on the insurance business. Section I of the Act amends the Clayton Act by striking out Section 2 of the Clayton Act and by substituting for the stricken section six new paragraphs. The first of the new paragraphs (Section 2(a) of the Clayton Act) prohibits certain price discriminations and quantity discounts.2 The

1. See Patman, "The Robinson·Patman Act," Pages 3-5. 2. Section 2(a) reads as follows: "That it nhall be unla·wful for any perfon engaged in commerce, in the course of such commerce, either directly or indirectly, to discriminate in price between different purchasers of commoditiei. of like gl'ade and quality, wiie:-e either or any of the purchasers involved in such discrimination a.re in commerce, where such commodities are sold for use, consumption, or re~ele within the United States or any TeITitory thereof or the Distrfrt of Columbia or any insular possession or other place under the jurisdiction of the United States, and where the effect of such discrimination may be substantially to Jessen competition or tend to create a monopoly in any line of commerce, or to injure, dei1troy, or prevent competition with any person who either grants or knowingly receives the benefit of such dis­ criminat.ion, or with customers of either of them: Provided, That nothini.'!: herein contained shall prevent differentials which make only due allowance for differences in the cost of manufacture, sale, or delivery resulting from the diff;iring n1ethods or quantities in which such conunoditil:'S are to such purcl111sers sold or

exceptions to the prohibition of quantity discounts are of considerable importance. Quantity discounts or differentials are permitted provided they make due allowance for differences in cost of manufacture, sale or delivery resulting from differing methods or quantities in which the commodities are sold or delivered. Therefore, discounts which reflect adual and provable differences in cost of manufacture, sale, or delivery are permitted,3

Also, discounts which do not substantially lesf!en competition or tend to the creation of a monopoly are permitted even though they may not be based upon actual difference in cost, If, in the event a complaint is :filed alleging violation of this Section and it is proved that a price discrimination exists, the burden is on the seller to justify the discriminatory discount or differential. Section 2(b) of the Clayton Act as amended makes this clear.,1;

Section 2(c) of the Clayton Act as amended by Robinson-Patman prohibits the allowance of brokerage, except for .::ervices rendered, to the other party to the transaction or to an agent of the other party.s It will be noted that this prohibition does not carry the usual qualification to the effect that it applies only where the acts prohibited may substantially lessen

3. Three types of discounts are defined as follows: •·Quantity discounts (non-cumulative discounts based upon the dollar amount bought at a single time, and usually deli\·ered at a single place), '·Cumulative or volume discounts (cumulative discounts based UJIOn the total dollar purchases over a period of time, often for delivery at a number of different places), and ''Functional or trade discounts (discounts which depend upon the distributional status or classification of the customer)." -80 Congressional Record, Pages 7969, 7970; ~fay 21, 1936.

4. Section 2(b) reads as follows: "Gpon proof being made at any hearing on a complaint under this section, that there has been discrimination in price or services or facilit-ies furnished, the burden of rebutting the prima-facie case thus made b;· showing justification shall be upon the person charged with a violation in this section, and unless justification shall be affirmatively shown, the Commission is authorized to issue an order terminating the discrimination: Provided, however, That nothing herein contained shall prevent a seller rebutting the prima-facie case thus made by showing that his lower price or the furnishing of services or facilities to any purchaser or purchasers was made in good faith to meet an eriunlly low price of a competitor, or the services or facilities furnished by a competitor.'' rSCA Sec. 13 (b).

5. Section 2(c) reads as follows: "That it shall be unlawful for any person engaged in commerce, in the coun,e of such commerce, to pay or grant, or to receive or accept. anything of vah,e as n. commission, brokerage, or other compensntion, or anr allowance or discount in lieu thereof, except for services rendered in connection vdth tl10 ~ale or purdmHi of goods, wares, or merchandise, either to tl1e other party to such transa('fion or to an agent, representative, or other intermediary therein where such intermediary is acting in fa.et fol' or in behalf, or is ~mbject. to the direct or indire<'t control, of any party t-o such transaction other than the person by whom such compensation is so granted or paid. USCA Sec. 13(c). 180 PRoCEEDINOS competition or tend to create a monopoly. The prohibition is absolute to the extent that it applies.& Under the language of the Section, payment of brokerage to a repre­ sentative of the buyer is condemned even though the allowance may never reach the buyer. It is for this reason that this Section has an important bearing upon insurance in view of long established practices. While brokers in the insurance business do represent the buyer, they receive commissions from the seller, which commissions are not passed on to th~ buyer but are retained by the broker as payment for service rendered. In the insurance business brokers are indep_endent contractors and are not a part of the staff of a buyer's organization. This fact argues for a different application of Section 2 ( c) in the insurance business than to industry generally. Section 2(d) prohibits payments to or for the benefit of a customer in consideration for services or facilities furnished by or through the customer in connection with the sale, etc., of products or commodities. The prohibition does not apply where the payments are available on pro­ portionally equal terms to all customers. 1 This Section is designed to ~liminate the practice of large buyers of demanding allowances which pur· port to compensate the buyer for advertising and other sales promotional services. Section 2(e) prohibits discriminations between purchasers of com·

6. Federal Trade Commission rulings are summarized as follows in Supplement 3 to Volume VII, N.A.M. Law Digest (May, 1945): 1. Direct or indirect brokerage payments by a seller to a buyer are unlawful regardless of the effect on competition. 2. A brokerage house, even though independently owned and managed, is the agent of the buyer in purchasing transactions, 8. Price discrimination is a burden on commerce and brokerage to buyers often hides price discrimination. In regulating commerce by making certain broker· age payment8 illegal, the Congress did not violate the prescriptions of the Fifth Amendment. 4. A broker, serving the buyer, often renders services to the seiler but for this he cannot be paid by the seller, for such service is merely incidental to his service for the buyer. 5. To come within the language "except for services rendered," a seller's payment to a buyer or bis agent must be for services which the seller was bound to render in connection with the sale. 6. The prohibition against brokerage or allowances in lieu thereof to buyers is absolute. 7. The defense allowed for ''meeting competition'' (Section 2(b)) l'elates to price and service discrimination by a seller and does not :relate to brokerage or pay for a buyer's services. 8. The brokel'age section (2 (c)) applies only to transactions in interstate com­ merce, while price discriminations are covered if either of the purchases is in interstate commerce. (Biddle Purchasing Co. v. FTC (2nd Circuit). 96 F. (2d) 687; Oliver Bros. Inc. v-. FTC (4th Circuit), 102 F. (2d) 763; The Great A & P Tea Co. v. '.FTC (3rd Circuit), 106 F. (2d) 667; Webb-Crawford Co. v. FTC (5th Circuit). 109 F. (2d) 268; Quality Bakers of America v. FTC (1st Circuit), 114 F. (2d) 393; Fitch & Kentucky v. Tennessee Light & Power Co., 186 F. (2d) 12. 7, Section 2 ( d) reads as follows : "That it shall be unlawful for any pe:rson engaged in commerce to pay or contract for the payment of anything of value to or for the benefit of a customer ot such person in the course of omch comerce as compensation or in consideration for an7 services or tacilities furnished by or through such customer in connection wlth the pl'ocesaing, handling, sale, or offering for sale of any products or commodities manufactured, sold, or offered for sale by such person, unless such payment Ol' consideration is available on proportionally equal terms to all other customel'II' competing in the distribution of such products or commOdities." UBOA Sec. 13(d), Mm-WINTER MEETING 181

modities bought for resale. Since insurance is not bought for resale it appears to have no application to insurance.s Section 2(f) provides that it is unlawful for any person engaged in commerce to receive a prohibited price discrimination.D Section 2 of the Robinson-Patman Act applied only to litigation pend­ ing at the time of enactment. Section 3 of the Robinson-Patman Act is not amendatory of the Clayton Act. It is frequently refened to as the criminal section. This section has not been invoked by the Department of Justice. Inasmuch as it relates to price discriminations, its applicability to the business of insurance will presumably be governed by principles similar to those hereinafter referred to in connection with Section 2(a) of the Clayton Act as amended by Robinson-Patman. However, Section 3 differs considerably from Section 2(a).10 Section 3 does not contain the limiting language of Section 2(a) which requires that the discrimination must be such that it may '' sub­ stantially ... lessen competition or tend to create a monopoly." It makes the discrimination itself unlawful provided that the goods are '' of like grade, quality, and quantity." The omission of the qualifying language contained in Section 2(a) may raise interesting questions as .to the en· forceability of Section 3 under the Due Process amendment. On the other hand, the language of Section 3 may require such an interpretation of "like quantity" as to render the Act innocuous. Section 4 of the Act expressly eliminates from the prohibitions of the Act the return of a portion of the net earnings or surplus to members by cooperative a:-:sociations.11 It is belie't'ed that this Seetion requires no special examination.

8. "That it shall be unlawful for any person to discriminnte in favor of one pur· chaser against another purchaser or purehasers of a commodity bought for resale, with or without processing, by contractinl; to furnish or furnishing, or by con· tributing to the furnishing of, anr service!:! or facilities connected with the processing, handling, sale, or offering for sale of such commodity so purchased upon terms not accorded to all purchasers on proportionally equal terms." USCA Sec. Vl{e). 9. Section 2{f) reads as follow:,; "That it shall be unlawful for any person engaged in comrnnce, in the course of such commerce. knowingly to induce or receive a discrimination in price which is prohibited liy this section." USCA Sec. 13(!). 10. Section 3 reads as follows; "It shall be unlawful for any person engaged in commerce, in the course of sucb commel'ce. to be a party to, or assist in, anr transaction of sale. or eontract to i::ell, which discriminates to his kno\\'letl;:::e against compdito:-s of the purd1aser, in that any di:s low<.'!' than tho"R. c;c;.acted by said person elsewhere in the Cnited Str.tPs for tlw Jn1rpo.~e of de~1roying Mmpetition, or eliminating a compctit<)r in such part ?f tho l)nited States; or to sell, or contract to sell, goods at unreai,onably low prices fur the purpose of de· stroying competition or eliminatiug a competitor." USCA Sec. 13(a). 11. Section 4 reads as follows; "Nothing in this Act 11hall prevent a cooperative association from returnin_g to its members, producers, or consumers the whole or any part of, the net earnings or surplus resulting from its trading operations, in proportion lo their purchases or sales from, to, or through the association." USCA Sec. l~(b). 182 PROCEEDINGS

B. APPLICABILITY OF IWBINSON-PATML!.N ACT TO INSURANCE Irrespective of the treatment of the Robinson-Patman Act in Public Law 15, hereinafter discussed, it is necessary to determine whether and to what extent Robinson-Patman applies to the insurance business. The Act was aimed at specific practices in the consumer goods :fie]d. These practices had to do with the sale in commerce of "commodities" (Section 2(a)), ''goods, wares or commodities'' (Section 2(c)), ''pro­ ducts or commodities" (Section 2(d)), and "goods" (Section 3). With reference to the varying language in the different sections, it will be noted that each of the sections contains either the word "commodity" or 1 the word ' 'goods. ' It is necessary, therefore, to determine whether the words '' commodi­ ty'' and ''goods'' include insurance. The word ''commodity,'' is now generally understood in its commercial sense in which it denotes that which affords advantage or profit, that which affon:ls convenience or advantage, especially in commerce, including everything movable which is bought or sold, an artiele of trade or commerce, something that is produced or used and is the subject of barter and sa~e, something movable and tangible, almost any description of article called movable or personal estate, wares, and merchandise of any kind, property. In referring to commerce, it may comprehend everything movable, that is bought or sold, except animals.12 The cases construing ''commodity'' as related to insurance are not in agreement. In Palatine Insurance Company v. Griffen, (Tex. Civ. App. 1918) 202 S. W. 1014, insurance was held not to be a commodity under a statute prohibiting any agreement to refuse to buy from or sell to any person an article of merchandise, produce, or commodity. A similar decision was made in Duggan Abstracting Company v. Moore, (Tex. Civ. App. 1940) 139 S. W. (2d) 198, where the business of compiling abstracts of title was held not to be an article of merchandise, produc.e or commodity. The case most frequently referred to as holding ''commodity'' not to include insurance is Queen Insurance Co. v. State Attorney General, (Tex. 1893) 24 S. W. 397, 22 L.R.A. 483. The Court held that the statute which prohibited making or performing '' any agreement not to sell or dispose of any article or commodity of trade, use, merchandise, commerce or consumption below a common standard so as to prevent free competi· tion '' did not apply to a combination of Fire Insurance companies to use uniform rates of insurance and agents' commissions throughout the state. The Court stated that the word ''commodity'' is '' ordinarily used in the commercial sense as any movable or tangible thing that is ordinarily produced or med as the subject of barter or sale.'' Insurance was held to be a ''commodity'' in Beechley v. Mulville (1897) 102 Ia. 602, 70 N. W. 107. In this case, a group of insurance agents were charged with violating a statute which prohibited '' combinations to :fix the price of oil, lumber, coal, grain, :flour, provisions or any other commodity or article whatever." The Court referred to Anderson's Law Dictionary, which defined the word ''commodity'' as ''convenience, privi­ lege, profit or gain. ' '

12. See 12 Corpus Juris, Page 153. Mm-WINTER MEETIXG 18J

In State ex rel. Taylor v. Ross (1906) 4 Ohio N. P. N. S. 33i, an indictment under the antitrust law against insurance companies for unlaw­ fully combining to fix prices, etc., wa::= sustained on the ground that insurance was a commodity, and in~urance companie~ ,vere engaged in barter and tra,de within the meaning of this law. The Court re:fused to follow the earlier Ohio case of Runck v. Cloud (1901) 8 Ohio N. P. 448. Two subsequent nisi prius cases have refused to follow Taylor v. Ross. See State v. Beovee (19li) 6 Ohio N. P. N. S. 33i, and Foster v. Anken Bauer (1913) 14 Ohio N. P. N. S. 63i. The fact that the United States Supreme Court has now taken the position that insurance is commerce may have a tendency to encourage state courts as well as Federal courts to construe the word H commodity" more broadly.is The applicability of Section 2 ( c) to the insurance business involves a construction of the words '' goods, wares or merchandise.' 1 Many of the cases construing these words arose in connection with the Statutes of Frauds of the various states, and are not particularly helpful as to in­ surance. The word ' 1 goods'' has been held to be limited to property which has an intrinsic value. On the other hand, it has been held to include movables not having any intrinsic value in themselves such as choses in action as well as those in possession, evidence of debt, bank bills and notes, bonds, mortgages, etc.14 While it is possible to argue rather effectively that Section 2(c) relating· to brokerage does not apply to the insurance business for the rea.o;on that the word ''commodity'' is not used and that the words '' goods, wares or merchandise'' do not apply to insurance, there nevertheless remains a possibility that they might be considered to include insurance. There is little uniformity in the decisions interpreting thei,.e words. They are various. ly interpreted according to the context and subject matter. Those decisions holding the word ''goods'' to be limited in meaning to property which has an intrinsic value may be used in support of the argument that the brokerage section does not apply to insurance. On the other hand, the decisions holding that the word ''goods'' includes things which have no intrinsic value in themselves such as choses in action, etc., may be construed to afford the ground work for decisions specifically holding the brokerage section applicable to insurance. C. THE ROBINSON-PATJIAN ACT AND PUBLIC LAW 15 (Insur­ ance Antitrust Moratorium Act of the i9th Congress, first i;ession, approved March 9, 1945.) It may be argued that Congress intended, by adopting Public Law 15, that the Robin!:lon-Patman .Act is to apply to the business of insurance after January 1, 1948. Section 3(a) of Public Law 15 provides in part: "Until January I, 1948, .•. the Act of June J9, 193G, known as the Robinson-Patman Anti-Discrimination Act, shall not apply to the business of insurance or to acts in the conduct thereof.'' This langwtge implies that

13. See 21 A.L.R. at Page 551. 14. See Keyser v. Sunapee School Dist-riet ::-,/o. 8, 35 :N". H. 477, 483. See also U. 8. v. 1fou\ton 27 F. Cas. No. 15, ~27, ::, Mason 537, 544; Gibbs v. Usher, 10 F. Cas. :So. 5387, Holmes 348, 3.';1; Epping v. Robinson, 21 Fla. 36, 52. 184 PROCEEDINGS after January 1, 1948, the Robinson·Patman Aet wm app1y to the business of insurance to the extent that other sections of the Act fail to limit sueh application. It is necessary, therefore, to examine other sections of Public Law 15 to determine how and to what extent the Robinson-Patman Act will apply to insurance after January 1, 1948. Section 2(b) reads in part as follows: "No Act of Congress shall be construed to invalidate, impair or supersede any law enacted by any state for the purpose of regulating the business of insurance or shaU impose a fee or tax upon such busineses, unless such Act specifically relates to the business of insurance; provided, that after January 1, 1948, ... the Act of October 15, 1914, as amended, known as the Clayton Act •.• shall be applicable to the business of insurance to the extent that such business is not regulated by state law.'' Nowhere in this section is there a specific reference to the Robinson­ Patman Act. However, the proviso specifically refers to the Clayton Act '' as amended.'' The amendments to the Clayton Act necessarily include those amendments contained in tJie Robinson-Patman Act. It seems, there­ fore, that Section 1 of the Robinson-Patman Act, which amends Section 2 of the Clayton Act, and which includes the price discrimination and broker­ age sub-sections and the sub-sections referring to other allowances, is included within the specific language of the proviso. Accordingly, after .January 1, 1948, Section 1 of the Robinson-Patman Act will apply to the business of insurance only '' to the extent that such business is not regulated by state law.'' This fails to dispose of Sections 2, 3 and 4 of Robinson-Patman. Section 2 is completely inapplicable to insurance and Section 4 is believed to be unimportant from the standpoint of our present discussion. Section 3, however, must be considered. It may be argued that by reason of the failure of Congre~.s to include a specific reference to Robin.son-Patman in the provi.so of Section 2 (b) of Public Law 15, it wa.s intended that the sections of Robinson-Patman which are not amendatory of the Clayton Act should not apply in any manner to the business of insurance after January 1, 1948. It may, on the other hand. be argued that since Section 3(a) of Public Law 15 implies that after January 1, 1948, the Robinson­ Patman Act shall apply to the business of insurance, and since the appli­ cation of Robinson-Patman to insurance after January 1, 19481 is not limited by specific 1·eference in Section 2 (b), Section 3 of Robinson-Patman will apply to insurance after January 1, 1948, irrespective of any regulatory laws enacted by the states. It is believed that neither of these alternative interpretations is sound. Effect must be g'iv.en to that portion of Section 2 (b) of Public Law 15 which precedee the proviso. Since the Robinson-Patman Act does not specifically relate to the business of insurance, it cannot be e,onstrue

3 of Robinson-Patman, otherwise there would be no oeeaBion to consider whether Section 3 invalidates, impairs or supersedes it. Our conclusion is that since Section 1 of Robinson-Patman amends the Clayton Law, it i.s included within the proviso of Section 2(b) of Public Law 15. Being within the proviso, the price discrimination, brokerage and other allowances sub-sections apply to insurance '' to the extent'' that there is no state law regulating the specific activities prohibited by these sections. With reference to Section 3 of Robinson-Patman, while it is not included within the proviso, it is included within the language of Section 2 (b) preceding the proviso from the standpoint that it may not invalidate any state law which regulates activities inc1uded under Section 3. D. THE IMPACT OF THE ROBINSON-PATMAN ACT ON INSUR­ ANCE Since Public Law 15 may make the Robinson-Patman Act generally applicable to insurance transactions, aft.er January 1, 1948, the question arises whether there are practices in the insurance business which might be considered vulnerable under some one of the Sectjons of that Act. Considering first the price discrimination sections (Section 2(a) of Clayton as amended by Robinson-Patman and Section 3 of Robinson-Patman), it should be noted that the Act applies to individual seI1ers and does not require any combination as between companies. In this respect it must be distinguished from the Sherman Act.15 The activities of individual companies may violate any one of the Sections of the Robinson-Patman Act. Various practices in the insurance field should be considered in this connection. Among these practices are: ( 1) charging varying rates by size of risk (2) retrospective rating available to risks of certain size (3) graduated expense by size of risk

15. Section 1 of the Sherman Anti-Trust Act (Act of July 2, 1890, Chapter 647, 26 Stat. 209, as amended; 15 U.S. Code, Section 1 et seq.) reads in part as follows: "Every contract, combination in the form of trust or otherwise, or conspiracy, in restraint of trade or commerce among the several states or with foreign nations, is hereby declared to be illegal ..." (Emphasis ours). The reference to combina­ tions and conspiracies necessarily includes more than one person or more than one corporation. Section 2 of the Sherman Act reads in part as follows: "Every person who shall monopolfae or attempt to. monoi;,,°lize. or c?mbine .or conspire with any other person or persons to monopoh~ . . . ThIS secho~ .apphea to the activities of an individual person or corporatJOn and to the activ1ties of persons or corporations acting in combination. . . Section 2(a) of the Clayton Act as amended by Robinson-Patman reads m part as follows: "That it shall be unlawful for any person engaged in commerce . . ." The reference is to "person" and not to a combination of persons or a conspiracy participated in by more tban one person. Section 2(c) of the Clayton Act as amended by Robinson-Patman reads in part as follows: ''That it shall be unlawful for any person engaged in commerce ." It will be noted that this language does not refer to combinations of persons or to con· spiracies. Sections 2(d) and 2(e) of Clayton 1111 amended by Robinson·Patman also refer to "any person" and thus do not include combinations of persons or conspiracies between persons. Section a of Robinson-Patman also refers to ''persons engaged in commerce" and doea not include combinations or conspiracies. 186 PROCEEDI!\"GS

(4) fleet rates available to risks covering a specified number of cars (5) expense constants applied to risks of certain size (6) loss constants applied to risks of certain size (7) experience rating and other adjustments by size of risk (8) policy forms (comprehensive) restricted to risks of certain size (9) minimum premium by size of risk (10) "equity" ( competith·e) rating

These practices might be questioned under Pa1·agraph 2(a) or under Section 3 of Robinson-Patman, Additional activities might be questioned under Section 3. For example: (1) territorial classifications, (2) general reductions in rates by territory, (3) differences in rates between states when considered in the light of the fact that the Robinson-Patman Act applies on a national le,·el.

As to the test of legality, there am differences between Section 2(a) of Clayton as amended by Robinson-Patman, and Section 3 of Robinson­ Patman. Under Section 2(a) the basic question ·which must first be passed upon is whether in fact a discrimination exists. On this point retrospective rating may be cited as an illustration. Assuming that retrospective rating is available to risks where the premium is $1 1000 or more, it may be argued that such a plan does discriminate against a risk with a premium of $990 in favor of a risk with a premium of $1,010. If discrimination is present, the burden of defending the discriminatory practice is on the accused and the defense may be either that the effect of the retrospective rating plan cannot be to substantially lessen competition or to tend to the creation of monopoly, or that due allowance for cost of manufacture, sale or delivery resulting from differing methods or quantities has been made in the plan. A further defeni,e [ contained in section 2 (b)] is that the price was set in good faith to meet that of a competitor.

With reference to Section 3 of Robinson Patman, it has been pointed out that the burden on the government or other complainant is greatly increased. ''Intent'' must be shown. It also must be shown affirmatively that the goods were of like grade, quality and quantity. Thus, while Section 3 may seem somewhat broader than Section 2 (a) in its prohibitions, it would seem that the obligation on the complainant under Section 3 is con· siderably greater and the obligation on the respondent correspondingly less. Another section which must be considered is Section 2 ( c) of Clayton as amended by Robinson-Patman, which deals with brokerage. For con­ venience, this section wi11 be referred to as 2 ( c). It is difficult to arrive at any definite conclusions as to whether or not an insurance broker would come under Section 2(c) of the Act or whether he would be exempted as a legitimate intermediary. It iB true that in the insurance business brokers are considered to repree'ent the buyer. In some instances, the state statutes specifically contemplate that the broker shall represent the buyer. For example, Section 6015, Missouri Insurance Laws, MID-WIXTEH MEE'fl:,,;'G 187

reads in part as follows: "'Vhoever for compensation, acts or aids in any manner in negotiating contracts of insurance or reinsurance, or placing risks or effecting imurance or reinsurance for any person other than him· self, and not being the appointed agent or officer of the company in which insurance or reinsurance is effected, shall be deemed an insurance broker ... '' Similarly, Section 141 of the Insurance La:ws of Nevada reaUs in part as follows: "The term 'non-resident broker' as u.-ed in this article means any person, partnership, ai::sociation or corporation, not a l'esident of or a domiciled company in this state, who or which for money, com­ mission, brokerage, or anything of value acts or aiUs iu any manner any s

Section 2(tl) may be construed to affect practices in the insurance business which have to do with price allowances made to specific risks :for services perforn1eJ by the insur('d which would otherwise be performed by the insurer. It is believed that these practices are not. numerous or of seriomi consequence to the business. It may be considernd practicable anti proper to eliminate them. On the other hand, it may be well to pro<'eed on the bal:lis of adopting state legislation of such dunacter that no section of the Robinson-Patman Act will apply to the business of insurance. The comments juet made apply to Section 2(e) although it may be questioned whether there are transactions in the insurance business which come within tho language referring to 11 commodities bought for resale.''

In order to determine the extent of state re~ulation necessary to exempt companies from the operation of the Robinson-Patman Act, it is necessary to consider the various Sections of Robinson-Patman separately. We cannot assume that regulation which exempts the companies from the operation of one section of Robinson·Patman will be effective to exempt the <'ompanies from the operation of other sections dealing with different subject matter. Accordingly, the important sections of Robinson-Patman will be separately treated:

Section 2(a) of Clayton as amended b:,, Robinson-Patman relates to prices or rates. Discounts from established prices are prohibited under certain circumstances. The most logical and perhaps the only way by which states may accomplish the ouster of this section of the Robinson-Patman Act and at the same time permit the influrance business to operate effectively and in the public interest is through the passage of rate regulatory laws.

16. See eases cited under footnotl' 6. 188 PROCEEDINGS

It is believed that there should be included in such laws anti-rebate and anti-discrimination sections. Section 2 ( e) of Clayton Act as amended by Robinson-Patman is the brokerage section. It is believed that state regulation sufficient to protect the companies and brokers against prosecution under this section should provide for the licensing of brokers and for the revocation of license, should specifically authorize the payment of commissions to licensed brokers and should specify the conditions under which brokerage may be paid to out· of state brokers. It may be questioned whether stat,e regulation which goes only to the extent indicated is adequate for the reason that even though the state law specifically authorizes payment of brokerage, it does not protect the public against the harmful effects of improper rebates by brokers. It would seem however, that the adoption of anti.rebate provisions applicable to companies, agents and brokers would certainly accomplish the desired result. Section 2(d) of Clayton Act as amended by Robinson·Patman Act is the section designed to eliminate allowances which purport to compensate the buyer for advertising and other sales promotione.l services. A broad anti-rebate provision will render this section inoperative. The comment made with reference to Section 2(d) of the Clayton Act as amendl3d by Robinson-Patman is believed also to apply to Section 2(e) which prohibits discrimination in favor of one purchaser against another purchaser in connection with services or facilities having to do with the sale of a commodity bought for resale. The section probably has no direct bearing on insurance practices.

Section 3 of Robinson~Patman prohibits certain price discriminations and is commonly referred to as the criminal section. There is considerable question as to the meaning and enforceability of its provisions. A rating law such as that herein l'ecommended together with an anti-rebate section would eonstitute a valid ouster. The remaining sections of the Robinson.Patman Act ar~ unimportant from an insurance standpoint.

RECOMMENDATIONS 1. The enactment in each State cf rating laws that meet the require­ ments of Public Law 15. 2. The enactment in each State - either as an integral part of the -rating law or »ulependently - of statutes (a) prohibiting unfavr rate discrimina.tions and (b) prohibiting rebates. Typical statutory provisions prohibiting rate discrimination and re­ bating are found in the New York Insurance Law, Sections 183(e), 188 and 209. 3. In the absence of a statutory regulation of rates, the in.,urer af· feoted, for protection against the impact of the .Robinson-Patman .Aot, must rely exolus«Jely upon State laws prohibiting discrimination and rebates. In s-uch case our recommendation is the enactment, if it is possible, of MID-WINTER MEETING 189

necessary excepti,ons to the discrimination and rebating statutes to enable

For example, without the aid of rating laws and in the face of sevel'e discrimination and l'ebating statutes, life insurers have relied upon express statutory provisions to enable the issuing of group policies at rates less than the usual rates and to enable the gTanting of other differentials:

Maine lnmirance Laws, Section 140 ' 'Nothing in the three preceding sections shall be so construed as to prohibit any company issuing non-participating life insurance from paying bonuses to policyholders or otherwise abating their prem­ iums in whole or in part, out of surplus accumulated from non-par­ ticipating insurance; nor to prohibit any company transacting in­ dustrial insurance on the weekly payment plan from returning to policyholders who have made premium payments for a period of at least one year directly to the company at its home or branch offices, a percentage of the premium which the company would have paid for the weekly collection of such premiums; nor to prohibit any life insurance company doing business in this state from issuing policies of life or endowment insurance with or without annuities at rates less than the usual rates of premiums for such policies, in.suring members of or­ ganizations or employees of any employer who through their secretary or employer may take out insurance in an aggregate of not less than fifty members and pay their premiums through such secretary or em­ ployer; nor to prohibit an agent from receiving commissions from his company for insurance on himself.'' New York Insurance Law, Section 204 (2) ''No dome:,tic, foreign or alien life insurance company shaH be permitted to do business in this state if it hereaftel' issues, within or without this state, any policy of group life insurance on which the premium shall be less than the net premium based on the American Men Ultimate Table of Mortality, with interest at three and one-ha]f per centum per annum, plus a loading computed in accordance with a formula which shall be determined by the superintendent. Anything in this chapter to the contrary notwithstanding, any group life insur· ance policy issued or delivered in this state may provide for readjust­ ment of the rate of premium based on the experience thereunder, at the end of the first year of or any subsequent year of insurance thereunder, and such readjustment may be made retroactive only for such policy year.'' 4. The enactment in each State of sta.tutes recognizing insurance brokers and delineating the rights and du,ties thereof, specifically authoriz­ ing the payment of commissions to licensed brokers and specifying the conditions under which brokerage may be paid to out-of-State brokers. Because, as pointed out in the foregoing analysis, the applicability of the Robinson-Patman Act to insurance is uncertain and because the intent of Congress, as expressed in Public Law 15J is by no means clear, our recommendation is that the applicability of the Robinson.Patman Act UIU PlWCEI,:onrns be included in any discussion that maybe held with the Insurance Sub­ committees appointed by the Senate Judiciary Committee and by the House Judiciary Committee. Respectfully submitted, John M. McFall, Chairman Joseph B. Beach Harry E. Moore W. Ray Thomas Felix Hebert Robert L. Hogg John R. Cooney September 19, 1945

EXHIBIT "B" SUPPLEMENTARY REPORT OF THE SUBCOMMITTEE ON THE ROBINSON-PATMAN ACT (Submitted at October 18-19, 1945, meeting of All-Industry Committee and

amended at November 26-27, 19451 and at March 11-15, 1946, meetings of All-Industry Committee) LEGISLATIVE PROPOSALS 1. RATING LAWS The subject of rating laws that meet the requirements of Public Law 15 is not discussed herein, because it is a matter for consideration in connection with the Sherman Act. 2. PROVISIONS TO ACCOMPANY STATE RATING LAW (a) .A nti-disorimination Rating laws usually contain appropriate anti-discrimination pro­ visions as essential parts of rate making. The following, adapted from existing statutes, are recommended as a basis for anti-discrimination pro­ visions to accompany State rating lawa: (1) Casualty and Swrety Rating Law: ''Rates shall be reasonable, adequate and not unfairly dis­ criminatory.'' (2) Fire Bating Law: ' 'No insurer, nor any rating bureau, shall fix or change any rate which discriminates unfairly between risks in the application of like charges and credits. or which discrimi· nates unfairly between risks of essentia!Jy the same hazard, territorial classification, and having substantially the same degree of protection. ' ' (b) Anti.Rebate The following, adapted from existing statutes, are recommended as a basis for anti-rebate provisions to accompany state rating laws: Mrn-'\YIXTER MEETING 191

"No insurer or employee th~reof, and no broker or agent shall pay, allow, or give, or offer to pay, allow, or give, directly or indirectly as an inducement to insurance, or after insurance has been effected, any rebate, discount, abatement, credit, or reduction of the premium named in a policy of insurance, or any special favor or advantage in the dividends or other benefits to accrue thereon, or any valuable con­ sideration or inducement whatever, not specified in the policy of in­ surance, except to the extent that such rebate, di,;count, abatement, credit, reduction, favor, advantage or consideration may be provided for in rating systems ········------···---··· ( *). No insured named in a policy of insurance, nor any employee of such insured shall knowingly receive or accept, directly or indirectly, any such rebate, discount, abatement, or reduction of premium, or any special favor or advantage or valuable consideration or inducement. Nothing herein contained shaU be construed as prohibiting the payment of commissions or other compensation to regularly appointed and licensed agents and to brokers duly licensed by this State, nor as prohibiting any par_ticipating in­ surer from distributing to its policyholders dividends, savings or the unused or unabsorbed portion of premiums and premium deposits.'' 3. STATUTES IN THE .ABSENCE OF RATING LAWS (a) A nti-discriminatitm The follo"·ing are recommended as a basis for appropriate in~ dependent anti-discrimination statutes: (1) Fire ''No insurer doing in this State the business specified in Section -----···---- shall promulgate or use any schedule of rates, any form or any underwriting ru]e or classification system which discriminates unfairly between risks of es­ sentially the same hazard, territorial classification, and having substantially the same degree of protection.'' (2) CasitaUy and Surety

1 ' No insurer doing in this State the business specified in Sections --····--···· shall promulgate or use any schedule of rates, any underwriting rule or classification system which discriminates unfairly between risks or c1asses of risks.'' (A specific Statute for Workmen's Compensation is not included for the reason that Workmen's Compensation in­ surance is so completely regulated as to rates that it seems unnecessary to suggest a pro·vision to be u1,ed independently of a rating lnw.)

(3) Life "No insurer J.oing in this State the business specified in Section ··········-· shall promulgate or use any rate or system of rating which diB:criminates unfairly between insurants of the same class and equal expectation of life in the amount

(*)Insert appropriate words to describe authorized rating system under the terms of the Rating Law. 192 PROCEEDINGS

or payment of premiums or in any return of premium, dividends, or other advantages.'' (4) .J.ccident and Health ''No insurer doing in this State the business specified in Section ...... shall make or permit any unfair discrimina- tion between individuals of the same class in the amount of premiums, policy fees, or rates charged for any policy or contract of insurance, or in the benefits payable there­ under."

(b) .4 nti-rebate The following is recommended as a basis for an appropriate independent anti-rebate statute: "No insurer or employee thernof, and no broker or agent shall par; allow, or give, or offer to pay, allow, or give, directly or indirectly, e.s an inducement to insurance, or after insurance has been effected, any rebate, discount, abatement, credit or reduc­ tion of the premium named in a policy of insurance, or any special favor or ad:vantage in the dividends or other bene1its to aceru,e thereon, or any valuable consideration or inducement whatever, not specified in the policy of insurance. No insured named in a policy of insurance, nor any employee of such insured shall knowingly receive or accept, directly or indirectly, any svc_ili rebate, discount, abatement, or reduction of premium, or any special favor or advantage or valuable consideration or induce­ ment. Nothing herein contained shall be construed as prohibiting the payment of commissions or other compensation to regularly appointed and licensed ag~nts and to brokers duly licensed by this State; nor as prohibiting any participating insurer from distributing to its policyholders dividends, savings or the unused or unabsorbed portion of premiums and premium deposits.'' ( c) Necessary Exceptiom In the absence of a statutory ra.ting law, the anti-discrimination and anti-rebat~ statutes must contain specific exceptions to enable the in­ surer affected to operate efficiently. Uniform exceptions cannot be set forth in the statutes because different classes of insurance require different ex­ ceptions. In the case of life insurance, the following statute prohibits diserimina.Eion and rebates and contains typical exceptions for Life In­ surance Compani~s: "No Life Insurance company doing business in this State shall make or permit any distinction or discrimination in favor of individuals between insurants of the same class and equal expectation of life in the amount or payment of premiums or rates charged for polici~s of insurance, or in the dividends or other benefits payable thereon, or in any other of the terms and conditions of the contracts it makes; nor, except as oth"rwise expressly provided by law, shall any such company or any agent thereof make any contract of insurance or agreement as to sueh contract, other than as plainly expressed in the policy Mm-WINTER MEETING 193

issued thereon; nor shall any company or agent pay or allow, or offer to pay or allow, as inducement to insurance, any rebate of premium payable on the policy, or any special favor or advantage in the dividends or other benefits thereon, or any valuable consideration or inducement not specified in the policy contract of insurance; or give, or sell, or purchase or offer to give, sell or purchase, as inducement to insurance or in connection therewith, any stocks, bonds, or other securities of any insurance company or other corporation, association, or partnership, or any dividends or profits accrued thereon, or any­ thing of value whatsoever not speci:fied in the policy.''

"No person shall receive or accept from any company or agent, sub­ agent, broker, or any other person any such rebate or premium payable on the policy, or any special favor or advantage in the dividend or other benefits to accrue thereon, or any valuable consideration or in­ ducement not specified in the policy of insurance.'' "Nothing in this section shall be so construed as to prohibit any com­ pany issuing non-participating life insurance, from paying bonuses to policyholders or otherwise abating their premiums in whole or in part out of surplus accumulated from non-participating insurance, nor to :Prohibit any company transacting industrial insurance from returning to policyholders who have made premium payments for a period of at least one year directly to the company at its home or district offices, a percentage of the premium which the company would have paid for the collection of such premiums; nor shall anything in this section be construed e.s prohibiting the delivery of any group life insure.nee policy in this State which provides for the readjustment of the rate of premium based on the claim and expense experience thereunder, at the end of the first year or of any subsequent year of insurance there­ under, provided such readjustment is made retroactive on1y for such policy year.''

4. BROKERS ACT The following, adapted from existing statutes, is recommended as a basis for appropriate Brokers Act: Sec. 1. This Act shall apply to all brokers as defined herein. Sec. 2. The term ''broker'' as used in this Act, means any person, partnership, association or corporation, who or which, for money, com­ mission, brokerage, or anything of value, acts or aids in any manner in the solicitation or negotiation, on behalf of the assured, of contracts for insurance of any of the following kinds as specified in See ...... , namely: Life, Accident, Health, Casualty, Fidelity, Surety, Fire and Marine. See. 3. No person, partnership, association or corporation shall act as a broker without :first procuring a license so to a.ct from the (Com­ missioner), Sec. 4. Application for a broker's license shall be filed with the (Commissioner) in writing and in the form prescribed by him, 194 PROCEEDINGS

See. 5. The (Commissioner) shall issue a broker's license to an ap­ plicant when (a) an application provided for in See. 4 has been filed with and approved by the (Commissioner) and the (Commissioner) shall have determined the applicant to be competent and trustworthy, (b) the applicant has paid an annual fee as follows: If the applicant is a resident of this State, ...... dollars; if the applicant is a non- resident of this State, ...... dollars. See. 6. Whenever the (Commissioner) upon notice and hearing is satisfied that any applicant for license or any broker acting under his supervision and holding a license from him is violating or has violated any provision of the insurance laws of this State, or that he is incompetent or untrustworthy, he shall proceed to issue an ordet denying or revoking the license of such broker. Sec. 7. An insurance company or agent thereof may pay money, commission or brokerage, or give or allow anything of value, for or on account of the solicitation or negotiation of contracts for insurance of the kind or kinds enumerated in Sec. ~ of this Act, to a duly licensed broker. (Detailed provisions for notice, hearings and review of orders and finding should be integrated with the general state statutes.)

EXHIBIT ''C'' SUPPLEMENTAL REPORT (Submitted by John M. McFall, Chairman, in behalf of Robinson-Patman Act Subcommittee, at September 4-6, 1946, meeting of All-Industry Committee) As requested, I have reviewed with the members of the Subcommittee on the Robinson-Patman Act the Legislative Proposals heretofore sub­ mitted to the All-Industry Committee. There is still some question as to the applicability of the Robinson­ Patman Act to insurance becaut"e of the content of the Robinson-Patman Act and because of the uncertain terms of Public Law 15. But our opinion is that insurance cannot afford to proceed on the assumption that the Roblnson-Patman Act is inapplicable and run the risk of the federal penalties, namely, action by the Federal Trade Commis$ion, suits for treble damages, and in some cases criminal prosecution. Our problem is to determine the State legislative program that will protect the insurance industry ftom the impact of the Robinson-Patman Act. 1. Payment of commission to brokers We recommend that a Brokers Act in substantiaUy the form submitted in our Legislative Proposals be passed in each State whose laws recognize insurance brokers but which do not specifically authorize the insurer to pay commissions to such brokers. For example, in Arizona, brokers are defined by. statute and ar,e licensed but the law does not authorize the insurer to pay commissions to brokers. Mm-WINTER MEETING 195

From our preliminary examination we believe that legislation (in many cases simply an additional provision authorizing payment of commissions) is required in the following States: 1 Arizona Massachusetts Pennsylvania WaHhington Idaho Missouri - Rhode Island West Virginia Indiana Nebraska Tennessee Wyoming Louisiana New Hampshire Utah Alaska Maine Oregon Vermont Puerto Rico

2. Pro'Visions to accompany S·tate Rating Law (a) Anti discrimination The provisions of the Casualty a11d Fire Rate Regulatory Bins ("Rates shall not be excessive, inadequate or unfairly discrimina­ tory'') are recommended. (b) Anti-rebate The anti-rebate section attached to the Rate Regulatory Bins is recommended.

3. Absence of Rat1·ng Law ·(a) Anti-discrimination Independent anti-discrimination statutes as suggested in Legislatirn Proposals are recommended for each kind of imiurnnce unregulated as to rates. (b) Anti-rebate The anti-rebate section nttached to the Fire nnd Casualty ,Rate Bills h: recommended as a basis for appropriate independent anti-rebate statute. ( c) N ec·e:;:sar_v exceptions The independent anti-dh·<·rimination and anti-rebate statutes must contain exceptions as !:'lugp;t>:"tPd in Legislative Proposalt>..

EXHIBIT • · D"

AN ACT RELATING TO UNFAIR PRACTICES IN TIIE BUSINESS OF INSURANCE Sation 1-Purpose. The 1mrpose of this Act is to regulate the trade practices in the business of insurance1 in accordance with the intent of Congress as ex­ prel:'sed in Public Lan· 15 - 79t11 Cougress, by deiiuing, or providing for the determination of, all acts, methods, and practices which constitute l. In Florida, Georgia, Hawaii, Iowa, Kansas, Kcntneky, ]\[iehigan, Minnesota, Montana, N. Dakota, Oklahoma, S. Dakota, Texas and Wisconsin brokers are not recognized. In Alabama, ArkanRas, California, Colorado, Connect.icut, Delaware, District of Columbia, lllinoi~. Maryland, Mississippi, New Mexico, New York, Nevada, New Jersey, N. Carolina, Ohio, 8. Carolina and Virginia, brokers are recognized bnt statutes already enacted are believed t.o be :;1uffieiently definite to authorize the payment of commissions to the kinds of brokers recognized. 196 PROCEEDINGS unfair methods of competition and unfair or deceptive acts and practices in this state, and to prohibit the same. Section 2-Unfair Methods and Unfair or Deceptive .Acts and Practices Prohibited. No person1 engaged in the business of insurance shall engage in this state in unfair methods of competition or in unfair or deceptive acts and practices in the conduct of such business. Section 3-Metlwds, .Acts and Practices Which A.re Defined Herein As Unfair or Deceptive. The following are declared to be unfair methods of competition and unfair or deceptive acts and practices in th~ business of insurance. (a) Misrepresentations am,d False Advertising of Policy Contracts. No person engaged in the business of insurance in this state shall make, issue, or circulate, or cause to be made, issued or circulated, any estimate, illustration, circular, or statement of any sort mis­ representing the terms of a.ny policy issued or to be issued or the benefits or advantages promised thereby, or the dividends or share of the surplus to be received thereon, or shall use any name or title of any policy or class of policies misrepresenting the true nature thereof. Nor shall any such person make any misrepresentation to any person insured in any company for the purpose of inducing or tending to induce a policyholder in any company to lapse, forfeit, or surrender his insurance. (b) False lnformwtion and .Advertising Generally. No person engaged in th~ business of insurance in this state shall make, publish, disseminate, circulate, or place before the public, or cause, directly or indirectly, to be made, published, disseminated, circulated, or placed before the public, in a newspaper or other publication, or in the form of a notice, circular, pamphlet, letter or poster, or over any radio station, or in any other way, an advertisement, announcement or statement of any sort containing any assertion, representation or statement with respect to the business of insurance or with respect to any person in the conduct of his insurance business, which is untrue, deceptive or misleading. (c) Defamation. No person engaged in the business of insurance in this state shall make, publish, disseminate, or circulate, directly or indirectly, or aid, abet or encourage the making, publishing, dissemi­ nating or circulating of any oral or written statement or any pamphlet, circular, article or literature which is false or maliciously critical and which is calculated to injure any other such person. (d) Boycott, Coercion and Intimidation. No person engaged in the business of insurance in this Rtate shall enter into any agreement to commit, or by any concerted action, commit, any act of boycott,

1. "Persun"-·\Vhenever trsed in this Act shall include individuals, corporations, associations, partnerships, reciprocal exchanges, inter-insurers, Lloyds insurers, fratern11,I benefit societies, and any other legal entity engaged in the businel:18 of insurance. MID-WINTER MEETING 197

coercion or intimidation resulting or tending to result in unreasonable restraint of, or a monopoly in, trade or commerce. (e) False Financial Statements. No person engaged in the busi­ ness of insurance in this state shall file with any supervisory or other public official, or shall make, publish, disseminate, circulate or deliver to any person, or place before the public, or cause directly or indi­ rectly, to be made, published, disseminated, circulated, delivered to any person, or placed before the public, any financial statement of an insurer which does not accurately state its true :financial condition. (f) Stock Operations and .Advisory Board Contracts. No insur­ surance company doing business in this state shall issue, nor permit its agents, officers, or employees to issue or deliver, agency company stock or other capital stock, or benefit certificates or shares in any common-law corporation, or securities or any special or advisory board or other contracts of any kind promising returns and profits as an inducement to insurance; and no corporation or stock company acting as agent of an insurance company nor any of its agents, officers, or employees shall be permitted to sell, agree or offer to sell, or give or offer to give, directly or indirectly, in any manner whatsoever, any share of stock securities, bonds, or agreement of any form or nature promising returns and profits as an inducement to insurance or in connection therewith. (g) Discrimination. No life insurance company doing business in this state shall make or permit any distinction or discrimination in favor of individuals between those of the same class and equal expectation of life in the rates charged for contracts of insurance or of life annuity or in the dividends or other benefits payable thereon, or in any other of the terms and conditions of the contracts it makes, nor shall it discriminate unfairly between other risks involving es­ sentially the same hazards and expense elements or between risks in the application of like rates and credits. (h) Rebates. (1) Except as otherwise expres!=ly provided by law, no 1ife insurance company or its agent shall make any contract of insurance or agreement as to rnch contract, other than as plainly expressed in the policy issued thereon; nor shall any 1such company or agent pay or allow, or offer to pay or allow, as inducement to insuran<'e, any rebate of premiums payable on the policy, of any special favor or advantage in the dividends or other benefits thereon, or anv valuable consideration or inducement not Rpecified in the policy· contract of insurance; or gh•e, or sell, or purchase or offer to give, sell, or purchase as inducement to insurance or in connection therewith, any stocks, bonds, or other securities of any insurance company or other corporation, association, or partnership, or any dividends or profits accrued thereon, or anything of value whatsoever not specified in the policy. (2) Nothing in this or the preceding subsection shall be so construed as to prohibit any company issuing non-participating life insurance from paying bonuses to policyholders or otherwise abating ]98 PROCEEDINGS

their premiums in whole or in part out of surplus accumulated from non participating insurance; nor to prohibit any company transacting industrial insurance from returning to po1icyho1ders who have made premium payments for a period of at least one year directly to the company at its home or district offices, a percentage of the premium whieh the company would have paid for the collection of such prem· iums; nor to prohibit the readjuf>tment of the rate of premium for a group life insurance policy based on the loss or expense experience thereunder, at the end of the firf'lt year or of any subsequent year of insurance thereunder, such readjustment to be made retroactive only for such policy year. (i) Any violation of any one of Sections ...... is also hereby declared to be an unfair method of competition and an unfair or deceptive act and practice in the business of insurance.2 (j) The enumeration in this Act of specific unfair methods of competition and unfair or deceptive acts and practices in the business of insurance is not exclusive or restrictive or intended to limit the powers of the (commissioner) or any court of review under the pro­ visions of Section 4 of this Act. (Note: Each state may add such additional definitive acts as may be considered necessary or desirable.) Section 4-0ther Unfair Competition, Acts and Practices. (a) If the (commissioner) shall have reason to beli.eve that any person engaged in the business of irnmrance is engaging in this state in any method of competition or in an act or practice in the conduct of such business, other than those enumerated in subdivisions (a) to (i) inclusive of Section 3, and that such method is an unfair method of competition, or that such act or practice is unfair or deceptive, or i-f he shall have reason to believe that any such person is engaging in this state in. any method of competition or in any act or practice enumerated in Section 3, and that a proceeding by him in respect thereof would be to the interest of the public, he may issue and serve upon such person a statement of the charges and a notice of a hearing thereon to be held at a time and place fixed in t11e notice which sha11 not be less than ...... days from the date of service thereof. The person so complained of shall have the right to appear at the place and time so fixed and show cause why an order should not be entered by the (commissioner) requiring such person to cease and desist from the violation of the law charged in the complaint. If after such hearing the (commissioner) shall be of the opinion that the method of competition or the act or practice in question is prohibited by this Act, he shall reduce his :findings to writing and shall issue and cause to b_e served on the person charged with the violation of law a.n order requiring such person to cease and desist from such method, act or practice. Until the expiration of the time allowed for filing a (notice of appeal) (petition for writ or certiorari), if no such (notice of appeal) (petition for such writ) has been duly filed within such time, or, if a

2. Insel·t section numbers of any other ~ections of the Immr11nce Law which it is deemed desirable or necessary to include as 11n unfair trade practice. Mrn-\Y1x1 ER MEEflXG 199

(notice of appeal) (petition for rnch writ) has been filed within sU<~h time, then until the transcript of the record in the proceeding has been filed in the ...... court, as hereinafter provided, the (commissioner) may at any time, upon such notice and in such manner as he shall deem proper, modify or ,;et asiJ.e, in whole or in part, any report or any order made or issued by him under this s_ection. Aftflr the expiration of the time allowed for filing a (notice of appeal) (petition for writ of certiorari), if no such (notice of appeal) (petition for such writ) has been duly filed within such time, the (commissioner) may at any time, after notice and opportunity for hearing, reopen and alter, modify, or set aside, in whole or in part, any re1Jort or order made or issued by him under this section, whenever in his opinion conditions of fact or of law have so changed as to require such action or if the vublic interest shall so require. (b) Any order of the (commissioner) directing a11y person to cease and desist from using any method of competition Ol' act or practice shall be subject to review (here insert language describing scope o.f review) by (appeal) (writ of certiorari) to (the ·····- court) of ...... county.3 The court shall determine whether the Illing of the (appeal) (petition for such writ) shall operate as a stay of such order of the (commissioner). The court may, in disposing of the issue before it, modify, affirm, or reverse the order of the (commissioner) in whole or in part. To the extent that the order of the (commissioner) is affirmed. or modined, the court shall issue its own order commanding obedienee to the terms of the order of the (commissioner). (c) No order of the (commi:,,sioner) or judgment of the court to enforce the same shall i11 any wis.e relieve or absoh-e any person from any liability under any other Jaw:- of this state. ( d) An order of the ( connni.s;;ioner) to cease and desist shall become final - (1) upon the expiration of the time allowed for filing a (notice of appeal) (petition for writ of certiorari), if no 1mch (notice of appeal) (petition for such writ) has been duly filed within such time; or (2) upon a final decision of the court if a judicial review has been soug'ht of the order of the (commissioner). (e) If the report of the (commissioner) does not charge a violation of this Act, then any party to the proceeJings, including any intervenor, may within ········-··· days after the service of such report cause a like petition to be filed in the . . rourt of . county for a view o:f the report of the (commissioner).4 Section 5--Power of (Commissioner). The (commissioner) shall have power to examine and investigate into

3. The county in whieh the seat of government is loeatetl. If time within which appeal must be taken should be limited, insert SUPh provi~io11. 4. Set forth judicial review i,;tatutes and procedures in ea.eh state. 200 PROCEEDINGS the affairs of every person engaged in the business of insurance in order to determine whether such person has been or is engaged in any unfair mthod of competition or in any unfair act or practice. Section 6-Hearing, Witnesses, Production of Books. At the time and place fuced for the hearing before the (commissioner), such person shall have an opportunity to be heard, The (commissioner) upon such hearing may administer oaths, examine and cross-examine wit­ nesses, receive oral and documentary evidence, and shall have the power to subpoena witnesses, compel their attendance, and require the production of books, papers, records, correspondence, or other documents whieh he deems relevant to the inquiry. The (commissioner) upon such hearing may, and upon the request of any party shall, cause to be made a written record of an the ~videnee offered or introduced and proceedings had at such hearing. Nothing in this Act contained shall require the observance at any hearing of formal rules of pleading or evidence.

Section 7-.Appearances. Upon good cause shown, the (commissioner) may permit any person to intervene, appear and be heard at such hearing. Section 8-Procedure .Additional. The powers vested in the (commissioner) by this Act, shall be in addition to any oth~r powers to enforce any penalties, fines or forfeitures authorized by law with respect to the methods, acts and practices hereby declared to be unfair or deceptive.

Secti(J71, 9-Penalty. Any person who violates an order of the (commissioner) to cease and desist after it has become final, and while such order is in effect, shall forfeit and pay to the state of ...... a civil penalty of not more than $5,000 for each violation, which may be recovered in a civil action. Section IO-Punishment for Failure to Obey Subpoena. In case of refusal of any person to comply with any subpoena issued hereunder or to testify to any matter to which he may be lawfully inter- rogated, the ...... court of any county on application of the (commissioner) may issue an order requiring such person to comply with such subpoena and to testify; and any failure to obey such order of the court may be punished by the court as a contempt ther.eof.

8ectim 11-ConstitutWnality. If any section, subsection, subdivision, paragraph, sentence or clause of this Act is held invalid or unconstitutional, such decision shall not a:ff'ect the remaining portions of this Act. MID-WINTER MEETING 201

EXHIBIT ''E'' AN ACT RELATING TO UNFAIR PRACTICES IN THE BUSINESS OF INSURANCE Section I-Purpose. The purpose of this Act is to regulate the trade practices in the business of insurance, in accordance with the intent of Congress as ex­ pressed in Public Law 15 - 79th Congress, by defining, or providing for the determination of, all acts, methods, and practices which constitute unfair methods of competition and unfair or dectptive acts and practices in this state, and to prohibit the same.

Section 2-Unfair Methods .and Unfair or DeceptWe Acts and Practices Prohibited. No personl engaged in the business of insurance shall engage in this state in unfair methods of competition or in unfair or deceptive acts and practices in the conduct of such business. Section 3-Meth-Ods, Acts and Practices Which Are Defined Herein As Unfair or Deceptive. The following are declared to be unfair methods of competition and unfair or d_eceptive acts and practices in the business of insurance: (a) Misrepresentations and False Advertising of Policy Contracts. No person engaged in the business of insurance in this state shalJ make, issue, or circulate, or cause to be made, issued or circulated, any estimat,e, illustration, circular, or statement of any sort misrep­ resenting the terms of any policy issued or to be issued or the benefits or advantages promised thereby, or the dividends or share of the surplus to be rec,eived thereon, or shall use any name or title of any policy or class of policies misrepresenting the true nature thereof. Nor shall any such person make any misrepresentation to any person im:ured in any company for the purpose of inducing or tending to induce a policyholder in any company to lapse, forfeit, or surrender his insurance. (b) False Information and Advertising Generally. No person engaged in the business of insurance in this state shall make, publish, disseminate, circulate, or place before the public, or cause, directly or indirectly, to be made, published, disseminated, circulated, or placed before the public, in a newspaper or other publication, or in the form. of a notice, circular, pamphlet, letter or poster, or over auy radio station, or in any other way, an advertisement, announcement or state­ ment of any sort containing any assertion, representation or statement with respect to the business of insurance or with respect to any person in the conduct of his insurance business, which is untrue, dec~ptive or misleading.

1. "Person"-Whenever used in this Act shall include individuals, corporations, associations, partnerships, reciprocal exchanges, inter-insurers, Lloyds insurers, fraternal benefit societies, and any other legal entity engaged in the business of insurance. 202 PROCEEDIXGS

( c) Defamation. No person engaged in the business of insurance in this state shall make, publish, disseminate, or circulate, directly or indirectly, or aid, abet or encourage the making, pub1ishing, dissemi· nating or circulating of any oral or written statement or any pamphlet, circular, articl.e or literature which is false or maliciously critical and which is calculated to injure any other such person. (d) Boycott, Coercion and Intimidation. N9 person engaged in the business of insurance in this state shall enter into any agreement to commit, or by any concerted action, commit, any act of boycott, coercion or intimidation resulting or tending to result in unreasonable restraint of, or a monopoly in, trade or commerce. (e) False Financial Statements. No person engaged in the busi­ ness of insurance in this state shall file with any supervisory or other public official, or shall make, publish, disseminate, circulate or deliver to any person, or place before the public, or cause directly or indirectly, to be made, published, disseminated, circulated, delivered to any person, or placed before the public, any tinan<'ial statement of an insurer which does not accurately state its true financial condition.

(f) Stock Operations and Adi:isory Board Contraots. No insur­ ance company doing business in this state shall issue, nor permit its agents, officers, or employees to issue or delfrer, agency compa11y stock or oth~r capita] stock, or benefit certificates or shares in any common­ law corporation, or securities or any special or advisory board or other contraets of any kind promising returns and profits as an inducement to insurance; and no corporation or stock company acting as agent of an imurance company nor any of Hs agents, officers, or employees shall be permitted to sell, agree or offer to f'ell, or give or offer to give, directly or indirectly, in any manner whatsoever, any share of stock securities, bonds, or agreement of any form or nature promising returns and profits as un inducement to insurance or in connection therewith. (g) Discrimination. No life insurance company doing business in this state shall make or permit any distinction or discrimination in favor of individuals between those of the same class and equal expectation of life in the rat~s charged for contracts of insurance or of life annuity or in the dividends or other benefits payable thereon, or in any other of the terms and conditions of the contracts it makes, nor shall it discriminate unfairly between other risks involving es­ sentially the same hazards and expense elements or between risks in the. application of like rates and credits. (h) Rebwtes. (1) Except as otherwise expressly provided by law, no life insurance company or its agent shall make any contract of insurance or agreement as to such contract, other than as plainly ex.­ pressed in the policy issued thereon; nor shall any such company or agent pay or allow, or offer to pay or allow, as inducement to insur­ ance, any rebate of premiums payable on the policy, or any special favor or advantage in the dividends or other benefits thereon, or any valuable consideration or inducement not Rpecified in the policy con- Mm-W1xTER MEETING 203

tract of insurance; or give, or sell, or purchase or offer to give, sell, or purcha;_;ie as inducement to in~urance or in connection therewith, any stocks, bonds, or other securities of any insurance company or other corporation, association, or pnrtnership, or any dividends or profits accrued thereon, or anything of value whatsoever not specified in the policy. (2) Nothing in this or the preceding subsection shall be so construed as to prohibit any company issuing non-participating life insurance from paying bonuses to policyholders or otherwise abating their premiums in whole or in part out of surplus accumulated from non-participating insurance; nor to prohibit an,v company transacting industrial insurance from returning to policyholders who have made premium payments for a period of at least one year directly to the company at its home or district offire~, n perrentage of the premium which the company would have paid for the collection of such premi­ ums; not to prohibit the readjustment of the rate of premium for a group life insurance policy based on the loss or expense experience thereunder, at the end of the first :,·ear or of any subsequent year of insurance thereunder, such readjustment to be ma

(i) Any violation of any one of Sections ·-···· ---··· ------·-- is also hereby declared to be an unfair method of competition and an unfair or cleceptive act and practice in the business of insurance.2 (j) The enumeration in thi:-1 Act of i:>pecific unfair methods of competition and unfair or deceptive acts and practices in the business of insurance is not exclusive or restrictive or intended to limit the powers of the (commissioner) or any court of review under the pro­ \"isions of Section 4 of this Act. (Note: EHC'h state may add such additional definitive acts as may bo consiJ.ered necessary or desirable.) Section 4-0ther Unfair Competition. _1cf8 and Practirns, (a) If the (commissioner) ::hall ha,e reason to believe that any persno engaged in the business of insurance is engaging in this state in any method of competition or in an aC't or practice in the conduct of such business, other than those enumerated in subdivic1ion:-1 (a) to (i) inclusive of Section 3, and that such method is an unfair method of competition, or that such act or practice is unfair or deceptive, or if he shall have reason tn beliew that any such person is engaging in this state in any method of competition or in any act or practice enumerated in Heetion 3, and that a proceeding by him in respect thereof would be to the interest of the public he may is~ue and serve upon :ouch person a statement of th.e charges and a notice of a hearing thereon to be held at a time and place fixed in the notice which shall not be lei-s than --·····----- days from the date of service thereof. The (commissioner) shall, after such hearing, make a report in writing in which he E

2, Insert section numbers o! any other sections of the Insurance Law which it iii; deemed desirable or necessary to include as an unfair 1ri:dti prnctke 204 PROCEEDINGS

(b) If such report charges a violation of this Aet and if such method of competition, act or pl'actiee has not been discontinued, the ( com­ missioner) may, through the Attorney General of this State, at any time after ...... days after th$3 service of such report cause a petition to be filed in the ...... court of this state within the district wherem the person resides or has his principal place of business, to enjoin and restrain such person from engaging in such method, act or practice. The court shall have jurisdiction of the proceeding and shall have power to make and enter appropriate orders in connection therewith and to issue such writs as are ancillary to its jurisdiction or are necessary in its judg­ ment to prevent injury to the public pendente lite. {c) A transcript of the proceedings before the (commissioner) in­ cluding all evidence taken and the report and findings shall be fil~d with such petition. If either party shall apply to the court for leave to adduce additional evidence and shall show, to the satisfaction of the court, that such additional evidenc~ is material and there were reasonable grounds for the failure to adduce such evidence in the proceeding before the ( com· missioner) the court may order such additional evidence to be tak,en before the (commissioner) and to be adduced upon the hearing in such manner and upon such terms and conditions as to the court may seem proper. The (com­ missioner) may modify his findings of the facts or make new findings by reason of the additional evidence so taken, and he shall file such modified or new :findings with the return of such additional evidence. ( d) If the court finds that the method of competition, act or pra.etic.e complain,ed of is enumerated in subdivisions (a) to (i) inclusive of Section 3, or, if not so enumerated, that in the judgment of the court, the method of competition c_omplained of is unfair, or the act or practice complained of is unfair or deceptive, and in either case the continuance o:f such method of competition, act or practice whether or not enumerated in Section 3 would result in substantial injury to the public and that the :findings of the (commissioner) are supported by the weight of the evidence, it shall issue its order enjoining and restraining the continuance of such method of competition, act or practice. ( e) If the report of the (commissioner) does not charge a violation of this Aet, then any party to the proceeding, including any intervenor, may within ...... days after the service of such report cause a like petition to be filed in the ...... court of ·····················-····-···- county for a review of the report of the (commissioner),8 Section 5-Power of (Commissioner). The (commissioner) shall have power to examine and investigate into the affairs of every person engaged in the business of insurance in order to determine whether such person has been or is engaged in any unfair method of competition or in any unfair act or practice. Section 6-Hearing, Witnesses, ProductWn of Books. At the time and place fixed for the hearing before the (commissioner), such person shall have an opportunity to be heard. The (commissioner)

3. Set forth judicial review Btatutes and procedures in each state. Mm-WINTER MEETrnG 205

upon such hearing may administer oaths, examine and cross-examine wit­ nesses, receive oral and documentary evidence, and shall have the power to subpoena witnesses, compel their attendance, and require the production of books, papers, records, correspondence, or other documents which he deems relevant to the inquiry. The (commissioner), upon such hearing may, and upon the request of any party shall, cause to be made a written record of all the evidence offered or introduced and proceedings had at such hearing. Nothing in this Act contained shall require the observance at any hearing of formal rules of pleading or evidence. Section 7-Appcarances. Upon good cause shown, the (commissioner) may permit any person to intervene, appear and be heard at such hearing. Section 8--Procedure ..ddditional. The powers vested in the (commissioner) by this Act, shaU be in addition to any other powers to enforce any penalties, fines or forfeitures authorized by law with respect to the methods, acts and practices hereby declared to be unfair or deceptive. Section 9-Punishment for Failure to Obey Subpoena. In case of refusal of any person to comply with any subpoena issued hereunder or to testify to any matter to which he may be lawfully inter­ rogated, the ···-··········---··················· court of any county on application of the (commissioner) may issue an 01·der requiring such person to comply with such subpoena and to testify; and any failure to obey such order of th_e court may be punished by the court as a contempt thereof. Section 10-Comtitutionality. If any section, subsection, subdivision, paragraph, sentence or clause of this Act is held invalid or unconstitutional, such decision shall not affect the remaining portions of this Act.

EXHIBIT ''F'' AN ACT RELATIVE TO THE FILING AND APPROVAL OF FORMS OF POLICIES OF ACCIDENT AND HEALTH INSURANCE, EN­ DORSEMENTS, RIDERS AND APPLICATIONS WHICH ARE ATTACHED THERETO AND RATE MANUALS (AND REPEALING SECTIONS ...... ) Be It Enacted (By ············--················-·-····-··········-·········-·······················) Section I-Filing of Forms and Rate Manuals. (a) No policy of insurance against loss or expense resulting from th_e bodily injury or death of the insured by accident or from the sickness of the insured shall be delivered or issued for delivery in this state, nor shall any form of endorsement, rider or application which becomes a part of any sueh policy be used, until a copy of such forms and the rate manual 206 PROCEEDINGS showing rules, elassifieation of risks and pr~m.ium rates, if any, pertaining thereto have been filed with the Commissioner of Insurance; and every such filing shall state the proposed effective date thereof. The (Commissioner) may require that no policy shall be delivered or issued for delivery in this state and no applications, riders, endors~ments or rates shall be used in connection therewith unless approved by him as conforming to the require­ ments of this Act and of other provisions of the Insurance Law of this state. (b) An insurer may satisfy its obligation to make such filings by becoming a member of, or a subscriber to, a licensed rating organization which makes such filings, and by authorizing the (commissioner) to accept such filings on its behalf; provided, that nothing contained in this Act shall be construed as requiring any insurer to become a member or sub· scriber to any rating organization. ( c) No such policy contain provisions which are unjust, unfair, in· equitabJ_e, contrary to law or to the public poJicy of this state or calculated to mislead the insured or encourage misrepresentation of such policy and no such premium shall be excessive, inadequate or unfairly discriminatory and no classification shall produce a premium rate which is excessiv'e, inadequate or unfairly discriminatory. Section 2-Withdrawal of Filings. (a) If at any time, the (commissioner) finds that a filing of forms or rate manual does not meet the requirements of this Act, or of other provisions of the Insurance Law of this state, he shall after a hearing held upon not less than ...... days' written notice, specifying the matters to be considered at such hearing, to every insurer or rating organization which made such filing, issue an order specifying in what respects h~ finds that such filing fails to meet the requirements of this Act or other pro­ visions of the Insurance Law of this state, and stating when, within a reasonabJe period thereafter, such £ling shall be deemed no longer effective. Copies oi said order shall be sent to every such insurer or rating organi­ zation. Said order shall not affect any policy made or issued prior to the expiration of the period set forth in said order. (b) An insurer or rating organization may at any time amelld or withdraw any filing made by it by giving written notice to the (Com· missioner), and may make new filings of forms, rules, premium rates and classifications with respect to the same or different policies. Every such amended filing or new filing shall be subject to all the provisions of this Act. Section 3-Information To Be F,urnished (Commissioner). Every insurer or rating organization so filing any form, rule, premium rate or classification shall furnish to the (Commissioner) on his request, information as to the loss experience, ~xpense factors and other matters to enable him to determine whether the requirement,; of this Act have been met. Section 4-Rating Organization:,. (a) A corporation, an unincorporated association, a partnership or a.n MID-WIKTER MEETIKG 20i individual, whether located within or outside this state, may make appli­ cation to the (Commissioner) for, license as a rating organization for insurance against loss or expense resulting from the bodily injury or death of the insured by accident or from the sickness of the insured and shall file therewith ( 1) a copy of its constitution, its articles of agreement or association or its certificate of incorporation, and of its by-laws, rules and regulations governing the conduct of its business, (2) a list of its members and subscrib~rs, (3) the name and address of a resident of this state upon whom notices or orders of the (Commissioner) or process affecting such rating organization may be served and ( 4) a statement of its qualifications as a rating organization. If the (Commissioner) finds that the applicant is competent, trustworthy and otherwise qua1ifi~d to act as a rating organization and that its constitution, articles of agreement or association or certificate of incorporation, and its by-laws, rules and regu­ lations governing the conduct of its business conform to the requirements of law, he shall issue a license to act as a rating organization. Every such application shall be granted or denied in whole or in part by the (Com­ missioner) within sixty days of the date of its filing with him. License1:1 issued pursuant to this Seetion shall remain in effect for three years unless soon!3r suspended or revoked by the (Commissioner). The fee for said license shall be twenty-five dollars. Licenses issued pursuant to this Section may be suspended or revoked by the (Commissioner), after hearing upon notice, in the eYent the rating organization ceases to meet the requirements of this subsection. Every rating organization shall notify the (Commis­ sioner) promptly of every chang·e in (1) its constitution, its articles of agreement or association or its certificate of incorporation, and its by-law:,, rules and regulations governing the conduct of its bm1iness, (2) its list of members and fmbscribers and (3) the name and addn:iss of the re;;ident of this state designated by it upon whom notices or orders of the (Com. mis~ioner) or process affecting such rating organization may be served. (b) Subject to rules and regulations which have been approved by the (Commis1-ioner) as r~asonable, each rating organization shall permit any in1-urer, not a member, to be a subscriber to its rating services. Notice of prOposed changes in sueh rules and regulations shall be given to sub­ srribers. Each rating organization shall furnish its rating services without discrimination to its members and subscrib~rs. The reasonableness of any rule or regulation in its application to subscribers, or the refusal of any rating organization to admit an insurer as a subscriber, shall, at the request of any subscriber or any such insurer, be reviewed by the (Commissioner) at a hearing held upon at least ten days' written notice to such rating organization and to such subscriber or insurer. If the (Commissioner) finds that surh rule or regulation is unreasonable in its application to subscribers, he shall order that such rule or regulation shall not be ap­ plicable to subscribers. If the rating organization fails to grant or reject an insured 's application for imbscrib.er!-hip within thirty days after it was made, the insurer may request a review by the (Commissioner) as if the application had been rejected. If the (Commissioner) finds that the insurer has been refused admittance to the rating organization as a subscriber without justification, he shall order the rating organization to admit the insurer as a subscriber, If he finds that the action of the rating organization was justi:fied1 he shall make an order affirming its action. 208 PRoCEEDINGS

(c) No rating organization shall adopt any rule the effect of which would be to prohibit or regulate the payment of dividends, savings or un­ absorbed premium deposits allowed or returned by insurers to their policy­ holders, members or subscribers. (d) Cooperation among rating organizations or among rating organi· zations and insurers in rate making or in other matters within the scope of this Act is hereby authorized, provided the filings resulting from such cooperation are subject to all the provisions of this Act which are applicable to :filings generally. The (Commissioner) may review such cooperative activities and practices and if, after a hearing, he ti.nds that any aueh activity or practice is unfair or unreasonable or otherwise inconsistent with the provisions of this .A.et, he may issue a written order specifying in what r~spects such activity or practice is unfair or unreasonable or otherwise inconsistent with the provisions of this .A.et, and requiring the diseontinuanee of sueh activity or practice.

Section 5-..dppeal by Mi'OOrity .

.Any member of or subseriber to a rating organization may appeal to the (Commissioner) from the action or decision of such rating organization in approving or rejecting a.ny proposed ehange in or addition to the :filings of such rating organization and the (Commissioner) shall, after a hearing held upon not less than ten days' written notice to the appellant and to such rating organization, issue an order approving the action or decision of such rating organization or directing it to give further consideration to such proposal, or, if such appeal is from the action or decision of the rating organization in rejecting a proposed addition to its filings, he may, in the event he finds that such action or decision was unreasonable, fasue an order directing the rating organization to make an addition to its :filings, on behalf of its members and subscribers, in a manner consistent with his :findings, within a reasonable time after the issuance of such order.

Section 6-lnformation To Be Furnished Insurers: Hearings and 4-ppeals of lnS'Urers.

Every rating organization and every insurer which makes its own rates shall, within a reasonable time after receiving written request therefor and upon payment of sueh reasonable charge as it may make, furnish to a.ny insured affected by a rate made by it, or to the authorized repres13ntative of such insured, all pertinent information as to such rate. Every rating organization arid every insurer which makes its own rates shall provide within this state reasonable means whereby any person aggrieved by the application of its rating system may be heard, in person or by his authorized representative, on his written request to review the manner in which such rating system has been applied in connection with the insuranee afforded him. If the rating organization or insurer fails to grant or reject such request within thirty days after it is made, the applicant may proceed in the same manner as if his application had been rejected. .Any party affeeted by the action of such rating organization or sueh insurer on such request may, within thirty days after written notice of such action, appeal to the (Commissioner), who, after a hearing held upon not l~ss than ten Mm-WINTER MEETING 209

days' written notiee to the appellant and to such rating organization or insurer, may affirm or reverse such action. Section 7-Examination. The (Commissioner) shall, at least once in :five years, make or cause to be made an examination of each rating organization licensed in this state as provided in Section 4. The reasonable costs of any such examination shall be paid by th!:! rating organization examined upon presentation to it of a detailed account of such costs. The officers, manager, agents and employees of such rating organization may be examined at any time under oath and shall exhibit all books, records, accounts, documents, or agreements gov9rning its method of operation. In lieu of any such examination the (Commissioner) may accept the report of an examination made by the insurance supervisory official of another state, pursuant to the laws of such state. Section 8-Rate Administration. The (Commissioner) may make reasonable rules and ?!:!gulations neces­ sary to effect the purposes of this Act.

Section 9-False or Misleading Information. NO person or organization shall wilfully withhold information from, or knowingly give false or misleading information to, the (Commissioner), any rating organization, or any insurer, which will affect th~ rates or premiums chargeable under this Act. A violation of this Section shall subject the one guilty of such violation to the penalties provided in Section 10 of this Aet.

Section IO-Penalties. The (Commissioner) may, if he finds that any ptrson or organization has violated any provision of this Act, impose a penalty of not more than fifty dollars ($50) for each such violation, but if he finds sueh violation to be wilful he may impose a penalty of not more than :five hundred dollars ($500) for each such violation. Such penalties may be in addition to any other p!;,malty provided by law.* The (Commissioner) may suspend the license of any rating organiza­ tion or insurer which fails to comply with an order of the (Commissioner)

within the time limited by such order1 or any extension thereof which the (Commission~r) may grant. The (Commissioner) shall not suspend the ]icense of any rating organization or insurer for failure to comply with an order until the time prescribed for an appeal therefrom has expired or if an appeal has been taken, until such or

* In some statas the imposition of fines by administrative officers is prohibited by basic law. It may be necessary to modjfy this section to provide for the imposition of Jines and penalties by some other appropriate state authority. 210 f'ROCEEDINOS

No penalty shall be impoBed and no liqense shall be suspended or revoked except upon a written order of the (Commissioner), stating his findings, made after a hearing held upon not less than ten days' written notice to such person or organization specifying th!3 alleged violation. Section 11-Hearing ProcedHre and Judicial Review. (a) Nothing contained in this Act shall require the observance at any hearing of formal rules of pleading or evidence. (b) Any order or decisiou of the (Commissioner) shall be subject to review (here insert language indicating scope of the review) by (appeal)** (writ of certiorari)** to (the ...... comt)*"' at the instance of any party in interest. The court shall determine whether the filings of the (appeal)** (petition for such writ)** shall operate as a stay of any such order or decision of the (Commissioner). The court may, in disposing of the issue before it, modify, affirm or reverse the order or d~cision of the (Com­ missioner) in whole or in part. Section 12-Non-.Application to Certain Policies. Nothing in this Act shall apply to or affect (1) any policy of Work· meu 's Compensation Insurance or any policy of liability insurance with or without supplementary expens~ coverage therein; or (2) any policy or contract of reinsurance; or (3) life insurance, endowment or annuity contracts, or contracts supplemental thereto which contain only such pro­ visions relating to accident and health insurance as (a) provide additional benefits in case of death by accident, and as (b) operate to safeguard such contracts against lapse, OJ' to g'ive a special surrender value or speciai benefit or an annuity in the event that the insured or annuitant shall become tota11y and permanently disabled, as defined by the contract or supplemental contract. Section 13-Laws Repealed. Sections ...... of the statutes of this state are hereby repealed. AU other laws or parts of laws inconsistent with the provisions of this Act are hereby repealed. Section 14-Constitutionality. If any section, subsection, subdivision, paragraph, sentence or e1ause of this Act is held invalid or unconstitutional, such decision shall not affect the remaining portions of this Act. Section 15-Effective Date. This Act shall take effect*** ..... ** Consideration should be given to the pract.ice and procedure in each state. *** The eft'ective date of this Al't should be set sufficiently ahead to allow the insur· ance department, the companies and the rating organizations to prepare tht'lm· selves with necessary personnel and procedures to carry out- the purposes of the Act. It is recommended that such effective date should be not later than October 1, 1947, which is 90 days prior to January 1, 1948, when the moratorium under Public Law 15 ends. Mm-,VIXTER MEErIXG 211

EXHIBIT ''G'' MEMORANDUM QUESTION DOES SECTION 3 OF THE CLAYTON ACT (TYING CONTRACTS SECTION) PROHIBIT AN AGREEMENT WHEREBY AN INSURANCE COMPANY AGREES TO ACCEPT UNPROFITABLE BUSINESS FROM AN AGENT ONLY IF IT RECEIVES A CERTAIN AMOUNT OF PROFITABLE BUSINESS! OPINION The right of one in business to exercise reasonable discretion in respect to his own business methods has been jealously guarded by the courts. Smiley v. Kansas 196 U.S. 447; Locker v • .American Tobacco Co. 195 N.Y. 565 This right includes the power to discontinue dealiug with another for any reason satisfactory to the one exercising the right, or for no reason at all. Raymond Brothers Clark Co. v. Federal Trade Commission; 263 U.S. 565, affirming 280 Fed. 529 (8 C.C.A.) which has vacated an order of the Federal Trade Commission. A fortiori, continued dealing with another, may be conditioned on certain requirements being met. In fact the Clayton Act itself in one s.ection expressly preserves the right to select one':,:, own customers. (Title 15 U.S.C.A. - Commerce and Trade Sec. 13 (a) p. 187). Therefore in the absence of a clear ,vithdrawal of this rig-ht by .'lome specific provision of the Clayton Act we must conclude the right remains unimpaired. Section 3 of the Clayton Act ( so-called Tying Contra,!ts Section) r('ads as follows: "Sec. 14. Sale, etc. on agreement not to use goods of competitor. It shall be unlawful for any person engaged in commerce, in the course of such coriimerce, to leas~ or make a sale or contract for sale of gooJs; wares, merchandise, machinery, supplies, or their commodities, whether patented or unpatented, for use, consumption, or resale within the United States or any territory thereof or the District of Columbia or any insular possession or other place under the jurisdiction of the United States, or fix a price charged therefore, or discount from, or rebate upon, such price, on the condition, agreement or under­ standing that the lessee or purchaser thereof shall not us.e or deal in the goods, wares, merchandise, machinery, supplies, or other com­ modities of a competitor or competitors of the lel:'sor or seller, where the effect of such lease. sale or contract for sale or such condition, agreement, or understanding ma;v be to substantially lessen competition or tend to create a monopoly in any line of commerce.'' At the outset we are confronted with the question of whether the 212 PROCEEDINGS language above quoted is applicable to the insurance business, or to the relationship of insurance company principal with its agents. The section deals with Iea,:es and contracts of sale for goods, wares, merchandise, machinery, supplies or other commodities. In an insurance transaction there is no question of leasing, and there is a split of authority on whether or not insurance is a commodity. There would appear to be no sale of goods, wares, merchandise, machinery or supplies; but even if the language could be stretched to apply to insurance, it does not appear to be susceptibl~ of application to the relation of insurance company principal with it.a agent, ''The words 'lease,' 'sale,' 'contract of sale,' 'lessee' and 'purchaser,' being the words used, and no other relation than lease and sale being m_entioned, there is no expressed purpose in the clause quoted to make it cover any other subject than leases, sales, or contracts for sales, and to embrace no other persons than lessees and purchasers. The words are so clear they require no construction, and to needlessly construe, in order to broaden the scope of the section, whether done by the Trade Commission in administering, or by the court in super­ vising the administration of, the statute, would be for either or both such agencies to write into it what Congress has not expressly written. (Curtis Publishing Co. v. Federal Trade Commission. C.C.A. Pa. 1921, 270 Fed. 881, affirming 260 U.S. 568.) ' ' The tying contract section was intended to prevent one seller or lessor from closing the market to other sellers or lessors. It was intended to prevent tying the purchaser or lessee to one seller or lessor. International Business Machines v. U.S. 298 U.S. 131 It is obvious that the agreement in question does not tie the agent to the insurer in any sense. It tends to the other result since it encourages the agent to find other underwriting facilities. However, even assuming that the language in question would apply to insurance and to the relationship of insurance company principal &Dd its agent, it is still difficult to see how this section prohibits the contract in question. Making the assumptions in the preceding sentence, the section would prohibit an insurance company principal furnishing its underwriting facilities to an agent on condition that the agent was not to use the underwriting facilities of an insurer who is a competitor of the insurance company principal, when the effect of such agreement may be to sub· stantially lessen competition, or tend to create a monopoly in any line of commerce. This obviously is not the contract stated in the question. In view of the foregoing it is our opinion that Section 3 of the Clayton Act does not apply to the contract set forth in the question. Respectfully submitted,

Commts.rioner Harringt011r (Massachusetts): The report of the meetings of December 3 to 7 of the two committees have been previously read to you Mm-WINTER MEETING 213 and everybody has received copies of them. There are additional copies here at the end of the table 1f anybody needs additional copies, and that report, you are all familiar with, and it contained Exhibit A, a proposed accident and health regulatory bill; Exhibit B, an act relating to unfair practices in the insurance business; and Exhibit C, a report of the Sherman Act Subcommittee. Mr. Chairman, I move the adoption of so much of that report and a supplemental report then I will present.

President Dineen: Do I hear a second t

Commissioner Larson (Florida): I second the motion.

President Dineen: We have a motion made and seconded that this report be adopted. Is there any discussion T All in favor, signify by saying "Aye." Opposed, "No." The "Ayes" have it and it is so ordered.

REPORT OF COMMITTEE ON RATES AND RATING ORGANIZA· TIONS AND FEDERAL LEGISLATION OF NATIONAL ASSOCIATION OF INSURANCE COMMISSIONERS NEW YORK, N. Y., DECEMBER 3-7, 1946 The Committee met at the Hotel Delmonico in New York City on December 3-6, 1946, and at the office of the New York Insurance Depart­ ment on December 7. The following members were present: Charles F . .J. Harrington, Massachusetts, Chairman J. Edwin Larson, Florida Newell R. Johnson, Minnesota Robert E. Dineen, New York Also present were the following Commissioners: John D. Pearson, Indiana Donald Knowlton, New Hampshire Walter Dressel, Ohio William A. Sullivan, Washington Th~ foI1oWing departmental personnel were also present: E. A. Faircloth, Florida John K. Tilton, Florida Robert D. Williams, Washington George H. McAteer, Washington Lloyd Yaudes, Wisconsin Alfred J. Bohlinger, New York Thomas C. Morrill, New York Raymond Harris, New York Victor Cohen, New York At the same time there was a meeting of the All-Industry Committee and consultations were held between the two committees during the progress of the meetings. 214 PROCEEDINGS

The meeting of the Committee was devoted to a. consideration of three main subjects - regulatory treatment of the accident and health business, tr~atment of the Federal Trade Commission Act on a state level and proposed amendments to the model rating bills. They will be discussed in this report in the order named . .Accident and Health Insurance Reference should be made to the report of this Committee for the meeting held October 23-26, 1946. The Accident and 1:I.ealth Subcommittee of the Sherman Act Sub­ committee of the All-Industry Cornmitttle submitted a report to this Com­ mittee which had previously been adopted by the All-Industry Committee. In substance, this report incorporated a request to defer action on the accident and health regulatory problem until December, 1947. The spokes· man for the subcommittee presented certain oral arguments to this Com­ mittee as to why action should be deferred. The members of this Committee agreed unanimously that a postponement 1.vas not in the public interest and that the industry and the Commissione1·s should come to grips with the problem at this time. The Accident and Health Subcommittee thereupon submitted to this Committee a proposed statute for dealing with certain aspects of the accident and health business patterned in some respects along the lines of the proposals ret forth in the report of October 23-26 and in some respects similar to the plans now used in New York, New Jersey and Florida. At the Octob$;!r meeting certain representatives of the industry had stated to this Committee that appropriate legal machinery had to be devised to regulate activities in concert in the accident and health field. At this meeting, however, the members of this Committee were informed that those companies which had heretofore followed those practices would revise or adjust their procedures so as to eliminate the necessity for any legislation at this time covering concerted activities. At the October meeting it was pointed out that those companies which actetl in concert in the accident and health :field transacted a relatively small proportion of the business. In view of this determination this Committee concluded that there was no occasion at this time to draft any legislation dealing with concerted activities and for that reason a less detailed form of legislation was considered. Attach!;ld hereto and marked Exhibit A is a draft of proposed legis­ lation endorsed by the Accident and Health Subcommittee and the All­ Industry Committee anms created by the S.E.U.A. case a11d U. S. Public Law 15 were to be solved upon a state level, it was necessary to devise an integrated program. The job could not be done by a patchwork approach; the parts had to fit together ,vithin, the contemplation of U. S. Public Law 15. This point can best be illustrat!ild by a reference to the situation which con­ fronted this Committee in connection with conditions in the accident and 216 PROCEEDlNGS health business. As we pointEl;d out in our previous report, it is a known fact that there are a number of companies operating in that business which prOvid~ inadequate policy bene:fits at excessive prices. This situation could not continue. The problem was how to regulate it. Should it be done by a rate regulatory bill such as the model bills! Should it be treated through a bill of the type set forth earlier in this reportf Should it be regulated under an omnibus unfair trade practices act at a state level 7 If a decision was reached not to deal with this problem under a bill similar to the model rating bills and if no accident and health bill of the type set forth earlier in this report was adopted, it was apparent that in order to cope with the situation an extremely :flexible unfair trade practices act was required. In the illustration given this Committee has presupposed that the states wanted to cope with this problem on a state level; otherwise existing federal acts designed to cope with this problem would become automatically operative after January 1, 1948. Similar illustrations could be given in other branches of the business. This brings us to a consideration of Exhibit B. That bill may be described as an unfair and deceptive practices act containing prohibitions against certain enumerated practices and an omnibus provision designed to cover unenumerated practices. It is the belief of this Committee that to the extent possible this act provides adequate machinery for dealing with the seope of the Federal Trade Commission act on a state level. We do not claim that this act can prevent the Federal Trade Commission from exercising the broad powers conferred upon it to act as the investigatory agent of Congress. In the drafting of this bill certain prohibited practices have been set forth. Most practices in the insurance business inimical to the public welfare are well known and may be defined in a bill of this type. However, these practices sometimes vary from state to state and consequently legis~ lation which might be necessary in one state would not be necessary in another. The Committee emphasizes that where this legis]ation is introduced consideration should be given to the purely local problems of the state in drafting the definitive section of the bill. It will be noted that under this proposed bill, while power is conferred upon the Commissioner to issue cease and desist orders in connection with the enumerated practices, his power in connection with the unenumerated practices is limited. Authority has been given to him to initiate proceedings, subpoena witnesses, conduct hearings and make findings as to unenumerated praetices. However, before his findings may be enforced it is necessary to bri:iig an action in court through the medium of the Attorney General of the state. That this procedure is more circuitous than one giving the Commissioner power to issue cease and desist orders in any case is ap· parent. In considering this more restrictive form of administrative pro­ cedure the Committee was influenced by certain considerations: (1) Because of the experience of the states in regulating the business over a period of many years, unfair and deceptive practices are well known to the regulatory authorities and consequently should be set forth in the statute itself. This procedure, in the opinion of the Committee, is to be commended because under it people subject to the law know in advance what they may not do. ( 2) Although the history of state legislation in the insurance busines.

J. Edwin Larson, Florida Newell R. Johnson, Minnesota. Robert E. Dineen, New York Maynard Garrison, California

EXHIBIT 1 'A'' PROPOSED AMENDMENT TO LAW FOR PERSONAL ACCIDENT AND HEALTH INSURANCE A. No policy of insurance against loss or expense from the sickne~s, or from the bodily injury or death by accident of the insured shall be issued or delivered to any person in this State nor shall any application, rider or endorsement be used in connection therewith until a copy of the form thereof and of the classification of risks and the premium rates, or, in the case of cooperatives or assessment companies the estimated cost pertaining thereto have been filed with the Commissionor of Insurance. B. No such policy shall be issued, nor shall any application, rider or endorsement be used in connection therewith, until the expiration of 30 days after it has been so filed unless the Commissioner shall soonf:!r give his written approval thereto. C. The Commissioner may, within 30 days after the filing of any such form, disapprove such form (1) if the benefits provided therein are unreasonable in relation to the premium charged, or (2) if it contains a provision or provisions which are unjust, unfair, inequitable, misleading, deceptive or encourage misrepresentation of such policy. If the Com­ missioner shall notify the insurer which has filed any such form that it does not comply with the provisions of this section or section, ······------­ -·-···------·------(insert here appropriate references to the Standard Pro­ vision Section and any other relevant sections) it shall be unlawful there. after for such insurer to issue such form or use it in connection with any policy. In such notice the Commissioner shall specify the reasons for his disapproval and state that a hearing will be granted within 20 days after request in writing by the insurer_ D. The Commissioner may at any time, after a hearing of which not less than 20 days wi·itten notice shall have been given to the insurer, withdraw his approval of any such form on any of the grounds stated in this section_ It shall be unlawful for the insurel' to issue such form or me it in conn~ction with any policy after the effective date of such with­ drawal of approval. The notice of any hearing calleU under this paragraph shall specify the mattel's to be considered at such heai·ing and any decision affirming disapproval or directing withdrawal of approval under this section shall be in writing and shall specify the reasons th~l'efor. E- Any order or decision of the Commh,sioner under this section shall be subject to review by appeal (writ of certiorari) to the ------··------···------Court at the instance of any party in interest_ In the case of disapproval or withdrawal of a.pproval of a form previously in use the court shall determine whether the :filing of the appeal (petition for such writ) shall operate as a stay of any such order or decision. The court may, 219 in disposing of the issue before it, modify, affirm or re\·er8e the order or decision of the Commissioner in whole or in part. Explanatory Notes: Subsection "E" should be omitted in any :;,tate which has a specific general provision for appeal from the review of Uecisions of the Com­ missioner of Insurance. The scope of the review should be reyised to conform to the policy of the state in which this bill i~ introduced. Provisions for filings by fraternal benefit societies may be included in this section in the case of states having no other applicable p1·ovisionc; for such societi~~- A more detailed explanation as to the manner of intergrating this statute into existing lmurance Laws will be ~et forth in an addendum to be issued by this Committee following the December, 1946, meeting.

EXHIBIT ''B'' AN ACT RELATING TO UNFAIR PRACTICES IN THE BUSINESS OF IN8URANCE Section 1-P.urpose. The purpose of this Act is to regulate the trade practices in the business of insurance, in accordance with the intent of Congre.,;s as expres~ed in Public Law 15 - i9th Congres~, by defining, or proviUing for the de­ termination of, all acts, method;;:, and practices which constitute unfair methods of competition and unfair or deceptive acts anJ. practic~s iu tlfr, state, and to ptohibit the same. Sel'tion 2-Definitions. (As used in this Act): (a) "Persons" shall mean any individual, corpo1·ation, association, partnership, reciprocal exchange, inter-insurer, Lloyds insurers, fraternal b_enefit society and any other legal entity, engaged in the business of insurance, including agents, bookers, and adjusters. (b) ("Commissioner") shall mean the ("Commissioner") of In­ surance of this State. Section 3-Unfair Methods and Unfair or Decepti1·e Acts and Practices Prohibited. No person shall engage in this state in unfair methods of competition or in unfair or deceptive acts and practit"es in the conduct of the business of immrance. Section 4-Methods, .Acts and Pract-ices 1Vhich .LI.re Defined Herein As U-n,­ f air or Deceptive. (a) The following are declared to be unfair methods of competition and unfair or deceptive acts and practices in the business of imurance: (1) Misrepresentations and False .Advertising of Policy Con­ tracts. Makmg1 issuing, circulating, or causing to be made, issued, circulated, any estimate, illustration, circular or statement misrepresenting the terms 220 PROCEEDINGS

of any policy issued or to be issued or the beneiits or advantages promised thereby, or the dividends or share of the surplus to be reeeived thereon, or making any false or misleading stat.ement as to the dividends or share of surplus previously paid on similar policies, or making any misleading representation or any misrepresentation as to the :financial condition of any insurer, or as to the legal reserve system upon which any life insurer operates, or using any name or title of any policy or class of policies misrepresenting the true nature thereof, or making any misrepresentation to any policy holder insured in any company for the purpose of inducing or tending to induce such policyholder to lapse, forfeit, or surrender hfa insurance. (2) False Information and ..tl.d-vertising Generally. Making, pub· lishing, disseminating, ch:culating, or placing before the public, or causing, directly or indirectly, to be made, published, disseminated, circulated, or placed before the public, in a newspaper, magazine or other publication, or in the form of a notice, circular, pamphlet, letter or poster, or over any radio station, or in any other way, an advertisement, announcement or statement containing any assertion, repr.esentation or statement with respect to the business of insurance or with respect to any person in the conduct of his insurance business, which is untrue, deceptive or misleading. (3) Defamation. Making, publishing, disseminating, or circulat· ing, directly or indir~ctly, or aiding, abetting or encouraging the making, publishing, disseminating or circulating of any oral or written statement or any pamphlet, circular, article or literature which is false, or maliciously critical of or derogatory to the financial condition of an insurer, and which is calculated to injure any person engaged in the business of insurance. (4) Boycott, Coercion and Intimidation. Entering into any agreement to commit, or individually or by any concerted action committing any act of boycott, coercion or intimidation resulting or tending to result in unreasonable restraint of, or a monopoly in, the business of insurance. ( 5) False Financial Statements. Filing with any supervisory or other public official, or making, publishing, disseminating, circulating or delivering to any person, or placing before the public, or causing directly or indirectly, to be made, published, disseminated, circulated, delivered to any person, or placed before the public, any false statement of financial condition of an insurer with intent to deceive. Making any false entry in any book, report or statement of any in· surer with intent to deceive any agent or examiner lawfully appointed to examine into its condition or into any of its affairs, or any public officia.J to which such insurer is required by law to report, or which has authority by law to examine into its condition or into any of its affairs, or, with like intent, wilfully omitting to make a true entry of any material fact pertaining to the business of such insurer in any book, report or statement of such insurer. {6) Stock Operations and .d.dvi.sory Board Contraots. Issuing or delivering or permitting agents, officers, or employees to issue or deliver, agency company stock or other capital stock, or benefit certificates or shares in any common-law corporation, or securities or any special or advisory MID-WINTER MEETING 221

board contracts or other contracts of any knd promising returns and profits as an inducement to insurance. (7) Unfair Discriminatto11,, (a) Making or permitting any unfair discrimination between individuals of the same class and equal expectation of life in the rates charged for any contract of life insurance or of life annuity or in the dividends or other benefits payable thereon, or in any other of the terms and conditions of such contract, provided that, in determining the class, consideration may be given to the nature of the risk, plan of insurance, the actual or expected expense of conducting the business or any other relevant factor. (b) *Making or permitting any unfair discrimination between indi­ viduals of the same class involving essentially the same hazards in tho amount of premium, policy fees, or rates charged for any policy or contract of accident or health insurance or in the beneftts payable thereunder, or in any of the terms or conditions of sueh contract, or in any other manner whatever, provided that, in determining the class, comideration may be given to the nature of the risk, plan of insurance, the actual or expected expense of conducting the business or any other relevant factor. (8) Rebates. (a) Except as otherwise expressly provided by law, knowingly permitting or offering to make or making any contract of life insurance, life annuity or accident and health insurance, or agreement as to such contract other than as plainly expressed in the contract issued thereon, or paying or allowing, or giving or offering to pay, allow, or give, directly or indirectly, as inducement to such insurance, or annuity, any rebate or premiums payable on the contract, or any special favor or advantage in the dividends or other benefits thereon, or any valuable con· sideration or inducement whatever not specified in the contract; or giving, or selling, or purchasing or offering to give, sell, or purchase as inducement to such insurance or annuity or in connection therewith, any stocks, bonds, or other securities of any insurance company or other corporation, associa­ tion, or partnership, or any dividends or profits accrued thereon, or anything of value whatsoever not specified in the contract. (b) Nothing in clause (7) or paragraph (a) of Clause (8) of this subsection shall be construed as including within the definition of discrimi­ nation or rebates any of the following practices: (i) paying bonuses to policyhold~rs or otherwise abating their premiums in whole or in part out of surplus accumulated from nonparticipating insurance, provided that any such bonuses or abatement of premiums shall be fair and equitable to policyholders ana for the best interests of the company and its policy· holders; (ii) in the case of life insurance policies issued on the industriat debit plan, making allowance to policyholders who have continuously for a specified period made premium payments directly to an office of the insurer in an amount which fairly represents the saving in coI1ection expense; (iii) readjustment of the rate of premium for a group insurance policy based on the loss or expense experience thereunder, at the end of the first year or of any subsequent year of insurance thereunder, which may be made retroactive only for such policy year.

* In the event that unfair discrimination in connection with accident and health coverage is treated in other statutes the above section should be omitted. PROCEEDINGS

( 9) Requiring as a condition precedent to loaning money upon the security of a mortgage upon real property, that the owner of the property to whom the money is to be loaned, negotiate any policy of in­ surance covering such real property through a particular insurance agent or broker or Drokers, provided, however, that this provision shall not pre­ vent the exercise by any insurance company of its right to approrn or disapprove of the insurance company selected by the borrower to under­ write the insurance. (Note: Each state may add such additional definitive acts as may be considered necessary or desirable.) (10) .Axiy violation of any one of Sections ------

(b) The enumeration in this Act of specific unfair methods of com­ petition and unfair or deceptive acts and practices in the business of insurance is not exclusive or restrictive or intended to limit the powers of the ( commissioner) or any court of review under the provisions of Section 11 of this Act. Section. 5-Power of (Commissioner)_

'l'he (commissioner) shall have pm-ver to examine arnJ investigate into the affafrs of every person engaged in the business of insurance in order to determine whether such person has been or is engaged in any unfair method of competition or in any unfair act or practic!:l. Section 6-Notice of Hearing. If the (commissioner) shall have reason to be1ieve that any person jg engaged in this state in any unfair method of competition or in any unfair or deceptive act or practic~ in the conduct of such busines"', as enumerated in subsection (a) of Section 4, and that a proceeding by him in respect thereto would be to the interests of the public, he shall issue and serve upon such person a statement of the charges and a notfre of a hearing thereon to be held at a time and place fixed in the notice, which shall not be Jess than ·--·-·------days from the date of service thereof. Section 7-Hearing, Witnesses, Prvduction of Books. At the time and place fixed for the hearing before the (commissioner), such person shall have an oppo1tunity to be heard and to show cause ,.,.hy an order should not be made by the (commissioner) requiring such person to cease and desist from the acts, methods or practices so eomplained of. The (commissioner) upon such hearing may administer oaths, examine and cross-examine witnesses, receive oral and documentary evidence, and shall have the power to subpoena witnesses, compel their attendance, and require the production of books, papers, records, correi:pond~nce, or other documents which he deems relevant to the inquiry_ The ( commissionel'), upon such hearing may, and upon the request of any party shall, cause to be made a written record of all the evidence offered or introduced and proceedings had at such hearing.

1. Insert seetion number of any other sections of the Insurance Law w11ieh it is deemed desirable or necessary to indude ai; an unfair trade practice. Mrn-WIXTER MEETIKG 223

Nothing in this Act contained shall require the obi.ervance at any hearing of formal rules of pleading or evidenee.

Section 8-Appearances.

Upon good cause shown, the (commissioner) may permit any person to intervene, appear and be heard at such hearing_

Section 9-Cease and Desist Order and Re-dew. If after hearing the (commission~r) shall determine that the acts, methods or practices which are the subject of the inquiry are defined in subsection (a) of Section 4, and shall be of the opinion that the person complained of has engaged in such acts or practicys in violation of the provisions of such subsection, he shall reduce his findings to writing and shall issue and cause to be served on the person charged with the violation of law an order requiring such person to cease and d~sist from such method, act or practice- Until the expiration of the time allowed for filing a (notice of appeal) (petition f~ writ of certiorari), if no such (notice of appeal) (petition for such writ) has been duly filed within such time, or, if a (notice of appeal) (petition for such writ) has been :filed within such time, then until the transcript of the record in the proceeding has been filed in the ------···------court, as hereinafter provided, the (commissioner) may at any time, upon such notice and in such manner as he shnll deem proper, modify or set aside, in whole or in part, any report or any order made or issued by him under this section. After the expiration of the time allowed for filing a (notice of appeal) (petition for writ of certiorari), if no such (notice of appeal) (petition for such writ) has been duly filed within such time, the (commissioner) may at any time, after notice and opportunity for hearing, reopen and alter, modify, or sf't aside, in whole or in part, any report or order made or issued by him under this section, whenever in his opinion conditions of fact or of law have :>o changed as to require such action or if the pub!ic interest shall so require.

(b) Any order of the (commissioner) Uirecting any person to ceaRe and desist from using any method of competition or act or practi<'e shnll be subject to review (here insert language describing scope of review) by (appeal) (writ. of certiorari) to (the ------·-···------court) of ------·-···------county.3 The court shall determine whether the filin(!.' of the (appeal) (petition for such writ) shall operate as a stay of such order of the (commissioner). The court may, in disposing of the issue before it, modify, affirm, or reverse the order of the ( commissioner) in whole or in part. To the extent that the order of the ( l'ommisRioner) iR affirmed or modified, the court shall is~ue its own order commanding obedience to the terms of tJ1e order of the (commissioner)-

( c) No order of the (commissioner) or judgment of the court to enforce the same shall in any wise reliffrn or absolve any per11on from any liability under any other laws of this stat~.

3. The county in which the seat of government is located. If tiI1w ,,·ithiu whid, appeal must be taken should be limited, insert such provision. 224 PROCEEDINGS

( d) .A.n order of" the (commissioner) to cease and desist shall become final - (1) upon the expiration of the time allowed for filing a (notice of appeal) (petition for writ of certiorari), if no such (notice of appeal) (petition for such writ) has been duly filed within such time; or (2) upon a. final decision of the court if a judicial review has been sought of the order of the (commissioner). ( e) If the report of the (commissioner) does not charge a violation of this Aet, then any party to the proceeding, including any intervenor, may within ...... days after the service of such report cause a like petition to be :filed in the ...... court of ...... county for a view of the report of the (commissioner). Section 10-Penalty. Any person who violates an order of the ( com~issioner) to cease and desist after it has become :final, and while such order is in effect, shall forfeit and pay to the state of ...... a civil penalty of not more than $5,000 £or each violation, ,vhich may be recovered in a civil action. Section 11-Procedure As to Undeftned .Methods of Unfair Competition or Deceptive .Acts and Practices. (a) If the (commissioner) shall have reason to believe that any person engaged in the business of insurance is engaging in this state in any method of competition or in any act or practice in the conduct of such business other than those enumerated in subsection (a) of Section 4, and that such method is an unfair method of competition or th.at such act or practice is unfair or deceptive, and that a proceeding by him in respect th~reto would be to the interest of the public, he may, after a hearing held upon notice as provided in Section 6, make a report in writing in which he shall state his findings as to the facts and serve a copy thereof upon such person. (b) If such report charges a violation of this Act and if such method of competition, act or practice has not been discontinued, the ( commis­ sioner) may, through the Attorney General of this state, at any time after ...... days. after the service of such report cause a petition to be filed in th~ ...... court of this state within the district wherein the person resides or has his principal place of business, to enjoin and restrain such person from engaging in such method, act or practice. The court shall have jurisdiction of the proceeding and shall have power to make and enter appropriate orders in connection therewith and to issue such writs as are ancillary to its jurisdiction or are necessary in its judgment to prevent injury to the public pendente lite. (c) A transcript of the proceedings before the (commissioner) in­ cluding all evidence taken and the report and findings shall be filed with such petition. If either party shall apply to the court for leave to adduce additional evidence and shall show, to the satisfaction of the court, that Mm-WINTER MEETING 225 such additional evidence is material and there were -reasonable grounds for the failure to adduce such evidence in the proceeding before the ( com· mission~r) the court may order such additional evidence to be taken before the (commissioner) and to be adduced upon the hearing in such manner and upon such terms and conditions as to the court may seem proper. The (commissioner) may modify bis findings 0£ the facts or make new findings by reason of the additional evidence so ta.ken, and be shall file such modified or new :findings with the return of such additional evidence. (d) If in the judgment of the court the method of competition com­ plained of is unfair or the act or practice complained of is unfair or dec~ptive, and the proceeding by the (commissioner) with respect to such method of competition, act or practice is 0£ intere!'t to the public, and the :findings of the (commissioner) are supported by tl1e weight of the e-vidence,4 it shall issue its order enjoining and r~straining the continuance of such method of competition, act or practice. Section 12-Procedi1:re .Additional. The powers vested in the ( commissioner) by this Act, f'hall be in addition to any other powers to enforce any penalties, fines _or forfeitures authorized by law with respect to the methods, acts and practices hereby declared to be unfair or deceptive. Section 13-Punishment for Failure to Obey Subpoena. In case of refusal of any person to comply with any e:ubpoena issued hereunder or to testify to any matter to which he may be lawfully inter­ rogated, the ··············---··-··········----·· court of ------·· ..... county or the county where said party resides on application of the (commissioner) may issue an order requiring such person to comply with such subpoena and to testify; and any failure to obey such order of the court may be punished by the court as a contempt thereof. Section 14-Immunity from Prosecution. If any person shall ask to be excused from attending and testifying or from producing any books, papers, records1 correspondence or other documents at any hearing on the ground that the testin;ony or evidence required of him may tend to incriminate him or subject him to a penalty or forfeiture, and shall notwithstanding be directed to give sueh testimony or produce such evidence, he must none the Jess comply with. such direction, but he shall not thereafter be prosecuted or rnbjecteU to any penalty or forfeiture for or on account o-f any transaction, matter or thing concerning­ which he may testify or produce evidence pursuant thereto, and no testi­ mony so given or evidence pioduced shall be received against him upon any criminal action, investigation or proceeding, provided, however, that no such individual so testifying shall be exempt :from pro:>ecution or puni8h­ ment for any perjury committed by him while so t~stifying and the testi­ mony or evidence so given or produced shall be admissible against him upon any criminal action, investigation or proceeding co1H·erning such per-

4. The reference to the evidence required upon hearings before the court concerns itself with rules of evidence. The rules of evidence vary in different jurisdictions. Appropriate language is to be used in each state. 226 PROCEEDINGS

jury, nor shall he be exempt from the r~fusal, revocation or suspension of any license, permission or authority conferred, or to be conferred, pursuant to the Insurance. Law of this state. Any such individual may execute, acknowledge and file in the office of the (commissioner) a statement ex· pressly waiving such immunity or privilege in respeet to any transaction, ntatter or thing specilied in such statement and thereupon the testimony of such person or such evidence in relation to such transaction, matt~r or thing may be received or produced before any judge or justice, court, tribunal, grand jury or otherwise, and if so received or produced such individual shall not be entitled to any immunity or privilege on account of any testimony he may so give or evidence so produced. Section 15--ConstitutionaUty. If any section, subsection, subdivision, paragraph, sentence or clause of this Act is held invalid or unconstitutional, such decision shall not affect the remaining portions of this Act.

EXHIBIT ''C'' REPORT OF THE SHERMAN ACT SUBCOMMITTEE

December 51 1946 The Conference Committee, after careful consideration of the proposa]s of the National Association of Independent Insurers, recommended the adoption of the following amendments to the Casualty and Surety antl Fire, Marine and Inland Marine Rate Regulatory Bills: Section 4(a) of the Casualty Bill is amended to read as follows: (a) Every insurer shall file with the (commissioner) every manual of classitieations, rules and rates, every rating plan and every modifica­ tion of any of the foregoing which it proposes to use. Every such filing shall state the proposed effective date thereof, a·nd shall indicate the character and extent of the coverage contemplated. When a filing is Mt accompanied by the information upon which ,the insurer suppo·rts su.ch filing, and the (commissioner) does not have sufficient information to determine whether such filing meets the requirements of the .Act, he may require such insurer to furnish the informa,tion upon which- it S'Upports such filing. Any filing may be supported by (1) the experience or iudgment of the insurer or ra.ting organization making the filing, (2) the experience of other in.

date thereof, and shall indicate the character and extent of the coverage contemplated. When a filing is not accompanied by the information upon which the insurer 811,pports such filing, and the (commissioner; does not have sufficient information to determine whether such filitng meets the requirements of the Act, ,Jte rnay require suck inS'lhrer to furnish the information upon. which it supports such filing . .An.y filing may be s,upp-0rted by (1)

Section 5 of the Casualty Bill is amended by adding thcr('to the following new subsection:

(e) No ma.nual of classificQ)tions, rules, rati-ng plan, rahng Rystrm, plan of overation or any modificat-ion of any -0f the foregoing which establishes standards for measuring 1·ariations in ha::ruds or r·:rpensc provisions, or both, shall be disapproi·ed if the rates therchN produced mrrt the requirement,<, of this Act.

Seetion 5 of the Fire Bill is amended by 11dding thereto the following new subseetion:

(e) No manual, minimum, cla.~.~ rate, rating schedule, rating plan, rating rule, rating system, plan of operation or anv modification of any of the foregoing shall be di:wpprored (f the rotes thereUy pro­ duced meet the requiremen,ts of this Ad.

'fhe:-e amendments were offered nnd adopted for the purpose of aYoid­ ing possible misinterpretation of thC> inte11t oi' the sections amended. The amendments do not represent a departtue m principle frcm the Bills r,s approved at Portland, Oregon, in June, Hl4li.

Commissioner Harrington (1la,;i,adrn::;:ett:<): This is a sup111emental report which was prepared as a result of the request of ('ertain commis­ sioners for some comparison between the proposal of the industry, entitled, An Act Relating to Unfair Prartices in the Business of In. urance, a draft submitted as of December 3 and from which the draft attached to the report you have just approved was prepared and added to and amended. The report enumerates the sections on which we differnd rind we have sufficient reports available here for Commissioners. We haven't more than that at this time. There wiH be more available later. We m.mld Jilie to have the Departments take them. I believe there are about thirty Jl('re, enough to satisfy most everybody here, and we \'11i11 see that additional copies are forwarded to you at your home departments. Only the t1epartments, and one to a department1 please, at this point. You will note that that repo1t gives you the comparison sedion by section, of the changes that "·e have made down through the third page, 228 PROCEEDINGS and the concluding paragraphs of the report, which covers the points omitted in the original report, are as follows: '' Concerning the foregoing changes, your committee has not explored them thoroughly, and same may be .=aid insofar as the All-Industry Com­ mittee is concerned. "Regarding the balanc~ of Exhibit A, attached to your Committee's report, Section 6 and 14 are new sections which have been proposed by your Committee. Section 9 has been adopted from the draft of the Bill marked Exhibit D attached to your Committee's report of October 23 to 26, 1946. Section 11 has been adapted from Section 5 of the All-Industry revision of December 3, with such changes as have been necessitated in procedure arising from the fact that Section 5 of the AlLindustry Com· mittee revision of December 3 embraced in one section the procedures embodied in Sections 9 and 11 of Exhibit A, etc." (Continues reading) As you know, Commissioner McCormack took no part in these pro­ ceedings. Mr. Chairman, I move the adoption of the supplementary report.

President Dineen: Do I hear a second T

Secretary Parkinson (Illinois) : I second the motion.

President Dineen: The motion has been made and seconded that this report be adopt~d. Is there any discussion! All in favor, signify by saying ''Aye.'' All opposed, 1 'No.'' The ''Ayes have it.

SUPPLEMENTAL REPORT TO REPORT OF COMMITTEE ON RATES AND RATING ORGANIZATIONS AND FEDERAL LEGISLATION OF NATIONAL ASSOCIATION OF INSURANCE COMMIS­ SIONERS, NEW YORK, N. Y., DECEMBER 3-7, 1946

The purpose of this supplemental report is to can attention to certain items contained in Exhibit B ( An Act Re1ating to Unfair Practices in the Business of Insurance) attaehed to the report heretofore made and by this Committee. In order that the members of the National Association of fo. surance Commissioners may have all available material, there is attached hereto the proposed bill covering unfair trade practices which was submitted to your Committee by the All-Industry Committee, being the revision of December 3, 1946.

Section 2 (a), The words '' including agents, brokers and adjusters'' are new. The All-Industry Committee suggested adding agents and brokers and your Committee proposed that adjusters be included in the definitions.

Section 4 (a) ( 1). The words '' or the dividends or share of the surplus to be received thereon, or making any false or misleading statement as to the dividends or share of surplus previously paid on similar policies, or raking any misleading representation or any misrepresentation as to the MID-WINTER MEETING 229

:financial condition of any insurer, or as to the legal reserve system upon which any life insurer operates,'' have been added by your Committee.

Section 4(a) (2). The words "or placing before the public, or causing,'' have been added by your Committ~e.

Section 4(a) (3). The words "of or derogatory to the financial con­ dition of an insurer," have been added by your Committee.

Section 4(a) (4), The words "or individually" have been added by your Committee.

Section 4(a) (5). In the place of the words "any :financial statement of an insurer which does not accurately state its true :financial condition'' contained in the All-Industry revision of December 3rd, your Committee has proposed the words '' any false statement of financial condition of an in­ surer with intent to deceive.'' The entire second paragraph concerning the making of false entries in books. etc., has been proposed by your Committee.

Section 4(a) (7) (a). The words "involving esfentially the sa;me hazards, expense elements" contained in the AH-Industry revision of De­ cember 3rd have been omitted and the words '' provided that, in determining the class, consideration may be given to the nature of the risk, plan of insurance, the actual or expected expense of conducting the business or any other relevant factor" haye been proposed by the All-Industry Com­ mittee. Semion 4(a) (7) (b). Tlie words "and expense elPmerlts" contahed in the All-Industry revision of December 3rd have been omitt~d. The All­ Industry Committee proposed the words '' or in any other manner whatever, provided that, in determining the class, consid!';lration may be given to the nature of the risk, plan of insurance, the actual or expected expense of conducting the business or any other relevant factor.'' Section 4(a) (8) (a). Th~ words "knowingly permitting or offering to make or'' and '' or paying or aHowing, or giving or offering to pay, allow, or give, directly or indirectly,'' have been proposed by your Com· mittee. Section 4(a) (8) (b). The words "provided that any such bonuses or abatement of premiums shall be fair and equitable to policyholders and for the best interests of the company and its policyholders; in the case of life insurance policies issued on the industrial debit plan,'' have been proposed by your Committee. Section 4(a) (9). This entire subsection was proposed by your Com­ mittee. Section 4(a) (10). This is a revision of Section 4(a) (9) of the All-Industry revision of December 3rd. The words which have been deleted repreaent a purely editorial change. Section 4(b). The change in the last line of this subsection is purely editorial and was necessitated by changes in section numbering. 230 PROCEEDINGS

Section 6 of the All-Industry revision of December 3rd covering the subject of multiple state advertising by foreign or alien insurers has been omitted in its entirety.

Concerning the foregoing changes, your Committee has not explored them thoroughly and the same may be said in so far as the All.Industry Committ~e is concerned.

Regarding the balance of Exhibit A attached to your Committee's report, Sections 6 and 14 are new sections which have been proposed by you'r Committee. Section 9 has been adopted from the draft of bill marked Exhibit '' D'' attached to your Committee's report of October 23-26, 1946.

Section 11 has been adopted from Section 5 of the All-Industry revision of December 3rd with such changes as have been necessitated in procedure arising from the fact that Section 5 of the AU-Industry revision of Decem· ber 3rd embraced in one section the procedures embodied in Sections 9 and 11 of Exhibit A attached to your Committee's report of December 3-7, 1946.

None of the foregoing four sections, namely, 7, 9, 11 and 14 has been consider~d by the All Industry Committee.

Your Committee has given no consideration to the problem<:. arising out of the Clayton Act. Due to insufficient time your Commit.tee has been unable to consider this subject. Respectfully t

AN ACT RELATING TO UNFAIR PRACTICES IN THE BUSINESS OF INSURANCE Revision of December 3rd Section !~Purpose. Th!3 purpose of this Act is to regulate the trade practices in the business of insurance, in accordance with the intent of Congress as expressed in Public Law 15 - 79th Congress, by defining, or providing for the determination of, all acts, methods, and practices which constitute unfair methods of competition and unfair or deceptive acts and practices in this state, and to prohibit the same.

Section 2~De;/in4tions. (As used in this Act) (a) "Person" shall mean any individual, corporation, association, partnership, reciprocal exchange, inter-insurer, Lloyds insurers, fraternal benf:fit sbciety and any other legal entity, engaged in the business of insurance. l\.lrn-'\VIXTER MEETIXG 231

(b) ("Commissioner") shall mean the ("Commissionern) of In­ surance of this state. Section, 3-Unfair Metkodi; a-nd [nfai,r or Deceptive .Act.11 and Practices Prohibited.

No person shall engage in this state in unfair methods of ('ompetition or ill unfair or deceptive acts and practiees in the conduct of the business of insurance. Section 4(a)-Methods, .Acts and Practices TVkich Are Defined Herein As Unfair or Deceptire.

The following are declared to be unfair methods of competition aud unfair or deceptive acts and practices in the business of insurance: (1) Misrepresentations and False .AdvertiBing of Polfry Contracts.

Making, issuing, circulating, or causing to be maUe1 is:>ued, circulated, any estimate, illustration, circular, or statement, the terms of any policy issued or to be issued or the benefits or advantages promised thereby, or the dividends or share of the surp, u:,; to be received thereon, or using any name or title of any policy or class of policies miRprese senting the true nature thereof, or making any misrepresentation to any person insured in any company for the purpuse of inducing or tending to induce a policyholder in any company to ]apl'e, forfeit, or surrender his insurance. (2) False lnformaticrn a.nd Advertising Generally. Making, pub­ lishing, disseminating, circulating, or placing before the public, or causing, directJy or indirectly, to be made, publisheJ, dissemiHatetl, circulated, or placed before the pubiic, in a newspaper, magazine or other publication, or in the form of a notice, circular, pamphlet. letter or poster, or over any raJio station, or in any other way, an advertisement, announcement or statement containiug any as~ertion, representation or statement with respect to the husines=- of inmrance or with respect to any person in the conduct of his insurauee lmsines;;, which is untrue, decepfo·e or mi:•leading. (3) Defama.tion. Making, pubfo:.hing, disseminating, or circulat­ ing, directly or indirectly, or aiding, abetting or encourag·ing the mak­ ing, publishing, disseminating or circulating of any oral or written statement or any pamphlet, circular, article or literature which is false or maliciously critical and which is calculated to i:1jure any person engaged in the business of insurance. (4) Boycott, Coercion and Intimidation. Entering into any agree­ ment to commit, or by any concerted action, committing, any act of boycott, coercion or intimidation resulting or tentling to re:mlt in unreasonable restraint of, or a monopoly in, the business of insurance. (5) False Financial Statements. Filing with any supervisory or other public official, or making, publishing, disrnminating, circulating or delivering to any p.erson, or placing before the public, or causing directly or indirectly, to be made, publi~hed, dhiseminated, circulated, 232 P&OCEEDINGS

delivered to any person, or placed before the public, any financial statement of an insurer which does not accurately state its true financial condition.

(6) Stock Operations and .Advisory Board Contracts. Issuing or delivei'ing or permitting agents, officers, or employees to issue or deliver, agency company stock or other capital stock, or benefit cer~ tificates or shares in any common-law corporation, or securities or any special or advisory board contracts or other contracts of any kind promising returns and profits as an inducement to insurance.

(7) Unfa,i,r Discrimination. (a) Making or permitting any un­ fair discrimination between individuals of the same class involving essentially the same hazards, expense elements and equal expectation of life in the rates charged for contracts of life insurance or of life annuity or in the dividends or other benefits payable thereon, or in any other of the terms and conditions of such contracts.

(b) *Making or permitting any unfair discrimination between individuals of the same elass involving essentially the same hazards and expense elements, in the amount of premium, policy fees, or rates charged for any policy or contract of accident or health insnrance or in the benefits payable thereunder, or in any of the t~rms or conditions of such contract.

(8) Rebates. (a) Except as otherwise expressly provided by law, making any contract of lif~ insurance, life annuity or accident and health insurance, or agreement as to such contracts other than as plainly expressed in the contract issued thereon, or paying or allow­ ing, or oft"ering to pay or allow, as inducement to such insurance, or annuity, any rebate of premiums payable on the contract, or any special favor or advantage in the dividends or other benefits thereon, or any valuable consideration or inducement not specified in the contract; or giving, or selling, or purchasing or offering to give, sell, or purchase as inducement to such insurance or annuity or in connection therewith, any stocks, bonds, or other securities of any insurnnce company or other corporation, association, or partner~hip, or any dividends or profits accrued thereon, or anything of value whatsoever not specified in the contract. (b) Nothing in clause (7) or paragraph (a) of Clause (8) of thiE! subsection shall be construed as including within the de:finition of discrimination or rebates any of the following practices: (i) paying bonuses to policyholders or otherwis~ abating their premiums in whole or in part out of surplus accumulated from non~participating insur­ ance; (ii) making allowance to industrial policyholders who have continuously for a specified period made premium payments directly to an office of the insurer in an amount which fairly repre~nts the saving in collection expense; (iii) readjustment of the rate of premium for a group insurance policy based on the loss or expense ~xperience * In the event that unfair discrimination in connection with accident and health co,•erage is treated in other statutes the above section should be omitted. MID·WINTER MEETING 233

thereunder, at the end of the first year or of any imbsequent year of insurance thereunder, retroactive only for such policy year. (Note: Each state may add such additional definiti\-e acts as may be considered necessary or desirable.) (9) Any violation of any one of Sections ...... of the statutes of this state is also hereby dedared to be au unfair method of competition and an unfair or deceptive act and practice in the business of insurance. 1 (b) The enumeration in this Act of specific unfair methods of competition and unfair or deceptive acts and practices in the business of insurance is not exclusive or restrictirn or intended to limit the powers of the (commissioner) or any court of review under the pro· visions of Section 5 of this A.ct. Section 5-Procedure .As to Defined and Other Unfair ..:lets and Prnctices. (a) If the (commissioner) shall have reason to believe that any person engaged in the business of insurance is engaging in this state in any unfair method of competition or in any unfair or deceptive act or practice in the conduct of such business, other than those enumerated in Subsection (a) of Section 4, or if he shall have reason to believe that any such person is engaging in this state in any method of competition or in any act or practice enumerated in Subsection (a) of Section 4, and that a proceeding by him in respect to any such method of competition, act or practice ,vhether or not so enumerated, would be to the interest of the public, he may issue and serve upon such person a statement of the charge:; and a notice, of a hearing thereon to be held at a time and place fixed in the notice which shall not be Jess than ...... days from the date of service thereof. The (commissioner) shall, after such hearing, make a report in writing in which he shall state his findings as to the facts, and serve a copy thereof upon such person. (b) If such report eharges a violation of this Act and if such method of competion, act or practice has not been discontinued, the (commissioner) may, through the Attorney General of this State, at any time aft13r ...... days after the service of such report cause a petition to be filed in the ...... court of this state within the district wherein the person resides or has his principal place of business, to enjoin and restrain such person from engaging in such method, act or practice. The court shall have jurisdiction of the proceeding and shall have power to make and enter appropriate orders in connection therewith and to issue such writs as are ancillary to its jurisdiction or are necessary in its judgment to prevent injury to the public pendente lite. ( e) A transcript of the proceedings before the (commissioner) in· eluding all evidence taken and the report and findings shall be filed with such petition. If either party shall apply to the court for leave to adduce additional evidence and shall show, to the satisfaction of the court, that such additional evidence is material and there were reasonable grounds for

I. Insert section numbers of any other sections of the Insurance Law which it is deemed desirable or necessary to include as an unfair trade practice. 234 PROCEEDINGS the failure to adduce such evidence in the proceeding before the ( com­ missioner) the court may order such additional evidence to be taken before the (commissioner) and to be adduced upon the hearing in such manner and upon such terms and conditions as to the court may seem proper. The (commissioner) may modify his findings of the facts or make new findings by reason of the additional evidence so taken, and he ~hall :file such modified or new findings with the return of such additional evidence. (d) If the court finds that the method of competition, act or practice complained of is enumerated in Subsection (a) of Section 4, or, if not so enumerated, that in the judgment of the court, the method of competition complained of is unfair, or the act or practi,:e complained of is unfair or deceptive, and in either case that the proceedi11g by the (commissioner) with respect to such method of competition, act or practice whether or not enumerated in Section 4 is of interest to the puhlic and that the findings of the (commissioner) al'e supported by the weight of the evidence, it shall issue its order enjoining and restraining the continuance of such method of competition, act or practice. (e) If the report of the (commissioner)

Seotion 6-Multiple State Adn'rUsing b.lJ Foreign or Alien lns1.wers. If any foreign or aJien inrurer engagf's 111 this state in an unfai1· method of competition or in an unfair or de(•eptiye practice a~ defined in clauses (1) and (2) of Subsection (a) nf Section 4, by means of any advertisement, announcement or ~tatement, in any nrngnziue or other periodi· cal publication having a genei·al circulation in m:q·e thnn fhe states, or by means of any radio broaclca:::t to more than fire !',tates1 h1cluding the state of domicile of such insurer, an

upon such hearing may administer oaths, examine and cross-examine wit· ness):!S, receive ora] and documentary evidence, and shall have the power to

subpoena witnesses, compel their attendance1 and requhe th~ production of books, papers, records, correspondence, or other document.; wl1ich he deem'i! relevant to the inquiry. The (commissioner), upon rneh hearing may, and upon the request of any party shall, cause to be m:H1e a written record of all the evidence offered or introduced and proceedings had at such hearing,

Nothing in this Act contained shall requirf' the oh,,ervauee at any hearing of formal rules of pleading or evidenee.

Section 9~.Appearances. Upon good cause shown, the (1;ommissioner) may permit any persnn to intervene, appear and b!'l heard at such hearing. Section IO-Procedure A.dditfonal. The powers vested in the ( commissioner) h,v this Act, t

Commissioner Harrington (Massachusett:-): ~uw, )fr. Prt>;-1ident, 1 think for the record, I should mention that as to the report.:< o-f the R_vrneue1e meeting and the meeting at the Commodore on October ~:{ to 26, Commis­ sioner McCormack didn't participate in them, but ,vrofr u,:, a letter which he asked be included in the records of the Committee, :rnd that has been done by vote of the Committee.

President Dineen: Gentlemim, before we proceed to a eomdderation of the next report, I hope those of you who want to give the problem covered by Commissioner Harrington's report, I hope you ,vi1l understand that if you have any occasion to come to grips with thiH problem immedi­ ately, by taking these two reports together, the report which w~ gave you 236 PROCEEDINGS last Sunday and the one which Commissioner Harrington read, you will be able to tell exactly the terms upon which agreement has been reached and those loose ends upon which no decision has been made, and we are indebted to Larry Ensor for that suggestion. I hope, Larry, it will be of some help to you and others who are similarly situated. Maynard Garrison, are you ready with Laws and Legislation at this timet . , . Commissioner Garrison read the report of the Laws and Legislation Committee as follows:

REPORT OF LAWS AND LEGISLATION COMMITTEE NATIONAL ASSOCIATION OF INSURANCE COMMISSIONERS DECEMBER 10, 1946 Honorable Robert E. Dineen, President National Association of Insurance Commissioners Sir: The Laws and Legislation Committee of the National Association of Insurance Commissioners met at the Commodore Hotel, New York City, New York, at 10:30 A. M. Tuesday, December 10, 1946. All members of the Committee consisting of the following were present: Owen Jackson, Missouri Lawrence E. Ensor, Maryland Donald Knowlton, New Hampshfre Jack McKenzie, Arkansas John D. Pearson, Indiana Donald Dickey, Oklahoma William A. Sullivan, Washington Maynard Garrison, California The Chairman announced that he had written all Commissioners in November inviting them to submit any matters they might wish to be considered by the Committee but that no matters had been thus far submitted as a result of which the Committee's agenda was brief. The only matter considered by the Committee was the question of sponsoring uniform. legislation declaring the obligations of the International Bank for Reconstruction and Development (whose formation arose out of the Bretton Woods Agr~ment) eligible for investment by insurers. At the invitation of the Chairman, Mr. E. G. Collado, United State ExecutiVe Director of the Bank appeared before the Committee which listened with keen interest to his able and detailed explanation of the organization and operations of the International Bank and of the nature of the obligations it proposes to issue. The Committee agreed, and so resolved, that the eligibility of the obligations of the International Bank for Reconstruction and Development for investment by insurers is a matter for determination by each State separately. The Chairman stated that the assignment given the Committee in Mm-WINTER MEETING 237

June to a.sseinble and codify al] model uniform legislation approved by the Association was being done under his direction but that sufficient time ~a.d not elapsed to permit completion of the research work necessarily involved therein.

There being no further business before it the Committee adojurned a.t 11:15 A. M.

Respectfully submitted,

Maynard Garrison, Chairman Lawrence E. Ensor William A. Sullivan Jack G. McKenzie Ow!;lD E, Jackson D. F. Dickey John D. Pearson

Commissioner Garrison (California): Mr. Chairman, I move the adop­ tion of the report.

Commissioner Lars011, (Florida): I second the motion.

President Dineen: There is a motion, mad~ and ~oconded, that the report be adopted. Is there any discussion T All in favor, signify their approval by saying ''Aye.'' All opposed, 1 •No.'' The •'Ayes'' have it and it is so ordered. Here is an announcement that I am about to make, and as soon as it is made, I will ha>'e our Uniform Accounting in.-e::-tigators auditing you.*** Is George Benjamin here i

Commissioner Larson (Florida): He has g·one homn. His Committee had no meeting and they haYe no report.

Commissioner Garrison (California): You appointed an Auditing Com­ mittee, consisting of Kavanaugh, Shelby Davis and my:,elf, and it turned out that the Secretary and Treasurer had been audited in June, that there wasn't any occasion for fmther audit. In fact, the Secretary-Treasurer doesn't have his books here, so we are unable to make any audit at this time. The appointment of your Committee we find was somewhat ill-advised. (Laughter)

President Dineen: Well, what you are saying is, you did a poor job and now you're blaming me for appointing you. (Laughter) All right, I will accept that report with misgivings. Billy Sullivan, the Fraternal Committee .

• . . Commissioner Sullivan read the report of the Frat~rnal Committee as follows: 238 PROCEEDINGS

REPORT OF THE FRATERNAL COMMITTEE NEW YORK, N. Y., DECEMBER 9-10, 1946 The preparation of a proposed uniform fraternal code has engaged the attention of this Committee sinee 1939. The work was undertaken because of dissimilarity of state statutues regulating the organization and super· vision of fraternal benefit societies. Many of the states have based their laws upon the so-called '' Mobile Bill,'' recommended for enactment by the states at the meeting of this Convention at Mobile, Alabama, in 1910. However the laws enacted and administrative orders issued by the states during the years since 1910 have produced a pattern of non-uniformity.

At the invitation of this Committee, the Law Committee of the National Fraternal Congress prepared a propornd Uniform Fraternal Code and presented it to this Committee in June, 1940. Without setting forth in detail the extent of deliberations of this Committ~e, it is sufficient to say that frequent meetings were held at which strenuous efforts were made to achieve a meeting of minds with representatives of the National Fraternal Congress and among the members of this Committee as to the provisions of the proposed code. Redraft No. 6 of the proposed code was issued on October 4, 1946.

D.espite the most serious and earnest endeavor, it has not been possible to resolve essential differences which exist within the Committee and with the representatives of fraternal benefit societies on some of the major pro­ visions of the proposed code, e,·en though there is substantial agreement on a majority of the provisions. In view of the fact that patient and prolonged consideration has not produced a satisfactory solution to the problems before the Committee, but instead has made it plain that some of the differences in opinion are of a basic character and irreconci1able, this Committe13 has, by majority vote, resolved to request that it be dissolved. It is the opinion of the Committee that no useful purpose will be served by continued study of this problem, and a:,ks that it be discharged and diaso1ved. Respectfully sumbitted, William A. Sullivan, Chm. Chas. R. FiRcher Charles F. J, Harrington Newell R. .Tohn~on Walter Dressel

Com1nissioner Sullivan (Washington): 1fr. Chairman, I mo,·e the adoption of the report.

President Dineen: Do I hear a second!

Commissioner Gough (New Jen1ey): I !-iecond the motion.

President Dineen: Is there any discussionf Are you ready for the Mrn-WJXTER MEETING 239

question! All in favor, signify by saying ''Aye.'' Oppo~ed. Th~ ''Ayes'' have it and it is so ordered.

Commissioner Neel (Pennsyl\'ania): Mr. Chairman, I want to be re­ corded as being in complete accord with this resolution as presented here with the exception of the final line on page 1, where it states "Even though there is substantial agreement on a majority of the provisions,'' All other conditions, I completely support.

Commissioner Harrington (Massachm,etts): Mr. Chairman, this h1 simply to correct the record. I take the report of Commh:;sioner Sullivan dated October 4, 1946, which reads as fol!ows: "The Fraternal Committee meeting, August 26 to 30, 1946, took the following action on the proposed Uniform Code as it now appears in redraft No. VI: Section 11, Institutions; no vote on adoption. Section 15. Non-Forfeiture Benefits, Basis of Value, voted to adopt. Section 31, Fra· ternal Benefit Societies may convert into a Mutual Life Insurance company; no vote on adoption. Section 33, Funds, Rates, voted to include subsections 4 and 5. Section 36, Reports on Valuation; voted to adopt. AU other sec­ tions were voted adoption unanimously.'' That is the record as set forth by the Chairman of th~ Committee from the records of the Secretary, verified by other mem be1·s of the Committee from their notes of what took place at Gul1 Lake, and, so far as the Committee is concerned, that is how close we came to having a uniform code for fraternal benefit societies.

President Dineen: All right, gentlemen, we will pass to the next order of business. Is there a rf)port by the Subcommittee on the N. F. C. Mor­ tality Tablet Commissioner Johnson, will you come up and report .

. , • Commissioner Johnson read the report of the Examinations Com­ mittee as follows:

REPORT OF THE COMMITTEE ON EXAMINATIONS NEW YORK, N. Y., DECEMBER 10, 1946 The Committee was called to order at about 2:45 P. M. on Dec~mber

101 1946, in the West Ballroom. In addition to the Chairman, the following Commissioners were present: James M. McCormack, Vice-Chairman, Tennesse!?, represented by Mr. E. H. Mashburn C. A. Gough, New Jersey, Zone 1 George A. Bowles, Virginia, Zone 2 Owen G. Jackson, Missouri, Zone 3 David A. Forbes, Michigan, Zone 4 Commissioner Butler representing Zone 5 and Commissioner Thompson representing Zone 6 were not present. 240 PROCEEDINGS

The Subcommittee of the Committee on Examinations submitted its report on the !:lXamination of rating organizations, which matter was assigned to it at the Portland meeting. The report was thoroughly dis· cussed and was adopted after effecting a minor amendment. The Subcommittee then reported on its assignment to further consider the plan of examination of pools, syndicates, etc., adopted at the Portland meeting. Your Committee adopted the recommendation of the Subcommittee to amend part 5 of the previously adopted plan.

The Subcommittee then submitted its report on the r 'Recommended Minimum Quali:fications for Convention Examiners.'' This matter was submitted by Zone 6 and adopted at the Association meeting in Portland last June and the Subcommittee was charged with further consideration of the problem. The Subcommittee's report was adopted. The Examinations Committee presents herewith the three reports which were adopted by it: A. Statutory Examinations of Rating Organizations.

REPORT OF SUBCOMMITTEE OF EXAMINATIONS COMMITTEE New York City, December 10, 1946 To the Examinations Committee of the National Association of Insuranc~ Commissioners: Your undersigned Subcommittee appointed at the Portland meeting last June to give consideration to the matter of statutory examinations of rating organizations reports as follows: A public hearing was conducted by the Committee and at which rep­ resentatives of several of the principal rating organizations of a more or less national character appeared and gave the Committee the benefit of their views, supplemented with written memoranda upon the subject matter, and which aided the Committee very much in its consideration. Under most, if not all, of the existing rating laws and as proposed in the bills recommended by the Commissioners, periodic examinations of rating organizations are required to be made by the supervisory insurance officials of the states in which any such rating organization may be licensed. Under these laws provision is made that the supervisory official may accept the report of an examination made by the insurance supervisory official of another state, pursuant to the Jaws of such state. It would be our recommendation, therefore, that the plan of exami­ nation of pools, syndicates, etc., adopted at the Portland meeting last June, insofar as may be applicable, be adopted for rating organizations, as follows: (1) That the scope and details to be covered in any examination of rating organizations shall be developed by experience and by the require­ ments of the laws of the states in which any such rating organization is licensed or operates. Mm-WINTER MEETING 241

(2) That in the examination of a rating organization licensed or operating in more than. one state, the home state superintendent or com­ missioner invite representative participation therein by officials of such other states as he might deem appropriate and also give notice of the impending examination to the officials of the other interested states and the names of the other states to participate therein.

(3) That such examinations, in order to be acceptable by other interested states and thus avoid unnecessary duplication of work and ad­ ditional expense involved, should cover any reasonable request made by the official of such other interested state. In the event that the home state supervisory official has no statutory authority to make such examination or refuses, neglects or is unable to do so, the Chairman of the Committee on Examinations of the National Association of Insurance Commissioners at the request of one or more of the stat.es in which the rating organiza­ tion is licensed, shall designate one of such interested insurance supervisory officials in place of the home state supervisory official to proceed in the same manner as aforesaid.

( 4) That copy of th~ report on examination be furnished to each other interested state as promptly as possible after completion of the examination and copy also be submitted to the Chairman of the Examinations Com­ mittee for inclusion in his annual report to the Association of examinations made. Resp~ctfully submitted, C. A. Gough, Deputy Commi:

REPORT OF SUBCOMMITTEE OF EXAMINATIONS COMMITTEE New York City, December 10, 1946

To the Examinations Committee of the National Association of Insurance Commissioners:

The undersigned Subcommittee in giving further consideration to the plan of examination of pools, syndicates, etc., adopted at the Portland meeting last June, recommends that Recommendation No. 5 of said plan be amended to read as follows, the italicized matter being new:

(5) Authorize the filing of reports on examination with each inter­ ested insurance department and each company which is a subscriber or member of the association and also submit copy to the Chairman of the Examinations Committee for iittclusion in his annual 'report of examinations made.

With this amendment the Plan would then read as follows: 242 PltOCEEDIKGS

PLAN OF EXAMINATION OF POOLS, SYNDICATES, ETC. (As adopted by the National Association of Insurance Commissioners at Portland, Oregon, and as amended at New York City, DecembeI", 1946) 1. Negotiate with the associations themselves or their subscribing memb~ra and obtain from them an agreement to the principle of a periodical examination (preferably annually) of the association as a !>eparate entity, and the collection of examination fees and charges directly from the association examined. This negotiation to be carried on by the superin­ tendent or commissioner of the state in which the pa1·tieular or~anization is located and its books and records kept. 2. Designate as the home state of each association the one in ,Yhich its principal office is iocated. 3. Authorize the home state to set tlie time for and rmpen·ise the conduct of the examination of each association within its jurisdiction. 4. Define the manner in which other states Ehou1d be invited to par­ ticipate in the examination, but allow the home state as much discretion as possible in deciding the necessary number of participants, and the jurisdictions from which they shou1d be recruited. The selection of other states to participate in the examinations to be left to the be,at judgment of the aforesaid superintendent or commissioner. 5. Authorize the filing of repo1ts on exarnilrntion with ea<:h interested insurance department and each company which is a subscriber or rnemher of the association and also submit copy to the Chairman of the Examina­ tions Committee for inclusion in his annual report of examinations made. 6. Promulgate the doctrine that such reports should be recognized as official state documents and their contents accepted by all other ex­ aminers without further visits to the associations when the memb~r eom­ panies are examined.

j. Encourage the adoption by each interei-ted state insurance depart­ ment of a method of reviewing thei-e reports, and in,e.,tigate any 11on­ compliauce with state statutes which they may disclo~e. Respectfully submitted, C. A. Goug·h, Deputy Commissioner, N .•J. Seth B. Thompson, Commissioner, Oregon David A. Forbes, Commission~r, Michigan SUBCQMMITTEE C. Amended Qualifications for Convention Examiners and Conduct of Zone Examiners.

RECOMMENDED MINIMUM QUALIFICATIONS FOR CONVENTION EXAMINERS (Italicized matter is new; that in brackets, old matter, eliminated) 1. That only examiners [regularly] with at least two years' in.wrance MID-WINTER MEETING 243

examination experience employed by the department to reguJar1:y conduct Us examination work be selected to represent the zone in convention exami­ nations.

2. That the insurance commissioners of each state :file with the Chair­ man of the Zone a list of examiners who will represent his department in such convention examinations, stating in each case his classification, [whether of senior or junior grade, his age,] educational background, and a brief outline ·of his [last ten years busin!3ss] previous experience.

3. That no examiner be selected for these examinations, unless his name has been :filed with the Chairman of the Zone.

4. The Chairman of the Zone will in turn conYcy to each state within the Zone the roster of examiners filed with him, together with [such] the information provided in paragraph 2 above [concerning each examiner which has come to his attention]. In this manner each state in the Zeme wiJl be conversant ·with and have knowledge of each examiner who may be called upon to represent the Zone. Should [any] objection to any ex­ amiqer arise, such objection with detailed [reason therefore] explanation should be filed first with the Commissioner appointing :rnch examiner and [also] with the Chairman of the Zone. [Such objection should be a subject of a hearing in a manner prescribed by the Zone Commissioner should the necessity develop for rnch hearing.] If the object-ion requfres a hearing, ·such hearing should be held in a manner prescribed by the Commissioners of the Zone.

It seems natural that each Commissioner of the Zoue is vitally inter­ ested in the caliber and quality of Zone examiners, a1< at some time or other these examiners will represent his state in a conYention examination.

RECOMMENDED CONDUCT OF ZONE EXAMINERS ON CONVENTION EXAMIKATIOKS

1. Cooperate \\ith examiner in charge and other examiners. An examiner shall accept such duties in reganl to the examination as may be assigned to him by the examiner in charge. If specific instructions have been issued to an examiner by his commissioner or if specific information has been requested by a commissioner of the zo11e r('present!3d by the examiner, he sha11 arrange with the examiner in cliarg·e for compliance with such instructions or request.

2. Assume full responsibility for work assigned tn him an

4. Conferences or contacts with company officials, except in regard to minor matters arising in connection with his work, should be held only with full knowledge of all participating examiners. 5. Examiners are faet finding officials and as such should confine their efforts to determining the facts regarding the operations of the company and make their report accordingly. They should be courteous and tactful at all times and should confine within the conferences with participating examiners and company officials and within the written report the voicing of any criticisms. 6. Maintain the same working hours as the company or those pre· scribed by the state department in charge of the examination. 7. Remain on the examination until it is completed and a signed final draft of the report is in possession, unless for jwtiflable reasons and by complete agreement between the e:caminer in charge and the other par· ticipating ezaminers aN'angemen.ts are made otherwise. 8. Any major difficulty arising during the course of an examination which ,s n.ot reool11eil after thorough discussion with the e:caminer in Marge and the participating e::cwminers should [immediately] be conveyed to the commissioner [represented] and to the Chairman of the Zone represented by the examiner encountering the difficulty. The Chairman then submitted a report on all convention examinations called since the last report, i. e., from May 16, 1946, to and including November 15, 1946. The Chairman advised that two copies of the report were mailed to each Department and that the report will be included in the proceedings, after sueh corrections as may be brought to his attention by the various Departments.

EXAMINATIONS CALLED FROM MAY 16, 1946, TO NOVEMBER 15, 1946, INCLUSIVE Company Located Statea or Zonea Participating

ALABAMA Mutual Savings Life Ina. Co. Decatur Ga. Allstatea Life Ins. Co, Montgomery Md.

CALIFORNIA Pacific National fire Ins. Co, San Francisco Z I waived Pa. Nebw.

COLORADO National Farmers Union Life Ass'n. } Denver N.D. Ore.

CONNECTICT Phoenix Mutual Life Ins. Co, Hartford N.D. Iowa MID-WINTER MEETING 245

Company Located States or Zones Participating Connecticut fire Ina. Co. Hartford R.l. Miss. Minn. Nebr. (Omitted from previous report)

ILUNOIS Protection Mutual Fire Ins. Co. Chicago Z 1 waived Pa. Z 3 waived Great Central Mutual Ins. Co. Peoria Ohio Z 3 waived Millers National Ins. Co. Illinois Fire Ins. Co. } Chicago Z I waived Pa. Ca. Ark. North American Union Life Z 6 waived } Chicago Ohio Z 3 waived Assur. Soc. Supreme Liberty Ins. Co. Chicago Md. Ky.

INDIANA Hoosier Casualty Co. Indianapolis W.Va. Iowa

IOWA Lutheran Mutual Life Waverly Pa. Mich. Tex.

KANSAS

Farmers Alliance Ins. Co. } McPherson Mo. AJliance Mutual Cas. Co. Central States Fire Jna. Co, Wichita R.I. Mias. Minn. Nebr. (Omitted from previous report) LOUISIANA Lafayette Fire Ina. Co. New Orleans Tex.

MASSACHUSETTS Springfield Fire & Marine Ins. } Co. New England Fire Ina. Co. Springfield Ohio Mich. N.Mex. Sentinel Fire Ina, Co. New England Casualty Co.

MICHIGAN Great~Weat Life Assurance Co. Winipeg, Canada Ohio Mo. Cal. Auto Owners Ins. Co. Lansing Ohio National Casualty Co. Detroit Z I waived Pa. Ky. Tex. Ariz. Manufacturers Life Ins, Co. Toronto, Canada Z 1 waived Pa. Wash. Michigan Fire & Marine Ins. Co. Detroit Mass. Ohio N.Mex. Women's Benefit Association Port Huron Z I waived D.C. Ala Wyo. Cal. Federal Life & Casualty Co. Detroit Z I waived D.C, Ala. Z 6 waived Preferred Ina. Co. Grand Rapids Ohio 246 PROCEEDINGS

Company Located States or Zones Participating MINNESOTA Modern Life Ins. Co. St. Paul Fla. Tex. Minneapolis Fire & Marine Ins. Co. } Minneapolis Conn. Miss. Nebr. ( Omitted from previous report) NEBRASKA Supreme Forest Woodmen Circle Omaha Pa. Mo. Iowa National American Fire In,. Co. Omaha S.D. Cal. American Reserve Life Ins, Co. Omaha Iowa

NEW JERSEY Universal Ins. Co. Universal Indemnity Ins. Co. } Flemington Pa. Z 6 waived

NEW YORK Home Life Ins. Co. New York City Pa. Mo . .Jnd. Commonwealth Ins. Co. North British & Mercantile New York City Ca. N.D. Nebr. Idaho Ins. Co. American Home Fire Assur. Co. New York City Pa. Miss, Tex. Globe & Rutgers Fire Ins. Co. General Exchange Ins. Corp. New York City Motors Insurance Corp. Ind. Ark. Preferred Accident Ins. Co. New York City Protective Indemnity Co. Pa, Ind. Z 6 waived

NORTH CAROLINA Southern Fire Ins. Co. Durham Va.

OHIO Ohio Casualty Ins. Co. Ohio Ins. Co. } Hamilton Z 1 waived Ky. Mich. Okla. Ohio Farmers Ins, Co. Cal. Ohio Farmers Indemnity Co. } LeRoy Mich, Z 6 waived

PENNSLYVANIA American Aviation & General Ins. Co. } Reading Ky. Nebr. Mont. Fidelity Mutual Life Ins. Co. Philadelphia Z 1 waived W.Va. Ala. Ind. Ark. Z 6 waived Coal Operators Casualty Co. Greensburg Ky. Serb National Federation Pittsburgh Mich. Calvert Fire Ins. Co. Philadelphia Md. Fla. Ariz. Philadelphia Manufacturers Mut. Fire } Philadelphia Z 1 waived Mich. Insurance Co. of State of Pa. Philadelphia N.Y. Miss. Tex. Mrn-"\-VIXTER MEETING 247

Company Located States or Zones Participating

RHODE ISLAND Providence Washington Ins. } Co. Providence Ga, Cal. Anchor Insurance Co. Equitable Fire & Marine Ins. Co. Providence Conn. Miss. Minn. Nebr. (Omitted from previous report)

TEXAS United Fidelity Life Ins. Co. Oailas Z 6 waived Trinity Universal Ins. Co. } D II Security National Fire Ins. Co. a as Pa. Fla. American General Ins. Co, Houston Miss. Traders & General Ins. Co. DalJas La. Highway Ins. Underwriters Austin La.

VIRGINIA Continental Life Ins. Co. D.C.

WASHINGTON United Pacific Ins. Co. Tacoma 111. Z 5 waived Ore.

WEST VllWINIA Conservative Life Ins. Co. Wheeling Tex. Cal.

Calls have been received on the following companies but reports on participation are not complete so the companies will be listed in the next report:

New York Life Insurance Company, New York City, N. Y.

Atlantic Life Insurance Company, Richmond, Va.

Northwestern National Life Insurance Co., Minneapolis, Minn.

Provident Mutual Life Insurance Company, Philadelphia, Pa.

John Hancock Mutual Life Insurance Company, Boston, Mass.

Berkshire Mutual Life Insurance Company, Pittsfield, Mass.

Modern Woodmen of America, Rock Island, 111.

Fidelity Life Association, Fulton, Ill.

Mutual Trust Life Insurance Company, Chicago, Ill.

State Farm Group, Bloomington, Ill.

Ben Hur Life Association, Crawfordsville, Ind. 248 PROCEEDINGS

The Chairman then presented a. statement of Receipts and Disburse­ ments covering the period from October 18, 1946, to December 1, 1946. The statement, as follows, was approved by the Committee.

NEWELL R. JOHNSON, CHAIRMAN, COMMITTEE ON EXAMINA· TIONS, NATIONAL ASSOCIATION OF INSURANCE COMMISSIONERS Statement of Receipts and Disbursements, October 18, 1946, to December 1, 1946

RECEIPTS: From: Nellis P, Parkinson, Secretary-Treasurer, National Ass 'n. of Insurance Commissioners ...... $100.00

DISBURSEMENTS: Postage ••...... •...... $10.00 Telegrams ····-··-····························--··············--·····-·········----- 3.83 Telephone tolls ...... 4.05 Stationery ...... 1.10 18.98

Balance on hand, November 30, 1946 ...... $ 81.02 CONTB.tl: American National Bank, Saint Paul, Minnesota, on deposit, November 30, 1946, as per statement ...... $ 81.02 Respect:fully submitted, N ew~ll R. Johnson, Chairman

Commissioner Jolt:Mon (Minnesota): The Subcommittee suggested a change in Artie1e V of that portion that was adopted at Portland, this language: (Reads language) Mr. President, that is the only change of language in that Section 5. Do you wish that I read th~ balance of it!

President Dineen: No, because that was previously read.

Commissioner Johnson (Minnesota): The corrections made on the amended qualifications of Convention examin,ers and conduct of zone ex­ aminers, In addition to the report adopted at Portland, the Committee suggests a change in No. 1. I will read the whole paragraph; it is just a. short one. (Reads paragraph 1) The next correction in th,e adoption at Pol't1and is in Paragraph 2. It deletes '' the last 10 years'' and puts in there just '' previous experi­ ence." It doesn't limit the time. I am trying to avoid reading all this detail. The next correction is in Paragraph 4 and now reads as follows: (Reads paragraph 4) MID-WINTER MEETING 249

Those are the only corrections in that portion of it adopted at Portland. Paragraph 7 of that report is changed to read as follows: (Reads change) Mr. President, I move the adoption of the report.

Commissioner Larson (Florida): I second the motion.

President Dineen: A motion hafl been made and :'!econded that tho report be adopted. Is there any discussion 1

Commissioner Knowlton (New Hamp~hfre): Mr. Pre.c:ident, may I ask the Chairman of that Committee a question before I vote on the reportf

President Dineen: We are going to let you do that!

Commissioner Knowlton (New Hampshire): Commi:'!:::ioner John:'!on, does the report with reference to the qualification.c: of examiners prevent a state which has no examiners in th~ Department from participating in Convention examinations f

Commissioner Johmon (Minnesota): No.

President Dineen: Are there any other question.c: f

Commissioner Goiigh (New Jersey): Ne~ell, don't .vou want to include in your motion that those reports be included ln the official proceedings T

Commissioner Johnson (Minnesota): I assumed they would be filed. I move that they be included.

Secretary Parkinson (I1Iinoh1): If you give them to me, they will be included.

Commissi

Commissioner Johnson (Minne.c:ota): No.

President Dineen: Now, to keep our parliamentary proc-edure straight, we haYe a motion here nOw that all of the exhibits attached to this report be included in the record. I am ready to put the vote on that question. All in favor, say "Aye." All oppos~d, "No." The "Ayes" have it and it is so ordered. Now, the vote on the report itself. Any debate'f All in farnr, signify by saying ''Aye.'' All opposed, ''No.'' The motion is carried and it is so ordered. 250 PROCEEDIKGS

Is there anybody here on parliamentary law, On a motion of this kind, th~ presiding officer doesn't vote, is that correct f

8eC1'etary Park,nson (Illinois): I couldn't answer that. (Members say only in case of a tie)

President Dineen: Just so it appears on the record that I didn't vote on it. I wanted to make one other announcement to you here. In connection with the dissolution of the Fraternal Committee as now constituted, I call your attention to the fact that with the dissolution of that Committee, the Subcommittee on N. F. C. Mortality Table would likewise fa11 with it. Commissioner EI1ery Allyn, the Life Committee report.

Commissioner A11yn read the report of the Life Committee as foliows:

REPORT OF LIFE INSURANCE COMMITTEE ON MEETING OF DECEMBER 10, 1946 Hon. Rob~rt E. Dineen, President National Association of Insurance Commissioners Sir: A meeting of the Life Insurance Committee was held on December 10, 1946, at the Hotel Commodore, New York. The Committee memb~rs present were: Commissioners Kavanaugh, Martin, Perkins and Allyn. Deputy Superintendent Harris represent~d Superintendent Dineen of New York. The matters on the agenda were discussed in open session which was followed by an executive session. Th.e report of the \'ilorking Committee on Sandard Non-Forfeiture and Valuation Laws covering its meeting of October 21-22, 1946, was received and, after deliberation, was adopted by unanimous vote. In this report the Working Committee recommended adoption by the Association of a resolution under whieh, in brief, the method of determining eash surrender values and the value of paid-up non-forfeiture benefits preBcribed by the Standard Non-Forfeiture Law may be described in policy forms a.s the ''Standard Non-Forfeiture Value M~thod,'' whether the adjusted pre­ mium defined in such law or whether an amount or amounts producing higher values and benefits be used. Your Committee herewith submits this resolution to the Association for adoption. Reports of th.e Working Committee covering their meetings of May 22 and December 7, 1946, were also received and unanimously adopted. Such reports deal with interpretations as to techni<'al matters connected with the Standard Non·Forfeiture Law and related matters. The reports of the Working Committee are attached hereto and for purposes of record it is recommended that they be printed in the Pro­ c~dings. Mm ,v1.~TER MEETINC. 251

Because of the unprecedented volume of policy forms which will be filed with the various Departments during l94i in compliance with the Standard Non-Forfeiture Law, it was :resolved that the Chairman of the Lif!:l Committee be empowered to appoint a subcommittee which will be a~tborized to recommend to the various Departments a standard procedure with regard to the :filing of life insurance policy forms. Such a step is designed to facilitate the work of the Departments in this regard. Your Committ~e voted to continue the Working Committee to study and report on technical matters in connection with tho Standard Non­ Forfeiture and Valuation Laws. It was also resolved that the Chairman of the Life Committee be empowered to confer with the Secr~tnry of War for the purpose of seeking a solution to the problems arising from the sale of immranee in U. S. army camps and government re~•erYation-"' Joeated in states in which the insurers are not licens~d to operate. Respeetfully subrnitterl., Walter Dre:,.:,.el Robert E. Dineen Alfred W. Perkin~ ,vade 0. Martin .Tr. Luke Kavanaugh (orally) Vt. Ellenr Allrn, Chairman

REPORT OF WORKING COMMITTEE ON STANDARD NON­ }'ORFEITURE AND VALUATION LAW TO LIFE INSURANCE COMMITTEE COVERING MEETING OF DECEMBER 7. !~46 Hon, W. Ellery Allyn, Chairman Life Insurance Committe.e National Association of Insuran('e Commissioner,: Sir: A meeting of the Working Committee on the Standard Non Forfeiture and Valuation Laws was held at the Kew York Insurance Department on Decemb~r 7, 1946. All Committee members and seYeral other Department members and Company representati,..es were present. The points discussed at this meeting-. together with the Committee ·s recomm~ndations thereon, are as follows: 1. Question: As the law now stands, can temporary extra premiums be charged without interfering with non·forfeiture valuesT Recommendation: The Standard Non-Forfeiture Law proYides that the Commission may approve special mortality tables for calculating ad­ justed premiums and present values in the case of insurance issued on a standard basis. It can be demonstrated mathematically that, by using certain special tables for the calculation of minimum cash values and paid-up non-forfeitur~ benefits, the temporary extra premium payable in 252 PROCEEDINGS any year is absorbed in the {' c.ost of insurance'' for that year. This procedure exactly reproduces the standard minimum cash values and results in Bmaller minimum paid-up and extended insurance benefits. As a practical matt!clr therefore, the minimum cash values and paid-up non-forfeiture benefits computed according to the Extended C.S.0. Table are applicable to policies carrying temporary extra premiums.

2. The question was raised as to whether the Standard Non-Forfeiture Law is applicabl~ to single premium policies. In the opinion of this Com­ mittee, the proper answer is in the affirmative. Since premiums have been paid for the duration of the policy, the cash surrender value at any point is the net present value of the future guaranteed benefits provided for by the policy.

3. The q1:1estion has been raise3 whether cash surrender values may be adjusted to the next higher doJJar without recomputing the valu~ of corresponding paid-up insurance and/or extended insurance benefits. In this connection, attention is called to Section 4 of the Standard Non­ Forfeiture Law which stipulates that the value of any paid-up non-forfeiture benefit shaU be '' at least equal to'' the corresponding cash surrender value.

4. Pursuant to the request of the Life Insurance Committee, we have givtn further study to the report of our meeting of May 22, 1946, which was submitted at the Portland meeting, and the phraseology of the amendment to the Standard Non-Forfeiture Law recommended in Items l and 2 of that report has been slightly modified . .A copy of such report, as amended, is attached hereto and its adoption by the Life Insurance Committee is now respectfully requested. Respectfully submitted, Raymond Harris George H. McAteer G. Y. Keetch Thomas T. Moore W. Harold Bittel Russell 0. Hooker, Chairman Carl A. Tiffany

REPORT OF WORKING COMMITTEE ON STANDARD NON­ FORFEITURE AND VALUATION LAWS TO LIFE COMMITTEE Hon. W. Ellery Allyn, Chairman, Life Committee, National Association of Insurance Commissioners. Sir: A meeting of the Working Committee appointed to advise the Associa­ tion on the interpretation of the Standard Non-Forfeiture and Valuation Laws was held at the Hotel Pennsylvania, New York, on Wednesday, May 22, 1946. The Committee members pri'lsent were Harris (New York), Bittel (New Jersey), Levita (Pennsylvania) and Hooker (Connecticut). Mr. Sackman of the New York Department was also present. Representatives of the life insurance industry were Mr. Shepherd of the Life Insurance Association of America, Mr. Guertin of the American Life Convention and Mrn-WI~TER MEETING 253

Mr. Walter 0, Menge. The Committee was informed by the industry repre· sentatives that Committees of the Life Insurance Association of America. and the American Life Convention had met and agreed upon recommenda­ tions with respeet to the various questions presented in the memorandum submitted by the Life Insurance Association of America to your Committee under date of February 7, 1946. The resulting recommendations were that immediate action be taken with respect to the points raised in Sections 1 and 5 of that memorandum. The indm,try representatives stated that the other points were not considered by their Committees, since it was felt that they were not immediately urgent and that existing laws should be amended only where absolutely necessary. They pointed out, however, that Section 8 of the memorandum could be conveniently adopted at this time inasmuch as all existing laws on this subject are drafted in substantial conformity therewith. The Committee, after meeting in executive session. recommend that the Standard Non-Forf~iture Law be amended in the following particulars and that, where necessary and practicable, the corresponding laws of the various states which have adopted this legislation be amended acco1·dingly:

1. Change Section 2(f) to read as follows: "A statement that th~ cash surrender values arnl the paid-up non-forfeiture benefits available under the policy are not leRs than the minimum values and benefits required by or pursuant to the insurance law of the state in which the policy is tlelivered; an explanation of the manner in which the cash surrender values and the paid-up non-forfeiture benefits are altered by the existence of any paid-up additions credited to the policy of any indehte

2. Amend Section 5 by inserting after '' year ' ' in the third line the following words (set off by commas):

'' excluding amounts stated in the policy as extra premiums to cover impairments or special hazards. ' '

Reason: To permit companies to charge temporary or varying extra premiums under substandard policies without altering the standard cash surrender values and non-forfeiture benefits. This change eliminates all extra premiums from the computation for the sake of convenience, but the elimination of permanent extra premiums would not affect the adjusted premiums. It should be noted that separate provision is made in the last sentence of Section 5 for the substandard policies based on special tables.

3. Amend the first paragraph of Section ~ by substituting for the words "On and after January first, nineteen hundred and fourty-four," the words "In the case of policies issued on or after the operative date of this Act as defined in Section eight,".

Also, amend Section 8 to read as follows: '' After the effective date of this Act, any company may file with the commissioner a written notice of its election to comply with the provisions of this Act after a specified date before Janu­ ary first, nineteen hundred and forty-eight. After the filing of such notice, then upon such specified date ( which shall be the operative date for such company), this Act shall become operative with re­ spect to the policies thereafter issued by such company. If a company makes no such f)lection, the operative date of this Act for such company shall be January :first, nineteen hundred and forty eight.''

Reas()'TI,: To clarify and improve the prov1s10ns as to the effective date of the Act, and as to the operative dates of the Act for the respective individual companies. Adoption of these amendments would necessitate few, if any, changes in existing laws.

The Committee feels that the other points noted in the memorandum referred to above are not of immediate urgency and that recommendations involving amendments to existing Jaws should be made only where abso­ lutely nec~ssary. However, these questions, as well as others presented from time to time, will receive continuous study. Respectfully submitted, Raymond Harris Carl A. Tiffany W. Harold Bittel George H. McAteer Maurice Levita Russell 0. Hooker, Chairman H. Raymond Strong Note: Henry G. Sellman, the only other Committee member, had no opportunity to sign but concurred in the Report. MID-WISTER MEETING 255

REPORT OF WORKING COMMITTEE ON STANDARD NON­ FORFEITURE AND VALUATION LAWS TO LIFE INSURANCE COMMITTEE COVERING MEETING OF OCTOBER 21-22, 1946 Hon. W. Ellery Allyn, Chairman Life Insurance Committee National Association of Insurance Commissioners Sir: A meeting of the Working Committee on the Standard Non-Forfeiture and Valuation Laws was held at the New York Insuranee Department on October 21-22, 1946, to consider various technical questions which had been brought to its attention in connection with th.e interpretation of such laws. The Committee members present were Bittel (New .Jersey), Harris (New York), Keetch (Texas), McAteer (\Vashington), Tiffany (I1Iinois), and Hooker (Connecticut). The meeting ,-..-as also attended by Bruce E. Shepherd, Manager of the Life Insurance Association of American and Alfred N. Guertin, Actuary of the American Life Convention. Several life insurance company representatives were a1so present. Following the gen­ eral meeting an executive session was held. The points discussed at this meeting, tog~ther with the Committee's recommendations or suggestions, arc set forth below.

1. It will be recalled that the Life Insurance Association of America and the American Life Convention jointly pr,esented a resolution to your Committee at the Portland meeting on June 12, 1946, reading as follows: "W'hereas, the National Association of Insurance Commis· sioners, at its December, 1942, meeting, recommended a standard non-forfeiture law for uniform enactment by the states; and '' Whereas, the use of simple. non-technical language in policy forms describing the m~thod of calculating non-forfeiture benefits is desirable;

• 1 Be It Resolved, That the method of determining non-for­ feiture values described in the standard non-forfeiture laws may be referred to as 'Commissioners' Non-Forfeiture Vnlue Method,' ~hether the adjusted premium as defined in such laws be used or whether there be used in lieu thereof an amount, or amount:<, which may be describ~d as non-forfeiture factors which produce cash !'I-Ur· render values in excess of minimum -..alues.'' The above resolution was not recommended by the Life Insurance Committee to the Association for adoption, as requested, due possibly to the fact that neither the Working Committee nor your (\,mmittE•e had had any reasonable opportunity to study the same and that the Working Committee was unable to bring· out any unanimous or near-unanimous r~commendation at that time. During the interim between the P01·tland meeting and the current meeting of the Working Committee, much valuable work was done by the 256 PROCEEDINGS

New York D~partment and company representatives toward ·improving and strengthening this resolution and reconciling the difficulties which had prevented its previous favorable consideration. After a thorough discussion and some further revision at the October 21-22 meeting, your Committee unanimously recommends this resolution for adoption. ( Copy of revised draft is appended hereto.) Some explanation appears appropriate as to why the Association is requested to adopt a resolution of this nature. Section 2 ( f) of the Standard Non Forfeiture Law requires policies to contain a statement of the method used in calculating cash surrender values and paid-up and extended in­ surance benefits for all policy durations, even though the policy is required to contain a table showing these values in figures. Such a statement, in order to be of e.ny value, must be precise and complete. This requirement inevitably involves a considerable volume of highly technical and compli· cated matter in life policy forms. This difficulty could be largely avoided by the adoption of a standard and authoritative definition of the method to be employed, to which definition the companies could refer in their policy contracts. The adoption of the resolution would accomplish nothing more than to establish a name for the formula stipulated in the model law already adopted and sponsored by the Association. Companies could then substitute for the long, cumbersome and technical phraseology which would otherwise be required, a simple statement suCh as the following: '' The cash surrender values under this policy are calculated in accordance with the Standard Non·Forfeiture Value Method with a. non-forfeiture fa

resolution have now been removed and it recommends the adoption thereof by the Association at the earliest possible date. (The following points deal with questions raised by various Depart. ments upon which the opinion of the Committee has been requested as a guide to the uniform consideration of policy forms.) 2. The question was raised whether, if values are produced by the formula employed at the end of the -first poliey year, values should be required for fractional premium payments in the first policy year. It is the opinion of the Committee that the insured should be given the benefit of values at any duration where they are produced by the formula, whether such duration be fractional or integral. This stat~ment, of course, applied to paid-up non-forfeitlll'e benefits only, inasmuch as the law stipulates that cash surrender values need not be paid until premiums have been paid for at least three full years, 3. The question was raised whether a policy providing term insurance for several years, automatically followed by permanent insurance, should be considered as two separate policies for the purpose of the Act. ln the Committee's opinion, the respective portions may be treated separately if the portion providing permanent insurance takes the Company's regular rate at the then attained age. The rateJ. age provision in the law appears to cover this point. However, the Committee draws a distinction between policies providing purely term insurance followe

A further meeting of the Working Committee is scheduled to be held at the New York Insurance Department on December 7, 1946. Insurance Departments are invited to submit any questions dealing with the Standard Non-Forfeiture and Valuation Laws upon which the opinion of this Com­ mittee is desired. Respectfully submitted, Raymond Harris George H. McAteer W. Harold Bittel Thomas T. Moore Guy Y. Keetch Rus: ell 0. Hooker, Chairman Carl A. Tiffany

RESOLUTION PRESENTED TO LIFE COMMITTEE OF NATIONAL ASSOCIATION OF INSURANCE COMMISSIONERS BY LIFE INSURANCE ASSOCIATION OF AMERICA AND AMERICAN LIFE CONVENTION AT PORTLAND, OREGON, ON JUNE 12, 1946 (Draft as amended at meeting October 21-22, 1946) '' WHEREAS, the National Association of Insurance Commissioners at its December, 1942, meeting recommended a Standard Non-Forfeiture Law for uniform enactment by the states, and "WHEREAS, that law which has been enacted in a number of states requires that there be a statement in the policy of the method of calculating cash surrender values and paid up non-forfeitur~ benefits, and '' ,vHEREAS, that law provides a method of ca1culating such values and benefits, the description of which at length requires the me of technical actuarial terms, and "WHEREAS, it is desirable that this method be used and that the statement of it be complete but in simple language, and WHEREAS, in the event that a policy does not contain a detailed statement of the method of calculating such values and benefits, the policy­ holder should be able to ascertain from the Insurance Commissioner the CR$\h surrender value or paid-up non-forfeiture benefit to which he is ~ntitled upon lapse or surrender of his policy and the method of determining such value or benefit, and "WHEREAS, the Life Committee of this Association now reports, recommending that this be facilitated through an interpretation by this Association of the aforesaid provision in the Standard Non-Forfeiture Law which would give recognition to a designation of the method by some descriptive title that will have exact meaning whenever used, be it therefore "RESOLVED that the Association accept and approve of this report of the Life Committee; and be it further

"RESOLVED that this Association promu1gate the foUowing aR ~n interpretation of the provision of the Standard Non-Forfeiture Law which requires the policy to contain a statement of the method to be used in MID-WINTER MEETUW 259 ca.leulating cash surrender values and paid-up non-forfeiture benefits, namely (1) that the method of determining such values and the present value of such benefits by deducting the present value of adjusted premiums from the present value of future benefits may be described as th~ 'Standard Non~Forfeiture Value Method,' whether the adjusted premium defined in such law be used or whether there be used in lieu thereof another amount or amounts which produce cash surrender values at every duration not less than those produced by the use of such adjusted premium, provided. that such adjusted premium or other amount or amounts are stated or defined in th.e policy, and (2) that such adjusted premium or other amount or amounts so stated or defined in the policy may be described as 'non· forfeiture factors'; and be it further "RESOLVED that it is the sense of this Association that, in the event a policy does not contain a detail.ed statement of the method of calculating cash surrender values and paid-up non-forfeiture benefits, the life insurance companies file with the Insurance Commissioners of the s.everal states a detailed statement of the method of calculating such values and benefits, and that reference to such filing be contained in the policy, provided such procedure is not in conflict with state law; and be it further '' RESOLVED that th.e above resolutions be recommeniled to the states for their guidance.'' November 18, 1946 Hon. Robert P. Patterson Secretary of "\Var Washington, D. C. As Chairman of the Life Insurance Committee of the National As· sociation of Insurance Commissioners, I Jiave received the fo11owing r~solu~ tion which was adopted by Zone 3 o-f said Association in ~ession at New Orleans on October 21, 1946. Zone 3 consists of the state~ of Kentucky, Tennessee, Louisiana, Mississippi, Alabama, Georgia, and Florida.

NON-ADMITTED COMPANIES WRITING LIFE I~SURANCE IN ARMY CA1fPS By Hon. Harry B. Wilson, Director of Insilrance of Kentucky Mr. Wilson stated that originally, the War Department order stated that agents could only solicit in army camps provided th<•y had a definite appointment with a specific individual. This order was lat~r amended to provide that the agent must represent an authorized company. The order has now been rescinded and unauthorized companies are now actively soliciting busilless on army posts. Th~ order was sent to the Commanding Officer of each Post and not to the State Insurance Departments. MOTION MADE AND CARRIED that the Insuranc~ Department of Kentucky will take the matter up with Commissioner Allyn of Connecticut, Chairman of the Life Committee, N.A.I.C., with the request that he com­ municate with the Secretary of War at the request of Zone 3. As this is a matter which merits the serious consideration of the entire National Association of Insurance Commissioners, the subject is 260 PROCEEDINGS being placed upon the agenda of the Life Insurance Committee which will hold an open meeting on Tuesday, December 10, 1946, at 4 P.M. in the West Ballroom of the Hotel Commodore, New York. Respectfully yours, W. Ellery Allyn, Commissioner The following comments by Commissioner Allyn: •.• And may I add here that your Committee deleted i:,everal ~entences at the bottom of page 2, beginning with "Unfortunately, the Jaw itself," and on page 3, through the words, '' twenty.four states would be involved.'' Deleted. The second sentence on page 3, "In view of the high standing of the Association,'' that entire sentence is also deleted. Those are the 011Jy changes in that report. Commission!;'r Luke Kavanaugh was not available for signature but gave his verbal consent. Mr. President, I move the adoption of the resolution.

Commissioner Larson (Florida): I second the motion.

President Dineen: A motion has been made and seconded that the report be adopted. Is there any question f

Commissione_r Harrington (Massachusetts): Mr. Chairman, I am not going to talk against the work of the Committee brcause, after all, I don't know enough about it. This is a technical subject. But I jmt suggest to you that I received the preliminary report of the Working Committee on November 12 in my office and since we have the Guertin Law enacted in our state and have problems under it, that this report deals with, ,vhich have been handled by us at variance so far with the report, I just don't want to get committed to something in this Association and then find that baek home we can't go through with it. This report, or this supplemental report of the Working Committee, I haven't seen at all, and I doubt that the membership generally has seen it.

Now, we have had some experience in dealing with technical nwtter~ by just a voice vote, without reading them, and I don't think that I am in a position to do that in connection with a business as big as the life insurance business.

I note also that this deals with matters concerning non-forfeiture benefits, and we have had some criticism directed against us hecause of certain attitudes we had with respect to non.forfeiture benefits that differed from the law that formerly existed in our state, and I just don't like to be placed in the position of voting away administrative procedures which may ben!:'fit the beneficiaries of li-fe insurance without knowing what they ~rP and, for that reason, I just want to say that I am going to vote "No" Mm-WINTER MEETING 261

on the resolution and I wanted to have the reeord clear as to my reasons for it.

President Dineen: The i:ecord will so note. Are you ready for th~ questionT All in favor, signify their approval by saying "Aye." Opposed, "No." The "Ayes" have it and it is so ordered,

Commissioner Harrington (Massachusetts): Will the reporter note my vote as ''No."

... Commissioner Larson read the final report of the Exer.utfre Com­ mittee as follows:

REPORT OF EXECUTIVE COMMITTEE NEW YORK, N, Y., DECEMBER 11, 1946 A meeting of the Executive Committee of the National Association of Insurance Commissioners was held at the Commodore Hotel, N~w York City, on '\Vednesday morning, December 11, 1946, The following members of the Committee were present:

J, Edwin Larson, Chairman Luk~ J, Kavanaugh Robert E. Dineen ,v. Ellery Allyn Oscar W, Carlson N. P. Parkinson Wade 0. Martin, Jr. Walter Dressel Maynard Garrison, represented by Deputy J. R. Maloney

James M. McCormack, represented by Deputy E. H. Mashburn The qu~stion of the convention city for the June, 1947, session of the Association was discu:=:sed. An invitation was extended by the Hon. Georges LaFrance, Superintendent of Insurance of the Province of Quebec, for the meeting to be held in Quebec either the first, second or third week thereof. Superintendent LaFrance, however, reported that he could guar­ antee accommodations for only 500 people. Other invitations from different cities were discussed and it was finally decided that a committee consisting of President Dineen, Commissioner Allyn and Director Parkinson be appointed and directed to make arrange· men ts for the Jun~ meeting. The question of the December, 1947, meeting was also discussed and an invitation from the Commodore Hotel, through its convention manager, Mr. William Buckley, was extended. An invitation was also extended by Commissioner Larson for the convention to be held in St. Petersburg or Miami Beach, Florida, and Commissioner Larson Was authorized by the Committee to explore this question and r.eport to it. 262 PROCEEDINGS

Director Donald R. Hodder of Nebraska extended an invitati-On to the Association that the June, 1948, meeting be held in Omaha, but immediate action was not taken on this invitation.

Thiel report of Subcommittee No. 2 of the Committee on Blanks was discussed and adopted with minor corrections. Respectfully submitted, J, Edwin Larson, Chairman

Commissioner Larson (Florida): I move the adoption of the report.

President Dineen: Do I hear a secondt

Commissioner Forbes (Michigan) : I second the motion.

President Dineen: Is there any discussion 7 Are you ready for the questiont All in favor, signify by saying "Aye." All opposed, "No." The "Ayes,, have it and it is so ordered. Is Commissioner Hobbs of Kansas hereT (Not present) We11, now, let's just make sure. I have crossed off every committee report that I can find here, but I wouldn't want to overlook anybody. Is there any other Chairman who has any report to makef That being true, that brings us back to the subject which w~ were debating this morning and the Chair will recognize Commissioner Forbes of Michigan, getting back to the question which was propounded this morning by Commissioner Bowles of 'Virginia. I think the Commissioner said that he would like to have some argument as to why the thing was needed. I think that was the substance of what he said, his idea being that we have gotten along without it for many years and didn't need it. I would like to have you answer the point he raised and make whatever contributions you care to.

Commissioner Forbes (Michigan): Well, Mr. President, first may I inquire if there are any commissioners in the room who were not here this morning when this report was read, whether or not they know what we are talking about and whether they know the contents of the report f

President Dineen: Well, Commissioner Sims wasn't here; Commissioner Hobbs wasn't here; Commissioner Knowlton, were you missing this morning tooT

Commisrioner Knowlton (New Hampshire): No.

Commissioner Sims (West Virginia): May I inquire if any affirmative action was taken T

President Dineen: No, no action was taken, Commissioner Sims. The MID-WINTER MEETING 263 question is open for discussion and Commissioner Forbes, in order to gear his discussion, he wanted to find out if somebody missed part of it this morning and he asked the general question if there were commissioners who were not here.

Cmnmissioner Bowles (Virginia): Mr. Chairman, is it in order for me to request that a poll of the membership be taken at this time to see ho\-.: many votes we have present and how many proxies we have1 There are 48 states. There are several of them absent and several proxies have been left here. We will assume we have a quorum, but i8 it not in order to find at this juncture how many members of the Association are present and how many proxies are presentf

Presidewt Dineen: ,veil, my own notion is that that is not in order. I presume someone can demand we determine whether there is a quorum present if they want to. If we want that done, we can.

Commissioner .J.llyn (Connecticut): Mr. President, I would like to propose that this matter be taken up in executive session by the Com­ missioners and I would so moTe.

President Dineen: Do I hear a second to that motion1

Commissioner Forbes (Michigan): I second it.

Commissioner Bowles (Virginia): Mr. President, you have taken this up in executive session. I thought it was understood at the conclusion of the last executfre sess-ion that you wanted to bring it upon the floor of the hom:e so that every Commissioner present would have an opportunity to be heard and to vote on it.

Commissioner .J.llyn (Connecticut): My motion, Commissioner Bowles, was for an executive session of the Commissioners, not a session of the Ex~cutive Committee.

President Dineen; I am just here as your faithful fervant and if you people will indicate to me by your \"Ote what you want done, I will see that it is done.

Commissioner Forbes (Michigan): Afr. President, I feel that there is disagreement among the Commissioners and it i,; a matter that involves the Commissioners only and not particularly the industry. For that reason, I second the motion.

President Dineen: Well, unless there i.; objection, are you ready for the question. on whether we shall go into executive session to discuss this matter! All in favor, signify by saying "Aye." Opposed, "No." The motion is carried. 264 PROCEEDINGS

Gentlemen, I should have made it plain before that at this meeting, every commissioner and every departmental employee is welcome. The brothers of the business are ~xcluded. This is strictly a family party and, that being so, I will now recognize Commissioner Forbes.

Commissioner Forbes (Michigan): In answering Commissioner Bowles' question, I would like to take the time for just a minute to review that part of the report leading up to the functions of the office, the functions it is expected to perform. In other words, so we can all understand what your Committee was thinking of in picturing such an office.

In the first place, we state that the Secretary's office of this Association is to be the Central Office. In other words, we are precluding any idea that was referred to one time as a super-duper commissioner with a separate office. In other words, this report is really an expanded office of the Sec· retary's office, such an office to be permanently located in a city to be decided upon by a vote of this Association.

In other words1 there is no committee going to select the location, not even the Executive Committee. If this report is adopted, this entire Associa­ tion will determine where that permanent office will be located.

Now, an assistant secretary would be employed. The official title to be given him is still Jeft open. To add a little dignity to the position, if you want~d to call him an executive secretary, this report permits it.

It also provides for the employment of a stenographer. Both these employees are to work under the direction of the Secretary, and they are only to be employed with the consent of the Executive Committee. The Executive Committee would have to approve the individuals chosen. In the future, if any additional employees should be hired, it would only be with the advice and consent of this Association, not the Executive Committee.

There has been some talk that if such an office is set up, possibly the office now in New York on Valuation of Securities would be consolidated with that offiee. This report recommends for the time being that that office remain separate, but if in the future this entire Association determines it would be feasible to consolidate the two offices, it could be done, but again only upon the vote of the Association.

In other words, we have tried, gentlemen, to keep this as democratic, certainly, e.s we could. Now, the functions that this Secretary's office would perform in the future, we have only named a few functions, because I think it would be impossible to state today all the functions that it would perform. A lot of the functions that wi11 be necessary, as I see them, would depend a great deal as to the type of legislation that is adopted in the various states during the coming sessions of the legislatures. But certainly at the outset, the office would perform, of course, the usual duties of the Secretary~ Treasurer, as it has in the p~t and as prescribed in the Constitution. It MID-WINTER MEETING 265

would be a clearing house for rulings of each department, and I think that is very important. To illustrate what I mean, at least, I had a hearing some few months ago in my offiee on a question involving the approval of a certain type of insurance coverage. I was told at that hearing that every state but two had approved. I didn't know whether they had or whether they had or whether th~y hadn't. At one time I served on a federal court jury and I recall that our :first vote in the jury room was 6 to 6. We didn't seem to be getting anywhere. I remember making the statement then that if the vote ever got down to 11 to 1 and I was the one, then I must be wrong and the others right and I would go along, but as long as somebody else felt as I did, at least I had a little moral backing and my thinking wasn't alone. So at that hearing, I would like to have known in advance of the hearing how many of the states had discussed the matttlr, how many had decided one way or the other. I since have found out that that form of coverage has only been approved in 16 states. Nmv, if we had a full-time assistant secretary in that office, I certainly could have contacted him and he should have been able to inform me on that question. As most of you know, I have been Chairman of this Interstate Rating Committee for the last few years. We haven't functioned for almost a ytlar now. Again, we are waiting to see what type of legislation we are going to have in the various states on rating, but I am assuming rating bills of some kind or other are going to pass in all the states, and if I can digress for a moment, you heard what Senator Ferguson said this noon; I think that should put a damper on any thinking that apparently some of the industry are still doing about going back to Washington for further legislation. So we have got to comply with Public Law 15 and we have got to have rating bills if the companies are going to act in concert. All right. If those bills pass and they file surety bond rates, taking George Bowles' state, supposing they should file surety bond ratt3s in his state this week and two weeks later they come to my state and file the same rates, because I am going to assume that those mtes will be the same in every state. Well, in George Bowles' state, if they disapprove them, when it comes to me, I am tempted to approve tht3m, I would like to know the reasons why the State of Virginia or any other state had disapproved them, because if some of us approve those rates and some disapprove, somebody is going to look very, very strange, and I think this office can perform that function, keep every department posted as to the developments in other departments. I think, too, that office can be a contact office with organizations like the Interstate Underwriters' Board, the National Council, the Committee on Interpretation and Complaint. I talked to the head of one of those groups this morning. He says he knows it would be of great help to them if they had some plaee to go, an office, to sit down and explain some problems; and, in turn, that office could bulletin every other department and we wouldn't have to wait the six months' period between our con· ventions. That office also could act as a medium for preparing and assisting 266 PROCEEDINGS in the reports of the committees and the preparation of an agenda for meetings of the Association. When we go to any city for a convention, I don 1t know why we should have to emp1oy outside stenographers. At one time, I was very active in our Michigan Association of Insurance Agents. Why, that Association even has an Executive Secretary employed on a full­ time basis and paid $6,000 a year, and his office rj:!ally does a good job. This Association is growing; its responsibilities are increasing, and, to me, we ought to have an office open the year 'rom1d, I can't conceive of any Commissioner of any state in the future performing the functions of the office of Secretary and Treasurer and still having time enough left to do his own job in his own state as Commissioner. ,ve were very for­ tunate, I think, the Association was, for a great many years to have one man, our old friend, Jess Read, as Secretary, but you might elect a Secretary tomorrow and the next year he might be out of office or he might have died and you have got to move all the records to another eity. Commissioner Parkinson just went through that and as the years go on and our permanent records increase, it is going to become more and more a difficult task to move them from one city to another as a new Secretary might b~ elected. I think that office should handle all conve11tiou examinations under the direction of the Secretary. Jess Read did it for years. There is no reason why the Secretary in the future couldn't do it. His assistant secretary, who is paid to do the clerical work, would actually handle the details of the correspondence involving Convention examinations. In our report, we state that we believe time wiJ prove the necer,sity for additional functions to be performed by this office. Of cour!'e, we mean by that this coming legislation, particularly on matters pertaining to interstate I'ating and general actuarial problems. lVe nre cogniza11t o.f the fact that every function that can and !"hould be performed by this office cannot be accomplished at its inception. \Ve believe, however, that starting in a modest way, the office and its services will grow and improve and will be of great value and help to state insurance supervisory officials. Let me emphasize again that it can't expand from the standpoint of personnel without the approval of this entire Association. AR I see it, gentl~men, i£ we don't work more closely together in the future than we have in the past, some of us are going to be very, very embarrassed in our decisions, and there is going to eventually be a demand for federal regu· lation. I hope I hav~ answered your questions.

Commissioner Gough (New Jersey): Mr. President, I think it is only fair that I should explain my position with respect to this matter, As is well known, I have been a very consistent objector through these several years to the establishment of a central office, and I did it principally upon one point, and that was delegation of authority, which was heretofore proposed or included in all of these propo~als. That, I have held that we should never do and never could properly do, delegate the authority given to each of us by the legislatures of our respective states. MID-WINTER MEETING 26i

Now, in this present proposal, that is not contained. As a matter of fact, this Committee, in the meeting on Sunday afternoon, covered that particular matter by providing that a committee of the Commissioners composed of the President, who is ex-officio a member of that Committee, and two others should have complete supervision and control of the opera· tions of this central office. So, with that provision matle aml the future safeguarded, I can see no objection to this present proposal. As a matter 0£ fact, it appears to me to he a mere scratch in the outer cirle of what is really b.eforn us. There is nothing more contained in this present propo:;al, if you disect it and examine it, than putting back what Bob Dineen took away a couple of months ago by separating the offices of Secretary· Treasurer and Chairman of the Examinations Committee. This proposes to put that back where it has been for all these years, that the Secretary· Treasurer shall be ex-officio Chairman of the Examinations Committee. He has been the custodian of all the recor

President Dineen: Chris, ·will you yield to a que::ition from mef I wish you would do this. Just let me ask a preliminary que:;ti9n of all the people here. How many men in this room have ever been in the office of our Valuations Committee here in New Yorkf Raise ~'our hands. Well, now, what I wish you would do is this. W ~ spend about $:!0,000 a year operating that office. We have, I think, four or five employee:;, Mr. Griffin, the Sec· retary, and three or four girls, and we rent an office down here on Broadway and, as you will notice, under this plan, apparently it contemplates i:;ooner or later putting the two of them together at some central place. I suppm,e they have in mind Chicago. But what I wish you would do is to explain to these people the functioning of the Committee OH Valuations and the functioning of the Subcommittee, so that they Nill find out hov;; an office of this kind can operate without the Commissionerf'. lo,:ing control of it and without abdicating their authority. I ,rish you would do that.

Commissioner Go-ugh (New Jere:ey): '!'hat organizntion was set up by this organization upon the recommendation of the Exernth·o Committee. It has been functioning now, as you know, for se,-~ral ~-ears and, a8 a member of the Subcommittee, I think entire:y satisfaetorilr, and it certainly has been of decided advantage and help to the ..\ssoci:1tion as a whole. Mr. Griffin, who is the Executive Secretary, not of the Association - and I would suggest you cover that in this propo.;al - not of the Association, but he is merelv Executive Secretarv of the Valuation:- Committee, aml e"ery act of Griffin's is done under the full jurisdiction and control of that Subcommittee, which is meeting tomorrow after this meeting here. and we will go into all the detailed matters, but that i~ your nwiu point. 268 PROCEEDINGS

Commissioner Fiacher (Iowa): Chris, you understand this Valuations Committee is only a very small part and a minor part of this organization; it is just one of the details of the organization. If you have got to have an office like that just to tend to one little detail, if you are going to put this whole Convention under the supervision of a central office and want to get it done for $20,000, if it costs you $20,000 to handle one detail, it will probably cost you $200,000 if you are going to handle everything like you are handling that. I am not particularly proud of that, Maybe you are.

Commissioner Bowles (Virginia): Chris, that organization to which you refer has been rend~ring splendid and satisfactory service, hasn't itf

Commissioner Gough (New Jersey): That is correct.

Commission.er Bowles (Virginia): Well, is this going to make it render any less service, if it is doing a satisfactory service! There isn't any change. Why do you want to change.

Commissioner Gough (New Jersey): Well, that, Mr. President, it seems to me is where the misunderstanding is.

Commissioner Bowles (Virginia): We are trying to get it understood.

Commissioner Gough (New Jersey): To me, there is no change. The only change is putting back, as I said, what you undid in October at Syracuse. Now, you are proposing to restore that to its former position, but it will have to be done by an amendment to the Constitution, so that even if this report is adopted this afternoon, it doesn't become effective until the Constitution has been amended.

Commissioner Forbes (Michigan): ,vell, although the report authorizes the Executive Committee and the President to go ahead with the organiza· tion as outlined, the consolidation of the work of the Chairman of the Examinations Committee and the Secretary's offic,e, as the report stated, would ha"'e to be done by a Constitutional amendment, which would have to be brought in later.

Commissioner Gough (New Jersey): Outside of that, they haven't done a thing but provide that the office is going to be in one place. The Secretary is going to follow the office rather than the office following the Secretary. Don't misunderstand me; I had nothing to do with the drafting of this report or anything about it other than I sat in as a. spectator Sunday afternoon, and was rather impressed with it, and particularly when they made provision for the supervision under the direction of the Committee.

Commissioner White (Mississippi): Mr. Chairman, I am not opposed to the report. I think the Committee has done a swell job in bringing us a report on this. We have been hearing about it ever sine~ I have been a MID-WINTER MEETING 269 member of the Association. I don't like to vote for anything, even though I have been guilty here of voting for reports that I didn't know all a.bout, mayb~, but this is quite important. I am just wondering, under the cir• cumstances, if it wou1dn 't be well to postpone it until the June meeting, and I say that :for more than one reason. We have a grnat many of the legislatures convening· in the next month and I don 1t know whether it would be so well understood or not if this were pasi:ed at the present time. There might be a danger then~; there might not be; but I, for one, would like to have a little more time to study it. That is all the objection I have to it. I am perfectly willing to provide the Secretary with more h~lp and no doubt it is needed. That is all I have to say about it.

Commissioner Garrison (California): Mr. Chairman, as a member of this Committee, and in view of my previously expressed interest in this project and the work that the Committee has done on it, I would like to take just two or three minutes to explain to my friend, Commissioner Bowles, what motivated me and what was in my mind as I formulated my conclusion on this subject. I came into this Convention ,or into the Association, three and one half years ago without any information whatever upon the subject of a central office, and my conclusions have resulted from the information that I have Picked up in hearing you speak, sir, and these other men who have been talking about this problem, I understand for ten or fifteen years. And I am sure that all of you will agree that the great, overwhelming sentiment has consistently been in favor of the e<'tablishment of a central office.

Commissioner Bowles (Virginia): \Vhat do you base that statement onf

Commissioner Garrison (California): I base it on my conversation with other memb~rs of the Association.

Commissioner Bowles (Virginia) : You don't base it on the recorded votes that have been brought up here every year since I have been a m~mber.

Commissioner Garrison (California): To answer your question, now that you have brought it up, I ·would like to refer you to the proceedings o-f this Association, the meeting in 1945, at which time a report of the Central Office Committee was made, of which committee I was not a member, and this is the report. "The Committee was appointed in June, 1945, to study the feasibility and desirability and the necessity of a central office of the National Association of Insurance Commission,ers. After extensive con­ sideration, it appears that the need for coordination among departments is constantly increasing and that some means to achieve greater cooperation is desirable and probably will be necessary to meet existing conditions. The Committee has no definite recommendations at this time as to the manner in which such coordination and cooperation are to be achieved. The Committee will continue its studies and will make a further report at the June, 1946, meeting of the Association. (Signed) Seth B. Thompson, Chairman.'' And that report was voted unanimously by this Association. 2i0 PROCEEDINGS

Now, I take that as being a commitment, an expression of opinion by this Association upon the principle of having a central office. It seemed to me at that time that the question of whether we should have a central office or not was one upon which this Association had acted. Now, of eour~ they did not pass upon the details of that office and it was my under­ standing when I went on this Committee that our function was not to discuss the question of whether we should have an office or not, but it was to present a concrete plan for the conduet of that offic~.

That is what we have done. We had our meeting Sunday. Commissioner Gibbs was there; Commissioner Gough was there i others were there and expressed their views regarding the details1 regarding the formulation and the control and the limitation upon the central office.

Now, if you have any objection to the specific recommendations here, then I think we ought to hear those objections and amend the report or integrate those views that you have into the report so that the conduct of the central office is satisfactory to all of you, but so far no one has had any specific objections to the method that has been recommended for the conduct of this office. Those suggestions that were presented to us Sunday afternoon were put into this report to meet the very things that have previously been intimated as objectionable. We had the opinion that we had given this thing lots of publicity; everyone knew that those on the Committee were going to come in with a r~port, with a specific, concrete proposal; our meeting was publicized; those who were interested were there. Commissioner Bowles was there and we thought we had given a full opportunity to everyone to make specific recommendations so that there wouldn't be any objection to the plan.

Now, if we were mistaken in that, if the qu,estion of whether we want a central office or not was not decided in 1945, then, of course, this Com­ mittee was entirely out of order in coming in with these specific recom­ mendations, but the fact is that we voted on this a. year ago and voted in favor of it and, as far as I am eoncerned, if the proposal that we have made isn't any good, I am willing to hear your suggestions and to change it so that it will be good.

Now, then, there is one thing I would like to make very clear so far as I am concerned, and I think I ~xpress the sentiment of that Committee. There isn't any thought in the conduct of this Committee or its report that the past should be criticized or that there was anything wrong with the conduct of this Association or in the supervisfon by the states. It is not any thought of criticism. This simply, a~ I understa11d it, is an effort so that, as good as the supervision has been in the past, we will implement ourselves so that we can do it, we hope, a little bit better in the future. I don't believe anyone here wanU3 to take the position that we have progressed as far as possible in respect to state ia:upervision, I think we are all of the opinion that it is good, of course, but that it certainly can be better1 and we have for ten years said that this is one of the ways in which we can make it better, and it seems to me that we ought to start doing that if that is our view. MID "\,YJNTER MEETING 271

Now, we were at considerable pains, Commissioner Bowles, last Sunday and in all our deliberations to safeguard the establishment and the machinery of this office adequately so that there would be no usurpation of the prerogatives of any commissioner. We in the first place provided that several of the aspects of this office 1'thould be ~ubject to the vote, not of the Executive Committee or the directorate of the President, but of the whole Association, so that you will have an opportunity to vote upon some of the vital aspects of this authority in this office. Secondly, we provid~d for a committee, so that the conduct of that office would always be under close control by that committee, and that committee always functioning under the direction of the management of your Association and its Executive Committee. We further specified in there the things that it could do and we said that those other things that it might in the future do would be subject to the authority of that committee. So that we, I belie\·e, have gone to con· siderable lengths to try to provide against the thing that I understood was in some of your minds, and that was creating some kind of a bureau that might detract from the authority and the respomibility that you have in your offic,e. Now, we have talked so mueh about the necessity for this office that I am not going to elaborate up on the I. U. B. or the committee and its relationships with the National Council or with Hobbs' position or with any of these other multitudinous activities that we carry on. which heretofore I believe have been somewhat in suspended status. That. to me, is so fundamental and it is so wel1 understood by everyone that I can't conceive of any necessity :for our arguing that point now. Just to give you, however, one example that I think is conclusive on this subject, and that is the fact that in all of the years we have never had a compilation or even a gathering together of the uniform laws that this Association has passed. You wi11 recall that the Laws and Legislation Committee last year were instructed to bring together into one vo]ume all of the uniform laws that have been endorsed by this Association. Now, just think of it. Here we are, agreeing upon uniform legislation and you can't find the legislation that has been passed upon in the past unless you go through every on~ of the reports and make a personal, extensive survey of that activity. That, to me, is a nearly fatal indictment of that phase of the eonduet of this Association, and it seems to me that certainly if we txpect the states to join in in the program of having uniform legislation, the breaking down of these state barriers that have heretofore prevented us from having homog_eneity in the aetivity of this Association, of ail things, it should be possible to put your :finger on the uniform laws that we are expected to have passed in our state legislatures. We started Jast June to bring that work to completion and it is a monumental task, I ee.n assure you, and it will be another Hix months before we are abJe to even scratch the surface insofar as getting it printed and indexed, etc. That is the work that should be carried on by a central office of this 272 PROCEEDINGS

Assoeiation; it shouldn't be left to any particular state or department or commissioner; it should be a continuing, progressive, permanent part of our work. Now, then, there is a peculiar aspect to many of these discussions that we get into. Oddly enough, those on this Committee, who worked hard on this report, are not the ones who will get the most benefit out of the central office. We have adequate staffs out there; we have a $350,000 appropriation for our activities and I don't believe that it ean be said that we are going to get a great deal of b1mefit, direct benefit, at least, out of the office. We are going to get our contribution doubled, which we are perfectly delighted to have done, but it seems to me that we shouldn't determine these things upon the basis of what it might mean to our particular state or how much good we are going to get out of it, or whether it is worth it from our standpoint. The question is, will it con­ tribute to the over-all picture of the success of this Association T And I am convinced, after 31.h years of discussion of this subject, that it not only will contribute but that it is practically indispensable. Not only is it in­ dispensable from the standpoint of what we do now and have been doing in the past, but because we have now been charged with a greater responsi~ bility with respect to this McCarran Act find the rating legislation that we are going to pass in these states in the next year or two, and it just seems to me that it goes without saying that if we are going to be able to carry this t~rrific responsibility in maintaining our relationships with the rating bureaus throughout the country, that we are going to be able to pass upon the rate structure and the mechanics in which those rates are arrived at, we have got to have some implementation tq, the present struc· ture so that we will have a place to go, a place to make our suggestions, we will have a continuity of the conduct of the Association, we will be always informed as to what is happening in the other states, we will be better able to know what the thinking is on any particular proposal that comes from these rating bureaus, and it seems to me it is time that we now aet upon this and not put it over until six months hereafter. It is not a complicated program; it is a simple program. It won't take you five minutes to take this report and sit down here and study it, and I think you could be convinced in half that time that it has lots of merit and that we are simply procrastinating if we put it off. We have put :ct off for years and years and years; we put it off a year ago; we put it off six months ago, and I say to you that if we put it off this time, it is not for the purpose of further study; it is simply going to - and no disr~spect to you7 Commissioner White - it is simply going to result in the fact that it will never be accomplished. I submit to you that if we are not going to do the things that these committees, after serious and conscientious work, recommend, we might as well stop serving on com­ mitte~s.

Commissioner PerkiM (Maine) : I think Commissioner Garrison has · expressed his views very well. I only wish I could do half as well. One point he made was, he said if there were any criticisms, they should be brought up. In other words, you should put up or shut up, and I agree with him. MID-WINTER MEETIXG 2i3

There 1s one thing in your report which I believe 1s dangerous, and that is, when you make reference at this time to rates and ratmg orgam· zations. I will tell you why. Every state in the Union, to my knowledge, already has passed a. rating bill or is going to introduce one this year. I don't want anybody, whether it is an insurance lobby or anybody else, to come up to my state and say, ''Now that you have a c,!mtraJ bureau, you can take this bill and no other.'' We want to be able to determine our own bill up our own way, and though I think I could combat it very easily by saying there isn't enough money in the eentral office to do anything on rates and rating organizations and when you are talking about $12,000 and $15,000, you are not talking about enough money, I just don't want that argument about it up in my legislature. Now, if the gentlemen can satisfy me on that point, I will change my views.

Commissioner Garrison (California): There was no such intention to have this central office do anything with respect to the detail of approving rates or approving legislation or approving the action of any bureau. It is Rimply a place where information is .sent to you upon which you can act more intelligently with respect to the conduct, but not to tell you how to do it. It is merely to provide you with the information on which you may act if you like.

Commissioner Sims (West Virginia): Mr. Chairman, I am obliged to go in a little bit in order to get back to my office tomorrow. From listening to the di.scussion here, I am reminded of the convention that the mice held and decided it would be a fine thing to bell the cat, but the question was, '' How are you going to put the bell on the cat 1'' Now, I happen to be auditor of the 8-tate. I pass upon all the bills presented to the State of West Virginia. I had to lay my hand on the Book of Law and hold the other one up and take an oath to support the Constitution of the State of West Virginia, and the laws made thereunder, and I find that the law say.s that no money shall be paid out of the state treasury exc.ept for .services rendei·ed, presumably already rendered, or ma­ terials received. More than that, the legislature more than 20 years ago came along and specifically said that no memberf:.hip fee in :my voluntary association shall be paid out of the state treasury. Now, how can I make a contribution to this organization, however desirable, however glorious, it may be, ho,vever useful it may be, to the State of We1,1t Virginia, I am inhibited by this specific restriction of the law. We have been fighting over that probl~m for 12 or 13 years now. There are people who want me to pay fees for classroom .school teachers in their colleges, biology teachers, and even now the coaches have an association of the colleges and they want me to pay their member~hip fee in the athletic association, and I have to turn thumbs down under the law and under my oath.

Now, I am wondering if some of you wouldn't have the same trouble when you try to run a requisition over your comptroller or auditor or whoever the official may be in your state.

President Dineen: Commissioner Larson, wm you take the Chair a ~74 PROCEEDINGS seoond, ( Commissioner Larson assumed the Chair) I would like to say one thing on this subject in answer to Commissioner Sims 1 point.

Commis8ioner Sims (West Virginia): I yield for a statement.

President Dineen: I understand you are inhibited by the law but, of course, we have the Council of State Government,i now being supported by states all over the United States, that is rendering a great service to the states. Now, here is my notion on this particular problem. If this plan goes in, the State of New York will probably pay more than 12 or 15 other states put together. Now, let me say one thing to you. I don't need a central office. I have got a budget of $1;500,000 and I have 600 employees. When I want some information and I can't get it, l send our examiners over and we dig it out, so from my standpoint, I don't need it. I have already talked with the Director of the Budget of our state, because a heavy share of this burden will fall on us. I have told the Director of the Budget in a general way - I never saw this plan before, but I have told him in connection with the central office idea and expir.ined what I conceived to be the need for it and, once I explained that, I was assured that the State of New York would accept its responsibility.

Commissioner Sims (West Virginia): I "WOULD like to go along, but how can we do it when we are in a straight-jacket and there isn't any hope of getting the legislature to repeal the statuteT

Commissioner Garrison (California): Will Commissioner Sims yieldf You are now contributing $150.00 a year. * * *

President Dineen: We might as we11 keep this thing on a high plane. I have declared publicly that I am considerably less than a parliamentarian and you folks elect!"d me when you knew l didn't know much about par­ liamentary procedure. Now, what I have got in mind is this, that we are all :friends, we have all got the same problem, and even if I do jimmy up the parliamentary rules, I would kind of like to have the people feel here that they have a chance to speak their mind, and I yield to the distinguished Commissioner from West Virginia.

Commissioner Sims (West Virginia): I entertain the kindest feelings toward the honorable Chairman and the other gentlemen who have already spoken, but I am in a dilemma. I will concede that the benefits are manifold and many, many more than these eloquent gentlemen have detailed here. (Laughter)

Commissioner CMroi (Rhode Island): Mr. Chairman, I hadn't intended to say anything on this, for the simple rea:::on that I came in with the Fire and Marine Committee after half of the report was read this morning ~nd the meeting was held the other day while I was having a Fire and MID-WINTER MEETING 275

Marine Committee meeting. Did I understand there was $7,500.00 or some· thing like that for the Secretary, and then it went on up to $20,000t Is that part of the report,

President Dineen: Yes, it contemplates increasing· expenditures.

Commissioner Carroll (Rhode Island): Well, all right, while the figures are in there, as long as a member of the Committee asked for criticism of the specific things, I am against it while the figures are in there. I don't think that any progress can be made, and I also think that possibly it is an insult to what we except the office to do to put a figure of $20,000 on there, because I think it is going to require a lot more, and possibly it will kill the entire thing if those amounts remain in there. Th~re is one other thing that possibly might bring Rhode Island into the picture, because of the fact that I think in all probability I operate our Department with the smallest appropriation of any state; being the smallest. I suppose things should be in their relative proportion, but I think that any state that needs anything still can get it in the line of information and facts. Commissioner Forbes mentioned that he was looking for some information and I think possibly he could get it a lot faster by writing to the individual states rather than writing to the central office, because any fellow, for the amount of money appropriatfd, certainly can't collect that information within ten years. That is the only thing I have to say. I just mention specifically the amounts, because I think definitely it minimizes the work that is going to be done by that office, and I speak also o-f the comparison of Mr. Griffin's section. If he takes care of one small thing :for $20,000, I don't think that we can handle the entire arrangement for that amount.

Commissioner Gibbs (Texas): Mr. President, I am not going to say very much. Commissioner Garrison and others ha,::e enumerated, and also Commissioner Forbes, many of the reasons for it. I would just like to add one thing, and I would suggest that this might help Commissioner Sims justify an addition to his remittance to the Association. One of the things that I have been particularly interested in was the gathering of the experience on this casualty expeme experience exhibit. We secured or rather we got the Council to agree to compile this combined experience this past year. ·we are going to ha-ve to beg them, or someone else, to do it again. It is not a tremendously large job but it is one that is of concern to every commissioner and not the sole responsibility of any one state, the compilation of this combined experience under the casualty expense exhibit. I would refer Commissioner Sims to that. He probabl;yt could add another $150.00 and say it is for the compilation of experience.

Commissioner Fischer (Iowa) : I am not g·oing to talk to you long about this thing. This is a special committee. I wasn't here Sunday a.nd didn't have an opportunity to hear the discussion. Most all things that I vote upon affirmatively, I like to know something about. If I don't know 2iG. ·PROCEEDINGS all about it, I vote against it. I am afraid I find myself in that position; This is· a special committee that was appointed to bring in a report. It seems very strange to me that this special committee didn't meet in time to place this report in the hands of every Commissioner before he came to this convention, to study this report. I heard it read here once. There are some things I think I would like to vote for about it, some things I would like to amend. I am not prepared to do either one. I think it is silly ·for this convention to come here and hear a haltingly read report that they didn't know anything about. And I apologize to my friend Dave; he .is not a reading clerk for the United States Senate. I think we will all agree to that, and I didn't follow him all the time. I don't know whether I want to vote for this report or not. I can't vote for it until I have seen it and studied it, You gentlemen have all had the high-pressure boys walk in and sit across the table from you and lay down a proposition and say, "Commissioner, what is your answer'f" And they are most of them smarter than I am, so I tell them to come back next Thursday and I'll tell them.

That is what I would like to have this Committee do. Now, they have spent about three hours here explaining this report. If it was the kind of a rE'port that it ought to be, it wouldn't need over ten minutes' explaining. I have only been commissioner eight years. Commissioner Garrison has been a. commissioner 31/.J years. I am not as smart as Commissioner Garrison, but when I was his age, I was a good deal smarter. (Laughter)

I find myself in agreement with my old friend, Jesse ,Vhite. I sat for several days with him in a committee, and with Ellery Allyn, on just a small thing, the definition of Group Life Insurance, and we placed that in the hands of everybody before the Portland Convention. That wasn't a very important special committee. This is a hell of an important com· mittee, it seems to me. We are going to have to amend the Constitution. We are changing the basic structure of this voluntary Association. I am very proud of this Assoeiation. I think it is the best one I ever belonged· to. I used to btlong to the Bartenders' Association. (Laughter) And, Mr. President, I would like to go along with Jesse White. I am sorry that this fa the last day. I think that if these commissioners just had thif! report mimeographed and in their hands for 12 hours, I think they are all smart enough to then vote intelligently upon it, but I don't believe I can. I am not as smart as the rest of them, but just having it read over once and then to vote on this thing at this time, to vote affirmatively, I'm afraid I couldn't do it. I '11 vote on it, but I would have to vote again::;t it, and I think perhaps I would like to vote for it. Thank you.

Commissioner Larson (Florida): Mr. Chairman, I want to say at the outset that what I am going to say is not with any view in mind of cutting off any debate on the part of anyone. If it :,1.eems to be, I apologize and certainly will expect you to vote accordingly, but it ~eemf! to me that this is an all-important subject and I think that many of the men here would vote quicker affirmatively upon this report had they had an opportunity to see it and read it a day or two before coming into this meeting. At least, I believe that is my position. I want to say that I belitve the Com· rnittee has rendered an outstanding job in the way they have tackled the MID·WINTER MEETING 277

problem and have tried to bring it in here, as individual members, some· thing that was constructive and for the best interests of the Association. But I am wondering, Mr. President, what harm would be done in delaying this until our June meeting. We have considered matters here that have been of greater importance than this from time to time and in years past and we haven't brought them up at one meeting and settled them in the n.ext of the following or the second or third meeting, but they have been studied. Therefore, I would like to offer, if I am in order, a substitute motion that the report be received, that it be mimeographed and that the Executive Committee be directed to send it out to all commissioners for study and that it be taken up by the Association at our meeting in June.

Commissioner White (Mississippi) : I second the motion.

Commissioner Fischer (Iowa) : I second the motion.

Presidewt Dineen: Now, once ag·ain, Robert's parliamentary procedure. Is this in order, Charley!

Commissioner Fischer (Iowa): Yes.

President Dineen: You 're a fine fellow to be advising me I (Laughter) Are you gentl~men all familiar with the motion that has just been pre· sented 7 The gist of it is, as I understand it, that we are to receive the report and consider it and bring it up at the next meeting, have it mimeo­ graphed and distribut_ed to all states. Now, one other question. Is it in order for the Chair to ask a question! What I would like to know about it is this, does this Committee have authority to hold any bearings on this thing between now and the next meeting, in the event that the suggestions come in, assuming that the motion were adopted f Does your authorization go that fart

Commissioner Forbes (Michigan): Our Committee was appointed for the purpose of considering and reporting on the feasibility of the Central Office of the National Association of Insurance Commissioners, to serve adequately, in the opinion of the Commissioners of thil'I Association. That was the motion made at your Syracuse meeting of the Executive Committee. This has been the first convention since. We held an open meeting Monday morning at 9:00 o'clock, instead of Sunday. It was scheduled on the program and the Committee tried to get stenographic serviee to get this report in sooner but was unable to do so until late yesterday afternoon, and today was the :first opportunity to present it. I want the record to show the reason why it came in late.

President Dineen: Dave, you are improving. You weren't half as halting that time. (Laught~r) Eddie Larson, this is purely a suggestion on my part and maybe the Chair shouldn't do it, but would you consider amending your motion so 278 PRoCEEDINGS

as to give this Committee the power to eontinue on until the next session and to hold hearings in the meantime if that is necessaryt

Commissioner Larson (Florida): I certainly would be glad to amend the motion to that effect. I think we should have the benefit of all the hearings and discussion and everything we can on it, I think it is of sufficient importance for that.

President Dffl.een: Then do I understand you have amended your motion to that extentf

Commissioner Larson (Florida): To continue the Committee, yes.

Presidewt Dineen: And to givfl them authorization to hold hearings if they feel necessaryf

Commissioner Larson (Florida): Certainly.

Commissioner G011,gh (New Jersey): Mr. President, if you do that, aren't you complicating it. Why send this out, this report, when by the time you come back next June, it will be entirely changed as a result of these hearings t If you are· going to postpone consideration of this until next June, pe:rmit the Committee to go on and hold hearings and whatnot, it seems to me they should withhold their report.

Commissioner Larson (Florida) : I would like to answer that, if I may, Commissioner, in this respect. I think that what we want is to see the report, to have it and study it, and it may be by studying the report, somebody might be able to make some contribution to this thing.

Commissioner Martin (Louisiana): It seems to me, in order to bring the matter to a final conclusion, we might combine several of your ideas. That is, first, to continue the Committee; secondly, to authorize it to hold hearings, and in the meantime to prepare mimeographed copies of the present report, send it out to all of the Commissioners. That will give the Commissioners an opportunity to write the Committee, giving them their ideas concerning any possible changes or objections, but then put a limit on the hearings of the Committee so that the Commissioners will receive their final revised draft at least thirty days before the next general convention. Then when we come in, we will have the final draft of the Committee, plus our own ideas about what we want to discuss, and we might finally bring it to a head in that manner.

President Dineen: Thank you, Wade.

Chris, may I ask you one thingt Apparently, this word "accept" is what bothers you. In other words, you would want to change that so they wouldn't be bound by it. That must be the wrong word. Receive for eon- Mm-WINTER MEETING 279 sideration might be a better way to put it. Do you want to amend your motion T

Commissioner Larson (Florida): I Qelieve I said "receive," Mr. President, received and be studied and the Committee be authorized to have it mimeographed and mailed out, and conduct hearings.

President Dineen: Gentlemen, we have one other report that was over­ looked and while that is being read, Tommy here can sit down with a pad and put this thing in the form of writing. By the way, gentlemen, I am your humble servant. I just thought I would give you a little piece of arithmetic. On the contributions for the Committee on Valuations, all the states contribute $11,560, and of that amount, the State of New York contributes $3,300.00, or practically one-third, so that whatever you do is quite agreeable to me but we will wind up by paying most of the load.

Now, gentlemen, while the scrivener here is at work, is Walter Robinson heref He has the report of the Committee on Blanks and, Walter, I apologize to you for not calling you before .

. . . . Deputy Commissioner Robinson read the report of th!cl Committee on Blanks as follows:

REPORT OF COMMITTEE ON BLANKS COVERING MEETING OF DECEMBER 9, 1946

Hon. J. Edward Larson, Chairman Executive Committee National Association of Insurance Commissioners Sir: A meeting of the Committee on Blanks was held as scheduled at the Hotel Commodore, December 9, 1946, at 4 P.M. Members in attendance were Superintendent Dineen and Commissioner Allyn of Subcommittee No. 2 and Messrs. Knudsen, Kenke, Bittel, Sanford, Tiffany, Hooker and Robin· son. Other Department and company representatives were also in attendance. In Secretary Dubuar 's absence Mr. Hooker acted as secretary.

Mr. Vander Feen, Chairman of the Committee on Blanks of the As­ sociation of Casualty and Surety Executives, and other company repre­ sentatives urged that the so-called wartime economies in the blanks be made permanent. After some discussion it was decided to instruct the secr~tary to place the various items involved on the agenda for consideration at the regular 1947 meeting of this Committee. Respectfully submitted, Walter A. Robinson, Chairman 280 P&OCEEDINGS

REPORT OF SUBCOMMITTEE NO. 2 OF THE COMMITTEE ON BLANKS ON MEETING HELD AT THE NEW YORK INSURANCE DEPARTMENT ON NOVEMBER 14, 1946 A meeting of Subcommitt~e No. 2 of the Committee on Blanks was held at the office of the New York Insurance Department on November 14, 1946. The purpose of the meeting was to consider suggested revision in the procedure followed by the Committee on Blanks in passing upon proposed amendments to the form of annua.1 statement. The following Commissioners were present: Hon. W. Ellery Allyn, Connecticut Hon. Charles F. J, Harrington, Massachusetts Hon. Robert E. Dineen, New York, by Alfred J. Bohlinger, Deputy Superintend~nt In addition there were a number of representatives of Insurance Depart· ments who attended the meeting. Commissioner Allyn acted as Chairman. In opening the meeting attention was directed to the faet that at the meeting of the Executive Committee of the National Association of In­ surance Commissioners at Portland, Oregon, on June 10, 1946, several letters, all identical in language, were presented in which request was made to consider amendment of procedure. The Executive Committee referred the entire subject to this Subcommittee for consideration and report at the meeting of the Executive Committee of the National Association of In­ surance Commissioners to be held in December, 1946. Representatives o:f various branches of the insurance industry attended the meeting. Spokesmen for the industry called attention to the fo11owing two major procedural amendments which they urged upon your Subcommittee for consideration. (1) The industry called attention to the fact that under the procedure which has been followed in the past the agenda containing matters to be considered by the Blanks Committee at its annual meeting is reeeived at a date too late for adequate consideration by the companies. At the present time under the procedure followed by the Committee on Blanks, proposed amendments are required to be :filed with the Secretary of the Committee on or before March 15th. It was suggested that the date for filing pro­ posed amendments be advanced to an earlier date and that at least sixty days be afforded to the industry to consider the agenda. Your Committee is of the opinion that the time heretofore allowed has been inadequate and believes that the date for filing of proposed amendment should be advanced to January 1st in each year. A suggestion was also made that the meeting of the Blanks Committee which under present practice is held on or around April 30th be held at an earlier date and that the report of the Committee be sent out at a time which will ena.ble the various Insurance Departments, as well as members of the industry, to consider th!3 same prior to the meeting of the Executive Committee at the annual meeting in June. The members of the industry also urged that following the meeting of the Committee on Blanks the report of the Committee should be considered at a subsequent date by Subcommittee No. 2 and an oppor­ tunity afforded to the members of the industry to appear before the Subcommittee. Suggestions for amendment of the annual statement fre­ quently involve questions of policy and your Subcommittee is of the opinion Mm-'WIXTER MEETING 281

that on such questions ample opportunity should be afforded not only to members of the industry but to representatives of Insurance Departments to present their views for the guidance of the Subcommittee. However, your Subcommittee does not feel that ample time would be available to hold a meeting of the Committee on Blanks followed by a meeting of the Subcommittee which in turn would have to be follo,\·ed bv further con· sideration of the fu11 Committee. It is the opinion of your· Subcommittee that at the annual meeting of the Committee on Blanks the Subcommittees should also meet, at which time matters of policy could be established. The Subcommittee could thereupon meet with the full Committee on Blanks and all matters could be disposed of at surh meeting. After consideration your Subcommittee ha;; readied the conclusion and recommends that proposed amendments ~hould be filed on or before January ht in each year; that the Secretary should i::end the agenda of the meeting to all Insurance Commissioners, as well a<.l to the members of the industry who have requested the same, on or before February J ;.t: that the Blanks Committee, together with Subcommittees No, 1 and No, 2 should ho1d a meeting on or about April 1st in each ye~r - in any event, not later than April 5th; that the report of the Committee on B'nnks he sent out on or before May 1st in each year. In connection with propose therefore, As to amendments which do not entail material change-, in accounting procedures it has been the usual practice of the Committee on Blanks to make such changes effective in the year in which the amendment is adopted. Your Committee considers that decision as to the effectiYe date of any amendment is a matter which should be giwn careful attention and urge,; upon the (;ommitke on Blanks that when change~ involving major accounting pro· eedures are adopted the Committee on Blanks should not make such clianges effective in the year in which the amendment i:, adopted. The Committee recommends that the Executive Committee establish the following procedures to be employed by the Committee on Blanks. (1) All suggested changes and amendments shall be filed with the Secretary of the Committee on or before January 1st of each year. Sng· 282 PROCEEDINGS gestiollS received after that date can be considered at the current year's meeting of the Committee on Blanks only with the unanimous consent of the members of the Committee.

(2) The suggested changes and amendments and reasons therefor shall be stated in a concise and complete form.

(3) In the case of reports of Conferenee Committees, lengthy memo~ randa, special exhibits or special schedules, 250 copies thereof and the suggestions and reasons should be submitted to the Secretary of the Com· mittee. In the case of brief suggestions a notification to the Secretary of the Committee will be sufficient.

(4) The various classes of insurance companies should appoint com­ mittees to confer with Subcommittees of the Committee on Blanks. ( 5) The secretary shall prepar~ an agenda of all suggestions. Two copies of the agenda shall be sent to each Insurance Commissioner on or before February 1st in each year and copies of the agenda shall b~ sent to every industry Subcommittee requesting the same. Not more than 25 copies of the agenda shall be sent to any industry committee. (6) The Committee on Blanks as well as any and all Subcommittees thereof shall meet on or about April 1st in each year - in no event how­ ever, later than April 5th. (7) The report of the Committee on Blanks shall be sent out by the Secretary on or before May lat in each year. Two copies of the report shall be sent to each Insurance Commissioner. Copies of the report may also be sent to industry committees and other interested parties who may request the same. Respectfully submitted, W. Ellery Allyn, Connecticut Charles F. J. Harrington, Massachusetts Newell R. Johnson, Minnesota Robert E. Dineen, New York

Deputy Commissioner Robinson (Ohio): I move the adoption of the report.

President Dineen: Gentlemen, in connection with that report, can I call your attention to one detail 7 One of tlte subjects which is going to be considered at this June meeting is this non-controversial Schedule "L," and this Committee will have some material on that and there will be a report in advance of the next meeting, so when you come here, you can be pr13pared to act on it.

Commissioner Larson (Florida) : I second the motion.

President Dineen: We have a motion made and seconded. Is there MID-WINTER MEETING 283

any discussion T All in favor, signify their approval by saying "Aye." All opposed, ''No.'' The ''Ayes'' have it and it is so ordered.

Gentlemen, there is one other matter here while the scriveners are at work. I have here before me the resignation of Commfasioner Dressel of Ohio as a member of the Executive Committee, which creates a vacancy and, Director Parkinson, will you take the Chair, please .

. . . Secretary Parkinson assumed the Chair.

There being a vacancy, I would like to plac!'l in nomination for his successor, Commissioner Bowles of Virginia, and, in doing that, I would like to express publicly my regret and present to him my apologies for the artistic piece of bungling which I did up at Syracuse while we W!3re attempting to settle this Commissioners' thing. Under my masterful leader­ ship, by the time we got this thing manem·ered around, the only thing we hadn't done was to kick George in the teeth, and the payoff was that nothing of the kind was intended. \Ve have the highest of rj'lgard for him, but as I looked at the thing in retrospect, it was perfectly apparent that due to just p]ain ineptness to parliamentary procedure, I had done a great disservice to one of our most distinguished members and a man who has been our past President, and it has been a source of regr~t to me. I am genuinely sorry it happened and it seems to me the best way in the world to demonstrate that we have affection for him in our hearts and to show that no disservice was meant to him and no discourtesy was intended is to elevate him to the Executive Committee, and, that being so, I hope that some gentl13men here will second my motion and, if that happens, that we can make it unanimous.

Commissioner Neel (Pennsylvania): I second the motion.

Commissioner Sullivan (Washington): I second it also.

Commissioner Forbes (Michigan): Having nominated Commissioner Bowles for that position at the Syracuse meeting, I would lilt!:' to second the nomination.

Commissioner Harrington (Massachusetts): Mr. Chairman, Massachu~ setts would like to second the nomination of the great Virginian.

Commissioner Jla-shburn (Tennessee): Tennessee would also like to second that nomination.

Commissioner White (Mississippi): Mississippi also seconds the nomi· nation of Commissioner Bowles.

Commissioner Ensor (Maryland): I should also like to second the nomi· nation. 284 PROCEEDINGS

Commissioner .Martin (Louisiana): Louisiana. also wants to second the nomination.

Commissioner Johm,8on (Minnesota): I move the nominations be closed.

Ccmmissioner Gough (New Jersey): I move that the nominations be closed and Commissioner Bowles be elected unanimously.

. . . The motion was seconded by many.

Chairman ParkiMon; You have heard the motion and the second. The question is called for. All in favor signify by saying ''Aye.'' Opposed, ·''No.'' It is carried.

Commissioner Bowles (Virginia): Mr. President, I hardly know how to express my very deep appreciation. I have been genuinely touched by this expression of your friendship. I want to assure you, sir, that I took no exception whatsoever to the action of the meeting at Syracuse. It would have been my choice had I been there; it would have been my pleasure to place Commissioner Dressel 's name in nomination as a m~mber of the Executive Committee. I know him probably better than you people do. He is a valued member of Zone 2 down there and we have relied on him very heavily and had I been there myself, sir, that would have been my choice.

I nevertheless appr~ciate this expression of friendship. (Applause)

President Dineen: Thank you, George.

Commissioner Garrison (California): Mr. Chairman, I would like to say I think it is very fortunate that Commissioner Bowles has been induced to go on the Executive Committee, because with him being on the Com­ mittee, then we will be sure that the Central Office does not expand beyond the legitimate ramifications that are proper. (Laughter)

Commissioner Bowles (Virginia): I think it but fair to warn my fellow commissioners against the persuasive influence of that astute lawyer. I am sure that he has probably sent many an innocent man to the penitentiary, or probably to the electric chair. (Laughter)

Commissioner GarrUwn (CaJifornin): No, I have kept the innocent ones away from the penitentiary.

President Dineen: 'I'he Chair will recognize Commissioner Larson and, in view of what our friend Charley Fischer said about reading haltingly, I. just got word through the pipeline that he is sear~d to death to even start reading it. MID-WIXTER MEETING

Commissioner Lar801\ (Florida): Let's see how this sounds as a sub­ stitute motion: I move that the report of the Special Committee on Central Office be received and that the Executive Committee be authorized to have the report mimeographed and sent out to all departments for study and that the Committee be continued and be authorized to hold hearings with respect to its further study of th~ problem and report to all commissioners thirty days prior to the June, 194i, meeting.

Commfasioner Gough (New Jersey): That is 0. K.

President Dineen: You are a heroic man to undertake to read it. It has been made and seconded. Are you ready for the question T All in favor, signify by saying ''Aye.'' Opposed, The motion is carried. Gentlemen, the Chair is going to get tough and hold that we don't need a roII call. The motion is carried by a voice vote. I counted the voices myself. ,v~ll, now, is there anything further to come before this meeting! I suppose when you get out of the room, we will find out something else that we have muffed, but I can think of nothing further and, that being so, I want to express our pleasure at having you gentlemen her~. We hope to see you all at the meeting next June and goodbye and God bless you.

Commissioner Bowles (Virginia): Has any progress been made as to the June meeting place?

President Dineen: Not yet .

. • . Final adjournment was taken at 5:15 P.M., December 11, 1946..

Proceedings of the Seventy-Eighth Annual Meet­ ing of the National Association of Insurance Commissioners, Held at the Haddon Hall Hotel, Atlantic City, New Jersey, June 1-5, 1947

MONDAY MORNING SESSION, JUNE 2, 1947 The first Plenary Session of the 78th Annual Meeting of the National Association of Insurance Commissioners was called to order at 10 :45 A.M., June 2, 1947, in the Vernon Room of Haddon Hall, Atlantic City, New Jersey, President Robert E. Dineen presiding.

President Dineen: The meeting will please come to order. I notice there are a few of you people here who have cigarettes in your hand or in your mouth and the manager or the assistant manager, has just made an extraordinary announcement to the effect that there weren't any ash trays around, but if you put the cigarette butts on the floor, they would rather sweep them off the floor than take them out of the trays. That is Atlantic City for you. He guarantees it won't set the house on fire. The first order of business is to introduce the Reverend Robert C. Pedersen, Pastor of Margate Community Church, Margate City, N. J., who will deliver the Invocation, Dr. Pedersen.

Dr. Pedersen: We pause for a moment, our Father, to acknowledge our dependence upon Thee. Keep us from preoccupation with rules and regulations only, or even of material things. Help us rather to think in terms of human life and how we may serve all the people. May we find in our various tasks not merely a means of making a living but opportunity to contribute to the enrichment of life. We are aware especially in these days of the debt we owe to others for our rich heritage. May that awareness prompt us to worthy acts of service, that we may give freely of ourselves for todny and tomorrow, as we have received so abundantly from those who yesterday suffered and died for us. May we, by our devotion, be one with Thee in the Spirit, that together we may serve the new day. So may T4y blessings be upon us in these hours of conference and in the days to come. Hear our prayer, for we ask it in the Spirit of Him who came that all men might have life and have it more abundantly. Amen.

President Dineen: Thank You, Dr. Pedersen. 288 PROCEEDINGS

Ladies and gentlemen, the next order of business on our program was to have been the address of welcome by Joseph Altman, the Mayor of Atlantic City. I am told that the Mayor is indisposed this morning and his place will be taken by Mr, Louis Cunningham, the City Publicity Director. Mr. Cunningham, will you please step up here and greet these gentlemen.

Mr. Cun-n,ingham: Thank you very much, Mr. Dineen. I :first must apologize for Mr. Altman not being here, but if he got around to all the conventions, he couldn't get much work done. We had only one of any size last week and that was the Shriners. Some 50,000 of them were on hand, so them wasn't much room for any others. But the week previous there were some 17 groups here, and all of them were to be welcomed, so another chap in the publicity business and myself and the Mayor sort of split them up and we each ended up with three or four. However, I am very happy that it became my little task to come over and say "Hello 11 to you people, and also to express a hope that you will come back sometime before another 78 years. I understand that this is your first visit to .Atlantic City, that is, the first visit of the Associa­ tion, although I am sure that many of you have been here before, and we sinctrely hope that you won't wait so long, or some of you won't be around, I imagine. I am sure I won't be. I think that those of you who haven't been here before will find that our facilities in this town are particularly good, are particularly well :fitted for gatherings of this kind, or, in fact, for gatherings of all kinds. We have conventions here, large and small, day in and day out1 all the way from groups of 100 up to groups of 50,000, such as I mentioned we entertained last week, and we have made it our business to try to take care of you peoplt and to try to do what is right and what is best to assure your having a good time as well as to assur~ your having suitable facilities for your deliberations, your business sessions and the like. But, as I say, we do hope that when your business sessions are over, you will have a chance to look around the town a little bit and absorb some of the sunshine, get out on the Boardwalk, and perhaps send a few boxes of salt water taffy back to the folks back home. In addition to doing publicity for the city, I also represent the Atlantic City Race Track, and Hugh Riddle, one of our local insurance men, talked to me about some passes for you people, which we are very happy to provide, and I hope that sometime during your stay you are going to be able to get over there to see the new plant. It is quite a place and I think you will find that it comes right up to any of the better tracks in the country. We, too, feel that it fits in with the other scheme of things in Atlantic City, in that everything has to be bigger and better than anywhere else. This room - I imagine you folks have had a chance to look around

- is a most attractive p1ace1 and I know the people here at Haddon Hall ar,e going to do everything possible to make your stay a pleasant one. I don 1t want to take any more of your time, but I want you to know that PROCEEDINGS 289

the people of Atlantic City are very happy to have you here and hope, as I said before, that you will return here soon agam I have here a key to the city. It is not a gold key, and neither does it open anything. It is just our way of saying "Welcome" and expressing the hope that you will enjoy yourselves and come back soon again. It gives me a great deal of pleasure to pass this token along to your Presi­ dent, Mr. Dineen. (Applause)

President Dineen: Thank you, sir. This must be a progressive town when they have good looking birds like this fellow working for the city.

Now, I have another assignment here which gives me fl lot of pleasure. I am about to present to you the Host Commissioner from the State of New Jers~y, who, in addition to being a very fine public servant, is a delightful golfing companion and a man who can drive n. sharp bargain on the first tee with anybody in this room and with a reasonable assurance of giving you the "business." Larry Carey, will you step up here and e:xplain to these people how it is don~. (Applause)

Commissioner Carey (New Jersey): Thanks very much, Bob. You do a very good job yourself on that first tee. You do a good job up here, too.

Mr. President and gentlemen: We in New Jersey are especially proud to have you here with us for this convention. They say there is always a first time and, aR our good friend, Mr. Cunningham, pointed out, this is the first time in the 78 years of your deliberations tl1at you have come to this state. We are very glad, therefore, in the Department, and I ahm want to express, on behalf of the united insurance industry in this state, a hearty welcome. We are very glad to have you here.

Now, no effort has been spared in preparing for your convenience and for your comfort and enjoyment and we have had the heartiest support from a very capable committee representing this state's insurance industry. Every segment has been represented. We hope that you enjoyed our initial program yesterday and, of course, as you know, we had an outstanding performance on the part of the Prudential Family Hour yesterday. It was really no mean feat to bring such a group of talent from Broadway to Atlantic City for a broadcast, and I think they did a remarkable job. 'fhat, of course, was largely due to the efforts of the Chairman of the Gen.eral Committee on Arrangements, Mr. Carrol M. Shanks, and the Chairman of the Arrangements Committee is going to give you a few highlights on what is further in store for you. It is a special privi1ege, therefore, for me at this time to introduce to you the Chairman of the General Committee on Arrangements for this convention, Mr. Carroll M. Shanks, President of the Prudential Insurance Company of Newark, N. J. Mr. Shanks. (Appla use)

Mr. Shanks; It has been an unusual pleasure and opportunity, and I may say privilege, to work with Commissioner Carey and with the mem· bers of the insurance industry in New Jersey, to cooperate with the 290 PROCEEDINGS

Commissioner in this matter of entertainment. We want the Commissioners and their families and their guests to have the best time they possibly can here in Atlantic City. Now, you have noticed that the entertainment we have laid out ha!' b_een, as best we could, scheduled after working hours. We know this is a hard-working group and so we hope that you will get acquainted with Atlantic City during those after working hours. Before I elose, let me say, however, that I want to express here the greatest possibl!a' appreciation to the members of the industry in New Jersey, all the members on the Committee and the Subcommittees, and those that are not on the committees as well, for the work which th~y have done in trying to make all these things go smoothly and well. The ladies' luncheon, of course, and fashion show is being held this noon. This evening, there is a shore dinner at the Chalfonte, with all the trim­ mings, and those of you, particularly, who live inland and not on the seashore, I think will enjoy that. That has been arranged by the hotel management and by Mr. Charles H. Fulton, who is President of the Atlantic City A$sociation of Insurance Agents. Tomorrow evening, we have our annual banquet, an

President Dineen: Thank you very much, Carroll If you don't mind my saying so, I will have to tell you, as a young gentleman from the Syracuse farm belt area, that everyone I have talked tu was very much impressed and pleased with this radio broadcast. That was an opportunity for us to see a big league show in operation and we enjoyed it and it certainly started our meeting off with a bang. The next order of business is one that I always enjoy, and that is to present to you the gentleman who is to give the response to these a,ldresses of welcome, :;ind he is the one and only, and a Commissioner PROOEEDISGS 291

whom we all love, Comm1sS1oner Seth Thompson Seth, will you come up hete and respond. (Applause)

Commissioner Thompson (Oregon): Mr. President, Mr. Cunningham, Commissioner Carey, Mr. Chairman of the Arrangements Committee: It is indeed a pleasure to express to you the gratitude this body owes for the excellent start you have given to this Convention. For the past two years and a little over, there have been serious debates in the meetings of this Association with respect to something new that came into our lives a couple of years ago, and I thought we had received and explored all the possible expressions that might be given, but this morning in the first committee meeting we have a new description of a legal clause known as the Cracks and Crevices Clause, Mr. Cunningham, and perhaps it is 1itting that that expression should be first introduced to this body at Atlantic City. I am proud to be designated as the one to express to your our appre­ eiation for the invitation to come here, for the privilege of enjoying all of these facilities you speak of. I, with one other member of this organization, Mr. Cartwright, enjoyed your surf yesterda.v afternoon and fountl it delightful for this time of year. I understand you have cold water here, but to us from the Pacific Coast, it was ju~t regular ,rnter and it ,vas a wonderful afternoon.

I ·would like to say that you have no fear, Mr. Chairman, as to the arrangements going smoothly. Vite have been accommodated in excellent fashion. We thank you for your greetings and we now expect to enjoy to the full your kind hospitality. Thank you kindly. (AppJaus~)

President Dineen: It is always a pleasure again to hear from our good friend Seth. \Ve arn now about to take up the next step in the program. It always brings to mind our good friend, .Tess Rend, who has gone to the Great Beyond. I am going to introduce to you the Secretary of this Association, our good friend, Nellis Parkinson, and have him take steps for the tra­ ditional roll call. You know, when we elected Nellis as the Secretary, there was a Yery close vote on that. You will recall that. It seems that there were two states that Parky didn 1t know how to pronounce. He couldn't call Alabama, ''Alabam,'' and he couldn't call Idaho, 11 I-d~-ho.'' But we fiua1ly decideJ that no one would ever be able to call those names off tlie way .Jess did and we settled on Nellis and, of course, we have never had any regrets.

Now, as we go through the roll call, the various statiis will announce who is present representing them, the Commissioner first and those members of the Departmental personnel, and at the end of the roll call, we are going to ask all the new Commissioners to stand and subject themselves to the scrutiny of the multitude. ,ve will start off first, Commissioner Parkinson, with the roll caJJ. 292 PROCEEDINGS

Secretary Parkinson (Illinois): Mr. Chairman, I would like to make one further announcement. In order that the reporter may have an accurate record of the people in attendance and get th~ correct spelling and titles, I am requesting that each state representative submit a slip of paper to the reporter on which you will provide the corr~ct spelling and the correct titles of the persons here today representing your departments. I also would like for the Commissioners of Canada to be introduced by on~ of their number at the close of the roll call of the states .

. The roll call follows ...

Alabama-L. L. Gwaltney, Jr., Superintendent. Alaska- Arizona-Roy B. Rummage, Director; George A. Bushnell, Examiner. Arkansas--Jack G. McKenzie, Commissioner. California-Deputy Commissioner Maloney (California): Mr. Secre­ tary, California is represented by Cecil C. Lloyd, Chief Assistant Insurance Commissioner, J. R. Maloney, Deputy Insurance Commissioner, and I am very happy to introduce to this convention the new California Commis­ sioner, Hon. Wallace K. Downey. (Applause) Colorado-Luke J. Kavanaugh, Perennial Commissioner. Connecticut--George Goodwin, Deputy Commissioner; Russell Hooker, Actuary and Director of Examinations; W. Ellery Allyn, Commissioner. Delawar~William J. Swain, Commissioner; Frank Speakman, Actu­ ary; Miss Lulu Butz, Chief C~erk; Miss Bertha L. Butz, Deputy; Renner W. Leupold. District of Columbia- Florida-(Taking its annual vacation)-Deputies E. A. Faircloth, T. W. Shands, Hugh Christie, Tom Elmore; Special Attorney, John Tilton; Examiner, Albert Roberts; J. Edwin Larson, State Treasurer and Insurance Commissioner. Georgia-Zack D. Cravey (Come in later). Hawaii- Idaho- Illinois-M. E. Holohan, Chief Deputy; Carl Tiffany, Actuary; J. Thor Wanless and James W. Ross, Deputies; N. P. Parkinson, Director. Indiana-John D. Pearson, Commissioner; Karl Stipher, Deputy At­ torney General; Harry Wells, Chief Examiner; E. Westbrook, Actuary. Iowa-Woodrow Sherin, Act,rary; Ralph Knudsen, Deputy. Kansas-L. H. Hawley, Examiner; Robert Kaul, Assistant Commis­ l'lioner; Frank Sullivan, Commissioner. PROCEEDINGS 293

Kentucky-Charles M Wheeler, Chief Exammer, Leroy .J. Taft, Actu­ ary. Louisiana-Frank Purvis, Deputy; Ben R. Franklin, Chairman, Louisi­ ana. Inland Marine Rating Commission; A. S. E. Barnett, Member, Louisi­ ana Casualty and Surety Rating Commission. Maine--Guy R. WhittenJ Deputy Commissioner; Raymond J, Crosby, Examiner; Alfred W. Perkins, Commissioner. Maryland-Commissioner Hanley (Maryland): It is with pleasure that I announce Maryland is represented by Hazelton A. Joyce, Deputy Commission~r John H. Coppage, Chief Examiner; and F. Adtlison Fowler, Chief of the Rating Bureau. In addition to that, myself, Claude A. Hanley, who has been Insurance Commissioner just 15 days. Mas1mchusetts-Joseph S. O'Leary, Deputy; Charles F. J. Harrington, Commi~sioner. Michigan-L. I-I. Sanford, Second Deputy; David A. :E'orbes, Com· missioner. Mississippi-,Y. S. Smylie, Member, Mississippi Insmance Commission; Harvey L. Nelson, Member of Mississippi Insur:.i.nce Commission; "\V. F. Laughlin, Director of that Commission; \V. B. Fari~s, Examiner; Jes:=e L. 1,Vhite, Commissioner. Minnesota-Donald C. Rogers, Deputy Commissioner; Ne"·ell R. John­ son, Commissioner. :Missouri-Glen Evans, Deputy; A. C. Good, Actuar;v; R. C. Lashly, Chi~f Counsel; Owen G . .Jackson, Superintendent. Montana-John L. Holmes, "Actuary." (Laughter) (Commissioner) Nebraska-Represented by C. D. Spangler, Actuary; Harry Jaden, Examiner; and the new Director of Insurance of the State of Nebraska, Bernard R. Stone. Nevada- N~w Hampshire-Donald Knowlton, Commissioner. New Jersey-Chris A. Gough, Deputy; W. Harold Bittel, Actuary;

Oliver T. Somerville1 Deputy Attorney General; Lawrence B. Carey, Com­ missioner. New Mexico- New York-Walter F. Martineau, Deputy Superintendent; Raymond Harris, Deputy; Carl Typermass, Deputy; Alfred J, Bohlinger, Deputy; Thomas C. Morrill, Deputy; Al. Bennett, Counsel for the Liquidation Bureau in charge of new business (Laughter); Charles Dubunr, Chief Actuary; Charl~s E. Ryan, Chief of the Fire Bureau; Julius Sackman, Chief of the Life Bureau; William C. Gould, Chief of the Mutual Bureau; Edward J. Reilly, Chief of the Audit Bureau; .To,:eph F. Collins, Chief of 294 PROCEEDINGS the Rating Bureau; Victor S. Cohen, Chief of the Aecident and Health Bureau; David L. Shultes, Associate Statistician; and John Holmes' rival, Robert E. Dineen, the ''Actuary.'' (Superintendent) North Carolina-James M. Bates, Actuary; William P. Hodges, Com­ missioner. North Dakota-Harold Hopton, Chief Examiner; John C. Dustin, Actuary; Otto Krueger, Commissioner. Ohio-As always, Ohio is represented by Walt!'lr Robinson, Assistant Superintendent. In addition to Commissioner Robinson, we have Dean M, Kerr, Chief Examiner; E. G, Schuessler, Chief Counsel in the Attorney Gen~ral 's office; and W. Lee Shield, Superintendent. Oklahoma-Ralph W. Russell, Assistant Commissioner; Donald F. Dickey, Commissioner. Oregon-,Villiam F. Leary, Deputy; Seth Thompson, Commissioner. Pennsylvania-Mr. Secretary, it is my pleasure to introduce my new chief and our new Commissioner, Mr. James F. Malon~, Jr., Insurance Commissioner of the great Commonwealth of Pennsylvania. (Applause) In addition, we also have with us Mr. Oscar A. Kottler, Deputy; C. S. Lazarus, Chief of the Division of Companies; Ray T. Wilson, Chief o:f the Division of Agents and Brokers; George B. Elliott, Actuary; and Ralph H. Alexander, Deputy. Puerto Rico- Rhode Island-Francis T. McGovern, Chief Examiner; George A. Bis- son, Commissioner. South Carolina-George Benjamin, Commissioner. South Dakota- Tennesse~Richard M. Fenker, Actuary; James M. McCormack, Com­ missioner. Texas-G. Y. Keetch, Actuary o:f the Board; George B. Butler, Chair- man of the Board. Utah-Regnal W. Garg, Deputy. Vermont-Albert D. Pingree, Deputy. Virginia-Judge Harvey B. Apperson, Member State Corporation Com­ mission of Virginia in charge of Banking and Insurance; Hon. Blake T. Newton, General Counsel for the State Corporation Commission and the Bureau of Banking and Insurance; George A. Peery, Associate Chief Exe.miner and Statistician; Courtney W. Harris, Statistician for the Fire Bureau; Everett Francis, Aetuary; Mrs. George A. Peery, Moderator; George A. Bowles, Commissioner. Washington-Robert D. Williams, Special Deputy; William A. Sullivan, Commissioner. PROCEEDDiGS 295

West Vugm1a-Harlan Justice, Deputy W1sconsm-L. J, Yaudes, Deputy. Wyoming- The Commissioners from the provinces of Canada and from the Dominion of Canada, a number of them, are here, and I would like to ask Mr. G, D. Finlayson, the Superintendent of Insurance for the Dominion, to introduce the Superintendents from the various provinces. Mr, Finlayson.

Superintendent Finlayson: There are three of us present, Mr. Roy B. Whitehead, Superintendent of Insurance for the Province of Ontario; Mr. H_erbert Hunter, Superintendent of Insurance for the Province of Manitoba, and myself, Finlayson, of Canada. (Applause)

Secretary Parkinson (Illinois): Mr. Chairman, there are 43 states represented and three provinces.

President D-ineen: Thank you, sir. That constitutes a quorum and we will proceed with the next order of business.

Is the photographer on hand T There is a man up here who wants to get a photograph of the rogues' gallery. (Picture taken at this point)

I have been asked to mnke an announ<'ement that Zone 3 will hold a meeting at a place to be posted, as soon as this meeting is over.

Now, on behalf of the National Association of Insurance Commis­ sioners, I want to extend a welcome today not only to the old timers but particularly to our new Commissioners. Somewhere along- the route there has a statistical story become prevalent that the average official lif~ of a Commissioner is 21h years. I say that to the new Commissioners by ,vay of encouragement, to indieate that, first, within a very short time you will be an old timer and, almm,.t before you know it, you won't be a Commissioner. (Laughter) We are very happy to have you here and invite you to participate in the discussions and go to the meetings and do ,vhat yon can to make this organization, which is based upon cooperation, function successfully. I have one little note here. I won't read it a1l to you, but it comes from our warm friend, George LaFrance, the CornmissionC'r of the Province of Quebec, who is absent this time for the first time in many years, and who sent us a note regretting his inability to be pre:-~nt. The next order of business is the President's Address, and you people have to remember something. I gav_e you a break last December. At that time, I didn't make one, so this thing today will mean that during my tenure of office, you only had to listen to one instead of the customary two. And so, without further ado, we'll Jauneh into the subject . . . . President Dineen here read his address as follows: 296 PROCEEDINGS

ADDRESS OF PRESIDENT ROBERT E. DINEEN RATE REGULATION - AN ADMINISTRATIVE CHALLENGE Since .Tune 5, 1944, the day upon which the United States Supreme Court handed down its decision in the South-Eastern Underwriters case, the further enactment of rate regulatory laws throughout the United States has placed a new responsibility upon many Insurance Commissioners. It is this increase in responsibility, and the manner in which our Association can be of assistance in helping us discharge our new duties, that I propose to discuss today. It would b!:l well to clear the atmosphere at the outset upon one major proposition. Rate regulation is not a panacea. We all know that many factors enter into the success or failure of insurance companies. The maintenance of an adequate rate level is but a single factor. Companies with adequate rate levels have been wrecked by failure to live within the margins which the rates provide, or by bad underwriting, or by, unsound investment policies. There can be no substitute for sound management, and I know of no insurance regulatory scheme in this country which does not recognize this principle. Although the maintenance of an adequate rate level is but a single factor in the maintenance of solvency, it is nevertheless of vital importance. No management, no matter how capable it is, can long survive on inadequate rate levels. ·And since most of our companies do business in more than one state, the maintenance of adequate rate levels in all of the states in which the company does business is of the utmost concern. The extension of rate regulation places an ever-increasing burden upon the individual Commis­ sioners to think not only in terms of their own states but to think in terms of all the states in which the company or bureau whose rates are under review does business. Recently one of the leading participants in the debate on rate regula­ tion. made the following statement before a Congressional committee: ''Regulation of rates is not the only way, or even the best way, to regulate insurance in the public interest. We have recently seen an exampl~, under the strict rate regulation that exists in the State of New York, of the fail me of rate r~gulation to keep an insurer solvent.'' This statement overlooked entirely the fact that the company to which reference was made transacted seventy eight per cent of its business outside the State of New York, and that it was doing business in forty-four other states, the District of Columbia and the Territory of Hawaii. It transacted twelve lines of business. As of June 5, 1944, only two states in which it was licensed regulated all twelve lines; in fourteen states in which it did busi­ ness there was no regulation of its rates whatsoever; in seventeen states only its compensation business was regulated. Whether or not a company makes money in any particular state on a given line of insurance depends, of course, on a variety of factors. The amount which a company pays for its business varies from state to state. The quality of its underwriting may also vary. In the past the basic rate level may have been determined by regulation, by competition, or by a PROCEEDIXGS 297

combmat10n of both. In, hearmgs before the Committee on Rates and Rating Orgamzations of the National Associat10n of Insurance Com­ missioners, representatives of bureau companies have frankly conceeded that in order to meet competition in some states and at some times, bureau companies have been forced to sell insurance at rates lower than those called for by the experience of the bureau. The inference is that had the competition not existed the higher rate would haYe been charged. This procedure may result in a reduced margin 0£ profit, no profit, or even a loss, depending upon the facts in ,each particular case. The loss may be offset by gains in other, states where conditions more favorable to the company prevail or by gains in other lines.

Recently the New York Department conducted a study of a national rating organization. This organization collected its experience, used sub­ stantially the same forms and promulgated a general rate level, all on a national basis. In spite of that fact our examiners found instances where the iUenticaJ contract was being sold at different rates in differ~nt states heeause of purely local developments unrelated to the loss experience. In the past each state was a law unto itself antJ. the rates charged

were seldom, if ever1 the concern of other state:,. Differences in rate levels were nttributed to differences in coverage, acquisition coiit~, experience, etc. It was frequently said that because of these local variations, comparisons of rate le,els were of no value.

The prospective application of the Robinson-Patman Act aft~r Janu­

ary 1, l!J4811 has given this situation a new perspective. That law (Section 13) prohibits '' any person engaged in commerce * * * to discriminate in price between different purchasers of commodities of like grade and qual­ ity, * * * where the effect of such discrimination may be substantially to lessen competition or tend to create a monopoly in any line of commerce.'' It also forbids the sale of '' Goods in any part of the United States at prices lower than those exacted b;r said person elsewhere in the United States for the purpose of destroying competition, or eliminating a com­ petitor in such part of the United States; or, to sell or contract to sell, gootJ.s at unreasonably low prices for the purpose of destroying competition or eliminating a competitor." This statute also provides, and this is sig­ nificant, that '' upon proof being maUe, at any hearing on a complaint under this section, that there has been discrimination in price or services or facilities furnished, the burden of rebutting the prima facie case thus made by shm~ing justification shall be upon the person charged with a 1 violation of this section. ' It will be noted that the price discrimin:itions mentioned must be such

l. :Many observers feel that despite the uncertainty as to whether or not in:mrance constitutes "goods" or "commodities" as thos!.' words are u~ed in the Hobinso11- Patman Act (see Beech!ey v. Mulville (1897), 102 Iowa 620, 70 N. W. 107, 71 N. W. 428; State ex f'e!. Taylor v. Ross (1906. 4 Ohio N.P.N.S. 377: Speegle v. Board, of Fire Underwritera, 24 Adv. Cal, Reports. :n, Sept. 20, 1946); but see Queen Insurance Oo. v. Texas ( 1893), 86 Tex. 250, 2-! S. W. 397; Aetna Insurance Co. v. Commonwealth. 1899), 106 Ky. 864. 51 S. W. 624; flarria v. Commonwealth (1912), 113 Va. 746,845, 73 S. E. 561; Brock v. Hardie (1934), 114 Fla. 670, 154 Southern 690), the nrr fact that the Robinson-Patman Act is specifically mentioned in U. S. Puhlic Law 15 is a dear indication that Con­ gress intended its provisions to apply to the insurance business. 298 PROCEEDI~GS as. to lessen competition substantially or tend t& create a monopoly or to destroy competition or to eliminate a competitor, However, practically every state in the Union now has a statute upon its books which prohibits insurance companies from promulgating rat.es which are unfairly discritni· natory. These statutes do not provide that in order to make a case against the offending insurer the complainant must show that the rate quoted or used tended to lessen or d,estroy competition, create a monopoly or eliminate a competitor. It is enough if the discrimination is unfair.

It seems inevitable that as time goes on there will be an increasing interest upon the part of the various states as to what policyholders in other states are paying for insurance. The citizens of each state are entitled to know, and will expect their Insurance Department to know, whethi:,r the prices paid for insurance protection in that state are comparable to those paid elsewhere. Cognizant of its responsibilities under state laws pro. hibiting unfair discrimination and under the federal acts, the industry itself has been prompt to re<'ognize this new development and has sup­ ported in the All-Industry Bills provisions designed to facilitate the exchange of rating information among state.s. ThMe companies and rating organizations which operate on a national basis have anticipated that there will be an increasing interest upon the pint of individual Commis­ sioners to ascertain the treatment which they have accorded their policy· holders in other states. Where there is a difference in rate levels, the companies and bureaus should be prepared to ju~tify the difference.

It is manifest that these developments, nnmely1 the spread of rate regulatory laws and the impact of federal laws, will place an ever-increa:oing r.esponsibility upon Insurance Commissioners. And it may be noted that this responsibility is being placed on many Commissioners at a time when underwriting in many lines is unsatisfactory, and in some lines is being conducted at a loss, in spite of a statutory requirement that rates should provide a reasonable profit. Thm:te state:'! which have already undertaken this obligation have recognized the need for increased personnel and increased budgetary a1lowances to compensate therefor. But while the Commissioner may and should rely upon the study and advice o.f his technicians, in the final analysis the responsibility as to whether a rate should be approved or disapproved rests upon him, I am pleased to r~port to you that the National Association of Insur­ ance Commissioners has been alert to the problems and responsibilities incident to rate regulation and that ways and mrans have been and are being devised to help meet them. One of the problems in the past which has beset those Commissioners who have been charged with the regulation of rates has been the absence of homogeneity in the figur~s. Commissioners have come to me and expressed complete inability to compare the figurr.s of competing companies and variations in their rates, when no two of them kept their books upon the ·same basis. Your Association created a Committee on Uniform Accounting. The New York Department, acting under special appropriations of the Legi~lature for that purpose, has establish~d a staff of accountants and statisticians who have been engaged for eighteen months in making an examination of the records of various companies in all lines of business in order to lay the foundation for PROCEEDINGS 299

u01fo1m class1ficat10ns of accounts. When that work is completed - and it mvolved further consultat10n behrnen the Association and the mdustry - we shall have laid the grouudwork to facilitate compadsons of the operating results of the companies whose rates are under re\·iew. And I may add in passing that uniform classifications of accounts do not mean the end of competitive rates. On the contrary, they should stimulate a healthy competition between companies because Yalid comparisons of details of operations should then be possible. Thos!;l of you who have had experience in pa)'edng upon rates know the problems encountered in attempts to rate risks by size. That certain economies go with size is self-evident. The prob em is to pads on to those large risks the economies to which they iue entitled. without at the same time placing a disproportionate burden on the smaller risks with a re­ sultant unfair discrimination. That problem is inextricably interwoven with the development of uniform classifications of accounts. If rates are to be made properly on a size-of risk basis, the cornerntone of any such effort must be uniform classifications of accounts. If all the companies do not start from substantially the snme accounting premise, common sense tells us that they cannot conceivably arrive at results susceptible of comparison. A committee of your Association, undtr the chairnrnmhip of Commissioner HoJ.ges, is working on this phase of the problem. One of the most baffling features of in,::urnnce company statements is the gain and Joss exhibit. I have had businessmen who take pride in their ability to read a statement and who serve as members of the board of directol'S of fire and casualty companies, tell me that they cannot in­ terpret an insurance gain and loss exhibit. ·when a nmu is handed a gain and loss exhibit which shows that the company ha~ made two million dollars and is told that actually the company lost two million dollars, or vice versa, he cannot have a very high opinion of the basis upon which such gain and loss statements are computed. Thinking people in the business realize that :improvement in this direction is long since overdue. "'hile the Insurance Accountants Association has a ('ommittee working on a ·revised fire and casualty statement blank, it has given no consideration to a revision of the gain and lof!s exhibit, or, as it is calle(l in the statement, the Underwriting and Investment Exhibit.2 Your Association has a subcommittee stud.dog· the 1921 "Standard Profit Formula,'' which embraces this problem. Representatives of the Fire Insurance industry at the Grand Rapids meeting of this Association in December, 1945, stressed the necessity for the 11iloption h:v the states of uniform margins for profits and conflagrations, pointin~ out that if the states did not adher~ ,vith a considerable degree of uniformity to a standard formula, unnecessary confusion would ensue. This contention upon the part of the industry focused attention upon the ] 921 formuJa. Impetus for a reconsideration of the 1921 formula came from another direction.

2. Mr. T. F. Tarbell, Chairman of th.c :Joint Conunittel" on. l';1ifor111 ,\(•,•o,mting of the Insurance Accountants Assoernt10n and the Association of C'a:malty and Surety Accountants and Statistkians. speaking at a nwl'ting (>f the Tns,,ram·t, Accounting and Statistical Association in Chicago on May 16, 1947, stated that "no particular thought-was given to rhnn~inc: the prindplr of tlrnt I 1rnderwriting and investment) exhibit" by his Committee in the con~tructinn of the indt1stry·s pl'Oposed new blank. 300 PROCEEDINGS

As of May 16, 1947, fourteen states which had not regulated :tire insurance rates before June 5, 1944 - the date of the S. E. U. A. decision - had enacted rate regulatory statutes for the fire insurance business. It is but natural that Insurance Commissioners, charged for the first time with the responsibility of regulating fire rates, would want to review the history of the 1921 formula and its applicability to the fire insurance business in the light of present-day conditions. A great deal of water has gone over the dam in the quarter of a century since the formula was first adopted. Any student of the problem today would naturally ask: Has the formula stood the test in the courts 7 Has it met with the approval of the text writers T Has it been uniformly aceept~d, and i£ not, why not, Have changes in the times made revision necessaryf

Has the reduction in interest ratesa whieh has affected all branches of the business, necessitated a revision in ou1· previous thinking on pro:6.tf As of June 30, 1921, the national debt stood at $23,977,000,000. As of Jun~ 30, 1946, it stood at $269,422,000,000 - over ten times greater. Our economists tell us that while the national debt remains at this level interest rates will continue to be low. Is this a factor which should be taken into consideration today - and tomorrow - in determining a pro:fit formula T That portion of the 1921 formula dealing with conflagrations presents similar questions. The 1921 formula defined a conflagration as any loss in excess of a million dollars. It also provided that a reasonable under· writing profit is 5% and allowed an additional 3 % for conflagrations. In this connection the formula stated: '' The 3 per cent. allowance for conflagrations is subj~ct to revision if and when the records of conflagrations to be collected by the National Board shows that such 3 per cent. is excessive or inade­ quate.'' This commitment - arrived at by a voluntary agreemenV between the National Association of Insurance Commissioners and the National Board of Fire Underwriters - imposed an obligation upon your subcommittee and the industry to review the statistics over the twenty-five year p!;!riod. Preliminary figures show that the ''conflagration'' losses paid averaged about 1 % of the premiums. When the first million dollars of each loss is charged to the experience of the state in which it occurs and the remainder is charged on a countrywide ba:,is, in accordance with the terms of the agreement, the losses are substantially less than 1 % . The difference between 1% and 3% of the average annual nationwide fire insurance premiums (for stock companies licensed in New York) of $565,570,000 during the twenty-:tive years from 1920 to 1944, inclusive,

S. For instance, in 1921 when the formula was adopted the average net rate of intel'est earned by United States life insurance companies was 5.plus%. In 1946 it had fallen to 2.92%, an all-time low. And bear in mind that if our life insur· anee companies had to reinvest their entire portfolios at this time, the yield would be still lower. 4. See Majority Report of Committee on Fire Insurance reported on page 20 of the Proceedings of the National Convention of Insurance Commissioners, 1922. PROCEEDI:NGS 301 amounts to $11,311,000 per annum. In the meantime, however, we have had no conflagrat10n comparable to the San Francisco fire. I might add parenthetically that the history of that fl.re, as :;,ummarized in the Report of the Special Committee of the Board of Trustees of the Chamber of Commerce o:f San Francisco, dated November 13, 1900, should be required reading. for every su~ervisory official entrusted with the responsibility of passmg upon fire msurance rates. Furthermore, js the million dollar limitation for conflagrations originally fixed a proper one in light of today's conditions, having in mind the reduction in the value of the dollar and the fact that we are now living in the era of atomic energyf5

In addition to its exploration of the 3% allowance for conflagrations, the subcommittee will attempt to obtain data as to the actual profits or losses on fire insurance since 1921 in relation to the 5 % allowance for profit, This phase presents certain difficulties because, strange as it may seem, there are at the present time no separate profit figures on fire insurance in composite form covering this twenty-five year period. Figures as to premiums earned and losses incurred ( as well as written and paid) are available for the twtnty-five years, but expense figures for fire separately have been available only since 1935. Even these figures, collected under the New York Fire and Marine Experienc~ Exhibit, suffer from statistical shortcomings which diminish their usefulness. It will be necessary to adjust any data compiled for distortions which are unavoidable in the present underwriting exhibit,

And what of the improv~ments in accounting methods over the last twenty-five years 1 Cost accounting, to mention a single brand1 of accounting, has made tremendous strides in industry generally in the last twenty-five years. How can we better take advantage of th~se developments in the field of accounting not only in applying a formula but in showing its operations in a simplified and intelligible gain and loss exhibit which will make true and accurate figures available to those who make, regulate, and pay th~ rates f The questions which I have prupounded in connection with this par. ticular phase of the problem are by no means all-inclu.sive but they indicate, in my opinion, the necessity for a full exploration of the 1921 formula.

They also indicate something el:-e. Before .Tune 51 1944, a majority of states regulated workmen's compensation rates,6 but other casualty lines were, in general, unregulated. Since June G, 1944, twenty-five stat~s have undertaken the regulation of many casualty lines. 1 What formula will be applied by the states undertaking to regulate these other lines for the :first time1 And will a fommla which works adequately in one line of business

5. The New York Standard Fire Insurance policy (Insurance Law Section 168) excludes "l?,SS by fire or other perils . , , by: (a) enemy attack by armed forces ... 6. Alamaba, Arizona, Arkansas, California, Colorado. Delaware, District of Colum­ bia, Florida, Georgia, Indiana, Kansas, Kentucky, Maine, Maryland, Massachusetts, Michigan, Missouri, New Hampshire, New Jersey, New York, North Carolina, Oklahoma, Pennsylvania, South Carolina, Tennessee, Texas, Utah, Vermont, Virginia, Wisconsin. 7. Alabama, Arizona. Arkansas, Colorado, Connecticut, Delaware, Florida, Georgia, Iowa, Kentucky, Maine, Maryland, Michigan, MississippL Montana, Nevada, New Mexico, North Dakota, Oregon, South Carolina, South Dakota, Tennessee, Utah, Vermont, Wyoming, 302 PROCEEDINGS be satisfactory in another line of business1 Where will the cause of state regulation stand if ~ach state develops a formula of its own 1 And how will we square ourselves with the spirit of the Robinson-Patman Act, a federal statute designed to prohibit unfair discrimination, and of state acts prohibiting unfair discrimination, if the policyholders in one state are called upon by law or administrative regulation to pay rat~s which include a higher margin of profit than that allowed in other states, or vice versa1

One of our rate structures, in which stock and mutual companies vie for business, contains no allowance for profit whatsoever. It poses the question: Are those companies which are engaged in that business being conducted as eleemosynary institutions, or is provision being made for profit in the rate structure indirectly through redundant 1oading'l I Taise these questions today because in my own state where we have had experience with rate regulation since 1922, the volume of rat"'·regulated business Jast year exceeded $400,000}000 in a state containing approximately one-tenth of the nation's population. With rate r!;lgulation on practically a countrywide basis, the amount of rates regulated will run into billions of dollars.

We a.re no longer the sole arbiters as to the quality of our performance; Congress has the right to relieve us of the obligation to regulate rates if it is not satisfied with our work. Furthermore, Congre:;s, acting through its committees or through its so-called grand jury, the Federal Trade Commission, has the right to scrutinize our performance from time to time even though it does not care to undertake the regulatory burden itself. Legislative committees in the various states will have the same privi1ege. In my own State of New York we already have had on se,·eral occasions legislative investigations of insuranc,e rate making. Under the circum­ stances the picture is now clear. The states, in the main, have enacted rate regulatory laws pursuant to the Congressional invitation contained in U. S. Public Law 15. That, however, is merely the beginning of the under­ taking. It is now our job to execute the second step, namely, to administer these laws fairly and competently. 'Nha.t we do must make sense; it must be able to withstand critical review at any time. And it must make sense not only within the confines of a particular state; it must do so in relation to the activities of other states in the rate regulatory field. The drafters of the model bills did not add those provisions of the biI1s aIIowing for cooperation among states and the exchange of rate regu!atory information simply as a gesture. Those provisions were incorporated therein as a part of a cooperative policy among states under which rat!;l regulation must now :function on a national basis.

We have accepted a tremendous responsibility. The freedom of indi­ vidual action which state regulation contemplates should not encourage us to immunize ourselves from the activities of our brothet Commissioners in this field. We shall not achieve administrative perfection in rate regulation in a day. It took several years of intensive work following June 5, 1944, to evolve the present regulatory pattern and even that PROCEEDINGS 303

pattern is not yet complete.a For years to come the administrative de· velopment of a nationwide rate regulatory scheme will be in progress. To be successful its development must be characterized by wisdom and tolerance for the views of others not only within th~ borders of our respective states but outside. We must be at pains not to prescribe un­ necessary administrative procedures peculiar to our own state and at war with workable administrative procedure~ in other ~tatN1. A prolixity of conflicting and burdensome administrative requirements can bring the whole house of state regulation crashing down on our heads. The National Association of Insurance Commissionf'rs can serve a useful purpose in preventing any such catastrophe. For seventy-six years this Association has served as a vehicle for bringing Commissioners together and having them meet one another personally. The work of its committees has further serYed to weld the bonds of cooperation among the various states. I can foresee the advent of the day, not far distant, when one of your most important standing committees will be the Committee on Rates and Rating Organizations. That committee should serve as a clearing house for the problems incident to the operation of a rate regulatory system on a coast-to-coast basis. As your president, I have done everything within m~· power to utilize to the fullest extent the machinery of this Assoeiation to achieve the purpose for which it was created - cooperation among the states. The continuance of that cooperation in rate regulation is essential. Adherence to this policy will make certain that rate regulation on a state level, integrated through this Association, will function successfully.

President Dineen: You kno,v, when you think about making these Presidential addresses, it reminds me of my years in law school. At the compl.etion of my three years in the College of Law of Syracuse University, the only thing I could remember that anybody ever said at any time while I was there was the fact that one of my fellow students greeted the professor on medical jurisprudence one morning with the remark, '' Good morning, Doctor! Where's your horse,'' The next order of business will be to present to you the report of the Secretary, Commissioner Parkinson, Do you have it ready, Commission~r Parkinson,

Secretary Parkinson (Illinois): Mr. President, ladies and gentlemen: The report of the Secretary will be very bri!c)f. It consists only of a :financial report of the office of Treasurer.

Secretary Parkinson read his report as follo,.,·s: s. Rate regulatory legislation is still pending m Califorma. Connecticut Florida, llhnois Massachusetts, Missouri, Nebraska New H11mpsh1re, Ohio, Pennsylnmia, Rhode '1s1and, Texas, Wisconsin and the District of Columbia. 304 PROCEEDINGS

REPORT OF SECRETARY-TREASURER NATIONAL ASSOCIATION OF INSURANCE COMMISSIONERS MAY 28, 1946, TO MAY 24, 1947 Jess G. Read, Seeretary-Treasur~r May 28 to July 20, 1946 Lucy Conaway, Acting Secretary July 21 to September 19, 1946 N. P. Parkinson, Secretary-Treasurer September 1, 1946, to May 24, 1947 May 31, 1946, Balance on hand as per last Report of Treasur!:'r ...... $1,449.86 Contributed by StoJtes @ $150: Alabama, Arkansas, Cal­ ifornia, Colorado, Connecticut, Florida, Georgia, Hawaii, Idaho, Illinois, Indiana, Iowa, Kansas, Kentucky, Louis- iana, Maine, Maryland, Massachusetts, Michigan, Min. nesota, Mississippi, Missouri, Montana, Nebraska, New Hampshire, New Jersey, New York, North Carolina, North Dakota, Ohio, Oregon, Pf;!nnsylvania, Puerto Rico, Rhode Island, South Carolina, South Dakota, Tennessee, Texas, Utah, Vermont, Virginia, Washington, West Virginia, Wisconsin, Wyoming. 45 States @ $150 ...... $6,750.00 Oklahoma $100, Delaware $75, Nevada $75 ______250.00 Total collected from states ------···-···--········-····-···· 7,000.00 Received from sale of Proceedings--180 copies @ $1.50 270.00

Total Cash ----····-···········--············--···---··········----············-- $8,719.86 Disbursements - Summarized Printing, Letterheads, Committee Lists, Envelopes ____ .... $ 361.66 Printing 1946 Proceedings ····-··········-····-·····--········--·······-···· 2,267.37 Flowers, Jess G. Read Funeral ·--·-········-····---·····----·-·······-···- 26.49 L, W. Hoskins Co., Reporting Portlalld Meeting, Jun~, 1946 ·················································································· 602.99 L. W. Hoskins Co., Reporting New York Meeting, De- cember, 1946 -----·--······----··········----····-·--····----······----··-····· 374.31 Telegraph and Express Charges 26.04 Expenses Fraternal Committee Meeting, Commodor~ Hotel, N. Y., 1946 ·······----···········-··-----··················-······· 49.40 Allied Van Lines, moving Secretary's files and records from Oklahoma City to Springfield ------···---···--·-­ 106.67 Advanced for Expenses - Examinations Committee ·---·· 100.00 Secr~tary's salary - Jess G. Read, April 1, 1946-July 20, 1946 ··········· ································ ...... 595.00 Lucy Conaway - Stenographic services and Acting Sec- retary --·--··-··------·······---······----·-··---·--···-··-·-·-----··-·--·····---····· 250.00 Secretary's salary - N. P. Parkinson, September 1, 1946-April 30, 1947 ...... •...... •..... 954.40 Collector of Internal Revenue, Social Security ·····-········· 26.02 Collector of Internal Revenue, Withholding tax ...... 57.01

$5,797.36

Balance on hand May 24, 194 7 ····--······-----·----·········---··------$2,922.50 PRoCEEDINGS 305

Secretary Parbnson (Illinois): Mr President, I move this report be rere1ved subJect to a report on 1t from the Auditing Committee.

Commissioner McCormack (Tennessee): I second the motion.

President Dineen: It has been moved and seconded that the report of the Secretary be received subject to a report by th!3 Auditing Committee. L, there any discussion 7 All in favor, say u Aye." All opposed, "No." The ''Ayes'' have it and it is so ordered.

Commissioner Holmes (Montana): Ml'. President, I don't think there was any disposition made of the President's address and if it could be ~ent to Montana, ,vith some marginal explanation of those big words, we would appreciate it very much. (Laughter)

President Dineen: I 'II tell you what we are going to do with it. We 're going to ~end it to Butte, Montana, and have them put a copper coating on it, Daddy.

I will announce at our next session who the subcommittee will be.

I think for this bookkeeping job, if it is all right with you, 1 will designate Tom Morrill from my offi<~!3, who will undertake this assignment, and we '11 hm-e Commis,;ioner Luke Kavanaugh, foremost authority in the United States on accounting, act as his supervisor. ,vould you mind taking that assignment on, Luke, if he does an the work,

C-0·mmissioner Kava.naugh (Colorado): I would love to.

President D-ineen: There are some reports from our intrepid Chairman, Ed. Larson.

Commissiorier Larson (Florida): There are no reports, Mr. President, but I do want to make two or three mmouneements here. I feel they will be of importance and interest. As previously announced, all o-f tomorrow is given over to Committee meetings, also this afternoon, beginning at 2: 00 o 'eloek, and all these meetings will be held on the 13th iloor, in the Viking, Tower and West Rooms, as scheduled. There will be signs there and there should be no difficulty in finding the proper committee room that you might be interested in.

As previously announced, although not scheduled 011 your official pro­ gram, announced as of yesterday afternoon, there will be a meeting this afternoon at 2:00 o'clock in the West Room of the Central Office Com· mittee. I should also like to announce a meeting of the Executive Committee to com;dder unfinished business, and the report of the Committee on Blanks, 306 PROCEEDINGS

for 12:00 o'clock tomorrow in the West Room, which should be available at 12:00 o'clock. I should also announce, not scheduled on the agenda, but before the Committee on Accident and Health, Commissioner Knowlton has considered to be placed on the agenda, rulings of some of the state departments, which will also be considered by his Committee at 3:00 o'clock tomorrow afternoon.

President Dineen: There is one other announcement I want to make, and that will b~ for the benefit particularly of the new Commissioners. The older Commissionera have heard this upon many occasions. We have found out from experience in operating this Association that you can't make any progress if you let all the committee reports go until the last day. We have brought two very competent girls here who ean get your work out very rapidly and we are going to follow the policy that has been followed so successfully in other years. As soon as the reports are ready, we will bring them before th\;l general session, so all the work won't be left until the last day. I will ask the various members of the committees to please do what we all want to do, and. that is to bt at the meetings on time, so we can. dispose of our affairs expedi­ tiously. By the way, is Frank Harrington here T It is 12: 00 o'clock. Did you want to bring up for consideration your motion in connection with the amendment to the By Laws T I think we have time. If we get it disposed of now, it will be just that much less we have to do. Would you care to step up to the microphone and say what is on your mind and what is in your heart'f

Commissioner Harrin.gton (MassachusettR): Mr. President and members of the Association: The business which I propose at this time is the amendment to our Constitution. I am now in my tenth year as Commissioner of Insurance, having four times outlived that average life of Commissioners. I am not bragging; I am just telling you. The longer I stay, the more foolish I feel I look. In the early days of my association with this group, I found that the work progressed a good deal more slowly than it has in the later years and yet, always with an eye for improvement in legislative procedures, it seemed to me that there is a growing attitude on the part of legislatures, led, perhaps, by the Congress at the moment, to minimize the number of committees for the purpose of speeding up the legislative work, and in looking over the group of standing committees that appear in our Con­ stitution, it seemed to me that there was a considerable amount of duplication. I talked with a number of old timers in the Association, who agreed that it would facilitate our affairs and minimize the shuttling around we have to do if we could properly reduce the number of committees to which PROCEEDINGS 307 our work 1s referred. It was with that only in mind that I had the temerity to propose a change m Article XII of the Constitution and I notified the Secretary and the Secretary has notified each Commissioner, in accordance with the provisions of the Constitution, 15 days in advance of this meeting, of the changes proposed, and the change is simply this - To strike out the list of committees presently contained in Article 6, the second para­ graph, entitled Standing Committees, and substitute in lieu thereof the following: Accident and Health Committee Blanks Committee Examinations Committee Casualty and Surety Committee, which will inelude Workmen's Com- pensation Fire and Marine Committee Laws and Legislation Life Insurance Valuation of Securities. And since coming here and since listening to the President's address, I believe that a standing Committ~e on Rates and Rating Organizations might ·well be added.

The Committee on Federal Legislation it scemf: to me is unnecessary, b~caui,e that work can be handled by the La"·s anti Legi$lation Committee. Perhaps to avoid any doubt that we intend that federal legislation shall be watched by the Lmrs and Legislation Committee, we might include Laws and Legislation, State and Federal, in that Committee.

1 As a further quotation of the change, I included: ' A quorum for the transaction of business of a standing committee shall consist of D.ve members qualified to vote.'' That constitutes the entire proposed change in the Comtitution and, by the adoption of that, you eliminate the Fraternal Committee, and the only reason for eliminating the Fraternal Committee is that fraternals transact life and accident and health busine~s. I know of no fraternal that transacts other types of business. Those types of business can be adequately dealt with by the regular committees on Accident and Health and Life Insurance. And, as a further argument for that consolidation, l point to the :fact that we ha\"e no separate committee dealing with stock life insurance or stock acci

Taxation involves laws. We can't legislate on taxation except through the Jaws of the several states, and therefore it seemed that taxation might properly be referred to Laws and Legislation.

Unauthorized Insurance likewise concerns laws.

Workmen's Compensation is a form of casualty insurance and, since we have a Casualty and Surety Committee, it seemed that that might well he included there.

Ther~ is nothing, of eourse, in the Constitution or By-Laws that will p1·e\·ent the President designating any other committees that may be absolutely necessary for the conduct of the business of the Association, special committees, or any committees which he cares to designate.

Also, there is nothing that prevents these Constitutional committees from operating through subcommittees on the various subdivisions of the business, but what we do accomplish is this. We make it easier for every­ body, the Chairman of the Executive Committee particularly, in setting up the program, because he has less committees to deal with and is less confront~d with the overlapping possibilities and the people who are con• cerned with the various committees trying to cover more than one com· mittee meeting at a time.

It will also allow a longer time for each committee to consider its agenda before recessing or adjourning.

Commissioner Kavanaugh (Colorado): Will you enumerate those Com· mittees again that you have dropped.

Commissioner Harring-tan (Massachusetts): Those committees elimi· nated are the Fraternal Committee, Social Security Committee, Taxation, Unauthorized Insurance, Workmen's Compensation, The work, however, formerly assigned to those committees is not abolished; it is simply re­ directed to other eommitt~ in the interest of concentration of effort and efficiency. Further, it makes the chairmanship of a committee a position to be sought for and is an inducement to a Commissioner who wants to have the glory of being a chairman, if there is any glory in it, to get in ther~ and pitch and get his committee started on time and get some work out of the committee. Now, gentlemen, I can give you no more arguments in favor of this suggestion than the argume11ts which have been advanced all along the line in legislatures, including the Congress, for streamlining our legislative procedures and a trend toward greater efficiency, particularly in the days ahead, when perhaps we are going to have a great deal more attention from the National Capital than we have had in the past. I sincerely hope that the merits of this suggestion will appeal to you and, Mr. President, I move the adoption of the changes to the Constitution. PROCEEDINGS 309

President Dffleen: Does anybody else want to be heard on the subject t First, is there a second t

Commissioner White (Mississippi): I'll second it.

President Dineen: Does anybody want to be heard'J

Commissioner McCormack (Tennessee): I want to move an amendment to that, that we add the Fraternal Committee to the list. Fraternal insurance is a branch of insuranc~ that is not in harmony with life insurance on a stock and mutual basis. We have many :fine fraternal insurance companies with special codes in the various states and I think, in fairness to the insurance business and the millions of fraternal policyholders, they should be repres~nted by their committee, and I move that to that list we add the Fraternal Committee.

President Dineen: Commissioner MC',Cormack, you will recall that when you people elected me President, I had won the Nobel Prize for 15 years as a skilled parliamentarian. Remember that. Remember that meeting in Chicago, where in 10 minutes you fellows had me so boxed up I didn't know whether I was going or coming'f Now, I have to raise a point of order and I have to apply for help. Here is a former member of the United States Senate. (Former Senator Hebert of Rhode Island) He ought to know something about parliam~ntary procedure, eYen i-f he is not one of the Commissioners. What I want to know is this before we go on. As I understand our Constitution, it says if we are going to make a chang~, you have to submit it to the membership in advance of the convention. Now, that, as I understand it, has been done in this case, but does that give us the right, once that has been done, to modify that from the floor or, in other words, have we got to adopt the proposal he submitted or have we got to accept it as it is or have we got to reject it, or do we have the power to modify it here on the floor T In that, I am looking for guidance. What do you say, Ed. Larson 'f

Secretary Parkinson (Illinois): Mr. Chairman, may I offer my opiniont This proposal was presented to drop a specified number of existing com­ mittees. The suggestion by Commissioner McCormack would have the ~ffect of adopting the resolution almost entirely but only in part. I don't think, personally, that the matter of notice should pre\·ent adopting the resolution partially.

President Dineen; Well, now, you understand, ,Jame:-, I am not taking any slant on this; I am just trying to be the Chairman, and I just want to make sure that what we are doing is according to Hoyle.

Commissioner McCormack (Tennessee): Well, just as a matter of know. ing what we are doing, as I understood it, the proponent of the motion added on a committee himself on Rat~s and Rating Orgonizations during 310 PROCEEDINGS his talk. lf he had the right to add that one on, we certainly have the right on the floor.

President Dineen: He may have added it on, but we haven 1t got to that y~t. Now, I haven't any disposition to stifle debate. If it is the will of this convention that we consider these changes, it is all right with me.

Commissioner Thompson (Oregon): Mr. President, Article 12 with respect to amendments says: '' This constitution may be altered or amended at any m.eeting of the Association by an affirmative vote of a majority of the members qualified to vote provided that previous notice of the proposed amendment has been mailed to all members by the secretary­ treasur~r or the chairman of the Executive Committee at least 15 days prior to the meeting.'' It would appear that the language is clear, that if a proposed amendment has been sent in accordance with the Amendments section of the Constitution, then the discussion is before this Association and the requirements have been complied with and that any final determi­ nation by this Association in full meeting is in compliance with the section of the Constitution regarding amendm1:mts.

Commissioner Harrington (Massachusetts): Mr. President, since the point of order has been raised, it seems to me that I am probably out of order in suggesting the addition to this list of the Rates and Rating Organizations Committ~e. I think we are dealing with a little bit different situation and one which does not go to the heart of changing the Constitu­ tion. It seems to me, as I recall the provisions for changing the Constitution, a legislative body has the right to act on the proposed Constitutional change only and either accept it or rej.ect it. I may be wrong in ihat but, to my recollection, that is the procedure that is followed and, to avoid any difficulty about the legality of amending this Constitution, I withdraw any amendment I made and submit the matter simply upon the Constitutional amendm!;lnt as legally .sent out by the Secretary.

Commissioner McCormack (Tennessee) Mr. President, now that the proponent of the motion himself withdraws an amendment that he himself endorsed in regard to rates and rating organizations, which is an admission of the fact that the proposal is not complete, I now move that the resolution be postponed until the December meeting for further consideration and submission to the Convention.

President Dineen: The Chair will recognize Commis.sioner Stone of Nebraska.

Commissfoner Stone (Nebraska): It may not be according to protocol for a new Commissioner to speak, but it would seem to me that it would be all right to have Commissioner McCormack 's motion stand, since that does not change the Constitution, and it seems to me you can accept Commi.ssioner Harrington's motion to change the Constitution in whole or in part and you don't need to change that part of the Constitution. So I PROCEEDl!'IGS 311 think your motion would be in order. Comm1ss10ner Harrmgton 's motion adding the Rates and Ratmg Orgamzahons Committee nught not be in order, since that was not submitted to the Commissioners, but certainly yours would be, because that doesn't change the Constitution in any way,

Presidewt Dineen: Is the gist of your position that we must consider only the mat.erial that was sent to us in the notice1

Commissioner Stone (Nebraska): I would think so, where you have to designate in that just certain committees. However, I think that Com­ miss10ner McCormack 's motion would be in order, since that leaves the Constitution exactly as it is and let that committee stand. Then you could consider just those other committees that are contained in Commissioner Harrington's original report.

President Dineen: Would the members of this Association look upon it askance if your President turned to the Sage of Rhode Island, who is not a rnembed As an old parliamentarian, what do you say about this, Senator Hebert 1

Senator Hebert: Mr. President, it seems to me that it is always in order to accept the motion to amend the Constitution, in whole or in part. The proposal of the Commissioner from Tennessee now is to accept a part of the proposed amendment and to reject a part. It seems to me that is quite in order.

President Dineen: That is the way they did it in the Senate when you were there, huh 'i' Does anybody else want to be heard on this thing T

Commissioner lla.rrington (Masi'achusetts): l\Ir. Chairman, I have no purpose in rushing this thing through the Association. It has only been received ,vithin probably the minimum statutory time within which notices of this kind shall be given, so I will second Commissioner McCormack 's latest motion to lay it on the table until the December meeting.

President Dineen: It's a great thing to have a good backfield up here. The motion before us now is to lay Commissioner Harrington's pro· posal on the table until the December meeting, which will give the members and those interested an opportunity of exploring Commissioner McCormack 's motion. Are you ready for the question 1 Is there any debatef All in :favor, signify by saying "Aye." Opposed. Well, we would better have a roll call. What about it'i' Shall we have a roll call or a show of hands'\' (Show of hands caned for All right, a11 in favor of the motion putting this discussion over until Dec~mber, all in .favor of that - and this is for Commissioners only or those representing their Departments - raise their hands. (21) All 1ight, the noes. (Only a few hands) Obviously the" Ayes 11 have it and it is so ordered. 312 PROCEEDINGS

Is ther13 any other business to come before the houset As a special service here today we have a facility downstairs that enables you to fill out your sheets on the races and we have had the American Surety Company write a bond to guarantee that no Commissioner will dip in the Depart­ m~nt 's till if he loses over $4.00, so you can all go and relax.

. . , Recessed .• , •

WEDNESDAY MORNING SESSION, JUNE 3 The second Plenary Session, Wednesday morning, was called to order at 11:15 o'clock, President Robert E. Dineen presiding.

President Dineen: The meeting wilI be in order. We are now ready to receive reports and I will recognize the Chairman of th13 Executive Committee for the report of the Executive Committee.

. , . Commissioner Larson here read the Ex!3cutive Committee report, in three separate sections as follows:

REPORT OF EXECUTIVE COMMITTEE NATIONAL ASSOCIATION OF INSURANCE COMMISSIONERS ATLANTIC CITY, N. J., JUNE 1, 1947 The Executive Committee of the National Association of Insurance Commissioners convened in the Btnjamin Wei;it Room of the Haddon Hall Hotel, Atlantic City, N. J., at 2:30 P.M., Sunday, June 1, 1947, with the foIIowing members present: J. Edwin Larson, Florida, Chairman Robert E. Dineen, New York, President

Seth B. Thompson1 Oregon, Vice-Presidimt James M. McCormack, Tennessee, Vice-Chairman N. P. Parkinson, Illinois, Secretary·Treasurer W. Ellery Allyn, Connecticut William P. Hodges, North Carolina David A. Forbes, Michigan Luke J, Kavanaugh, Colorado Charles Purvis, representing Wade 0. Martin, Jr., Louisiana Reginald Garff, representing Oscar W. Carlson, Utah. Several other Commissioners were in attendance at the meeting. The Committee considered the agenda, a copy of which is attached hereto, which had been prepared by the Chairman. The first two items on the agenda, namely, securities registered in the name of a nominee and the daily rate of expenses of examiners on con· vention examinations, were referred to the Committee on Examinations. PROCEEDINGS 313

The proposed amendment to the constitution regardmg the Examina­ tions Comnuttee, submitted by Comm1ss10ner .Jackson und Zone 3, was briefly discussed. Commissioner Jackson was not present at the meeting and there seemed to be some que11tion as to whether or not the proposed amendment had been circularized among all Commis~:ioners prior to this or the last December meeting. It was the consensus of opinion of the Committee that this proposed amendment should be laid over until the next meeting of the Association. (In the meantime Chairman .Jackson requested that the proposed amendment be held oYer.) Your Committee next gave consideration to the matter of a committee to function with respect to a life insuranee tiling un,ler the C. S. 0. r~serve and non-forfeiture statutes. After brie-f llii,:cu!-sion this matter was referred to the Life Committee for consideration. The matter of consideration of cousolidating the committees of the National Association of Insurance Commissioners was uext wesented by Commissioner Harrington and referred to the Asl:lociation for consideration at this meeting.

Mr. Robinson of Ohio, Chairman of the Committee 011 BlankR, an­ nounced that his Committee's l'eport wa:, not available at this time. After discussion and in line with expediting and prepnring the agendas for the various committees of the National .Association of Insurance Commissioners, the following motion was made by Commis:-iouer McCormack, seconded by Commissioner Thompson and unanimously adopted: '' That the Chairman of the Executive Committee be authorized to refer subjects recommended to him for discmsinn to appropriate Committees according to his best judgment, such ~ction not to su:pers~de the authority of the Chairmen of otl1er Committees to consider proper subjects for their committees at the discretion of such committees.'' Invitations to bold the December meeting were received from Com­ missioners Butler of Texas and Larson of Florida. Whereupon a sub· committee of Commissioners Dineen, Allyn and Parkinson, was appointed to take the matter under consideration and to report bark at a later time during this meeting. In connection with the in,itations, Commissioner McCormack moved, and Commissioner Forbes seco11ded, that in the assign­ ment of rooms, the headquarters hotel take care of all C'onunis,;ioners and members 0£ their staffs. The motion was adopted. Respectfully submitted,

J, Edwin Larson, Chairman

AGENDA

( 1) Securities registered in the name of a nominee. (2) Daily rate of expenses of examiners on Conwntion Examina­ tions. (At request of Commis:;ioner George A. Bowles, of Virginia, and Zone 2.) 314 PROCEEDINGS

(3) Consideration of amendment to Constitution regarding Examina.· tions Committee. (At request of Commissioner Owen B. Jaekson, of Missouri, and Zone 3.) ( 4) Consideration of Committee to function with respect to life insurance filing under the C. S. 0. Reserve and Non-Forfeiture Statutes. (5) Consideration of Conso1idating Committees - Suggestion Chair­ man Larson. (6) Consideration Report Committee on Blanks.

REPORT OF EXECUTIVE COMMITTEE NATIONAL ASSOCIATION OF INSURANCE COMMISSIONERS ATLANTIC CITY, N . .T., JUNE 3, 1947 A meeting of the Executive Committee was held in the Benjamin West Room of the Haddon Hall Hotel at twelve o'clock noon on Tuesday, June 3, 1947. The following members of the Committee were present: J. Edwin Larson, Florida, Chairman Robert E. Dineen, New York, PreBident Seth B. ThompBon, Oregon, Vice-President James M. McCormack, Tennessee, Vice-Chairman N. p_ Parkinson, Ill~ois, Secretary-Treasurer W. Ellery Allyn, Connecticut William P. Hodges, North Carolina David A. Forbes, Michigan Deputy Charles Purvis, representing Wade 0. Martin, Jr., Louisiana At the beginning of the meeting Superintendent Dineen announced the sudden and untimely passing of our mutual good friend, Mr. Albert N. Butler, and out of respect to him the assembly stood for a moment of silent prayer. Superintendent Dineen announced that the annual meeting and ceremony of the Pamunkey Tribe of Indians had been postponed out of respect to Mr. Butler, who had been for many years very active and enthustiastic concerning this association and its activities. The first item of business was the report of the subcommittee appointed to consider the location of the December meeting. The committee reported that consideration had been given to the invitation of Florida. Commis­ sioner Allyn moved that the Executive Committee accept this invitation and that the December meeting be held in Miami Beach with the Flamingo Hotel as headquarters. The motion was seconded by Superintendent Dineen and carried. The dates for the meeting are Sunday, December 7th, through Wednesday, December 10th. Commissioner Harrington extended an invitation for the June meeting in 1950 to be held in Boston, Massachusetts. Commissioner Stone of Nebraska extended an invitation for the June meeting to b~ held in Omaha in 1948. Mr. Irwin Waller, President of the Professional Life Insurance Com- PROCEEDIXGS 315

pany of Jacksonville, Florida, extended a cordial invitation to all members present to come to Florida for the December meeting this year. Chairman Forbes of the subcommittee prestnted the report on the central office, which was discus~ed by the Executive Committee. Upon motion by Commissioner Parkinson, and seconded by Commissioner Forbes, the report of the committee was received and taken under consideration for study until the following day at 10:45 A.M. Commissioner McCormack raised several questions regarding the report and the committee agreed to endeavor to reconcile his views prior to the consideration of the full report by the Executive Committee. Deputy Commissioner Walter Robinson, Chairman of the Committee on Blanks, next presented the report of his committee, which report, with three minor changes, was adopted by the Committee and recommended to the Association for its consideration and approval. Your Chairman would be most derelict in his duty and unappreciative of the efforts of our hosts, Commissioner Carey anci. Deputy Commissioner Gough, if he did not express at this time his appreciation for the untiring efforts put forth in order to make this meeting the success which it has been. Deputy Commissioner Gough deserves a round of applause for his ski1lful planning and for his active supervision of the minute details in connection with the arranging of the program. Thanks also from your Chairman are extended to all members of the committee on arrangements, headed by Mr. Carrol M. Shanks, for their unsurpassed and complete efforts of hospitality and entertainment. The Committee adjourned until 10 :45 A.M. on Wednesday. R~spectfully submitted, J. Edwin Larson, Chairman

REPORT OF EXECUTIVE COMMITTEE NATIONAL ASSOCIATION OF INSURANCE COMMISSIONERS ATLANTIC CITY, N. J., JUNE 4, 1947 The Executive Committee met on June 4, 1947 at 11 A.M. with the following Commissioners present: J. Edwin Larson, Florida, Chairman Robert E. Dineen, New York, President Seth B. Thompson, Oregon, Vice-Prfsident Nellis P. Parkinson, Illinois, Secretary-Treasurer James M. McCormack, Tennessee, Vice-Chairman William P. Hodges, North Carolina W. Ellery Allyn, Connecticut David A. Forbes, Michigan Luke J. Kavanaugh, Colorado Georg!3 A. Bowles, Virginia Deputy Charles Purvis, representing '\Yade 0. Martin, Jr., Louisiana 316 PROCEEDINGS

·Upon motion of Commissioner Forbes, seconded by Commissioner Allyn, the Committee received the report of th~ Committee on Central Office and directed the Chairman of the Committee to submit the report to the Association today for its consideration. The motion was carried. Respectfully submitted, J. Edwin Larson, Chairman

REPORT OF COMMITTEE ON CENTRAL OFFICE FOR THE NATIONAL ASSOCIATION OF INSURANCE COMMISSIONERS ATLANTIC CITY, N. J., JUNE 2, 1947 Your Committee on a Central Office :for the National Association of Insurance Commissioners wishes to submit the following report. Our Committee was appointed for the purpose of considering &D.d reporting on the feasibility of a central offir.e for the National Association of Insurance Commissioners to serve adequately the pressing needs of the Commissioners of this Association. Since the appointment of the Committee, meetings and hearings have been held in New York City in December, 1946, at Des Moines, Iowa, on May 8, 1947, and at Atlantic City, N. J., on June 1 and 2, 1947. Your Committee believes that such an office should be established on the following basis: 1. The so-called central office to be the Secretary's Office. 2. The Secretary of this Association shall be the officer in charge. 3. The office to be permanently situated in a city centrally located The city to be decided by a vote of this Association, 4. All records of this Association, except records pertaining to the valuation of securities, to be permanently filed in that office. 5. An assistant secretary to be employed and also one stenographer to carry out the expanded functions of the office. 6. Such employees to work under the direction of the Secretary and to b~ employed by him with the advice and approval of the Executive Committee. 7. No additional employees are to be added to the staff except with the consent of this Association. 8. That the office now occupied in New York by the Committee on Valuation of Securities be continued as a separate office until such time as this Association might determine that it would be feasible to consolidate th~ two offices. 9. The functions which the secretary's office would perform in the future would be (a) The usual corresponding and recording duties of the Secre· tary as prescribed by the Constitution and By-Laws. PROCEEDINGS 317

(b) A somce for mfonnatrnn pe1tammg to rulmgs, rate fihngs, leg1slatr\'e and othe1 activities of the various state depart· ments. Such information furnished shall not be eonsidered as binding on any state department. ( c) A medium for preparing and assisting in reports of com· mittees and the preparation of agenda for meetings of the Association, (d) All convention examination routine details connected with calls and assignments to zones and reports connected there· with to be handled by this office under the direction of the Chairman of the Examinations Committee.

The Committee believes that time will prove the necessity for ad­ ditional functions to be performed by this office. We are cognizant of the fact that every function that can and should be performed cannot be accomplished at its inception. W{J believe, however, that, starting in a modest way, the office and its services will grow and improve and will be of great value and help to state insurance supervisory officials.

To adequately finance such an office is the immediate problem facing us. At the present time our budget is approximately $8,000 a year, most of which is collected from contributions made by the various states. We believ~ that under the plan proposed in this report such an office could be operated on a budget of approximately $25,000, which would be a suf· :ficient amount to employ an a

We further recommend thnt the proposed committee to be appointed if this r~port is adopted, give consideration to an equitable plan for the :financing o-f the office, giving weight to its importance to each state and the amount of insurance transacted in each state.

We further recommend that if this report is adopted, the President of th~ National Association of Insurance Commissioners communicate with the Commissioner of each state, advising him officially of the expansion of the functions of the Secretary's Office, some of the reaRons for its creation and the amount of money necesRary from each state for its maintenance. We believe such a letter would be helpful to each Commis· sioner in securing the necessary amount in the budget o-f his Department. We also recommend that no salary be paid to the Secretary·Treasurer for the reason that we do not subscribe to the JJrinciple that an officer of this Association should receive remuneration fur performing the duties of his office in this Association. Neither do we ,mbscribe to the principle that a chairman of any committee, such as the Examinations Committee, should reeeive remuneration. We recommend that the office be supervi:,ed by a standing eommittee of three appointed by the President. The President to be ex officio a. 318 PROCEEDINGS member of the Committee. The Committe,e shall report direct to the Executive Committee. As a forward step to closer cooperation between the states that state r~gulation may be continued, we recommend that this Association adopt this report and by so doing authorize the Executive Committee and the President of this Association to proceed with the organization of the Secretary's Office as outlined herein. R~spectfully submitted, Jack G. McKenzie, Arkansas Charles F. ~T. Harrington, MaRRaehm1etts David A. Forbes, Michigan, Chairman

REPORT OF BLANKS COMMITTEE New York City, April 9, 1947 To the Hon. L. Edwin Larson, Chairman of the Executive Committee of the National Association of Insurance Commissioners: Sir:-The Committee on Blanks herewith submits the following report of the proceedings of its meetings held at the Hotel Commodore in New York City, April 7~9, inclusive, for adoption by the Executive Committee:

ALL BLANKS 1. Rearrangement of Schedules and Page N1tmberings - S

that tlus schedule be ehmmated as not a vital reqmrement. Information would be available on examrnat10n or otherwise on request of rnsurance supervising officials.

5. Schedule T, Part l - Stoclc Fire, Mutual Fire, Miscellaneous and Re­ ciprocal Blanks Combine present columns (2) and (3) in a single colume (2) to be captioned '' Reinsurance Assumed.'' Combine present columns ( 4) and (5) in a single column (3) to be captioned ''Reinsurance Ceded.'' Renumber remaining present columns (6), (7) and (8) to become columns (4), (5) and (6). Change footnote in Stock and Mutual Fire blanks to read: "Total of

Columns (1)-(4) to agree with page 2, item 171 and dividends with page 3. 11 In the Miscellaneous Blank reference should be to "page 2, item 20" and in the Reciprocal Blank to "page 2, item 18 plus items 19 and 20.'' Reason: To omit breakdown of reinsurance between authorized and unauthorized companies, which varies according to states and which is considered unessential because of the present basis of taxation. 6. Multiple Lines - Stock Fire, Mutual Fire and Miscellaneous Blanks It is recommended to the several states that the attached Supplemental Schedules (marked Exhibits A and B) be used o.s a temporary re­ quirement until a new combined blank is adopted for Fire and Casualty companies. The alternative :forms of Supplemental Schedules apply to Fire or Casualty companies as the ease may be. MISCELLANEOUS BLANK 7. Schedule H Delete reference to "column 2" in the heading of Schedule H. Reason; To correct reference by reason of recent change on page 3. 8. Schedule O - Part l Change referenCj3 in the heading of column (5) from "Items 1-16, Col. 5, Page 3" to read: "Items 1-16, Col. 4, Page 3." Reason: To correct reference by reason of recent change on page 3.

CASUALTY INSURANCE EXPENSE EXHIBIT 9. Ins!:lrt column numbers (1), (2), (3), (4), etc., in the captions in the lower portion of pages 2 and 3 of the Exhibit to agree with the same column numbers in the captions by lines of business at the top of the Exhibit. Beason: For convenience of reference. PROPOSED MULTIPLE LINE BLANK 10. A special subcommittee was appointed to prepare a new combined form 320 PROCEEDINGS

of Annual Statement Blank which will include provision for the report· ing of pr~miuma, losses and reserves and also accompa.nying exhibits and schedules for the various lines of business written by Fire and Casualty companies. Note: It would be desirable to hold a conference to consider this proposal during the June meeting of the N.A.I.C. at Atlantic City.

LIFE BLANK 11. Page 2, 1temB 4-8 Widen premium block and decrease space for columns (3) and (4). Beason: To provide increased space in most important columns. 12. Page 5, items 1-5 D~lete one line each in items 1, 2 and 3 and add three new lines to item 5. Reason: Present space for the reporting of valuation bases for an­ nuities is insufflcient. 13. Page 5, item 10 At end of present item add: "valued at 31h% $ .•••••...... , 3% $--···-·····, ······o/c $•••••••••••• and ...... % $ .•...... • '' Beason: Since this item is of increasing importance, a separation ac­ cording to interest rates is desirable.

14. Page 81 item 42 Between "Net Level Premium" and "Illinois Standard" insert new line to read '' Commissioners Reserve Valuation Method.'' Beason: To make provision for such method. 15. Schedule .4, Part 1 Sokedule A~ Part 2 Change the :first portion of the heading of column (1) in each schedule to read: '' Location and description of property. '' The instruction relating to incumbrances should be retained. Beason: The information which is omitted relates to size of real property and it is not considered important to show these details since they are available from company records on examination. 16. Schedule D - Part 2 Under "Description" in column (1) delete the words "including redeemable options, if any." Beaacm: Market values are used on stocks so that information as to option is not essential. 17, Page 6, Exhibit of Policie8 Combine :first two columns under Ordinary Business, now headed "Whole Life Policies,, and "Endowment Policies," into a single ·column headed '' Whole Life and Endowment Policies'' ( excluding PROCEEDINGS 321

Group). Renumber remaining columns. The columns relating to Group Insurance should be changed to appear as follows:

Group Life

Number of Amount

Policies Certi1ieates

Combine the first two columns under Industrial Business now headed ''Whole Life Policies'' and ''Endowment Policies'' into a single column headed "Whole Life and Endowment Policies." Renumber re­ maining columns. Reason: No essential information is provided by a separation between whole life and endowment policies; furthermore, many long term en­ dowment forms approximate whole lif~ forms. 18. Schedule T - Part 1 Delete columns (2)-(5) relating to reinsurance and column (6). Provide new column headed '' Accident and Health Insurance Prem­ iums.'' Amend line now reading '' Dividends applied to purchase paid up ad· ditions'' to read '' Dividends applied to purchase paid up additions and annuities.'' A oopy of revised Schedule T is attached and marked Exhibit C. Reason: The need for the separation of reinsurance pr!;lmiums by states no longer exists under the present basis of taxation. The ad­ ditional column for aeeident and health insurance is necessary under the combined life and accident and health form of annual statement. The amendment of the line relating to dividends will permit dividends app1i~d to purchase paid up additions in the form of annuities to be reported in a single item for all states, which is consistent with the life dividends applied to purchase paid up additions. 19. Amendment of the Life Blank to Make Provision for the Beporting of .Accident and Health Business Th~ required changes in the Life Blank to accomplish this purpose (including a new Schedule H) are shown in attached Exhibit D. Reason: A company which does a combined Life and Accident and Health business will be enabled to report on a single form rather than on separate forms, which will be bene:6.eial both to the companies and the Departments. FRATERNAL BLANK 20. Page 2, item 13 , Change item to read: 322 PROCEEDINGS

"13. (A) Consideration for supplementary contracts: (a) Not involving life contingencies...... (b) Involving life contingencies...... '' Reason: Th!} inside amount references are not needed. 21. Page 3, item 16 Change item to read: '' 16. Paid for claims on supplementary contracts: (a) Not involving life contingencies ...... (b) Involving life contingencies...... " Reaoon: The inside amount references are not needed. 22. Page 4, item 9 Change item to read: '' 9. Bills receivable, $ ...... • ; Organizers' balances ( debit $...... ••••.... , credit $ .••••...•.••.... ), net $ •...... •...... , •...... •••..•.•...... •...• '' Reason: To clarify the net entry under Organizers' balances. 23. Page 4, item 29 Change item to read: r, 29, Organizers' debit balances.'' BeasQ11.: To clarify the entry for the item. 24. Page 5, Di3tribution of Assets and Liabilities .dooording to Funds Add three new items in a separate block between the necessary red lines: "(m) Unassigned funds at end of current year...... ( n) Unassigned funds at end of previous year...... ( o) Increase or decrease during the year...... '' Reason: To show conveniently the increases or decreases of the un. assigned funds during the year according to funds. 25. Page 7, iltems 25, 29 .and 30 Change the items to read: ''25. Totals (lines 22, 23 and 24) ...... ---···········-·······-··········· 29. Total claims released (lines 26 through 28) ...... 30. Claims unpaid December 31 of current year (lines 25 less 29) ...... '' Beason: To correct line references. 26. Page 24, Schedule T Add a footnote to read: "Total of column (6) to agree with page 3, line 9, column (6)." Reason: To verify the entries made in column (6) of Schedule T. Juvenile Annual Statement Blank 27. Schedu,le E The description of this Schedule should be changed to agree with the description of Schedule E in the Adult Statement Blank. PRoCEEDINGS 323

Reason: To obtain umformity of description in Schedule E of the two blanks. .Adult Valuation Beport Blank

28. Page 2, item 52 Insert five additional lines so that solvency ratios will be shown for ten consecutive years. Eliminate the reference: "Dee. 31, 1917...... %." Reason: The 1917 solvency ratio need not be repeated year after year. 29. Pages 2 and 3, Valuation on the" .Acoomulation Basis" Eliminate items 56 to 77 under the title stated. Change item 55 (with note) to read as follows: '' 55. Valuation on the 'Accumulation Basis' can only be made by Societies which have provided in their laws for such valuation as required by statute. Note: Any Society which values its certificates on the 'Ac­ cumulation Basis' should report in a separate statement the full results of such valuation on the basis of Actual and Contingent Assets and Liabilities, and in accordance with the s~t up of data used by such Society in its previous year's valuation on the like basis.'' Reason: The particular section on Valuation on the '' Accumula~ion Basis" is now used by very few Societies and is therefor'3 no longer of any real practical space value in the (Adult) Valuation Report form.

30. Page 3, Ini·estment Profit and Loss Exhibit Under the first line of page 3, enter a n~w block entitled '' I1niestment Profit and Loss Exhibit'' followed bv the information of items 19 to 29, inclusive (under column ''Total''wonly) appearing in the Gain and Loss Exhibit, page S of the Life Blank. This new exhibit will appear under new numbers, as follows:

INVESTMENT PROFIT AND LOSS EXHIBIT Totals­ All Funds 56. Gross profit on sale or maturity...... --·-······-·················· 57. Increase by adjustment in book value...... 58. Gain from change in difference between book and ad· mitted values ...... -- 59. * 60. Total...... 61. Gross loss on sale or maturity...... 62. Decrease by adjustment in book valu~ ...... 63. Loss from change in difference between book and ad- mitted values...... _...... 64. * 65. Totals...... - .... . 324 PROCEEDINGS

66. Net Profit From Investments (Item 60 less Item 65) ...... * Other items (D~scribe fully) Reason: The Exhibit will provide information not heretofore obtained.

31. Page 3, Schedule ..4, Column (5) Enter a reference under the caption of said column ( 5) to read: "(S!:)e Note X)" to refer to a footnote at the bottom of Schedule A. block to read as follows: "Note X. If voluntary extra reserves have been established during the year, indicate the form of certificates involved...... " Reason: The information requested will explain any changes in re- serves during the year."

32. Page 3, Schedule .J. Printer should enlarge the size of the block of this Schedule to provide six extra lines in addition to the two lines now following line (g). Reason: To provide additional lines for the reporting of data under the Schedule.

33. Pages 3 and 4 On account of the changes in items 29 and 30 above, all items on these two pages should be renumbered, beginning with item 78, which should be item "67." All other items should be renumbered consecutively from ''67.'' The present inside reference items should b~ changed as follows: Item 22. Delete "59, 72 and 74." Item 80. Change 79 and 78 to 68 and 67. Page 3 - Second Footnote. Change 89 to 78. Page4 -Note above item 81. Change "81 to 88" to read "70 to 77." Change ''81 to 87'' to read ''70 to 76.'' Change "86, 87 and 88" to read "75, 76 and 77." Item 85. Change 83 and 84 to 72 and 73. Item 87. Change 85 and 86 to 74 and 75. Page 4 - Footnoti:,. Change 91 to 80.

PROCEDURE OF THE COMMITTEE ON BLANKS IN CONNECTION WITH PROPOSED AMENDMENTS TO ANNUAL STATEMENT BLANKS

The following briefly summarizes the established procedure and rules of the Committee with respect to proposed amendments to the annual state· ment blanks:

(1) All suggested changes and amendments shall be filed with the Secretary of the Committee on or bef"ore January 1st of each year. Sug­ gestions received after that date can be considered at the current year 'a meeting of the Committee on Blanks only with the unanimous consent of the members of the Committee. PROCEEDINGS 325

(2) The suggested changes and amendments and reasons therefor shall be stated m a concise and complete form. (3) In the case of reports of Conference Committees, lengthy memo~ randa, special exhibits or special schedules, 250 copies thereof and the suggestions and reasons should be submitted to the Secretary of the Com­ mittee. In the case of brief suggestions a notification to the Secretary of the Committee will be sufficient. ( 4) The various classes of insurance companies should appoint com­ mittees to confer with Subcommittees of the Committee on Blanks. (5) The secretary shall prepare an agenda of all suggestions. Two copies of the agenda shall be sent to each Insurance Commissioner on or before February 1st in each year and copies of the agenda shall be sent to every industry Subcommittee requesting the same. Not more than 25 copies of the agenda shall be sent to any industry Subcommittee. (6) The Committee on Blanks as wen as any and all Subcommittees thereof shall meet on or about April 1st in each year - in no event, however, later than April 5th. (7) The report of the Committee on Blanks shall be sent out by the Secretary on or before May 1st in each year. Two copies of the report shall be sent to each Insurance Commissioner. Copies of the report may also be sent to industry Subcommittees and other interested parties who may request the same.

PROCEDURE TO BE FOLLOWED BY STATES IN MODIFYING CONVENTION BLANKS The Committee earnestly recommends that any department which finds it necessary to make any modification in the Annual Statement Blanks (Association Editions) other than in the exhibits of state business - whether by the insertion of items calling for additional information or otherwise - indicate such modification by printing the changes in red ink or, in Jien thereof, using an identification mark with a footnote at the bottom of the page on which the change occurs, reading '' Special Re· quirement of...... ,'' Name of State such footnote and identification mark to be printed in black faced type. The Committee also earnestly requests that in designating all such special items the Department employ fractions or letters so that the standard numbering of other items will not be affected.

STANDING SUBCOMMITTEES APPOINTED The Standing Subcommittee on the Fire Blank, as appointed, consists of the following: Charles B. Coulbonrn, Chm. W. Harold Bittel Charles E. Ryan Francis T. McGovern Earl L. Berger Georg/;l H. McAteer 326 PROCEEDINGS

T. H. O'Connell L. H. Sanford Guy Y. Keetch Clifford D. Spangler Richard M. Fenker Albert Burger Ralph Knudsen Carl A. Tiffany The Standing Subcommittee on the Misee1laneous Blank, as appointed, consists of the following: Joseph F. Collins, Chm. Guy Y. Keetch Charles A. Wheeler Richard 1t Fenk.er Charles B. Coulbourn L. H. Sanford T, H. 0 'Connell Francis T. McGovern Russell 0. Hooker Clifford D. Spangler EarI L. Berger C. J. McCann George H. McAteer W. Harold Bittel Ralph Knudsen Carl A. Tiffany Albert Burger J, R. Mahoney The Standing Subcommittee on the Life Blank, as appointed, consists of the following: Russell 0. Hooker, Chm. Albert Burger Charles B. Coulbourn Julius Sackman Clifford D. Spangler J<'rancis T. McGovern W. Harold Bittel L. H. Sanford George H. McAteer C, J. McCann Guy Y. Keetch C. S. Lazarus Richard M. Fenker Carl A. Tiffany The Standing Subcommittee on the Title and Mortgage Guaranty Blank, as appointed, consists of the .following: Isaac Siegel, Chm. Earl L. Berger W. Harold Bittel Clifford D. Spangler The Stanaing Subcommittee on the Fraternal Blank, as appointed, consists of th!:} following : George R. McAteer, Chm. Charles C. Dubuar Guy Y. Keetch L. H. Sanford Francis T. McGovern T. H. 0 'Connell H. L. Hall Albert Burg~r Oscar Kottler Richard M. Fenker The Standing Subcommittee on the Assessment Life and Accident Blank, as appointed, consists of the following: Charles C. Dubuar, Chm. L. H. Sanford C. S. Lazarus Clifford D. Spangler Guy Y, Keetch The Standing Subcommittee on the Reciprocal Blank, as appointe!l, consists of the following: L. H. Sanford, Chm. Ralph Knudsen Earl L. Berger C. J. MeCann Guy Y. Keetch PROCEEDINGS 327

The Standmg Subcommittee on the Non-Profit Hospital and Medical Service Blank, as appomted, consists of the followmg. Earl L. Berger, Chm. L. H. Sanford Russell 0. Hooker Carl A. Tiffany Harold Bittel Albert Burger Charles C. Dubuar

The S"peeial Committee for the Revision of Sehedule '' P,'' as ap- pointed, consists of the following: Russell 0. Hook~r, Chm. L. II. Sanford Charles A. Wheeler Francis T. McGovern George H. McAteer

The Special Committee for the revision of the Life Blank, as appointed, consists of the following: W. Harold Bittel, Chm. Richard M. Fenker Russell 0. Hooker Charles C. Dubuar Guy Y. Keetch Albert Burger Clifford D. Spangler Carl A. Tiffany C. S. Lazarus

The Special Committee to study instructions in connection with the Casualty Insurance Expense Exhibit, as appointed, consists of the following: Jos~ph F. Collins, Chm. L. H. Sanford Guy Y. Keetch Richard M. Fenker Russell 0. Hooker Albert Bur~er George Elliott

The Special Committee for the revision of the Frnternal Valuation and Gain and Loss Exhibit, as appointed, consists of the following: George H. McAteer, Chm. Richard M. Fenker Clifford D. Spangler L. H. Sanford Oscar Kottler Charles C. Dubuar Special Committee for the adoption of a Supplement to the Fraternal Valuation Report Blank, as appointed, consists of the following: Oscar Kottler, Chm. L. H. Sanford George H. McAteer Albert Burg-er Carl A. Tiffany Clifford D. Spangler Charles C. Dubuar Special Committee to devise Mu1tip1e Lines Blank and to unify ac· counting classifications of disbursements and other items, as appointed, consists of the following: Joseph F. Collins, Chm. T. H. 0 'Connell Earl L. Berger W. Harold Bittel Francis T. McGovern George H. McAteer Russell 0. Hooker Ralph Knudsen L. H. Sanford Guy Y. Keetch 328 PROCEEDINGS

Albert Burger Richard M. Fenker Clifford D. Spangler Carl A. Tiffany Respectfully submitted, Walter A. Robinson, Chairman, Ohio Commissioner N, R. Johnson, Vice-Chairman, Minnesota Charles C. Dubuar, Secretary, New York Russell 0. Hooker, Connecticut Carl A. Tiffany, Illinois Ralph Knudsen, Iowa T. H. O'Connell, Massachusetts L, H, Sanford, Michigan Albert Burger, Minnesota Clifford D. Spangler, Nebraska W. Harold Bittel, New Jersey Joseph F. Collins, New York Earl L. Berger, Pennsylvania Francis T. McGovern, Rhode Island Richard M. Fenker, Tennessee C. B. Coulbourn, Virginia George H. McAteer, Washington Note: Superintendent of Insurance George Lafrance of Quebec attended the meeting. The following members of the Committee on Blanks were unable to attend: F. M. Phillippi, .T. R. Mahoney, C. .T. McCann and Guy Y. Keetch.

Commissioner Larsen (Florida): Mr. President, in order that the matter may be properly before us, I move the adoption of the report of. the Executive Committee in its entirety.

Commissioner .Allyn (Connecticut): I second the motion.

President Dineen: Is there any debatef Does anybody want to be heardf

Commissioner Bowles (Virginia): Mr. Chairman, I have taken a more or less active part in this discussion through the years and I want to again ex.press my appreciation to the Committee for the splendid work that they have done. I want to also ex.prese my appreciation and congratulate the Association for the delay that baa taken place in its adoption. It is an entirely different report from the report that has heretofore been sub­ mitted to this convention. I think it is 90 or 95 per cent right and I. think they have done a tremendously swell job and I want additionally to con­ gratulate them. I am for it. Before I sit down, Mr. President, I would just like to leave with you for the record this little document prepared by Dr. J. N. Hillman, Past President of Emory and Henry College of Virginia, entitled ' ( Peril of PROCEEDINGS 329

Power,' 1 which portrays graphically the evils mherent m the concentration and centrahzatton of power in a central office, thus further removrng the power from the localities and people to whom it belongs.

President Dineen: Thank you, Commissioner Bowles.

Does anybody else care to be heard! All in favor, signify their ap· proval by saying ''Aye.'' Opposed. The ''Ayes'' have it and it is so ordered. Now, what has happened is this. You boys voted" Aye" :for this and a fellow named Dineen has got to go back home and, as the Director of the Budget, put up some of the dough to finance it. I am perfectly willing to do it and, as far as I am concerned, I think it is a forward st!:!P and I will have to say one thing to my friend, Commissioner George Bowles. George, I think that your insistence on raising some of these points has been very helpful, because it has produced a meeting of the minds, and I agree with you that this is a much better report than the one we had before. About all I can say is, I am very happy that a forward development of this kind took place during the time that I was privileged to serve you as your President. Now, I have another assignment that I want to make and that is, I would like to appoint a Committee on Resolutions, and we Yankees up north discovered that when it comes to drawing resolutions, the boys below the Mason and Dixon Line really have got it on us, so I am going to appoint an all-Southern committee, with Commissioner Bowles as the Chairman, Commissioner Gwaltney and Commissioner White to prepare the resolutions.

Commissioner Bowles (Virginia): Mr. President, at this point, do you know of anything we should call the Committee's attention to, since we have such a short while, so that it won't be overlooked 7 Do you know of anything special except the usual resolutions that we adopt t

President Dineen: No, I don't know of anything special, but your resolutions have a sort of lov~ly touch to them and I 'II leave it squarely in your hands as the Chairman.

Commissioner Bowles (Virginia): We specialize in that "touch."

President Dineen: The next order of business, Commissioner Kava­ naugh, I '11 do this for you, if you would like to have me, or I '11 let you step up to the stand.

Commisstoner KavaMiUgh (Colorado): You're younger than I am; you can do it better.

. . • President Dineen here read the report of the Committee appointed to audit the records of the Secretary as follows: 330 PROCEEDINGS

REPORT OF AUDITING COMMITTEE This is to certify that the undersigned has caused to be examined the records of the Secretary-Treasurer of the National Association of In­ surance Commissioners. I certify that all the receipts reeorded in the cash book between May 28, 1946, to May 24, 1947, inclusive, and as reported by said Secretary-Treasurer, were depmdted in the bank. All disbursements recorded w~re verified by proper voucher,;; and receipted bills. The balances as shown by the Secretary-Treasurer in the amount of $2,922.50 is in agreement with that shown by the bank statement as of May 24, 1947. Respectfully submitted, Luke J. Kavanaugh, Chairman Dated at Atlantic City, N. J. June 4, 1947.

Commissioner Kavanaugh (Co1orado): I move the adoption of the report.

Commissioner Allyn (Conneeticut): I second the motion.

President Dineen; Is there any debatef AH in favor, signify their approval by saying ''Aye.'' All opposed, ''No.'' The ''Ayes'' have it and it is so ordered. This is a democratic organization; we give them plenty of time to debate! I will read you now the :report. of the Va1uation of Securities Com· mittee. (Reads report)

REPORT OF COMMITTEE ON VALUATION OF SECURITIES NATIONAL ASSOCIATION OF INSURANCE COMMISSIONERS ATLANTIC CITY, N. J., J"UNE 2, 1947 The Committee on Valuation of Securities met at the Haddon Hall Hotel at 4 P. M. on June 2, 1947. Members of the Committee: Robert E. Dineen, New York, Chairman; C. A. Gough, New Jersey, Vice-Chairman; William A. Su11ivan, Washington; Charles F. J. Harrington, Massachusetts; Wade 0. Martin, Jr., Louisiana; W. Lee Shield, Ohio; Jack G. McKenzie, Arkansas; Newell R. Johnson, Minnesota, and James M. McCormack, Tennessee.

A quorum being present, the report as adopted by a majority of the Subcommittee was presented and the changes in the valuation rules from those applicable to December 31, 1946, statements were read by the Chairman. After discussion the report of the Subcommittee was adopted as submitted.

The Chairman read" the report of receipts and expenditures as sub­ mitted by the Secretary of the Committee on Valuation of Securities and PROCEEDINGS 331 the auditor's report on the operations of the office of the Secretary of the Comnuttee on Valuat10n of Secunties, A motion was made to continue the Secretary at his present rate of compensation for one additional year, in accordance with the usual practice. Attached is a copy of the valuation resolutions adopted applicable to December 31, 1947, statements.

MEETING OF THE SUBCOMMITTEE OF THE COMMITTEE ON VALUATION OF SECURITIES ON APRIL 22 AND 23, 1947 A meeting of the Subcommittee was held at the office of the Com­ mittee on Valuation of Securities on April 22 and 23 1 1947, and attended by the Honorable Charles F. J. Harrington (Mass.), Chairman; Honorable Robert E. Dineen (N. Y.), and Mr. W. Harold Bittel, Actuary of the New Jersey Department, and Mr. Edward J. Reilly, Chief of the Audit Bureau of the New York State Insurance Department, and the Executive Secretary, Mr. L. A. Griffin. The Subcommittee reviewed resolutions pre­ viously adopted and made the following revisions and recommendations:

Re: Annual Statements .as of December 31, 1947 ASSOCIATION VALUES RESOLVED, that for the inventory of stocks, other than of insurance companies and subsidiaries, and bonds in the annual statements of insur­ ance companies, societies and associations as of December 31, 1947, the following basis is recommended as fair market value: I. That all stocks, other than of insurance companies and subsidiaries, and bonds shall be valued at the market quotations as of De­ cember 1, 1947, excepting bonds secured by the full faith, credit and taxing power of political subdivisions of the United States of America and of the Dominion of Canada which arj:l not in default as to principal or interest on December 1, 1947. In the case of securities not quoted on December I, 1947, the latest avail­ able information shall be used. Values of insurance companies stocks as of December 1, 1947, shall be pub]ished in the book of Valuations of Securities. These values should be used only in state· ments filed with those states whose departmental practices or laws permit the use of market value quotations in determining the values allowable on insurance stocks. 2. That stock valuations shall include accrued dividends on preferred stocks and dividends declared and accrued on all stocks and shall be determined in accordance with the following rules: (a) Where a stock sold ex-dividend on December 1, 1947, and a dividend is payable in December, the Decj:lmber 1 price is to be used. (b) Where a stock sold ex-dividend on or before December 1, 1947, and the dividend is payable on or aft!clr January 1, 1948, the amount of the dividend is to be added to the December 1 price. 332 PROCEEDINGS

(c) Where a stock did not sell ex-dividend until after December 1, 1947, and a dividend is payable in Decei.nber, the amount of the dividend is to be deducted fro!ll the December 1 valuation. ( d) Where a stock did not sell ex-dividend until after December 1, 1947, and the dividend is payable on or after January 1, 1948, the December 1, 1947, price is to be used.

3. That where a bond is quoted ''flat'' on December 1, 1947, and interest is paid in December, the amount of the interest shall be deducted from the December 1, 1947, valuation.

AMORTIZATION OF BONDS RESOLVED, that for submission of annual statements to the various State Insurance Departments as of December 31, 1947, bonds not in d!'3fault as to principal or interest, which are certified by the insurer submitting the statement to be amply secured, shall be so deemed and shall be amortizable provided they are not income or perpetual bonds and provided they are included in any one of the five classifications described below:

1. All bonds issued, assumed or guaranteed by the United States of America or the Dominion of Canada and all bonds secured by the full faith, credit and taxing power of political subdivisions of the Uni~d States of America and of political subdivisions of the Dominion of Canada, which are legal for investment by insurance companies under the laws of the respective states. 2. All speeial revenue bonds of any state of the United States of America or any political subdivision thereof or any agency or instrumentality of any of the foregoing and all corporate bonds which on June I, 1947, were included in any of the four highest grades of any two recognized rating agencies. 3. All sp(3cial revenue bonds of any state of the United States of America or any political subdivision thereof or any agency Ol' instrumentality of any of the foregoing and all corporate bonds on which the yields to maturities based on December 1, 1946, and

on December 11 1947, Association Values do not, in the first case, !;'Xceed 1.80%, and in the second ease 1.80% plus the yield fol' comparable maturities of fully taxable unrestricted U. S. Govem­ ment Treasury obligations at the respective dates. Bonds which were not outstanding on December 1, 1946, shall be deemed amply secured and amortizable if the yield to maturity based on Decem· bed 1, 1947, Association Values does not exceed 1.80% plus the yield for comparable maturities of fully taxable unrestricted U. S. Government Treasury obligations. 4. Any bond issued by the same corporation and other corporate bonds and all special revenue bonds of any state of the United States of America or any politice.l subdivision thereof or any agency or in­ strumentality of any of the foregoing which, in the judgment of the Subcommittee of the Committee on Valuation of Securities, are equivalflnt in security to those bonds hereinbefore described, pro- PROCEEDINGS 333

v1ded that satisfactory evidence thereof is either already available or 1s made available by 1nsurance compames, societies and assoc1a· tions to the Subcommittee on or before September 1, 1947, and approved by it.

5. All bonds of foreign governments, foreign subdivisions and foreign municipalities which in the judgment of the Subcommittee are amply secured on the basis of the estimated ability of the respective obligors to make during the life of the issue, all contractual pay­ ments in the currency or currencies specified and at the places 0£ payment stipulated in the bonds and upon evid~nce that such payments can be remitted to the United States at the official rate of exchange.

RESOLVED, that bonds in default as to principal or interest and all special revenue bonds of any state of the United States of America or any political subdivision thereof or any agency or instrumentality of any of the foregoing and all eorporate bonds not meeting the tests described under classification 2, 3 or 4 of the foregoing Resolution and all income and perpetual bonds shall be deemed not eligible for amortization.

RESOLVED, that where quotations are obtainable, values of securities payable in foreign currencies shall be quoted in the book of Valuations of Securities at the appropriate foreign percentage quotation and at the ap­ propriate Dollar quotation in the United States. The rates of exchange applicable at December 31, 194i, shall be the rates current at December 1, 1947; provided, however, that the rate of exchange used in connection with securities payable in Canadian currency shall be the rate of exchange promulgated by the Canadian Foreign Exchange Control Board.

RESOLVED, that the book of Valuations of Se-curities to be published in January, 1948, shall be prepared in accordance with the forf:lgoing resolu­ tions and contain a notation agaimit each bond to indic.ate whether it is or is not amortizable.

RESOLVED, that in order to meet any unforseen conditions which may arise, ·the Committee on Valuation of Securities shall have full power to amend the resolutions regarding market and amortized values which have been adopted at this meeting. Such amendments sha11 b~come effective immediately upon their approval by the Executive Committee of the Association.

RESOLVED, that the Subcommittee of the Committee shall have full charge of the valuation and amortization work including disposition of unusual situations not adequately covered by the foregoing resolutions.

RESOLVED, that in cases where the condition of insurance companies, societies and associations may require the immediate disposition of securi­ ties, it is recommended that the discretion of the state supervisory officials of insurance should be exercised to vary the general formula herein set forth, so as to adopt prices reflected by the exchanges. 334 PROCEEDINGS

INSTRUCTIONS TO COMPANIES ON PREPARING STATEMENTS .Acquisitions made in December, 1947. Stoeks and bonds acquir!;)d in December, 1947, and not listed in the book of Valuations of Securities should be valued at not exceeding cost and the company reporting any such stock or bond should be required to be pl'epared to justify the value at which carried. .Amortizable Bonds on which no values are printed in the book. For all bonds secured by the full faith, credit and taxing power of political subdivisions of the United States of America and of political subdivisions of the Dominion of Canada which are not in default as to principal or interest on December 1, 1947, and all amortizable bonds, on which no values are printed in the book of Valuations of Securities, the amortized values should be entered in the "Market Value" column of Schedule D, Part 1 as well as in the "Amortized Value" column.

United States Savings Bonds. The following values shall be used for Unit~d States Savings Bonds in Schedule D, Part 1: 1. Market Values-Series ''A,'' ''B,'' ''C,'' ''D,'' ''F'' and ''G.'' The redemption value at date of statement to be entered in the ' 'Market Value' ' column ( col. 7). 2. Amortized Values--Series ''A,'' ''B,'' ''C,'' ''D'' and ''F.'' The value to be entered in the "Amortized Value" column (col. 16) shall b~, (a) the redemption value with no entry for accrual of interest in column 9, or (b) the actual cost if the company does take credit in column 9 for the difference between cost and re­ demption value, or (c) the value computed on a pro rata accumula­ tion of discount or an effective rate accumulation of interest with no entry in column 9. 3. Amortized Values-Series "G." Th~ value to be entered in the "Amortized Value" colUIDil (col. 16) shall be the par value with the interest received and accrued entered in column 9. Deductions from Admitted Assets on Account of Interownership of Insur­ ance Companies Stocks. Stock of the company itself, owned by it, or any equity therein or loans secured thereby, or any proportionate interest in such stock through the ownership by such company of an interest in another firm, corporation or business unit shall not be an admitted asset.

Valuation of 8-toc"k of a Subsidiary Company. The stock of a subsidiary ( other than an insurance company) of an insurer shall be valued on the basis of the value of only such of the assets of such subsidiary as wou1d constitute lawful investments £or the insurer if acquired or held directly by the insurer. PROCEEDINGS 335

Determination of Amortized Values of Bonds Reoetved Under Reorgamza· hons. The amount entered in the actual cost columns of Parts I and II, of Schedule D, for bonds and other securities received in exchange under reorganization, shall be based on the actual market quotations on such bonds and other securities at the time of acquisition of such bonds and other securities. "Valuation of Insurance Company Stocks. As indicated in the Resolutions of this Committee insurance company stock values printed in the book should only be used in statements filed with those states whose departmental practices or laws permit the use of market value quotations in determining the values allowable on insurance stocks. Bonds Not Eligible for Amortization. All such bonds should be carried in Schedule D, Part I, column 16 "Amortized or Investment Value December 31 of current year," at the Association Value3 shown in the book of Valuation of Securities and should be so reflected in admitted assets. Mortgages Insu.red Under the National Housing Act. Companies shall be allowed to take credit for the amortized value, on a five year basis, for the premium paid on a mortgage insured under the National Housing Act. Premium Paid on Real Estate Mortgage Loans. In the December 31, 1947, statements, the book Yalues of real estate mortgages acquired at a premium may be reported at values reflecting write·offs of such premiums over a three year period from date of acqui­ sition. Computation of Amortized Val-ues on Foreign Bonds. Amortized values on such bonds should be computed on the basis of the cost and par value in the foreign currency in which the bonds are payable and the amortized values thus computed should be converted into U. S. Dollars by the application thereto of the prescribed rate of exchange as of the statement date. The cost of foreign bonds purchased in the United States should be computed in the currency of the foreign country, on the basis of the rate of exchange existing at the date of purchase for the purpose of computing amortized values on the basis herein prescribed. A company carrying its Canadian assets and liabilities in Canadian Dollars in its statement shall reflect any difference in the rate of exchange between Canadian and United States Dollars on the statement date through a not admitted asset item covering the difference in currency values with respect to the excess of Canadian assets over Canadian liabilities reported therein. Computation of Values on Foreign Securities Not Eligible for Amortization. On shares of stocks and bonds not eligible for amortization United 336 PROCEEDINGS

States Dollar quotations published in the book of Valuations of Securities should be used. However, if a company has substantial policy liabilities payabl!:' in the currency involved or if evidence is made available that such securities can be disposed of in the foreign country and the proceeds in sueh foreign currency can be converted into United States Dollars on tho basis of the prevailing rate of exchange and remitted to the United States it may use the foreign quotations published in the book of Valuations on such securities and report the United States Dollar equivalents on the basis of the rate of exchang~ prescribed for the statement date. A company carrying its Canadian assets and liabilities in Canadian Dollars in its state­ ment shall reflect any difference in the rate of exchange between Canadian and United States Dollars on the statement date through a not admitted asset item covering the difference in currency values with respect to the excess of Canadian assets over Canadian liabilities reported therein.

GENERAL Oil Production Lo{llfl,8. The Subcommittee again gave careful consideration to oil production loans held by insurance companies and on the basis of information before the Committee recommends that such loans be not included in the book of Valuations of Securities. The Executive Secretary to the Committee has been instructed to keep a complete record of all such loans and prepare and have available a :file on each, including therein a completed questionnaire, engine~rs reports, legal opinions and all other necessary data for the use of the Subcommittee. The Subcommittee will pass on such loans and upon inquiry the Executive Secretary will submit the findings of the Subcom­ mittee to the various state insurance department officials and to insurers holding the particular issue. In determining the allowable values for statement purposes, of oil production loan and oil production loan bonds the procedure to be followed by the Executive Secretary of the Committee on Valuation of Securities shall be as follows: 1. The Executive Secretary shall first determine: (a) That the loan is secured by a first lien on interests in oil producing properties or leaseholds in the United Stat,s on which t11ere are operating oil wells. (b) That production from such wells and from other wells in the same fields is subject to regulatory jurisdiction of a com­ mission or tribunal constituted by law of the state or states in which such wel1s are situated. ( c) That the instruments evidencing the loan provide for the ap· plication during the life of the loan of a portion of revenue from recoverable oil which, upon reasonable estimates of such revenue as shown by an engineering or geologic report, shall provide for the payment of the interest and the complete amortization of the loan by maturity. 2. Th~ value of the underlying security (i.e., the oil in ground seeur~ ing the loan) shall be determined as of the statement date by PROCEEDINGS 337

multiplying the number of barrels of reeoverable oil in the ground, as estimated by a lieensed oil engineer, by the current market value per barrel of '' oil in the ground'' in the loeality where the wells constituting the underlying security for the loan are situated. The pric~ per barrel of recoverable oil in the ground, used in determining the total security for the loan, shall likewise be p1·e· dieted on the estimate of a lieensed oil engineer. 3. The allowable value of the total unpaid oil production loan or oil production loan bonds shall be the amortized value thereof, but shall not in any instance exceed 60 % of the value of the recoverable oil in ground constituting the security for the loan on th~ statement date, as determined in 2 above. United States Goi•ernment Treasury Obligations Used in the Determination of Yield Te.n. In order to clarify the particular issues used in the determination of the Government Yield Test, the word ' 1 unrestricted'' is included in the description of "fully taxable U. S. Government Treasury Obligations" referred to in the yield ttst resolution. Private Purcltcuses Made by Insurers. The large number of private purchases of corporate security issues made by insurers ( aggregating about 1,500 separate issues as of December 31, 1946) was discussed at length in its relation to the present method of valuation in order to develop what, if any, additional statistical tests should be applied to such issues in the determination of Association Values and eligibility for amortization. Neither market quotations or ratings are available for security issues in this category and the year-end determination of eligibility :for amortiza­ tion is arrived at after reviewing annual audit reports, indentures, agree­ ments, legal opinions and other statistical data either availabl~ through the usual statistical sources or made available by the insurers. Emphasis was placed on the fact that under private purchase investments the insurers have assumed in large part the responsibility of commercial bank functions and the question arises as to what, if any, administrative or legislative action should be taken in regard thereto. In order to explore the matter in all its ramifications the state insurance d~partments of New York and Massachusetts are now engaged in a study of corporate private purchase investments, the results of which will be reviewed by the Subcommittee at a later date and thereafter presented to the Association. Audit of the Books and Records of the Office of the Com,mittee on Valuation of Securities. At the December 12, 1946, Meeting of the Subcommittee a proposal from Joseph Froggett and Company, New York, New York, was accepted for the audit of the books and records for the fiscal year end,ed June 1, 1946. Due to the pressure of business the auditors were not prepared to 338 PROCEEDINGS proceed with the audit until April, 1947, and at the me~ting of the Sub­ committee on April 22 and 23, 1947, it was thought advisable to combine the audit for the two fiscal year periods ending June 1, 1946, and 1947. Arrangements were made with the auditors to complete these audits and there is herewith presented a copy of such audit. Yaluation of Insurance Companies Stocks. In order to increase the coverage of insurance companies stocks shown in the book of Valuation of Securities a resolution was adopted as follows: RESOLVED, that insurance company stock Association Values printed in the book of Valuation of Securities shall be determined as follows: First-Upon public sale or bid and asked quotation prices where these are available. Second-Upon the statement value, i.e., the sum of the Capital and Surplus held for Stockholders (including voluntary res~rves) di· vided by the Capital Stock shares outstanding as of November 30th, where no public sale or bid and asked quotation prices are available. Association Values determined by the "S~cond" method shall be marked with a symbol and a footnote designating that such Association Values have been calculated upon the November 30th statement value of Capital and Surplus. Association Values for insurance companitis stocks printed in the book of Valuation of Securities should be used only in statements filed with those states whose departmental practices or laws permit the use of market quotations in determining the values allowable on insurance companies stocks. Approved by: Subcommittee of the Committee on Valuation of Securities, N.A.I.C. Charles F. J. Harrington, Chairman, (Mass.) Robert E. Dineen (N. Y.) C. A. Gough (N. J.) Note:-Deputy Commissioner Gough of New .Jersey concurs in the above report, except in so far as the proposed treatment of immrance companies stock values is concerned. Specifically, he objects to printing in the book of Va1uations of Securities of statement values on stocks of life insurance companies in instances. where market quotations thereon are not available. Dated: May 20, 1947. March 11, 1947 Honorable Robert E. Dineen, Chairman Committe~ on Valuation of Securities; N.A.I.C. 61 Broadway, New York 6, New York Dear Sir: Your Subcommittee consisting of yourself, Commissioner Charles F. PROCEEDINGS 339

J. Harrington, Cha1rman (Massachusetts) and Deputy Commissioner C. A. Gough (New Jersey) are pleased to present to the full Comm1tt!;le and to the National Association of Insurance Com.missioner8 a report of the work performed during the fourth year of operations of this office. In accordance with the resolutions adopted by the Association on June 12th, and amended December 11, 1946, the Executive Secretary and staff prepared and issued the 1947 book of Valuations of Securities. The Association Values for bonds and stocks and notations as to eligibility for amortization of bonds shown in this publication were used for the inventory of stocks, other than of insurance companies and subsidiaries, and bonds in the annual statements of insurance companies, societies and associations as of December 31, 1946. Copies of the resolutions concerning stock and bond values were mailed to all insurance companies, societies and associations ,vho "·ere instructed to report all acquisitions of securities not already listed in the previous book of Valuations of Securities. Copies of all resolutions were mailed to all state insurance departments who were requested to furnish the names of insurance companies, societies and associations incorporated within their respective states, to receive a copy of the book of Valuations of Securities. .Association Values The resolutions provided the basis for the determination of fair market values to be used in the companies annual statements as of De­ eemb.er 31, 1946. The market price as of November 30, 1946, being recour mended, official stock e."l:cbange quotation sheets, newspapers and quotation services as of November 30, or the nearest date thereto were us~d. On securities not shown in the regular public quotation sources, direct inquiries by mail and telephone were made to security dealers and bankers familiar with the issues. On the basis of such information, Association Values were determined for 8,398 bonds and 4,519 stocks, or a total of 12,917 issues. See tabulation Exhibit ''A.'' .dmortizatWn Resolutions adopted provided a basis for determining the eligibility of bonds for amortization. There were 911 bonds rated in the four highest grades by two of the three recognized rating agencies, and therefore, eligible for amortization. Of 3,446 bonds compared with t.he '' yield test,'' 2,774 were eligible for amortization. In addition 2,651 bond issw~s, for which there was no rating or market price, were deemed equivalent in quality on the basis of -financial and other information. The total number of bonds eligible for amortization was 6,336. Of th.e 2,062 bond issues, not eligible for amortizaHon, 871 were in default, 409 were income or perpetual bonds, 672 failed to pass the '' yield test, 1 ' and 110 lacked sufficient information to determine eligibility for amortization or fair market yeJue. There wer,e a total of 8,398 bond issues listed in the book of Valuations of Securities. A tabulation of amortizable and non-amortizable bonds appears in Exhibit ''B.'' 340 PROCEEDINGS

.dnnuai Review of Valuation Work The Subcommittee reviewed the work incident to the preparation and distribution of the book, Decisions required as to the amortization of bonds and market values as to stocks and bonds, pursuant to resolutions adopted, were made with the advice of the Executive Secretary and ap­ proval of the Subcommittee. .ddvance Sheets and Bound Volume As in the past yea.rs a circular soliciting subscriptions to the Advance Sheets of the book of Valuations of Securities was mailed to 1,695 insurance companies, societies ana associations. The first sales letter was mailed on October 14, 1946, and resulted in 228 subscriptions. Follow-up correspond­ ence increased to 251 for the year and compar!3s with 245 in 1945, 234 in 1944 and 233 in 1943. On January 25, 1947, a copy of the paper bound book of Valuations of Securities was mailed to 1,695 insurance companies, societies and associa· tions. At the same time a total of 317 copies were mailed to various states and territorial inSUrance departments. See Exhibit '' C'' for itemized tabulation of book distribution and voluntary contributions. The Committee regrets that due to rising costs it has become necessary to increase the subscription charges to the Advance Sheets. The Committee has delayed this action as long as it possibly could. The incr~ased rates will become effective in 1947 when the subscription price will be $60.00 a set by First Class Mail, and $61.00 a set by Air Mail. State Contributions Voluntary contributions by the states for the support of the Com• mittee 's office are tabulated in Exhibit '' C. '' Contributions remain un­ changed, exeept that two more states have sent in voluntary contributions. Printt'ng and Binding of Book The contract for printing and binding the book was awarded to C. J. O'Brien, Inc., for the fourth consecutive year. A comparative statement of printing and binding expenditures plus handling and postage, for the four year period follows: Book Printf.ng & Binding Postage & Handling Total 1944 $2,217.00 $417.93 $2,634.93 1945 2,289.45 469.22 2,758.67 1946 2,282.28 416.10 2,698.38 1947 2,625.66 431.47 3,057.13 Although the contract priee per printed page waa increa.aed from $9.00 in 1944 and $10.00 in 1945, to $11.00 in 1946, the printing bill remained practically unehanged during the first three years. Thia was due to editorial economies introduced, resulting in fewer pages per book ea.eh year. How· ever, during 1946 the printing crafts union received wage increases, as a result of which the price was increased to $14.59 per printed page and this accounts for the increased printing cost shown for the 1947 book. PROCEEDINGS 341

At the moment there 1s httle hope that the printing trade will decrease prices and, as there 1s good ground to believe that mcreases are more apt to occur, the Subcommittee is endeavoring to arrange a long term printing contract that should reduce printing ~xpenditures over the years to come.

Oil Production Loan.a

Several hearings were held and testimony transcribed relating to the geological, legal and statistical aspects of an oil production loan, with particular emphasis upon the authenticity of oil reserve estimates, caleula· tions of rate of production of recoverable oil and the price per barrel of oil-in-ground prevailing in the :fields wherein oil is situated. Evidence was pr~sented by several renowned oil engineers and geologists and by banking and insurance company officia1s familiar with this type of loan and developed that considerable progress had been made in forecasting the amount of recoverable oil.in-ground and that there is a bona :fide public me.rket p.er barrel for oil-in-ground. On the basis of testimony and other factual information gathered a resolution was adopted providing a method for the determination of the allowable value for statement purposes, of oil production loans.

Oil production loans are not included in the book of Valuations of Securities. How~ver, there is on :file at the Committee's office detail infor­ mation on all oil production loans held by insurers. On the basis of this information it is possible to determine the allowable value for statement purposes of oil production loans. A supplemental questionnaire is prepared each year and submitted to those insurers holding this type of loans with the request that the completed information be forwarded to the Committee's office. Companies making new loans are requested to complete the original questionnaire and submit f:)ngineering reports, legal opinions and other pertinent data.

Proposed Method for the Valuation of Preferred Stocks Held by Life Insurance Companies

Further hearings were held on this subject with representatives of the industry. Consideration was given to the views presented at the various hearings and to much memoranda and extensive reports submittf:ld by the Life Insurance Research Committee, on both the economic and legal aspects of the proposal. The Subcommittee concludrd that this particular question covered but one facet of the problem and that sooner or later the identical problem would be presented in connection with thf:l valuation of common stocks and bonds ineligible for amortization. It was f~lt that if the valuation principle sought was extended to its logical conclusion it would involve a profound departure from methods which have normally been followed in determining the value of a company's assets as of a given date and gives rise to the question as to whether the solution of this problem should originat~ legislatively rather than administratively. The Subcommittee was of the opinion that further consideration should be given to the solution of this problem by the use of contingent reserves. 342 PROCEEDINGS

Preferred Stock8 Privately Purohased Consideration was given to the determination of Association Values for Preferred Stoeks, purchased at private sale, for whieh there are no public sales or quotations available and after due deliberation the Execu­ tive S.ecretary was instructed to continue the examination of auditol's reports, prospectuses, preferred stock provisions and inquiries into the nature and historical background and management of the issuing company. Furthermore, it was decided that the allowable value for such stocks shall b~ the cost value thereof unless the dividend actually paid produces a yield on such cost which is less than the current average yield (to be de· termined each December 1) of a group of selected high grade Preferred Stock Issues. If the yield on the cost is less than the average yield on the sel~cted high grade Preferred Stocks, the stock shall be valued at a :figure on which the dividend paid produces the same yield as the average yield as of December 1 on the Preferred Stocks selected as a criterion. This formula applies to privately purchased Preferred Stocks without dividend arrears. Security Valuation Cards and Files During the fiscal years of 1947 and 1948 the office of the Committee on Valuation of S~cuities will prepare and :file approximately 25,000 new properly lined valuation cards for all securities held or loaned upon by insurers doing business in the United States. In this connection all insUiere have been requested to furnish a copy of Schedule C, Part I and Schedule D, Parts I and II, dated December 31, 1946. The new cards have been procured and the necessary statistical typing and writing in, in ink, on th'3 cards is progressing satisfactorily. Annual Audit A proposal from Joseph Froggatt and Company, New York, New York, has been received and accepted for the audit of the books and records of the office of the Committee on Valuation of Securities, for the fiscal year ended May 31, 1946. A copy of the audit will be mailed to each member of the Committee on Valuation of Securities and also pr~sented at the June, 1947, meeting of the N.A.I.C. In conclusion your Subcommittee wishes to thank the various ste.te insurance departments and the insurance companies for their court'3ous cooperation. Respectfully submitted, Charles F. J, Harrington, Chairman (Mass.) Robert E. Dineen, (N. Y.) C. A. Gough, (N. .J.)

EXHIBIT i'A'' CLASSIFIED TABULATION OF SECURITY ISSUES Bond Issues: United States of America and Dependencies Bonds ...... 240 PROCEEDINGS 343

Federal Home Loan Bank Debentures ·····-··············-····-············-·············· l F!3deral Intermediate Credit Bank Debentures ····--··········--·····--·------·· 8 Federal Land Bank Bonds ··------···--·------······-----···············-··-····--····--···-·--··· 4 Local Housing Authority Bonds ····················-······-·---·········-························ 76 Municipal and Special Revenue Bonds ·····-··-·············----··--·-········-·--·-··----·· 2515 Dominion of Canada Bonds ·----·····-·--·-···-··------····--······················-····------···-···· 57 Dominion Guaranteed Bonds ·····················---···-·-··-···-- ···········-----··----··········· 37 Municipal Bonds of the Dominion of Canada ········-···············--··------······ 162 Foreign Bonds ------·-···········----···------····---··························------368 Railroad Bonds ---···-·····------··········--·····-··-······-----·-·····--······-----······------··'"··----·- 1627 Public Utility Bonds ··--····--·-···········-······---·-·····--·--······------·····--········----···--·- 1444 Industrial and Miscellaneous Bonds ···----········--·-·········-----·····----·-·····------1859

TOTAL ·······································-······················································-···- 8398 Stock Issues: Railroad Stocks ··-----·-·····-·············--·········--······-----···-·····--·······-----·····------·-···· 224 Public Utility Stocks ------············-·-········--··-··-··--·---···----··-·------·-·······-·········--- 718 Industrial and Miscellaneous Stocks ------·--·------····-·-···--····--·····-··---- 2889 Bank and Trust Company Stocks ········-····--···-······------····-----··-·------····------558 Insurance Company Stocks ------········-······---···--····-··--·····-···········---·----······ 130 TOTAL ...... 4510 TOTAL BONDS AND STOCKS ...... 12917

EXHIBIT ''B'' AMORTIZABLE AND NON·AMORTIZABLE BONDS .tl.mortizable Bonds Rating Test ··-·········--····------·-··------·-··-·------·······------· 911 Yield Test ···-············--····················---···--············---···-····---·-······---····-··-----·····2774 Equivalent in Quality ---····-····----·······----·········-········---···------·--···--·-········2651 TOTAL AMORTIZABLE BONDS ...... 6336 Non-..dmortizable Bonds Defaulted Bonds ··-···------······------·--·····-·-----····---·--····------871 Income or Perpetual Bonds ········----········---·······-·---·-·-··-·--······---·--·······-·· 409 Yield Test ----·-···---······------······-·-·······----·······---······-----·-·····--··--····-----·------672 No Information ------·-····--····-·····-········---······------·------·-··--····-·····--·------· 110

TOTAL NON AMORTIZABLE BONDS ...... 2062 TOTAL BONDS ·····················································-·········································8398

EXHIBIT ''0'' BOOK DISTRIBUTION AND CONTRIBUTIONS BY STATES AND TERRITORIES - 1946 State Companies Total Contribution Alabama 3 9 12 $ 67.50 Alaska 2 0 2 Arizona 3 0 3 344 PROCEEDINGS

Arkansas 2 7 9 100.00 California. 8 58 66 266.67 Colorado 3 12 15 33.34 Connecticut 12 43 55 866.37 Delaware 3 13 16 30.00 District of Columbia 1 5 6 Florida 1 32 33 100.00 Georgia 1 1 2 75.00 Hawaii 1 0 1 Idaho l 4 5 33.34 Illinois 42 163 205 666.67 Indiana 5 22 27 266.67 Iowa 4 38 42 167.00 Kansas 3 12 15 65.00 Kentucky 2 7 9 67.00 Louisiana l 7 8 66.67 Maine 3 3 6 133.33 Maryland 3 21 24 266.67 Massachus~tts 17 75 92 1,000.00 Michigan 6 37 43 220.00 Minnesota 6 35 41 267.00 Mississippi 1 3 4 50.00 Missouri 15 46 61 200,00 Montana 1 2 3 50.00 Nebraska 4 30 34 85.00 Nevada. 1 1 2 50.00 New Hampshire 2 17 19 50.00 New Jersey 5 31 36 300.00 New Mexico 1 3 4 New York 48 312 360 3,333.33 North Carolina. 3 23 26 66.67 North Dakota 3 12 15 25.00 Ohio 5 97 102 400.00 Oklahoma. 3 5 8 25.00 Oregon 3 7 10 50.00 Pennsylvania 50 172 222 1,000.00 Puerto Rico 2 1 3 Rhode Island 5 21 26 50.00 South Carolina 2 10 12 66.67 South Dakota 1 12 13 50.00 Tennessee 7 23 30 66.67 Texas 3 153 156 66.67 Utah 2 8 10 25.00 Vermont 2 11 13 66.67 Virginia 2 18 20 266.67 Washington 5 15 20 83.34 West Virginia 1 3 4 100.00 Wisconsin 6 55 61 267.00 Wyoming 1 0 1 25.00 TOTALS 317 1,695 2,012 $11,576.92 PROCEEDINGS 345

President Dmeen. I move the adoption of the report. Do I hear a second7

Commissioner .Allyn (Connecticut) : Second.

President Dineen: Is there any debatef All in favor, signify their approval by saying "Aye." Opposed, "No." The "Ayes" ha\"e it and it is so ordered. Commissioner Bill Hodges, are you ready with your reportf Come right up here, please. This is a report of the Committee on Workmen's Compensation.

, Commissioner Hodges read the report of the Committee aa follows:

REPORT OF WORKMEN'S COMPENSATION COMMITTEE The Workmen's Compensation Committee met on June 3, 1947, in th.e Haddon Hall Hotel, Atlantic City, N. J. Representatives of the National Council on Compensation Insurance met with the Committee and Mr. Roeber, General Manager, made a report of certain te:rt audits made as a result of action of this Convention in June, 1946, for the purpose of seeking a practicable improvement in the premium base for such insurance. Following Mr. Roeber's report the following resolution was unani­ mously adopted: '• The Committee accepts the report of the National Council with the understanding that the National Council will continue its study of the general qu~stion of e. rate level adjustment factor giving over-all recognition, state by state, to the aggregate effect of factors which produce underwriting results either better or worse than those cont~mple.ted by the rating procedure, and report be.ck at the December, 1947, session of the National Association of Insurance Commissioners, at which time it is understood that Com· missioner Gibbs of Texas, who instigated the question of a change in the premium base and who is not present at this meeting may reopen that question.'' Attached hereto a.s Exhibit ''A'' is a copy of the report referred to in the foregoing resolution. At the suggestion of Commissioner Harrington the Committ,ee dis­ cussed the advisability of and need for a detailed study of Schedule P of the Annual Statement form. Following such discussion the Committee adopted the following resolution: "R~solved, that the President appoint a subcommittee of the Workmen's Compensation Committee to institute a study of Sched­ ule P, with a view to developing a realistic and accurate system of 346 PROCEEDINGS

scheduling reserves, and that it study Professor Mowbray's sug~ gestion in this regard and work jointly with the Subcommittee on Blanks.'' Attached hereto as Exhibit "B" is a copy of Professor Mowbray'& paper to which reference is made. The Chairman announced the appointment of the following gentlemen to the Committee to study with the industry the question of Graduation of Expense by Size of Risk: C. C. Lloyd, California; George B. Elliott, Pensylvania; Thomas Shands, Florida; George A. Peery, Virginia; Joseph F. Collins, New York; James Higgins, New York; Paul Benbrook, Texas; Lioyd Yaudes, Wisconsin. There being no further business the meeting adjourned. Respectfully submitted, Wm. P. Hodges, Chairman Leroy J. Taft Wallace C. Downey J.P. Gibbs David A. Forbes L. Geo. B~njamin Lloyd J. Yaudes

EXHIBIT ''A' REPORT OF SPECIAL COMMITTEE TO MEET WITH COMMITTEE OF N.A.I.C. TO WORKMEN'S COMPENSATION COMMITTEE OF N.A.I.C. Be: Premium Base for Workmen's Compensation In.wrance In our report to the Workmen's Compensation Committee of the N.A.I.C., submitted at the December, 1946, session of that organization, it was pointed out that, pursuant to th,e resolution adopted at the June, 1946, session of the N.A.I.C., the National Council on Compensation Insur· ance had embarked on an extensive series of test audits to study and investigate the feasibility and practicability of improving the premium base for workmen's compensation insurance. That study has been completed. The Committee now reports that the study shows conclusively that none of the modifications of the present premium base investigaWd is either feasible or practieal for the following reasons: (1) Any of these methods would require the employer to increase and further refine the records he now maintains. This would undoubtedly involve confusing detail and additional expellse to the assured. (2) Employers are strenuously opposed to any increase in record k~ping or to any incrf)l'lSe in the expense that would be involved in such record keeping. Even today many assureds refuse to take advantage of the overtime elimination rule or the $100 limitation rule for these very r~asons. That employers do object to increased record keeping and the resulting increased expenses is quite evident from the auditors' comments contained in Exhibit I, the comments of insureds contained in Exhibit II, PROCEEDINGS 347

and the comments attached to the individual nsk audits followmg Exh1b1t x. (3) A very apprtciable increase in audit expense would be incurred by the carriers. (4) Total payroll offers the only basis for actual "t"erifi.cation against basic accounting records which must be maintained in the normal course of business. Departure from the total payroll basis opens the door to manipulation of records. (5) Any system of adequate and r~asonable rates requires that the same over-all premium be collected to pay for the losses incurred and tlie expenses of conducting the business, regardless of the basis under which such premium is collected. Thus, the simplest and most readily verifiable basis is of greatest advantage to all concerned. Total payroll offers the only universally available basis and is the most readily verifiable of any base which has been found. Attached hereto is a copy of the Report of the Special Committee on Overtime Wages re "Basis of Premium - Results of Test Audits." That Report outlines in detail the facts which were developed by the test audit program referred to above • .Approximately 130 of these special audits were prepared by the carriers for th~ purpose of this study. A great deal of time, effort and expense was involved. In addition to the time spent in making these audits, the Staff o:f the National Council spent months in reviewing and analyzing the reports. The heads of the Payroll Audit Departments of the carriers represented on our Special Committee on Overtime ·wages spent ,veeks working with the Staff of the National Council in corr~lating the results and assembling the vast amount of material into a cohesive and compre­ hensive report from which conclusions might be drawn. This material served as a basis for the attached report of the Special Committ~e on Overtime Wages, which report is endorsed by this Committee. As pointed out in th.e report of the Special Committee on Overtime Wages, it should be stressed that the tests covered a selected group of risks representing the best type of insured from the standpoint of record keeping and cooperation. This type of insured was selected in order to insure that our study would not immediat~ly be defeated by inability to secure factual data or cooperation. While touched on above and also in the report of the Special Committee on Overtime ,vages, the matter of increased cost both from the standpoint of the insured as well as the carrier, is of sufficient importance to bear repetition. Obviously, any further refinement in the payroll basis can only be accomplished through the medium of additional record keeping on the part of insureds as a group. A switch to a unit basis such as man-hour, man-day or man-week will rtiquire an entirely new set of records for those insureds who do not now keep such records for cost or other purposes. When we consider that under any method of premium determination the sam~ over-all premium must be collected, it is obvious that a change in the present premium base can only accomplish a redistribution of insurance 348 PROCEEDINGS

eosts among risks. This accomplishment will be at the expense of the added burden and cost of record keeping to the insured, and the increased cost of auditing to the insurance carrier in the face of no over-all decrease in premium cost. In view of the results of this investigation, and th,e conclusions herein set forth, the Committee is of the opinion that the payroll basis for premium determination as now used reflects the maximum complexity which should be required of insurance buyers. Perhaps consideration should even be given to a modification of, or the elimination of, the present over­ time elimination rule because of its dwindling importance, and to the present $5200 limitation rule because of the adverse reaction from insurance buyers. Sinee the payroll basis appears to be the only practicable one which affords reasonable satisfaction to the industry and to buyers, it seems obvious to the Committee that this basis should be continued. The Committee has also given consideration to certain other modifiea.· tions in the payroll basis which have been raised in numerous jurisdictions. These concern the question of the elimination of vacation pay, sickness pay, holiday pay and similar compemation for periods not worked. The Committee r~cognizes the inherent soundness of objections to inclusion of such remuneration in the premium base. However, the fact that very :few employers maintain any accurate record of such items and the fact that there is no possible audit basis susceptible to accurate verification, lead to the conclusion that the expense and trouble incidental to maintaining and auditing verifiable records for the elimination of such time not worked would be greater than the advantages derived. The Committee believes that extreme variation between risks and between industries in the incidence and degree of wage level fluctuations, as well as the absence of wage data of sufficient scope and detail, renders imp_ra.eticable and inequitable the application of any general wage factor. The Committee is keenly conscious of the criticisms which have been leveled at the existing ratemaking procedure because of the failure to recognize factors which, for individual risks and for wide segments of industry, may produce distorted premiums either excessive or inadequate over one or more years of time. The Committee is of the opinion that it is impracticable to overly refine our workmen 1s compensation rate structure so that such factors which have been the source of complaint could be givfn proper aeturial recognition in the development of rates for individual risks, classifications, or parts of classifications. The Committee is ot the opinion that it is impossible to give specific recognition to such factors individually. Nevertheless, the Committee is convinced that the best interests of the public and the carriers will be served if a means can be found of giving over-all recognition, state by state, to the aggregate effect of factors which produce underwriting rfsults either better or worse than those contemplated by the rating procedure. The Committee has therefore coneluded that, although the subject has been explored previously, a new effort should be made to develop a rate level correction factor baaed on underwriting results within a specified PROCEEDINGS 349 period in the recent past and limited in its effect to a. moderate percentage of decrease or increase in the rate level otherwise determined. The Com­ mittee feels that the attitude of all concerned towards such a factor will be effected by the knowledge now established that the alternatives of modification of the premium base or application of wage factors are impractical. · Thia Committee has recommended to the appropriate Committees of the National Council that prompt study of such a factor be undertaken looking toward submission of a report on this subject in ample time for oonsideration at the December, 1947, session of the N.A.I.C. Respectfully submitted, W. F. Roeber, General Manager National Council on Compensation Insurance For Special Committee to Meet with Committee of N ..A.I.C. Enclosures: (1) Report of the Special Committee on Overtime Wages (2) Exhibits I to X, inclusive (3) Memorandum outlining data to be obtained by test audits (4) Results of test audit on 114 individual risks.

EXHIBIT ''B'' WORKMEN'S COMPENSATION LOSS RESERVES The subject of this paper was prominent in the discussion of the Soeiety until the report of its Committee on Compensation and Liability Losses Reserves in May, 1931, but has since received little attention. The two salient principles in that report were: 2. The loss reserve should be based upon individual estimates of outstanding claims (and suits). 3. A minimum reserve based upon a pure loss ratio cheek should be applied for losses under policies issued in the three latest policy years. Other language in the report seemed to indicate the feeling was fairly general that the proposed minimum basis was not highly satisfactory a.s to workmen's compensation, but no better was found. This basis is now embodied in the law of most, if not all, states on the assumption that 65% of the earned premiums represents for workmen 'a compensation fairly well the pure premium plus expense loading. It is worked out in Schedule P of the annual statement. It keyed in with the standard rate making procedure with a uniform expense loading. To the extent that rate making procedure departs from that uniform expense loading, its theoretical founda· tion is weakened. It would, therefore, seem that some modification should be made to meet changed and changing conditions. The time seems oppor· tune to consider this now when, due to the requirements of Public Law 15, state laws regulating insurance are generally being scrutinized with a viilw to revision. 350 PROCEEDINGS

A general adoption of graduated expense loadings seems to mean inevitably that the average combined loss and expense ratio must rise tending to make the excess of 65 % of the earned premiums over loss and loss expense payment too low a minimum standard assuming its correctness under former conditions. We all know from experience that in good times it has tended to be redundant and in poor times the reverse, except for the latest policy year when it is generally if not always too low because the recorded earned premiums are not the true earned premiums. It might appear that a simple correction would be to raise the per­ centage to the effective average loss ratio anticipated under lower expense loadings. One strong objection to this is that probably the effective loss ratio change will not be uniform but will depend upon the distribution of each carrier's business between large and small rh,ks. It would be too laborious to try to find the earned pure premiums from payroll exposures and there are other objections to this procedl.lre. If the pres~mt formula is to be continued, it would be consistent to apply it to standard premiums but this should also be laborious and it would be impossible to check from other data in the statement. Whatever its merits as regards liability loss reserves, the present formula minimum is in the writer's opinion faulty for compensation loss reserves. The point where a minimum cheek formula is most needed, if at all, is on the most recent cases when the direct c1aim estimate must rest on the least dependable basis. It is here that, due to the excess of true earned premiums over recorded earned premiums, it generally brings out a lower reserve than the companies' direct estimates. The use of tabular values from a standard accident distribution was early suggested, but these values were to be based on type of case and this cannot readily be determined on recent cases. Tabular values baaed on duration have been prepared for indeterminate cases for use in exi,eri~ ence rating, but the writer has seen only one suggestion for the use of such values based on all bases. This was in a paper, "Temporary and Permanent Disability Reserves'' by M. M. Dawson at the October, 1916, meeting,1 setting out the claim valuation tables of the Dutch State Insur· ance Fund. This paper was not discussed at that meeting, perhaps because of its brevity and particularity, and has not been referred to since. This seems to the writer unfortunate for the principle underlying the tables seems to be sound, reasonably adaptable and well suited to our present situation. Once suitable tabl~s have been prepared, it does not appear laborious to apply. The valuation is of the losses directly and not indi· rectly through pure premiums or percentages of gross premiums.

To prepare the necessary tables the existing American Accident Table should be reviewed and brought up to date. Then taking a liberal standard law as the initial base the cases other than death cases could be evaluated in terms of indemnity durations.2 This could then be expressed in a series of numbers of claims persisting, say, at monthly intervals since the date of accident which would be similar to the lx column of a mortality table.

l. Proc. III. P. 49. 2. It is desirable to use a Jiberal law at the outset in order to get the maximum durations. The tables for the Jess liberal laws could then be derived by reducing the numbers at the longer durations before computing monetary values. P&oCEEDINGS 351

Using an assumed rate of mterest, the present value per dollar of deferred weekly mdemmty could be worked out for each duration of clalDl blend.mg into an annuity at an average age calculated on the new disabled life mortality table after a duration of, say, five years,

Since some fatal accidents' do not cause instant death, the deaths in the standard accident distribution would need to be segregated into those in which death was instantaneous and thos.e in which there was an inter• vening period of disability. The latter should be further set up in a ·table of duration of such intervening disability. A reasonable average value for a death case in te1·ms of weekly benefits could then be adopted and the numbers survhing on disability at each period multiplied by this value. This amonnt expressed in terms of 1 of weekly benefit should then be added to the present value for the disability cases at the corresponding duration. This would furnish a table for valuing all but known death cases. Known death cases can be ,·aiued on the basis of accepted mortality and remarriage tables by standard methods.

In practical operation if, as I think is usual, the company punches cards for open claims to prepare its direct estimate reserves, it could punch on those cards the month of the accident and the rate of weekly indemnity. Sorting these out by month of accident, the total weekly indemnity for each set could then be multiplied by the tabular value and the products totaled to get the reserve in the same manner as in a group valuation of a life insurance company. This would give the minimum indemnity reserve for disability cases. To this would, of course, be added the reserve for. survivors' benefits in fatal cases.

Ther~ remains to determine the reserve for deferred medical payments. For this, it would seem that a study of medical costs for a set of cases similar in composition to the standard accident distribution could be made tracing the payments by lapse of time since the accident. In this way a similar set of unit present values of r!:lmaining costs per ease of each duration could be worked out. In making up the reserve these values should be applied to the number of cases outstanding rather than amount of weekly benefit. The reason for this is obvious.

Theoretically, it would be necessary to have a set of such valuation tables for each state to conform to the benefits of its law. Practically, it seems probable that groups of laws are sufficiently alike that one set of tables would serve several states. Two supplementary reserves would be needed to provid~ for the full liability, a reserve for deferred claim expense which might be a fixed per· c.entage of the loss reserve as recommended by the committee in 1931,a and a re::1erve for unreported and reopened cases. These would have to he based on an examination of experience in that regard. The writer has not now a company's data. or staff to try out these principles. There may be found difficulties which he does not foresee that will make their adoption not feasible. He hopes not.

3. Proc. XVII. P. 334. 352 PROCEEDINGS

Certain advantages would appear to :ftow from the adoption of snch a plan. 1. Th13 reserve so calculated should blend smoothly into the ultimate l'eserve without the abrupt break that now comes when a policy year passes its third anniversary and a substantial sserve is usually automatically released to surplus. 2. The participating company, stock or mutual, would not need to defer d~termination of final dividend until the period of formula reserve is passed or, alterne.tively to accumulate surplus to meet an excess reserve required. 3. There should be a closer, or at least more stabl13, relation between the diroot estimate reserve and the statutory minimum. 4. The reserve would be divorced from rates and in th13 consideration of rates and rating plans their effect upon the probable adequacy of reserves would not need to be constantly in mind. With the 13:xpressed desire for more flexibility in the state supervision of rates under the new federal-state relation that is an important point. It hardly seems likely, however, tha.t regulation of reserves by sueh a plan would avoid the necessity of direct rate regulation as in the case of life insurance, a dream once expressed to the writer by the late Albert Whitney. If a. system of minimum loss reserves along the lines herein outlined is deemed feasible and desirable, the specification in the law would be quite simple, It would only be necessary to say that the liability for deferred payments on compensation losses shall be not. less than the present value of the future compensation on cases for which the company is liable eomputi:,d on the basis of such tables of disability, mortality and remarriage as may be approved by the commissioner and on an assumed rate of interest not exceeding 8%, It would seem better to leave the table unspecified in the law to permit easy change as experi~nce indicates to be desirable. Some body such as the National Council representing both the commissioners and the carriers should be charged with the duty of con­ tinuously studying developments and making recommendations for modifl.­ cation of standards and, in the interest of uniformity it would be desirable that it make regular reports to the Association of Commissioners on the apparent appropriateness of the existing reserve standard tables. It would probably be desirable to have a standing committee of the association in charge of this work though perhaps the provision for general supervision of the Council would be sufficient. The offering of these observations has been inspired by the fa.ets that in California there is not, as in New York, a general fund to take over the liabilities of insolvent carriers, but there is required of ea.eh carrier a deposit of securities or a surety bond to cover its deferred lia­ bilities based on th,, usual minimum loss reserve but at a higher fraction (70%) of the earned premium. and that under the comprehensive plan for war contracts and perhaps under proposed rating plans based on graduated expense loadings the reserve so computed may prove inadequate. At least this possibility must be considered by the Commissioner if such plans come before him for approval. PROCEEDINGS 353

Comm'88toner Hodges (North Carolina.): I move the adoption of the report.

Commissioner Sullivan (Washington): I second the motion.

President Dineen: The motion has been made and seeonded that we adopt the report of the Committee on Workmen's Compensation. Is there any discussion t All in favor, signify their approval by saying ''Aye.'' All opposed, ''No." The "Ayes" have it and it is so ordered.

Commissioner Hodges (North Carolina): May I be privileged to make one comment f This is the first time a report of the Workmen's Compen­ sation Committee hasn't raised hell in this Convention. (Laughter)

President Dineen: Commissioner Bowles, does your Committee on Casualty and Surety have any Teport to make t I shall now read you the report of the Committee on Casualty and Surety, Chairman Bow~es .

. President Dineen read the report as follows:

REPORT OF CASUALTY AND SURETY COMMITTEE WHEREAS, it has come to the attention of this Committee through statements of various Insurance Commissioners, including Commissioner Kavanaugh of Colorado, Commissioner Sullivan of Kansas, and Mr. Ga.rff of Utah, repr~senting Commissioner Carlson, that certain automobile in­ surance companies a.re operating under a so-called '' Knock For Knock Subrogation Agreement,'' under which agreement said companies forego making or prosecuting any claim against the other or its insureds arising from the right of subrogation under its policy contracts or by law, and WHEREAS, it has been the experience of Insurance Departments that such agreements, whatever be their intent, usually result in one or mor.e of the insureds being deprived of full policy beneftts and indemnity payments assumed by the company in accordance with their policy eon~ tracts, and WHEREAS, it further appears that an agreement exists between companies to compromise claims on a 50% basis or other percentage basis r!;!Sulting in setting off one claim against another and thus avoiding just settlement, THEREFORE BE IT RESOLVED that the agreements hereinabove outlined and all similar agreements are hereby condemned as being against th~ public interest because they take an unfair advantage of uninformed insureds and the public generally. Respectfully submitted, George Bowles, Virginia, Chairman. 354 PROCEEDINGS

Commissioner Bowles (Virginia): Mr. President I move its adoption.

Commissioner Harrington (Massachusetts): I second the motion.

President Dineen: Is ther~ any discussion f All in faYor, signify their approval by saying ''Aye.'' All opposed, ''No.'' The ''Ayes'' have it and it is so ordered.

Is Commissioner Don Knowlton here1 Are you ready on Accident and Health, Don 1

... Commissioner Knowlton read the Committee r~port as follows:

REPORT OF THE ACCIDENT AND HEALTH COMMITTEE TO THE NATIONAL ASSOCIATION OF INSURANCE COMMISSIONERS AT THE JUNE MEETING, 1947

This committee received a report from the committee of the accident and health industry which has been studying model standard provisions and accid.ent and health regulatory laws. This report showed that progress is being made and the work is continuing. A subcommittee of this com· mittee will meet with the industry committee in the hope that a definite report can be made to the December meeting.

Several insurance departments have issued rulings the effect of which would be to require companies to discontinue the us~ of policies previously approved if they do not conform to the requirements of the latest edition of the Official Guide and to require the resubmission of such policies re­ vised to so conform. This committee was informed that the Commissioners of Florida, Georgia and Texas have agreed to postpone the eftectiv13 date of such rulings until January 1, 1948, with the understanding· that this committee will study the question of the retroactive effect of the Official Guide and attempt to advance a. reasonable program dealing with the subject matter of such orders for consideration at the December meeting. This we will try to do. In the interest of uniformity in the approval of health and accident contracts in the forty-eight states we are again asked to urge our fellow commissioners to cooperate in the use and so far as possible in the uniform application of the principles of the Official Guide. We feel this is a reasonable request and in the interest of improved state supervision.

This committee recommends that this Association approve a uniform Hospital Report Blank for use by hospitals in furnishing information on claims under individual accident and health policies. It does not apply to claims under group policies. The blank has been approved by the American Hospital Association, the Internationa.l Claims Association and the Health and Accident Underwriters Conference. A copy of the blank is attached to and ma.de a part of this report. Zone 4 submitted to this committee recommendations for a program on securing accident and health loss experi~nee from companies by polic7 PROCEEDINGS 355

forms We voted to entertain these recommendations and give the subJect study. We hope to be able to provid~ an opportunity to all those mterested in this matter to be heard before the next December meeting and to report on the subject at that time. R!;lspectfully submitted, Jesse L. Whit George B. Butler W. Ellery Allyn T. W. Shands N. P. Parkinson Frank Sul! ivan Luke J. Kavanaugh Donald Knowlton, Chairman Guy R. Whitten

HOSPITAL REPORT Claim No·------···--··--·····-·------______Insurance Company Policy NO------···············--····--·· Name of HospitaL---·-·····------····-··········----- City .. ------·--·------·-·· State------­ Name of Patient------········--·········· Address------···--··-···--······ Age------·-· Admitted to Hospital on .. ------·--····---·--········--·····------·· (Date) at----··----.. a.m.-p.m. Discharg!c)d on---·········--···········-·········------·-·------(Date) at...... a.m.-p.m. Complaint• ···------··············-········------·--·-·······--··························--·------··--·

Date of First Symptoms:····------······--······------····-··--·------···· Final Diagnosis (Including complications): .. ------··--···-··--···--·----·----········--·········

Operations Performed (nature and date): .. ----····················----····------····-············

Taken from records OD----········-····················-····----194 •• ---· Signed by...... •...... •..• Title ···········-···------·····················------·--··-----·-····-····----

Commissioner KnowN-0n (New Hampshire): There are I think two members of this Committee whom I have not been able to find to get their signatures to this report, and if they agree to the report, I would like to have them go to the Secretary and sign it so we will have a complete report. Mr. President, I move the adoption of the report.

Commissioner Sullivan (Washington): I second the motion.

President Dineen: It has been moved and seconded. Is there any debatef All in favor, signify their approval by saying "Aye." All opposed, "No. 11 The "Ayes" have it and it is so ordered. I will .now call upon Commissioner Jack McKenzie for a report of the Committee on Fire Prevention.

Commissioner McKenzie (Arkansas): Mr. President, the Committee 356 PROCEEDINGS on Fire Prevention did not have a meeting due to the fact that the members of this Committee were in other committee meetings, but we did think it proper to acknowledge the efforts of the President in connection with his Fire Prevention Conference, so that I present this resolution.

, • . Commissioner McKenzie read the proposed resolution as follows:

REPORT OF THE FIRE PREVENTION COMMITTEE OF THE NATIONAL ASSOCIATION OF INSURANCE COMMISSIONERS Your Fire Prevention Committee calls attention to the President's Conference on Fire Prevention held in Washington on May 6, 7 and 8, 1947. The National Association of Insurance Commissioners was represented on the principal committee of this Conference by its President, the Honor~ able Robert E, Dineen, who also contributed a timely and thoughtful address to the Conference itself. Other Commissioners served on other committees and attended the Conference sessions. With the mounting losses of lives and property this effort to coordinate the fire prevention forees of the nation was most timely and from this eonferenee of experts and publie minded citizens has come an action program whieh is being m&de available to all state officials. The recom­ mendations it contains should result in greatly increased fire prevention work by public officials and private citizens alike. Of special interest to this Association are the recommendations for state conferences and state committees and for the vesting of fl.re marshal powers in some present or new state official where state fire marshals do not now ~xist. Your Committee feels that the President's Conference will be of immense ben13fit in the conservation of lives and property and suggests the adoption of the following resolution: WHERE.AS, the President of the United States because of his concern over the increasing losses of lives and property through preventable fires called a. national conference on Fire Prevention which was held in Wash· ington on May 6, 7 and B, and WHEREAS, this conference adopted an Action Program calling for greatly increased fir~ prevention activities by public officials with the support of all citizens, Now Therefore BE IT RESOLVED that the National Association of Insurance Com­ missioners in annual conference assembled at .Atlantic City, New .Jersey, does her~by express its appreciation of the forethought and great interest of the President and pledges its full support to this national effort to prevent needless fires. Respectfully submitted, Jack G. McKenzie, .Arkansas, Chairman James M. McCormack, T~mneseee George B. Butler, Texas Donald Knowlton, New Hampshire William P. Hodges, North Carolina PROCEEDINGS 357

CommMnoner McKenzie (Arkansas): Mr. President, I move the adop­ tion of this resolution and that copies of it be forwarded to the President of ~e United States and to Major General Philip B. Fleming, the General Chairman of the President's Conference.

President Dineen: Do I hear a second to the motion T

Commissioner Thompson (Oregon): I'll second it.

President Dineen: Is there any debate! All in favor, signify by saying ''Aye.'' Opposed, ''No.'' The ''Ayes'' have it and it is so ordered.

I will now call on Commissioner Butler for th~ report of the Committee on Laws and Legislation .

. . . Commissioner Butler read the report as follows:

REPORT OF COMMITTEE ON LAWS AND LEGISLATION NATIONAL ASSOCIATION OF INSURANCE COMMISSIONERS ATLANTIC CITY, N. J., JUNE 3, 1947 The Committee on Laws and Legislation met in the Benjamin West Room of the Haddon HalI Hotel at ten o'clock on June 3, 1947. The foilowing Commissioners were present: George B. Butler, Texas, Chairman Owen G. Jackson, Missouri, Vice-Chairman Donald Knowlton, New Hampshire Jack G. McKenzie, Arkansas John D. Pearson, Indiana Donald F. Dickey, Oklahoma Commissioner McCormack of Tennessee discussed with the Committee the advisability of further discussing a subject that has been pending in the Committee for some time, that subject being the raising of the standards of insurance departments. It was recalled that Commissioner MeCormack, when he was President of the National Association of Inaur­ anee Commissioners, made a spe~eh on this subjeet whieh was printed and sent to all the states for their consideration. Commissioner McCormack stressed the importance of having a competent staff in the various states with deputies, actuaries and examiners. After much diseussion, Commissioner Knowlton made a motion to have this subject placed on the agenda at the December meeting and to have the Chairman of the Committee notify all state d!;!partments that this subject would be seriously considered in Deeember and would be open for discussion by ail Commissioners. This motion was seconded by Commissioner Pearson of Indiana and voted by the Committee. Mr. James Rutherford, Vice-President of the National Assoeiation of Life Underwriters, and Mr. Smuck, attorney for that association, discussed a uniform qualui.cation la.w for life insurance underwriters to be adopted 358 PRoCEEDINGS by the various states. It was decided that this matter would be given further attention by the Committee at a later date and that Mr. Smuck would submit to the Chairman a proposed uniform bill. Mr. Smuck discussed further with the Committee the matter of th~ Commissioners' uniform bill in reference to companies doing business through the United States mail. There was no further discussion. On a. motion of Commissioner Dickey, th.e Committee adjourned. Respectfully submitted, George B. Butler, Chairman Jack G. McKenzie Owen G. Jaekson John D. Pearson Donald Knowlton Donald F. Dickey

Commissioner Sullivan (Washington): I move its adoption.

Commissioner Thompson (Oregon): I second the motion,

President Dineen: A motion has been made and seconded that the report of the Committee on Laws and Legislation be adopted. Is there any debate7 All in favor, signify their approval by saying "Aye." Opposed, "No." The "Ayes" have it and it is so ordertd.

Is Deputy Commissioner Garff here, from Utah T Did your Committee on Taxation meet, Commissioner Garff 7

Deputy Commissioner Garff (Utah): We did, but we didn't accomplish anything and have no report.

President Dineen: Well, this taxation is a very simple subject!

Deputy Commissioner Garff (Utah): Jim McCormack stepped in hal:f an hour late and I asked him to comment on a matter and he did and that settled it and the meeting adjourned. (Laughter)

President Dineen: That is such a lov~1y report, I think I will invite debate. Was there any action by the Committee on Social Security! I doubt that there was, because Commissioner Fischer, the Chairman, and Commis­ sioner Duel, tht Vice-Chairman, neither one were here. (No report sub· mitted) Is Commissioner George Benjamin here7 Commissioner EJlery Allyn f I know he has a report for the Life Committee. · Commissioner Jesse White, Fire and Marine. PROCEEDINGS 359

Commissioner White (Mississippi): Mr. President, I ha.ven 't been able to contact all the members of the Committee yet, but I have the report ready.

President Dineen: Supposing you come ahead and read it and they can vote on it from the floor .

. . . Commissioner White read the report as foI1mvs:

REPORT OF THE FIRE AND MARINE cmfMITTEE OF THE NATIONAL ASSOCIATION OF INSURANCE COMMISSIONERS The Committee met on Tuesday morning, July 3, 194i, at 9 A. M. with the following members present:

Commissioner Jesse L. White, Chairman, Mississippi G. F. Purvis, Jr., representing Commissioner Martin of Louisiana Commissioner W. Ellery .Allyn, Conn~cticut Commissioner Owen G. Jackson, Missouri Commissioner Charles F. J, Harrington, Massaehusetts Superintendent Robert E. Dineen, New York Commissioner Wallace Downey, California Commissioner James F. Malone, Jr., Pennsylvania

Superintendent Dineen reported informally as Chairman of the Sub­ committee on Underwriting Profit that the work of the Committee was still in progress; that the industry had been invited to submit briefs or memoranda on the subject and that several such briefs or memoranda had been received, and that in the near future a hearing would be held jointly by the Subcommittee and by the New Yol'k Insurance Department on this subject.

The Committee heard discussion by various Commissioners and members of the industry as to the practice of certain agents in failing to report fire losses to their companies until some time after the loss had been incurred and adjusted.

The Committee also heard a brief discussion on the abuse of binders by some agents.

Commissioner Harrington discussed informally the alleged shortage o:f underwriting capacity for fire insurance and urged the industry to provide coverage for those entitled to it; Superintendent Dineen stated that the problem of lack of underwriting capacity was also receiving attention in the New York Insurance Department. Superintendent Dineen present~d to the Committee a booklet entitled "Classification of Fire Occupancy Hazards" which was prepared by the State of New York. It sets forth in detail the development of the new classification of fire occupancy hazards adopted in 1946 by the National Association of Insurance Commissioners and by the National Board of Fire Underwriters. The booklet presents the reasoning which underlies each 360 PROCEEDINGS of the classifications that have been established. Copi~s were presented to the various State Insurance Departments and will be made available to the industry at cost. In addition the New York lns'Urance Department hM agreed to file ten copies with the Secretary to be permanently retained for reference purposes. (Italicized matter added by amendment.) A report of the Subcommittee on Interpretation and Complaint is attached. Having no further business the Committee adjourned at 10:30 A. M. Respectfully submitted, Jesse L. White, Mississippi, Chairman G. F. Purvis, Jr., Louisiana W. Ellery Allyn, Connecticut Charles F. J. Harrington, Massachusetts Robert E. Dineen, New York Wallace Downey, California

REPORT TO THE FIRE AND MARINE COMMITTEE BY THE SUBCOMMITTEE ON INTERPRETATION AND COMPLAINT At previous meetings of this Association, the Fire and Marine Com· mittee, through this committee, has made various reports to the Association concerning its efforts to :formulate a plan to create standard definitions or classifications of Fire, Marine and Casualty Insurance. The Association has heretofor~ authorized a three-member of the Casualty and Surety Com· mittee to serve jointly with this Committee in its study of this subjeet. While much preliminary work has been done, most of which has been touched upon in previons reports of this Committee, there is nevertheles" no final report to be offered at this meeting. We will continue our en~ deavors and report further at a later date. We received the report of the Joint Committee on Interpretation a.nd Complaint, which is attached hereto and submitted herewith. Since our last report there have been no appeals from the decisions of the Joint Committee. Rf:,spectfully submitted, W. Ellery Allyn, Connecticut, Ckawm.an James F. Malone, Jr., Pennsylvania Albert F. Jordan, District of Columbia .Tune 3, 1947

JOINT COMMITTEE ON INTERPRETATION AND COMPLAINT May 29th, 194 7 To: The Committee for the Definition and Interpretation of Underwriting Powers of the N.A.I.C. Honors.hie W. Ellery Allyn, (Connecticut) Chairman Honorable Albert F. Jordan, (District of Columbia) Honorable James· F. Malone, Jr., (Pennsylvania) PROCEEDINGS 361

At the December meeting of your Association, the Joint Committee on Interpretation and Comp1auit filed with you a Report whieh reviewed the general status and progress of the Nation-Wide Marine Definition from inception to the date of the Report. The Report detailed the status of that Dtifinition in each state. In the time which has e1apsed since the filing of the last Report, there have been no changes in the status ot the Definition in the states which have adopted the Definition except the following: Joint Committee's General Bulletffl is- Definition .A mended aueil to Signatories Stat• to permit Date No. MAINE Inland Marine Form covering Floor Plan merchandise ··---··-· Jan. 22, 1947 137 PENNSYLVANIA Inland Marine Form to cover merchandise in cold storage lockers ····----·----···--···------····----·- Feb. 7, 1947 138 NEW HAMPSHIBE Tourist alid/or Personal Effects Floater Policies to include coverage in permanent resi­ dence of Assured -··---·----···-·-··-· Feb. 17, 1947 139 Silverware Floaters to inc1ude coverage at permanent resi­ dence of Assnrl!d -··------·-·-····-··· Feb. 17, 1947 139 Inland Marine Form covering Floor Plan merchandise ···----··· March 17, 1947 141 GEORGIA Inland Marine Form covering Floor Plan merchandise ------·· March 13, 1947 140 VERMONT Inland Marine Form covering Floor Plan merchandise ··-·-··-·· April 10, 1947 142 ILLINOIS Inland Marine Form covering Floor Plan merchandise ------···· April 14, 1947 143 SOUTH CAROLIN.A. Inland Marine Form covering Floor Plan merchandise ·-·----·-· April 24, 194 7 144 MISSOURI Inland Marine Form covering Floor Plan merchandise ·······--- May 20, 1947 145 All other matters covered in the last Report are in substantially the same status_ Additional eases, of course, have been submitted to and decided by the Committee, its calendar being up to date. Resp~etfully submitted, JOINT COMMITTEE ON INTERPRETA­ TION AND COMPLAINT E, J, Perrin, Jr., Chairman Joseph G. Bill, Execut«Je Secretary

Commi&sionM White (Mississippi) : Those who have not signed this report, if you are agreeable to it, please report to the Sj:IBreta.ry and sign it. Mr. President, I move the adoption of the report. 362 PROCEEDINGS

President Dineen: Do I hear a second t

Commissioner ThompS-On (Oregon): I second the motion.

President Dineen: Is there any debate!

Commissioner Harrington (Massachusetts): Mr. President, in view of the criticisms that have been often directed against the Association for lack of factual information supporting various actions we have taken, I move that by the adoption of this report, we authorize the inclusion in the Association Proceedings, the printing of the report referred to in the last paragraph, prepared by the New Yoi·k Departmtnt concerning the classi­ fication of :fire occupancy hazards.

President Dineen: Do I hear a second 7

Commissioner Sullivan (Washington): I second the motion.

President Dineen: Frank, I have got a little bad news for you. My associate says it eost $1,000 to print that, and if we ever had that added here and asked the brothers to pay $1,000, it would be bad.

Commissioner Harrington (Masi,aehmetts): Well, Mr. Presid!;'!nt, I am afraid your associate isn't a competent estimator. I don't know what the cost per page is, perhaps the Secretary can tell us, but it seems to me that that report is not as voluminous as som!;'! other reports that have been included in the Proceedings and it does support an important change in the matter of fire insurance proceedings.

President Dineen: May I make an alternativ~ suggestion, Commissioner Harrington t In view of the adoption of the report of the Executive Com­ mittee providing for the en1arged functions of the Secretary's office and for the permanent filing of all of the records of this Association with the Secretary, would not that suffice, so that your motion could be amended to provide that it go on fil!:'! thereT I don't mean to press the point in opposition, I am thinking purely in terms of dollars and cents.

Mr. Morrill (New York): Mr. President, in support of the estimate, I might say that w13 have just had a thousand copies printed and what you might overlook is that there is a lot of Monotype composition in that report, and having 11000 copies printed by our Drpartment cost us $1,000 to print them. It might be that another printer in another section of the United States could do it cheaper, but I don't think mueh cheaper than $1,000.

secretary Parkinson, (Illinois): How many pages are therrT It costs $4. 75 a page. PROCEEDINGS 363

Pres1,dent D,neen: Frank, let me ask you this much. We are g01ng to have a session tomorrow morning Why don 1t you defer your mot10n on that and we will explore it in the meantimef Are you agreeable to thatf

Commissioner Harrington (Massachusetts): \Vell, if action is taken on the report, will it be in order to amend the reporU

President Dineen: This is a ,:eparate motion in connection with printing the records of the Association. I think it could be handled as a. separate motion at any time before we adjourn. I would prefer to have that done, so we won't act in haste and repent at leisure.

Co1n1nissioner McCormack (Tennessee): \Vithout intrrfering with the procedure, I intend to present to the convention anyhow a motion to have the Proceedings printed semi-annually insteaU of annually. There is no r,eason why we shoulu wait six months to get the proceedings of one meeting. It might come under the one head.

President Dineen: Frank, if that is agreeable with you -

Commissioner Ila,rrington (Massachusetts): We will withdraw the amendment at this time, 1\.fr. President, and, relying upon your excellence as a parliamentarian, we understand we are not foreclosed from bringing it up tomorrow.

President Dineen: Thank you, sir. Is there any debatef "\Ve are ready for the question. All in favor of the adoption of the report of the Fire and Marine Committee, signify their approval by saying ''Aye.'' Opposed, ''No.'' The ''Ayes'' have it and it is so ordered. Thank you, Commissioner White. Is Commissioner Allyn here yeU (Not present) Is Commissioner Jack Pearson of Indiana beret This is the report of the Committee on Real Estate.

. . • Commissioner Pearson read the Committee report as follows:

REPORT OF THE COMMITTEE ON REAL ESTATE

Th~ Special Committee on Real Estate having met at the Hotel Chalfonte-Haddon Hall in Atlantic City on Tuesday, .Tune 3, 1947, reports a.s follows: The matter of inflationary appraisals on Real Estate was brought up by Commissioner McCormack as one of the most dangerous aspects of the Real Estate Investment Field for Insurance Companies at this time. Commissioner McCormack requested that the Committee make a study of and give further consideration to evolving a formula., based upon 1940 364 PROCEEDINGS pri~ levels, for standardizing the system of Real Estate appraisals with the view of attempting to safeguard the industry against inflationary Real Estate prices. This suggestion wa.s looked upon with favor by the Committee and it was deeided the subject would be further explored and a r~port ma.de at the December meeting. Respectfully submittsd, John D. Pearson, Chairman Bernard R. Stone J. Edwin Larson Otto Kruger

Commission.er Pearson. (India:ua.): I move its adoption.

President Dineen: Do I hear a second f

Commissioner Larson (Florida): Second.

President Dtneen: It has been moved and seconded that the report of the Real Estate Committee be adopted. Is there any debate f All in favor, signify their approval by saying "Aye." Opposed, "No." The ''Ayes'' have it and it is so ordered. Is Com.missioner Dave Forbes here, from Michigan t Dave, is there any occasion for a report by the Committee on Interstate Ba.ting and Irregular Underwriting Practices!

Commi.ss£oner Forbes (Michigan): As Chairman of the Committee, Mr. President, I contacted by letter all the members of the Industry Committee on Interstate Rating and, with one exception, they recommended that no meeting hr held until the December meeting. By that time, all the rating legislation in the states that is still pending will have passed and we will then have a chance to study the various rating bills in the various states and be in a better position to act accordingly.

President Dineen.: Thank you, Commissioner Forbes. On the Subcommittee on Uniform Accounting, the report is that the accountants and statisticians are engaged in factual studies and when the studies are completed, a report of the Subc.ommitt~e will be made. Commissioner Harrington, do you have a report on the Special Com­ mittee on Federal Legislation and Rates and Rating Organization.sf

CommWlrioner Harrington (Massachusetts): Mr. President, there is a meeting scheduled for two o 'cloek and since we didn't complete our agenda, no report is available at this time. We will render it tomorrow morning. PRoCEEDINGS 365

President Dineen.: Commissioner Johnson of Minnesota.. It is too early, I take it, for the Te-port of the Committee on Examinations. By the way, that Committee, for the benefit of you people here, is scheduled to r1;1convene at 2: 30 this afternoon, I think in the room at the opposite end of the corridor. Are you ready to report on Life, Ellery f

Commissioner Allyn (Connecticut) : The report has been prepared. It has only been signed by three members of the Committee so far. I have been unable to locate them so far.

Presiden,t Dineen: Would you prefer to report tomorrow morning f

Commissioner Allyn (Connecticut): I would much pref~r to have the signatures of the members of the Committee before I make the report, sir.

President Dineen: These boys from th~ Wooden Nutmeg State are pretty cautious. Commissioner Harrington, what about a report on the subject that Mr. Diemand has such a slight interest in, MultipJe Line Underwriting!

Commissioner Harrington (Massachusetts): We have a report, Mr. Chairman.

President Dineen: Will you read it, please.

• . . Commissioner Harrington read the report as follows:

REPORT OF MEETING OF MULTIPLE LINE COMMITTEE NATIONAL ASSOCIATION OF INSURANCE COMMISSIONERS NEW YORK CITY, JUNE 3, 19~7

On April 21, 1947, the Commissioners' Multiple Line Committee and the Industry Multiple Line Committee met in joint session at the offices of the Atlantic Mutual Insurance Company at 49 Wall Street, New York City. Mr. John A. Diemand, Chairman of the Industry Committee, presided. A general discussion of the problems involved in the extension of Multiple Line Underwriting occupied the attention of the group. A report of the results of that meeting, dated April 30, 1947, is attached hereto. Following the meeting the Commissioners were of the opinion that considerable progr~ss had been made in advancing multiple line underwriting in the public interest since the National Association of Insurance Com· missioners endorsed the program submitted by the Industry Committee in June, 1944. The report hereinbefore referred to indieates the legislative accomplishments in the field of multiple line underwriting. 366 PROCEEDINGS

Your Committee believes that the vast amount of material dealing with the subject of multiple line underwriting accumulated by the Industry Committee should be of considerable assistance to this Committee . in making further constructive suggestions for the extension of legislative permission for insurance companies to progrJclSsively improve underwriting facilities demanded by the public. It is the feeling of your Commissioners 1 Committee that the success of the primary program recommended by the Industry membi::irs of this Committee forecasts the probability that the amplification of the original program can best be initiated by those familiar with the problems confronting management in the insurance busi­ ness. Your Committee regretfully announces the death of Mr. William H. LaBoyteaux, representing the brokers on the Industry Committee. Mr. LaBoyteaux donated his services most generously to the end that multiple line underwriting might be advanced in the public interest. His sound judgment, wise counsel and inspiring leadership were of immeasurable value to his associates on the Committee and to the Commissioners' Com­ mittee as well. We recommend that his colleague, Mr. Courtland Otis of Johnson and Higgins, be authorized to continue in his place as a member of the Industry Committee. Unless voted to the contrary by this Association, we recommend that by its adoption of this report, this Association authorizes the continuance of the Industry Committee named in the attached report with the sub· stitution of Mr. Courtland Otis for Mr. William H. LaBoyteaux, deceased. We further recommend that the Commissioners' Committee on Multiple Lines be authorized to invite the Industry Committee to give :further con­ sideration to constructive recommendations for the extension of multiple line underwriting in a manner consistent with the public interest; such report to be made to the Commissioners' Committee on Multiple Lines prior to the December meeting and made available to the Commissioners thirty days in advance of the m""eting at which action is to be taken. Respectfully submitted, Charles F. J. Harrington, Massachusetts, Chm. W. Ellery Allyn, Connecticut

REPORT OF MULTIPLE COVERAGES COMMITTEE April 30, 1947 Hon. Robert E. Dineen, President, National Assoeiation o-f Insurance Commissioners, 61 Broadway, New York, N. Y. Dear Mr. Superintendent: In June, 1944, the Multiple Line Underwriting Committee, appointed by the Honorable Charles F. J. Harrington, then President of your Associa­ tion, made its report and recommended: I. That any domestic fire, marine, casualty or surety company meet­ ing certain policyholders' surplus requirements be empowered to write any PROCEEDINGS 367

and all kmds of msurance or remsuranee on risks outside of the United States, its terr1tones and possessions. II. That any fire, marine, casualty or surety company meeting certain policyholders' surplus requirements be empowered to accept any and all kinds of reinsurance other than life insurance and annuities. III. That any fire or marine insurance company or any casualty or surety company licensed to write liability insurance, meeting certain finan· cial requirements,. be empowered to write insurance against any and all of the hazards of loss from damage to automobiles or from liability arising out of ownership, maintenance or use of automobiles. IV. That an~· fire or marine insurance company or any casualty or surety company lircnsed to write liability insurance, meeting certain finan­ cial requirements,. be empowered to write insurance agairn:;t any and all of the hazards of loss from damage to aircraft or from liability arising out of ownership, maintenance or use of aircraft. V. That any fire, marine, casualty or surety company be empowered to insure individuals against all risks of loss of or damage to personal property commonly insured under personal property floater policies. Your Committee also recommended that a continuous open minded and realistic study of th.e whole subject be instituted through appropriate committees of the Association, with the active cooperation and assistance of the entire insurance industry. Your Multiple Coverages Committee has reviewed the l~gislative prog­ ress made in the various states and finds as follows: Thirty-three states had legislation permitting full multiple power charters. Eight states had partial legislation, and t.rn of these had broader legislation pending. Se,·en states had no legislation, but three of these had legislation pending. Thirty-five states had legislation at least equivalent to that recom­ mended in the report of the Multiple Line Committee to the National Association of Insurance Commissioners in June, 1944. Thirty-nine states had legislation permitting the writing of a full automobile policy by either fire and marine or casualty and surety companies. This particular field of underwriting involves most of the problems which it has been alleged are involved in multiple line underwriting. So far as your Committee is aware, no serious results have appeared from the exercise of the combined fire and casualty powers embodied in this form.

The Multiple Line Underwriting Committee report of June, 19441 included the following comment: '' Furthermore, if the laws or regulations of any state shou]d 368 PROCEEDINGS

forbid the underwriting there or elsewhere of broad coverages which insu'tanee companies could otherwise make available, sub­ stantial nullification of the advantages of broad charter powers would result.'' The foregoing comment had reference to the so-ealled ,i Appleton Rule" in force in the State of New York. With the broad l~gislative authority for multiple line underwriting in many states, the Multiple Coverages Committee believes that the Appleton Rul~, as enforced by the State of New York, is now the greatest single barrier to the exercise of multiple pOWf'?S by the companies in the various states. Your Multiple Coverages Committee makes this report showing present legislative authority for multiple line underwriting and inquires whether your Association wishes it to make further study and r~port at the mid-year meeting in December. Respeetfu11y submitted, MULTIPLE COVERAGES COMMITTEE Commi&rioti6"8 Industry Members C. F. J. Harrington, Chairman John A. Diemand Lawrence E. Ensor Arthur F. Lafrentz W. Ellery Allyn S. Bruce Black J. Arthur Nelson William D. Winter William D. 0 'Gorman Kenneth C. Bell

C<>mmissioner Harrington (Massachusetts): Commissioner Ensor re­ tired from office before this report was completed and has not been replaced, but I feel h~ would sign it, because he has signed the joint report prepared by the industry and the Commissioners. Unless it is desired, I will not read the Industry Report but simply outline it. If there is objection to that, I will read it in full'.

Pre.rident, Dineen: The Chair will hold that you can outline it pro­ viding ~e outline is no longer than the report. (Laughter)

Commissioner Harrington (Massachusetts): The report outlines the five points contained in the original report made by the Industry Com­ mittee to this Association and then calls attention to the fact that a review of the development of multiple underwriting indicates that 33 states have legislation permitting full multiple power charters and eight states have partial legislation. Seven states have no legislation, but three of them have legislation pending. Thirty-five states have legislation at least equivalent to that recommended in the report of the Multiple Line Committee, and 39 states hav~ legislation permitting the writing of full Automobile by Fire and Casualty and Surety Companies.

That substantially covers the report, Mr. Chairman, and it is signed PROCEEDINGS 369 by ( reade names of Comm1ttee), I move the report be adopted, with the aeeompanymg industry report.

Commissioner Allyn (Conneeticut): I second the motion.

President Dineen: Is there any debatef All in favor, signify their approval by saying ''Aye.'' Opposed, ''No.'' The ''Ayes'' have it and it is so ordered. Commissioner Hunter of Manitoba said he had an announcement to make here and we are very happy to aeeord to our Canadian visitor the privileges of the floor. (Applause)

Commissioner Hunter (Manitoba): Mr. President, first I would 1ike, on behalf of the Canadian Superintendents of Insurance, to express our appreciation for the privi1ege afforded to us of attending your de1iberations and enjoying them, and also to thank you for the many courtesies that ate extended to us during our visits. As President of th~ Canadian Association, I would like to take the time to extend personally an invitation to all of you Commissioners, and also to any of the industry who would care to come, to attend our COD· ference, which is being held in Jasper on the 8th of September this year. Now, you all know that Jasper is the garden spot of Canada and one of the prettiest spots and we have really something to show you there and we real]y would love to have you with us on that date. I will be writing to you, but I would like to give you this information in advance so you ean go home and give the matter some thought and try to b~ with us on this date. Thank you. (Applause)

President Din.een: Thank you, Commissioner Hunter.

Commission.er Holmes (Montana): Mr. President, could we have Com­ missioner Hunter's speech translated into English f

Prerident Dineen: I am happy to report to you, .John, that there is another book on the press right now, what is known as a Primer for Commissioners. I will see that you get a copy. Now, I think we are at this stage where the only reports that have not been received are the Committees on Life, on Federal Legislation and Rates and Rating Organizations, which will be praetiea11y a eing]e report, and the report of the Committee on Examinations. Are there any other chairmen or any other reports of any kind which I have overlooked and which I haven't called for f We a.re ready for an announcement by the gentleman from Florida, Commissioner Larson.

Commissioruir Larson (Florida): I want to take just a half minute. For some several months past, Zone 3 has had under consideration a school 370 PROCEEDINGS of instruction for rating deputies, feeling that it is entirely timely and in order. Zone 3 is planning to meet tomorrow morning at 8:30 to endeavor to conclude and perfeet plans for the holding of this School of Instruction or Forum. Feeling that there might be some of you in the audience who may be a bit modest in presuming to offer your assistance or instruction to us on this occasion, we invite you to submit anythi11g that you have to offer which you feel would be timely and in keeping ,vith what ,ve are end~i:i.voring to undertake. We invite your suggestions and hope that out of this audience, someone from some of the bureaus might be in a position to offer something that would be helpful in our undertaking of this task for the deputies that are handling this problem and facing the enforcement of our regulations and laws as to fire and casualty and surety in Zone 3. Tomorrow morning at 8:30,

Commissioner Thompson (Oregon): Where1

Commissioner Larson (Florida): I do:n 't recall the name of the room. It is on this floor opposite the Tower Room. The Mandarin Room.

President Dineen: That certainly impresses me as being a very eon· struetive idea. I will tell you right now if there is anything you want us to do, we will be glad to do it.

Commissfoner MoCormac1.1 (Tennessee): Just for the sake of clarity, in its :final form, it may be possible that representatives of departments outside of Zone 3 would be welcome at the school, although :final deter­ mination has not been made. Is that right1 Commissioner Larson 1

Commissioner Larson (Florida): That is correct.

President Dineen: You are going to work out the details of the program as to where you will hold it, and how. It is an exploratory meeting. Well, gentlemen, if there is no other business to come before us - I recognize Commissioner Gough of New Jersey.

Commissioner Gough (New Jersey): Mr. President, arc zone reports in order at this time7

President Dineen: Yes, sir.

Commissioner Gough (New Jeri:,.ey): Zone 1 wishes to reports its selection of Commissioner Knowlton of New Hampshire as its member of the Executive Committee for the ensuing year and Commissioner Ellery Allyn as Chairman of the Zone for the ensuing year.

President Dineen: Those Zone 1 boys certainly pick good men, don't they! Do any other zone chairmen have any reports they would like to make! PROCEEDINGS 3il

Commisstoner Jackson (Missouri) : Zone 3 has picked ComID1ss1oner Wade Martrn as the member to represent the Zone on the Executive Com­ mittee but he has resigned, to become the Governor of Louisiana, I suppose, and we have selected in his stead, Com.missioner Jesse L. White of Mis­ sissippi.

President Dineen: Thank you, sir. Are ther~ any other zone chairmen who would like to report to us the results of their cloakroom machinations for the last two days T

Commissioner Thompson (Oregon): Mr. President, Zone 6 has chosen as its representative on the Executive Committee, Commissioner Sullivan of Washington, and has chosen the Oregon Department as Chairman of the Zone.

President Dineen: Congratulations, ·wmiaml \Vould any other zone chairmen care to report1' I have been asked by the Committee here to announce th,ey will have a. man downstairs who will help you figure the odds for the afternoon and the Prudential has agreed to underwrite it, so oven if you pick a. lemon, you can't lose. It is going to be the most succe.ssful meeting in the history of the Association, because we are on a basis where no matter what you do, you 're always right.

Commissioner Harrington (Massachusetts): Mr. President, in view of the fact that a meeting of the Examinations Committee is schedul~d for 2:30, I suggest that our meeting will start promptly, and we invite the members of the Committee to be present at 2: 00 o'clock. That is the Rates and Rating Organizations Committee.

President Dineen: I hope you all heard that announcement. Those who want to go to the track can go. Thos~ who want to stay here and work, we have a program mapped out for them. Commissioner Harrington's Committee will meet at 2:00 o'clock and the Examinations Committee, as I said earlier, will reconvene at 2:30. Do you have any announcements, Mr. S,ecretaryf

Secretary Parkinson (Illinois): No.

President D·ineen: That being so, we stand recessed•

. . . Recessed at 12:40 P.M..

THURSDAY MORNING SESSION June 5, 1947 The :final Plenary Session, Thursday morning, was call~d to order at 10 :30 o'clock, President Dineen presiding. 372 PROCEEDINGS

President Dineen: The meeting will please come .to order. Is Com­ missioner Bowles of Virginia here t George Bowles, are you ready with your . Resolutions t

Commissioner Bowles (Virginia): They are in the course of prepa.ra• tion right now.

President Di~e11,: All right. While we are waiting for them, I will call on Commissioner Allyn for a report of the Li£~ Committee.

Commissioner Allyn read the Committee report as follows:

REPORT OF LIFE INSURANCE COMMITTEE NATIONAL ASSOCIATION OF INSURANCE COMMISSIONERS ATLANTIC CITY, N. J., JUNE 3, 1947 Hon. Robert E. Dineen, President National Association of Insurance Commissioners Sir: A meeting of the Life Insurance Committ~ was held on June 3, 1947, at Haddon Hall, Atlantic City, New Jersey. The Committee members presen·t were: Commissioners Butler, Kavanaugh, Shield and Allyn. Deputy Superintendent Morrill represented Superintendent Dineen of New York and Deputy Commissioner Purvis represented Commissioner Martin of Louisiana. A discussion was held regarding the $20,000 limitation as to amount of individual coverage specified in the Standard Group Life Insurance Deftnition, No definite conclusion as to the d~sirability of amending the Standard Definition in this regard was reached by the Committee, and the matter will receive :further study.

There was a diseuSBion as to company practice regarding W&1' clauaea and the treatment of claims thereunder, particularly as to such clausea contained in policies issued immediately prior to and during World War II. Inasmuch as the Committee has no figures regarding war losSf18 at the present time, it was voted to place this matter on the agenda for the December meeting when it is anticipated tha.t the results of studies now befog made will be available. Reports of the Working Committee on the Standard Non-Forfeiture and Valuation Laws covering its meetings of April 10th and June 2nd, resp~ctively, were presented to the Committee. After discussion the April 10th report was adopted and the June 2nd report was received and will be formally acted upon at the December meeting. The April 10th report has already been released to the Departments and the Working Committee was instructed to forward copies of the June 2nd report in a similar manner. A copy of each of these reports is attached hereto. It is recommended that the Working Committee be continued and PROCEEDINGS 373 that its reports be transmitted to the Departments as in the past, subject to later confirmation by the Assoeia.tion. Respectfully submitted, W. Ellery Allyn, Chairman Robert E. Din~n w. Leo Shield G. F. Purvis, Jr. George Butler Luke Kavanaugh

NATIONAL ASSOCIATION OF INSURANCE COMMISSIONERS REPORT OF WORKING COMMITTEE ON STANDARD NON­ FORFEITURE AND VALUATION LAWS TO LIFE INSURANCE COMMITTEE COVERING MEETING OF APRIL 10, 1947

Hon. W. Ellery Allyn, Chairman Life Insurance Committee National Association of Insurance Commissioners Sir:

A meeting of the Working Committee on the Standard Non-Forfeiture and Valuation Laws was held at the New York Insurance Department, 61 Broadway, New York, on April 10, 1947. The Committee members present were Bittel (New Jersey), Fenker (Tennessee), Harris (New York), Tiffany (Illinois) and Hooker (Connecticut). The meeting was also at­ tended by Bruce E. Shepherd, Manager of the Life Insurance Association of America and Alfred N. Guertin, Actuary of the American Lif13 Con­ vention_ Several life insurance company representatives were also present. The Committee's recommendations with regard to points discussed at this meeting are set forth below: 1. The question was raised whether, in determining the "equivalent uniform amount" for the purposes of Section 5(ii) of the Standard Non­ Forfeiture Act, in the case of an endowment policy providing a varying death benefit, such as a child's educational policy with graded benefits at the juvenile ages, the pur~ endowment element should be taken into consideration. The governing provision in Section 5 is as follows: '' In the ease of a policy providing an amount of insurance varying with the duration of the policy, the equivalent level amount thereof for the purpose of this section shall be deemed to be the level amount of insurance provided by an otherwise similar policy, containing the same endowment benefit or benefits, if any, issued at the same age and for the same term, the amount of which does not vary with duration and the benefits under which have the same present value at the inception of the insurance as the benefits und~r the policy." It is clear from the text of the legislation that the amount of pure endowment must be taken into aecotlnt. The basic question is whether the 374 PROCEEDINGS pure endowment in the '.'otherwis13 similar policy 11 must be equal to (1) that specified in the original policy or (2) the '' equivalent level amount.'' The question turns on the interpretation of the word ''same'' contained in the phrase '' containing the same endowment ben~fit or benefits.' ' If the first interpretation is adopted, higher minimum non-forfeiture benefits are produced for the juvenile policies described than if the second is adopted and expense margins are relatively smaller at the low juvenile ages than at the higher ages. If the second interpretation is adopted, the minimum non-forfeiture benefits on short term infantile endowment policies ar'3 lower than if the first is adopted and expense margins are nearly as large as under a corresponding policy with level insurance equal to the ultimate amount. The Committee has concluded, after careful study, that the first in­ terpretation is in accordance with the intent of th!:l legislation and hae found no way, under the language of the statute, to permit the providing of margins as large as those at the higher ages on juvenile policies. 2. Mr. James T. Philiips, Actuary of the New York Life Insurance Company and Chairman of a Joint Committee of the Actuarial Society of America and Ame:ric.an Institute of Actuaries fo1'1ned to prepare basic functions and net premiums based on the Class 3 Disability Table (1926) and the Inter-Company Double Indemnity Mortality Tabl!;l combined with the C. S. O. Mortality Table, appeared before the Committee with regard to extensions made by his Joint Committee as follows: (a) Extension of disability rates according to Class 3 Disability Tabl!;l (1926) down to age 10. (b) Extension of accidental death rates according to Inter-Company Donble Indemnity Mortality Table down to age 5 and also up to age 99. It should be noted that the Standard Valuation Law specifies Class 3 Disability Table (1926) combined (for active lives) with a mortality table permit~d for calculating the reserves for life insurance policies as the legal minimum standard for valuation of total and permanent dis­ ability benefits in or supplementary to Ordinary policies Ol' eontra.cts; and that the same law also specifies the Inter-Company Double Indemnity Mortality Table combined with a mortality tabll} permitted for calculating the reserves for life insurance polieies as the legal minimum standard for the valuation of accidental death benefits in or supplementary to policies. Mr. Phillips informed us that the Joint Committee considered these extensions advisable in connection with its task in preparing the basic functions and net premiums required for the use of companies and depart­ ments under the Standard Valuation Law. On behalf of the Joint Com­ mit~e, he requests offi.eial approval by the National Association of Insurance Commissioners of these tabular extensions so that there can be no question as to the official status of the Class 3 Disability Table (1926) or the Inter-Company Double Indemnity Mortality Table when used with such extensions inelud~d therein. Your Committee has examined the extensions cited above and considers PROCEEDIXGS 375

them to have been properly made in aooordance w1th recognized actuarial prmc1ples It 1s, therefore, recommended that the Association adopt a resolution as follows: "RESOLVED that this Association hereby approves the ex­ tensions of the Class 3 Disability Table (Hl'.:!6) and the Inter­ Company Double Indemnity Mortality Table made by the Joint Committee of the Actuarial Society of America and Am!;lrican Institute of Actuaries appointed to prepare basic functions and net premiums based upon such tables combined with the C. S. 0. Mortality Table and that it hereby adopts such extensions as con­ stituting an int~gral part of these respective tables for the purposes of the Standard Valuation Law.'' Respectfully submitted, Raymond Harris, New York W. Harold Bittel, New .Jersey Guy Y. Keetch, Texas Carl A. Tiffany, Illinois George H. McAteer, Washington Richard M. Fenker, Tennessee Russell 0. Hooker, Connecticut, Chairman

NATIONAL ASSOCIATION OF INSURANCE COMMISSIONERS REPORT OF WORKING COMMITTEE ON STANDARD NON­ FORFEITURE AND VALUATION LAWS TO LIFE INSURANCE COMMITTEE COVERING MEETING OF JUNE 2, 1947 Ron. W. Ellery Allyn, Chairman Life Insurance Committee National Association of Insurance Commissioners Sir: A meeting of the '\Vorking Committee on Standard Non-Forfeiture and Valuation Laws was held at Haddon Han, Atlantic City, New Jersey, on June 2, 1947. The Committee members present were Bittel (Nl'!w Jerse)"), Fenker (TenDessee), Harris (New York), Tiffany (Illinois) and Hooker (Connecticut). The m~eting was also attended by Bruce E. Shepherd, Manager of the Life Insurance Association of America and Alfred N. Guertin, Actuary of the American Life Convention. Several life insurance company representatives were also present. The Committee's recommendations with regard to points discussed at this meeting are set forth below: L A question was raised in connection with the detj'lrmination o:f the "equivalent level amount" for the purposes of Section 5 of the Standard Non-Forfeiture Law in the ease of juvenile policies providing for a. prj'lmium return benefit in event of death prior to a fixed date and automatic insurance for the face amount thereafter. It is pointed out that if the amount of the premium return benefit should be considered as ''insurance'·' then the '' equivalent level amount'' applicable to such 376 PROCEEDINGS policies would be extremely low, thus producing unreasonably high cash values. This Committee is asked to recommend that the Association adopt a resolution that for the purposeB of the Standard Non-Forfeiture Statutes the equivalent level amount shall be taken as the amount of insurance automatieally provided at end of the premium return period, The question turns on whether or not a. return of premium benefit in the event of death constitutes insurance. While this might ultimately be a matter for court decision it is our present opinion that sufficient doubt exists so that we cannot conscientiously recommend the proposed resolution for adoption. The return of premium benefit in ease of death, particularly after the policy has been in foree several yea.rs, is fairly substantial and must be recognized as a death benefit in premium, reserve and other actuarial calculations. In view of the fact that th~ policy in question is entirely legitimate and in the public interest, the decision not to recommend the proposed resolution is made r!'luctantly. We feel, however, that it would be unwise in the long run to recommend int.erpretations which do not appear to be in substantial conformity with the provisions of the model law. It should be noted that the law as enacted by Ohio and Ka.nsaa sp~ci:fiea.lly provides for policies of this type, as did also the original draft of the Guertin Committee. This Committee is prepared to study the question with a view to suggesting an appropriate amendment to the model law if such action is considered neeessary. 2. To make concr,ete the recommendation in the report of this Committee covering its meeting of December 7, 1946, enabling the use of standard non-forfeiture values in certain substandard policies, as was intended in the drafting of the Standard Non-Forfeiture Law, it is recommended that companies be allowed to designate as the basis for minimum values on such policies substantially the following: The mortality table on which adjusted premiums and minimum non­ forf~iture values are to be based is the Commissioners 1941 Standard Ordinary Mortality Table or the 1941 Standard Industrial Mortality Table, as the case may be, with the rates of mortality increased while substandard extra premiums are being paid by an amount equal to the quotient of the product of (a), (b) and (e) divided by (b) wher,, (a) is the ratio of the adjusted' premium to the gross annual premium for the corresponding atandatd policy, (b) is the sum of 1 and the rate of interest used for non-forfeiture values, (c) is the gross annual extra premium per $1,000 insurance payable during the policy year, and ( d) is $1,000 minus the minimum standard cash value per $1,000 insurance at the end of the cunent policy year. The minimum non-forfeiture •alues produced by this special table so defined will be th~ same as those produced by the C. S. 0. Table or the· PROCEEDINGS 377

1941 Standard Industrial Table, respectively. Thie includes the In1n1mum cash surrender value of the minimums paid-up non-forfeiture value. The special mortality table described by this d~finition would vuy with each age at issue, plan of insurance, amount of extra premium, and length of the extra premium period. It is unnecessary that the special table should actually be computed, as the foregoing definition adequately defines the table and the minimum values arising from it. The Standard Non-Forfeiture Law does not require that the policy contain a statement of the mortality table on which adjusted premiums and minimum values ari' based, but merely a statement of the table used in the actual calculation of the values granted. As to the table on which minimum values for a substandard policy are based, i-f other than tbe tables specified for standard policies, the only requirement is that, in Section 5 of th~ Standard Non-Forfeiture Law, the tahle be '' speci1ied by the company and approved by the Commissioner." This requirement would seem to be satisfied by submission to and approval by the Com­ missioner of a definition in substantially the language given above, of a seri~s of special tables which will nominally form the basis for minimum values on certain substandard policies and will have the practical effect of allowing standard values to be used on such policies. 3. Consideration was given to certain concrete suggestions regarding policy form :filing procedure submitted by the Life Insurance Association of America and the American Life Convention as per their joint letter of May 26, 1947. It is recommended that the three numbered suggestions as to ti.ling procedur~ be adopted and that the states be requested to give due weight to evidence that a policy form has been approved by the com­ pany's state of domicile. The Committee further recommends that it be authorized to transmit these suggestions to Insurance Departments in a report supplementary to that transmitted under date of .January 16, 1947. Respeet:fully submitted, R. 0. Hooker, Connecticut, Chairmaa. W. H. 'Bitt.el, New Jersey G. Y. Keetch, Texas Carl Tiffany, Illinois R. M. Fenker, Tenneseee Raymond Harris, New York

Commissioner Allyn (Connecticut): I move the adoption of the report, Mr. President.

President Dineen: Do I hear a second 7

Commissioner KavaMVgh (Colorado): Second.

PreS1dent Dineen: Ia there any debate t

Commtsaioner Harrington (Massachusetts): Mr. Chairman, on the sub· 378 PROCEEDINGS jeet of War Clauses, it seems to me that the general practice among the companies has been to void the War Clauses on !;!Xisting policies, now that the war is over and that there is a very slight exposure among policyholders who are on :fronts where there is some battling going on. Certainly in a. time of peace, the· War Clauses shouldn't be continued on the policies of individuals who have been unfortunate enough to buy a policy during the war period, when all of their fellow members in the company are not subject to the same discrimination, and I move as an amendment to the Committee's report, the following: That this Association suggest that it is desirable for companies to void existing war clauses across the board.

President Dineen: Do I hear a second to that motion!

Commissioner Sullivan (Washington): I '11 second it.

President Dineen: Is there any debate on that!

CommisSWner Thompson (Oregon): Mr. President, I don't know whether the int~nt of the motion for the amendment is just what the language says. It is suggested that the best interests are served by the life insurance companies voiding their existing war clauses in time of peace, I presume that means, but did the maker of this motion intend that that should be qualified by companies which have voided any of their war clauses, voiding them all! There is no discrimination if the company voids all the war clauses, whether those policyholders are in service or in civilian life. If there is that kind of discrimination going on, I am not aware of it, and that, of course, would be appropriate, but whether it wo.uld be appropriate to recommend that war clauses be voided across the board by all companies, I think is a debatable matter.

Commissioner Allyn (Connecticut): Mr. Chairman, I would like to just make one comment, that this matter was pretty thoroughly discussed at the meeting of the Life Committee and it has been considered by members of the Life Committee, each of whom feels that there is no information at hand whatsoever on which we could act, and the Committee consequent1y made the unanimous report which I just read. We would be shooting in the dark.

President Dineen: May I ask a question of Commissioner Allyn f Was there··anything on the agenda of your Committee before you eame here indicating that this particular point raised by Commissioner Harrington was going to be explored at this mej'lting,

Commissioner Allyn (Connecticut): No, sir.

President Dineen: Frank, may I make a suggestion to you t Do you feel that if this Association acted favorably upon your m·otion, we might be placed in the position of going off half-cocked on a. matter of con­ side:;able substance 1 This, Committee :mys they a.re going to explore it PROCEEDINGS 379 and the question that you raise is intimately connected W1.th the broad question now being considered as to whether or not any of the hfe com­ panies want to revise the position which they took in connection with the payment of war claims. That subject is going to be exhaustively explored and this Committee has agreed to accept it. I am wondering if just common ·prudence wouldn't require that since it is to be debated, we wait six months and dispose of it at the December meeting.

Commi.ssioner Harrington (Massachusetts): Well, Mr. Chairman, if we are going to dispose of it at the December meeting, that is one thing, but we have an awfully bad habit of putting things off and then at the next meeting, putting them off again. I would say if the matter is going to be definitely reported on one way or the other at the next meeting, I would be willing to withdraw my motion, without any prejudice to any action that I may feel is necessary to take in my own state. I don't believe that young men who have bought war clauses, who have returned unimpaired, should have those war clauses continued against them in time of peace. They ought to be put on the same standing w:ith all other members of a mutual company, or all other members of a stock company, but particularly a mutual company, of which they are members. Now, I recognize that th!:lre may be some complications, since you have raised the point, due to the litigation that is pending in one case that has been referred to by Commissioner McCormack, and I will withdraw the motion, with the understanding that I will submit a memorandum on the subiect to the Committee and request affirmative action at the December meeting. ,vith the consent of my second, I will withdraw the motion.

President Dineen: While you are on the subject, will you make a notation of that, Mr. Sackman, for a little exploration along the same line. The motion has been withdrawn. Is there any further debate on the originaJ reportf Are you ready for the motion f AH in favor, signify their approval by saying ''Aye.'' Opposed, ''No.'' The ''Ayes'' have it and it is so ordered. We are ready for the report of the Committee on Examinations, Commissioner .Johnson. (Not ready) Commissioner Harrington, are you ready to read the joint report of the Committee on Federal Legislation and Rates and Rating Organizationsf

Commissioner Harrington (Massachusetts): Mr. Chairman, having in mind the rugged indivitlualism of the members of our Committee, I have just passed it to two of the members here. I think they ought to have the privilege of reading it before I present it.

Presiden't Ditneen: Suppose I read it7 The members of this Committee are not only articulate but literate. I am sure they ean follow it•

. . . President Dineen read the report aa follows: 380 PROCEEDINGS

REPORT OF JOINT COMMITTEE ON FEDERAL LEGISLATION AND BATES .AND RATING ORGANIZA.TIONS NATIONAL ASSOCIATION OF INSURANCE COMMISSIONERS, ATLANTIC CITY, N. J. JUNE 4, 1947 A meeting of the joint Committee on Federal Legislation and Rat.ea and Rating Organizations was held on June 2 alld 4, 194 7, at Atlantic City. The following matters were considered by the Committee: (1) Multiple State .&dvertising The Committee was informed that this matter was reee1vmg the consideration of a subcommittee of the All-Industry Committee. A tentative draft representing the latest thinking of the subcommittee waa re~ived. It appears that further consideration of this problem will be necessary. (2) Conriderwtion of the matter of implementing rate regulatory statutes. ( 3) Coordination of s-upervisory activities under 11ariOU8 rattng laws. (5) Uniform interpretation of the standard of rate making. These matters were discussed at length. The views expressed by representatives of the industry and the Com.missioners present indicate that these related matters present problems of primary importanc13. The nature and scope of the administrative problems inherent in the field of rate making can best be delineated by conferences between this Committee and a committee appointed from the industry. Your Committee suggests that the industry give immediate consideration to the selection of such a committee and advise the Chairman of this Committee when this has been done. The plea for assistance in the administration of rating laws voiced by Deputy Commissioner Garff of Utah manifeBts the need for stepping up the activities of the Rates and Rating Organizations Committee to the end that constructive assistance may be rendered our fellow Com~ missioners. The Committee calls attention to the fact that the enactment of rating Ia.we withont concurrent appropriations to carry out adequately the administrative duties imposed upon Insurance Commissioners under such rating laws can only result in inadequate administration of thest3 laws. Your Committee will endeavor to present a constructive program relative to these matters for the consideration of the Association at the next m.eeting. (4) Lawa dealing with the regulation. of dfa+f practices. The meeting of your Committee at Chicago on January 21-25, 1947, produced a legislative proposal, marked Exhibit "B" attached to the report of that meeting, dealing with the regulation of unfair methodl of competition and unfair and deceptive acts and practices in the business of insurance. The report of the Chicago meeting, a copy of which was forwarded in January to each Commisaioner, is attached hereto and recom· PRoCEEDINGS 381 mended by your Committee for adoption by this Association, together with the recommendations contained therein.

(6) Ezpl,ore neceaaity for state anti.trust law to 1'01ffld out mode"' state regulatory program. Superint~ndent Dineen expressed the opinion that a state anti­ trust law was necessary, citing authorities to support his views. The Committee feels that the views expressed by Superintendent Dineen are of sufficient importance to warrant further consideration of this matter before the next meeting of the Association and invites the representatives of the industry to submit memoranda concerning their views on the subject e.t an early date.

(7) Discussicm of Clayton Act. This item is retained on the agenda for further consideration of your Committee. A report will be rendered on the subject at the next meeting. Respectfully submitted, Charles F. J, Harrington, Massachusetts, Chm. Robert E. Dineen, New York Newell R . .Johnson, Minnesota. James M. McCormack, Tennessee Seth B. Thompson, Oregon J. Edwin Larson, Florida George B. Butler, Texas

REPORT OF THE JOINT COMMITTEE ON FEDERAL LEGISLATION AND RATES AND RATING ORGANIZATIONS OF THE NATIONAL ASSOCIATION OF INSURNCE COMMISSIONERS CHICAGO MEETING, JANUARY 21-25, 1947

The m~eting was held at the Continental Hotel on January 21-25, 1947. Present were the following members of the Committee: Charles F. J. Harrington, Chairman, Massachusetts Seth B. 'I'hompson, Oregon Newell R. Johnson, Minnesota. .J. Edwin Larson, Florida Robert E. Dineen, Npw York

Commissioner McCormack of Tennessee was not present but was rep· :resented by Richard Fenker, Actuary of the Tennessee Di:,partment. Com­ missioner Garrison of California was not present.

The following other Commissioners were also present: David .A. Forbes, Michigan John D, Pearson, Indiana Owen G. .Jackson, Missouri N. P. Parkinson, illinois 3S2 PROCEEDINGS

The following Departments were also represented: Wisconsin by Lloyd Yaudes, Deputy Commissioner; Harold Per· sons, Assistant Attorney General Louisiana by Benjamin Franklin North Dakota by John Dustin, .Actuary Indiana by Deputy Westbrook Also pres~nt were: John Tilton, of counsel, Florida Department Victor Cohen of the New York Department William Green, Assistant Attorney General of Minnesota At the same time the meeting of th,e Commissioners' Committee was in progress the All-Industry Committee meeting was also in session and various conferences were held between the two g1·oups . .Accident and Health Problem Two actions were taken in connection with this prob'em. The proposed amendment to the law for personal accident and health insurance (Exhibit A) which was attached to the report of this Committee dated December 3-7, 1946, contained the following paragraph under the heading ' 'Explanatory Notes' ':

'' A mor13 detailed explanation as to the manner of integrating this statute into existing Insurance Laws will be :=et forth in an addendum to be issued by this Committee following the December, 1946, meeting.'' At this meeting the Committee approved a footnote reading as follows, to replace the one above quoted: '' The above bill is recommended for enactment in each state in such a manner as to b~ applicable to all individual accident and health insurance policies irrespective of the type of insurer by which issued. It is not intended to be applicable to workmen's compensation insurance, accidental death or disability benefits is­ sued supplementary to life insurance or annuity contracts, medical expense benefits under liability policies, or to group accident or health insurance.'' Th!:!re seems to be some confusion upon the proposition that Exhibit ''A'' was to be used in conjunction with amendments to standard provision laws. It was not so intended and can be used as a regulatory measure in the accident and health field entirely independent of any standard pro­ vision law. The Committee also considered a request from certain health and accident underwriters that aviation accident and health insurance he excluded from Exhibit ''A'' and that appropriate reference to that effect be included in the footnote. The Committee gave full consideration to this request and rejected it, no adequate reasons having been advanced to the PROCEEDINGS 383

sahsfact10n of the Comnuttee as to why insurance of this type should be excluded from the proposed bill A revised copy of Exhibit ''A'' is attached hereto and made a part hereof, .An .Act Rela.ting to Unfair Practices in the B-1Mine,,:;s of Insurance Attached to the Committee report of December 3-i was Exhibit ''B'' entitled '' An Act Relating to Unfair Practices in the Business of In­ surance." In accepting this report of D~cember 3-i, 1946, to which Exhibit '' B '' was attached, the National Association of Insurance Commi.:sioners at its mid-winter meeting at the Hotel Commodore in New York in De· cember, 1946, authorized your Committee to review this material aud make whatever editorial corrections as may be necessary. Pursuant to that instruction your Committee reviewed Exhibit '' B '' attached to the December 3-7 report of this Committee. Conferences were held with rep1·esentativcs of th13 All-lntlustry Committee. Attached to this report is a new Exhibit "B" identifie

inapplicable to any agreement to boycott, coerce, or intimidate, or a.ct of boycott, coercion, or intimidation.'' Your Committee recommended the inclusion of a provision covering boycott, coercion and intimidation in the act because where a state deals adequately with these subjects at the state level it should minimize the likelihood of parallel action by the fedt,ral government.

Subsection 7(a) of Section 4(a) received the attention of your Com­ mittee. In the original Exhibit "B" subsection 7(a) of Section 4(a) reads as follows:

"Making or permitting aliy unfair discrimination between indi­ viduals of the same class and equal expectation of life in the rates charged for any contract of life insurance or of life annuity or in the dividends or other benefits payable thereon, or in any other of the terms and conditions of such contract, provided that, in determining the class, consideration may be given to the nature of the risk, plan of insurance, the actual or expected expense of conducting the business or any other relevant factor.'' In the draft attached to this r~port it now reads as follows: 11 Making or permitting any unfair discrimination between indi­ viduals of the same class and equal expectation of life in the rates charged for any contract of life insurance or of life annuity or in the dividends or other b~ne:fits payable thereon, or in any other of the terms and conditions of such contract.'' The difference between these two subsections is clear. The original subsection contained language setting forth factors to b13 considered in determining classes, whereas that language is missing from the new draft. In reviewing the original language the Committee pointed out that there was no requirement that equity should be done between classes and sug­ gested th~ addition of language to accomplish that result. Representatives of the industry recognized the obligation imposed upon insurers to do equity between classes as well as between insureds of the same class. The question was procedural because if a provision to do equity between classes was set forth specifically, the determination of questions arising thereunder would :fall upon the Commissioner. If no specific provision requiring equity was set forth, the problem was covered by the omnibus provision of the act requiring, by indir~ction, fair dealing ~pon the part of the company. Under the procedure adopted by your Com­ mittee the determination as to whether or not a company has been fair in establishing classes b~omes a judieial one, although it should not be overlooked that the Commissioner has jurisdiction in the :first instance under the power conferred upon him to hold hearings and make a report. If experience in enforcing this law diselos~s that the judicial procedure is too cumbersome, it should be a comparatively simple matter to revise the situation so that questions of this type can be determined by the Commission~r. The important thing is that under this new act a general statutory prohibition against unfairness between classes is imposed upon PROCEEDINGS 385

msurers. The same observations apply with equal force to subsection 7 (b) of Section 4(a) which 1s applicable to accident and health insurance. In the original Exhibit '' B'' it reads as follows:

i 1 (b) *Making or permitting any unfair discrimination bf:'tween individuals of the same class involving essentially the same hazards in the amount of premium, policy fees, or rates charged for any policy or contract of accident or health insurance or in the benefits. payable ther~under, or in any of the terms or conditions of such contract, or in any other manner whatever, provided that, in de­ termining the class, consideration may be given to the nature o~ the risk, plan of insurance, the actual or expected ~xpense of con­ ducting the business or any other relevant factor.'' In the new Exhibit "B" it reads as follows: '' (b) *Making or permitting any unfair discrimination between indiV'iduals of the same class and of ess"mtially the same hazard in the amount of premium, policy fees, or rates charged for any policy or contract of accident or health insurance or in the bene:tits payable thereunder, or in any of the terms or conditions of sueh contract, or in any oth~r manner whatever.'' A word should be said as to subparagraph (iii) of paragraph (b) of subsection 8 of Section 4(a) reading as follows: "Nothing in clause 7 or paragraph (a) of clause 8 of this sub­ section shall be construed as including within the definition of discrimination or rebates * * * the following practices: (iii) re­ adjustment for any one policy year of the rate of pr~mium for a group insurance policy based on the loss or expense experience thereunder, at the end of the :first or any substquent policy year of insurance thereunder.'' This section is designed to permit a form of retrospective rating in the group field. At :first it was felt that this section might be discriminatory beeaust it contained no provision requiring the company to do equity as between policies falling in this group and other groups not similarly rated as well as other classes; in short, the point was raised that this sub­ paragraph contained no standards. It was felt, however, that in view of paragraph 4(b) the general provisions o:f the act requiring fair dealing applied (or, to state it another way, prohibiting unfair dealing) and that this language in effect required the application of principles o:f equity. The act provides administrative procedures to deal with those situations where a company has failed to do equity. If it develops from experience that the judicial procedure is too cumbersome, consideration can be given to more direct administrative technique for handling this particular problem. The original Exhibit "B" contained a provision covering interference with the right of borrowers to select their own agent or broker. That provision has been eliminated from this draft and is fully covered in a footnote of the attached Exhibit '' B.'' It is repeated herewith in full: ".Attached to the report of this committee of D~cember 3-7, 1946, 386 PROCEEDINGS

was Exhibit B entitled 'An Act Relating to Unfair Practices in the Business of Insurance.' Se('.tion 4, subsection 9, of that draft contained a paragraph which is herewith quoted in full: '(9) Requiring as a condition precedimt to loaning money upon the security of a mortgage upon real property, that the owner of the property to whom the money is to be loaned, negotiate any policy of insurance covering such real property through a particular in~urance ngent or broker or brokers, proi·ided, however, that thi8 provision shall not prevent the exercise by any insurance company of its right to approve or disapprove of th~ insurance company selected by the borrower to underwrite the insurance.' '" The committee has given serious consideration to the practice fol1owed oy some lenders in insisting upon control of the insurance upon property subject to these transactions. In some states the prac­ tice is already prohibited by law; Section 422(a) of the New York Penal Code prohibiting such transactions in connection with real property is an illustration. The committee feels that no distinction should be drawn betwe~n transactions involving rea1 or personal property. In our earlier draft we had incorporated the language above quoted. It has been called to our attention, however, that such a. statute affects people and institutions generally in addition to those normally subject to regulation under an insurance regulatory statute. For that reason the committee feels that statutes of this type, in order to be effective, should be incorporated in a general statute rather than in an insurance regulatory statute. "We have been at pains to point this out lest our action in deleting the form~r Section 9 from the present draft be consttued as an abandonment by thtl committee of its condemnation of the prMtice. '' As to this specific item, Commissioner McCormack, through his proxy, Mr. Fenker, dissented, asserting that the provision should have been left in the new bill and, furthermore, that it should be ext,ended to include personal property as well as real property. Section 4 (b) set forth in the original Exhibit '' B'' is retained. It was suggested that this section was unnecessary because of the language of Section 9. The Committee, however, felt that b.ecause of the rule of ejusdem generis, applied by the courts of most states, caution required that in the interest of giving the act its full scope S.ection 4(b) be retained. Section 8, the judicial review section, has been revised to permit its adoption to varying state requirements and also to permit the applicability of standards of proof required in particular jurisdictions. Section 10, entitled "Judicial Review by Intervenor," which wa.a set forth in the original Exhibit '' B,'' is again set forth in the new Exhibit "B," although in revised form. It was incorporated in the bill by your Committee to furnish proteetion to the public in the ~vent that PROCEEDrn&s 387

m a JUSt cause the Comm1ss10ner found agaim'lt the complammg member of the public The draft provides that a member of the public in order to intervene must show that he has a good cause. Th.is should tend to eliminate unnece~sary litigation and prevent spite actiom.

Section 11, the penalty provision, has been revisf'd. In its original form it provided for the imposition of a tine not to exceed $5,000 for violation of rease and desist orders of the Commissioner and of the court. Upon ret'Ollf'ideration it ,vas decitJed to remove the orig'inal reference to the c·mut f'iince the court has broad inherent powers to (leal ,vith contempt which should 11ot be limited in an act of this t~·pe. 'T'h~ new draft contains a provision, howe,·er, for the imposition of fine for violation of the order of the Commissioner. An additional provi:'ion has heen added giving tho court the power in such ca::>es to consider whether the violation was wilfu] or otherwise. The Committee has provided a new clause to replace the original Section 14. The new clause was takl;ln directh· from the Federal Trade Commission Act. The theory was that since we' are attempting to parallel a federal act it is advisable to have the language as similar as possible. Furthermore, it was felt that the new language was better because it will tend to pre,·ent adverse decisions from weakening the over-all positiQn of the states in their effort to p1·eserve state r~gulation. The All-Industry Committee and your Committee are in agreement as to all the provisions of Exhibit "B," except as follows: (1) No agreement was readied with reference to Section 4(a)4, the boycott, coercion and intimidation section, although the language contained in the new Exhibit "B" is Eafo;factory to the Commissioners. (~) Nor was any agr~ement reached with referen<'e to Section 4 (b) which the industry regards as unnecessary and which this Committee regards as desiTable. The problem of dealing with multi-stat.e adverthdng still remains unsolved. Three methods of dealing with this problem ham been suggested. The original is found in subsection 6 of the industry re,ision of December 3, 194G, of an act rflating to unfair practices which was attached to the supplemental report of this Committee dated December 3-7, l.946. It reads as follows: "Section 6-Jfultiple State A.drertisi-ng by Foreign or Alien ln&Urers. If any foreign or alien insurer engag.es in this state in an unfair method of competition or in an unfair or deceptive practice as defined in clau~es (1) and (2) of Subsection (a) of Section 4, by means of any advertise­ ment, announcement or statement, in any magazine or other periodical publication having a general circulation in more than five states, or by means of anv radio broadcast to more than fire states. including the state of domicile ~f such insurer, and if the laws of the state >\·here such fosurer is domiciled make provision for the enjoining of .such method of com· petition or practice, it shall be the duty of the (Commh,sioner) to advise the insurance supervisory official of such domiciliary stat~ of the ·violation in order that he may take appropriuk action, but the (Commissioner) shall have no authority to proceed, with respect to such violation, under Section 5 of this Act. For the purpose of thi3 section the domiciliary 388 PROCEEDINGS state of an alien insurer shall be deemed to be it$ state of entry, or the state of the principal office in the United States.'' The second proposal reads as follows: "Section 7(d)-Multiple State Advertising. In the case of an unfair method of competition or of any unfair or deceptive practic~, as defined in Section 4(a) (1) or (2), by means of any advertisement, announcement or statement in any newspaper or magazine or by means of any radio broadcast no cease and desist order shall issue under (a) hereof unless the principal office of such newspaper or magazine is in this state or, in the case of a live radio broadcast, such broadcast originates in this state or, in the case of a radio broadcast by transcription, unless the master record was made in this sta~. If the newspaper or magazine does not have its principal office in this state or if the live broadcast does not originate in this state or it the master record was not made in this state [and if any unfair method of competition or any unfair or deceptive practice occurs by means of such n~wspaper; magazine or radio broadcast] the Commissioner of this state shall inform the Commissioner of the state of such principal offioo or of such origin or such making, as the case may be, of such practice or method in order that such Commissioner may take appropriate action,'' The third proposal reads as follows: '' Amend Section 3 by making pr~sent Section 3 (a) and adding hereto as subdivision (b) in para.graph the following:

'' (b) Any trade practice defined in clauses 1 or 2 of Section 4 of this Act shall be deemed to have been engaged in this state, regard­ less of where the practice occurred. If any foreign or alien insurance company engages in this state in any trade practices which, if engaged in by a domestic insurance company, would come within the definition of clauses 1 OT 2 of Section 4, then the Commissioner shall make a report ther,eon to the Commissioner of Insurance of the state of domicile, or in the ease of the alien company to the Commissioner of Insurance of the state wherein such company has its principal office in the United States, in order that such Commissioner may take appropriate action. "Amend Section 4, subdivisions (1) and (2) by making them appli­ cable only to domestic insurance companies.'' These suggestions on the multi-state advertising problem wiJl have the early attention of your Committee. CLAYTON ACT Th~ Committee has not yet addressed itself to the problem of dealing with the provisions of the Clayton Act on a state level. Proposed Amendments to Model Bating Bm1 Attached to this report is Exhibit "D," the Report of the Sheflllan Act Subcommittee of the All-Industry Committee dated Di:,cember 5, 1946. PROCEEDINGS 389

This report contarns two proposed amendments to the model eaeue.Ity ratrng bill and two proposed amendments to the model fire ratmg bill, which have been referred to of late as the Moser or Independent amend· ments. Since the amendments to the casualty and fire bills are substantially the same, no effort will be made in this report to differentiate betweeu. the two bills. These am~ndments were exhaustively explored by the Com: mitt.ee. A series of conferences were held between the All-Industry Com­ mittee and your Committee. As a result, new language for both amendments was adoptd by both the All-Industry Committee and this Committee and may be found in the attached Exhibit "E." The new language was adopted by a majority vote, Superintendent Dineen and Commissioners Johnson, Larson and Thompson voting in favor of them and Commissioners Harrington and McCormack (the latter by proxy) being opposed, with Commissioner Garrison not participating in the meeting and not voting. The Committee was unanimous upon the desirability of permitting insurers a reasonable latitude in the factors upon which they relied in support of their filings and was unanimous upon the proposition that carriers should also be allowed a reasonable latitude in devising new rating plans in the public interest. The differences between the members of the Committee turned upon other grounds which we shall not enumerate.

A question of statutory construction is presented by the revised language of the addition to Section 5 of both bills. In those states whieh enact Exhibit '' B,'' an act relating to unfair methods of competition, the question is: does the fact that rates proposed under a rating plan meet the requirements of a rating act prevent the Commissioner or the courts from invoking the provisions of Exhibit "B" where the rating plan is violative of its provisions f

The majority of the Committee does not believe that the language as revised will lead to that result. If the rates proposed by the plan are not excessive, inadequate or unfairly discriminatory, the Commissioner must approve, but if the plan is an unfair method of competition or is otherwise violative of Exhibit '' B,'' the provisions of that act remain applicable. To conclude otherwise would mean that a rating act could be used as a device to render inoperative the provisions of an unfair com­ petition act. Each ease must stand or fall on its own merits. In the final analysis it must be rrmembered that if the provisions of the Sherman Act, the Federal Trade Commission Act and the Robinson-Patman Act, the Federal Trade Commission Act and the Robinson-Patman Act are not adequately dealt with on a state level, the provisions of the fedj!ral acts will remain applicable. It is upon these assumptions that the majority of the Committee have approved the revis~d language. Respectfully submitted, Robert E. Dineen, New York Newell R. Johnson, Minnesota. James M. McMormaek, Tennesse~ Seth B. Thompson, Oregon 390 PROCEEDINGS

J. Edwin Larson, Florida *Charles F. J. Harrington, Massachusetts, Chm. January 25, 1947 *See Minority Report attached.

MINORITY REPORT

I concur in the foregoing report except to the extent that the repo1t recommends Exhibit '' E'' as an amendment to the rating laws previously adopted by the National Al"sociation of Insurance Commissioners last June as an approach to the solution of the rating problems.

The reasoning of a majority of the Committee as set forth under the caption '' Amendments to Rate Regulatory Bills'' applies with equal force to Exhibit "D" attached hereto. Exhibit "D" was adopted by the All­ Industry Committee by an overwhelming majority and recommended as amendments to the Casualty and Surety and Fire, Marine and Inland Marine Rate Regulatory Bills. I concede that the amendment, extending the waiting period, is a desirable amendm~nt to Exhibit '' D.'' The revised amendments (Exhibit '' E '') manifest an inclination to impose restraint and regulatory burdens on the activities of insurance carriers to an extent greater than appears n~cessary to meet the requirements of Public Law 15, or the provisions of the anti-trust laws.

Consideration of the forceful and persuasive arguments of Henry Moser and Hugh Harbison made in favor of Exhibit '' D, '' impresses me that the remaining amendments included in Exhibit '' E 11 are unnecessary. If the arguments of the majority with respect to the question of statutory construction are well-grounded, I believe that the Committee should have consid~red further amendments to the rate regulatory law rather than to suggest the regulation of rating plans under the provisions of Exhibit "B," and the regulation of rates under a rating law. I doubt that the All-Industry Committee is in agreement with such procedure.

The haste with which the foregoing r!:lport was prepared, did not permit adequate time for a discussion of this most important element of rate revision. The fact that the amendments to the rating laws, adopted by the Industry and the Commission~rs last June, have become necessary before such laws have been enacted in a. single state indicates clearly '' as we pointed out in our earlier report, the science of rate-making is a progr~ssive one and as time passes, changes and improvement will no doubt suggest themselves.''

The changes above suggested were advanced because of difficulties experienced in certain states by insurtrs operating under rating laws containing language similar to that sought to be amended. It is my opinion that other desirable suggestions can and will be offered for the consideration of the Legislaturf:!S charged with the responsibility of enacting rating laws. In closing, it should be stated that it is apparent from this report that there are no differences with reRpect to these amendments or this PROCEEDrnG~ 391 report which addl.t10nal time would not have afforded opportumty to reconcile Respectfully submitted, Charles F. J. Harrington, Massachusetts .Tanuary 25, 1947.

EXHIBIT ''A'' PROPOSED AMENDMENT TO LAW FOR PERSONAL ACCIDENT AND HEALTH INSURANCE

A. No policy of insurance against Joss or expense from the sickness, or from the bodily injury or death b,v accident of the insured shall be issued or delivered to any p~rson in this State nor shall any applicatio11, rider or endorsement be med in connection therewith until a copy of the form thereof and of the classification of risks and the premium rates,. or, in the case of co-operati .. es or assessment companies the estimated cost pertaining thereto ha,e been filed with the Commissioner of Insurance.

B. No such policy shall be issued. nor shall any application, rider or endorsement be used in connection therewith, until the expiration of 30 days after it has been so filed unless the Commissioner shall sooner give his written approval th~reto. C. The Commissioner may, within 30 days after the filing of any such form, disappro'"e such form (1) if the benefit:< proYided therein are unreasonable in relation to the premium charged, or (2) if it contains a provision or provisions which are unjust, unfair, inequitabl!;l, misleading, deceptive or encourage misrepresentation of such polic;v. If the Commis­ sioner shall notify the insurer which has :filed any such form that it does not comply with the provisions of this section or sections ...... (Insert here appropriate referenees to the Standard Provision Section and any other relevant sections) it shall be unlawful thereafter for such insurer to issue such form or use it in eonnection with any policy. In such notice the Commissioner shall specify the reasons for his disapproval and state that a hearing will be granted within 20 days after request in writing by the insurer. D. The Commissioner may at any time, after a hearing of which not less than 20 days written notice sha11 have been given to the insurer, withdraw his approval of any such form on any of the grounds stated in this section. It shall be unlawful for the insurer to issue such form or use it in connection with any policy after the effective date of such with­ drawal or approval. The notice of any hearing called under this paragraph shall specify the matters to be considered at such hearin!? and any d~cision affirming disapproval or directing withdrawal of approval under this section shall be in writing and shall specify the reasons therefor. E. Any order or decision of the Commissioner under this section shall b~ subject to review by appeal (writ of certiorari) to the ····················-········· Court at the instance of any party in interest. In the ease of disapproval 392 PROCEEDINGS or withdrawal of approval of a form previously in use the eourt shall determine whether the filing of the appeal (petition for such writ) shall operate as a stay of any such order or decision. The court may, in disposing of the issue before it, modify, affirm or reverse the order or decision of the Commissioner in whole or in part. E~pla-natory Notes: Subsection "E" should be omitted in any state which has a sp~ific general provision for appeal from the review of decisions of the Com­ missioner of Insurance. The scope of the review should be revised to conform to the policy of the state in which this bill is introduced. Provisions for :filings by fraternal benefit societies may be included in this section in the case of states having no other applicable provisions for such societies.

The above bill is recommended for enactment in each state in such a manner as to be applicable to all individual accident and health insurance policies irrespective of the type of insurer by which issued. It is not int,mded to be applicable to workmen's compensation insurance, accidental death or disability benefits issued supplementary to life insurance or an­ nuity contracts, medical expense benefits under liabi1ity po1icies, or to group accident or health insurance.

EXHIBIT ''B'' AN ACT RELATING TO UNFAIR METHODS OF COMPETITION AND UNFAIR AND DECEPTIVE ACTS AND PRACTICES IN THE BUSINESS OF INSURANCE Chicago Draft, January 24, 1947 Section 1-Declaration of Purpose. The purpose of this Act is to regulate trade practices in the business of insurance in accordance with the intent of Congress as expressed in the Act of Congress of March 9, 1945 (Public Law 15, 79th Congress), by d~:flning, or providing for the determination of, all such practices in thm state which constitute unfair methods of competition or unfair or deceptive acts or practices and by prohibiting the trade practices so defined or determined.

Section 2-Definitions. When used in this Act: (a) "Person" shall mean any individual, corporation, association, partnership, reciprocal exchange, inter-insurer, Lloyds insurer, fraternal benefit society, and any other legal entity engaged in the business of insurance, including agents, brokers and adjusters. (b) "Commissioner" shall mean the ("Commissioner") of Insur­ ance of this state. Section 3-Unf&ir Methods of Competition or Unfair and Deceptive Aetl or Praetiees Prohibited. PROCEEDINGS 393

No person shall engage in this state in any trade practice which is defined m this Act a.s or determined pursuant to this Act to be an unfair method of competition or an unfair or deceptive aet or practice in the business of insura.D.ce.

Section 4--Unfair Methods of Competition and Unfair or Deceptive Acts or Practices Defined.

(a) The following are hereby defined as unfair methods of competi• tion and unfair and deceptive acts or practices in the business of insurance:

(1) Misrepresentations and False Advertising of Policy Con· tracts. Making, issuing, circulating, or causing to be made, issued or circulated, any estimate, illustration, circular or statement misrepresenting the terms of any policy issued or to be issued or the benefits or advantag~s promised thereby or the dividends or share of the surplus to be received th~reon, or making any false or misleading statement as to the dividends or share of surplus previously paid on similar policies, or making any misleading representation or any misrepresentation as to the financial condition of any insurer, or as to the legal reserve system upon which any life immrer operates, or using any name or title of any policy or class of policies misrepresenting the true nature thereof, or making any misrepre· sen:tation to any policyholder insured in any company for the purpose of inducing or tending to induce such policyholder to lapse, forf!'lit, or sur• render his insurance. (2) False Information and Advertising Generally. Making, publishing, disseminating, circulating, or placing before the public, or causing, directly or indirectly, to be made, published, disseminated, cir­ culated, or placed before the public, in a. newspaper, magazine or other publication, or in the form of a notice, circular, pamphlet, letter or poster, or over any radio station, or in any other way, an advertisement, announce­ ment or statement containing any assertion, representation or statement with respect to the business of insurance or with respect to any person in the conduct of his insurance business, which is untrue, deceptive or mis­ leading. (3) Defamation. Making, publishing, disseminating, or circu· lating, directly or indirectly, or aiding, abetting or encouraging the making, publishing, disseminating or circulating of any oral or written statement or any pamphl~t, circular, article or literature which is false, or malicioU'sly critical of or derogatory to the financial condition of an insurer, and which is calculated to injure any person engaged in the business of insurance. (4) Boycott, Coercion and Intimidation. (a) Entering into any agreement to commit, or by any concerted action committing, any act of boycott, coercion or intimidation resulting in or tending to result in UD· reasonable restraint of the business of insurance, or (b) by any act of boycott, coercion or intimidation monopolizing or attempting to monopolize any part of the business of insurance. (5) False Financial Statements. Filing with any supervisory or other public official, or making, publishing, disseminating, circulating or 394 PROCEEDINGS dt'livering to any person, or placing before the public, or causing directly or indirectly, to be made, published, disseminated, circulated, delivered to any person, or placed before the public, any false statement of financial condition of an insurer with intent to dec~ive. Making any false entry in any book, report or statement of any insurer with intent to deceive any agent or examiner lawfully appointed to examine into its condition or into any of its affairs, or any public official to whom such insurer is required by law to report, or who has authority by law to examine into its condition or into any of its affairs, or, with like intent, wilfully omitting to make a true entry of any material fact pertaining to the business of such insurer in any book, report or statement of such insurer. (6) Stock Operations and Advisory Board Contracts. Issuing or delivering or permitting agents, officers, or employees to issue or deliver, agency company stock or other capital stock, or benefit certificates or shares in any common-law corporation, or securities or any special or advisory board contracts or other contracts of any kind promising returns and profits as an inducement to insurance. (7) Unfair Discrimination. (a) Making or pei·mitting any unfair discrimination between individuals of the same class and equal expectation of life in the rates charged for any contract of life insurance or of life annuity or in the dividends or other benefits payable thereon, or in any other of the terms and conditions of such contract. (b) *Making or p~rmitting any unfair discrimb1ation between individuals of the same class and of essentially the same hazard in the amount o:f premium, policy fees, or rates charged for any policy or contract of accident or health insurance or in the benefits payable thereund~r, or in any of the terms or conditions of such contract, or in any other manner whatever. (8) Rebates. (a) Except as otherwise expr.essly provided by law, knowingly permitting or offering to make or making any contract of life insurance, life annuity or accident and health insurance, or agreement as to such contract other than as plainly express~d in the contract issued thereon, or paying or allowing, or giving or offering to pay, allow, or give, directly or indirectly, as inducement to such insurance, or annuity, any rebate of premiums payable on the contract, or any special favor or ad­ vantage in the dividends of other benefits thereon, or any valuable con· sideration or inducement whatever not specified in the contract; or giving, or selling, or purchasing or offering to give, sell, or purchal'le as inducement to such insurance or annuity or in connection therewith, any stocks, bonds, or other securities of any insurance company or other corporation, associa­ tion, or partnership, or any dividends or profits accrued thereon, or anything of value whatsoever not specified in the contract. (b) Nothing in clause 7 or paragraph (a) of clause 8 of this subsection shall be construed as including within the definition of discrimi- *In the event that unfair discrimination in !'onnection with accident a11d healt-h Coverage Ls treated in other statutes the above section should be omitted. PROCEEDINGS 395

nation or rebates any of the followrng practices (1) tn the case of any contract of hfe msurance or life annmty, paymg bonuses to policyholders or otherwise abating their premiums in whole or in part out of surplus accumulated from nonparticipating insurance, provided that any such bonuses or abat~ment of premiums shall be fair and equitable to policy­ holders and for the best interests of the company and its pnlicyholders; (ii) in the case of life insurance policies issued on the industrial debit plan, making allowance to policyholders who have continuously for a specifi~tl period made premium payments directly to an office of the insurer in an amount which fairly represents the saving in collection expense; (iii) readjustment of the rate of premium for n group insurance policy based on the loss or expense ~xperience thereunder, at the end of the first or any subsequent policy year of insurance thereunder, whieh may be made retroactive only for such policy year.

(See footnote t) (0) Any -violation of any one of Sections-····------·, -······-----········----

(b) The enumeration in this Act of specific unfair methods of com­ petition and unfair or deceptive acts and practices in the business of insurance is not exclusive or restrictive or intended to limit the powers of the Commissioner or any court of review under the provisions of Section 9 of this Act. Section 5-Power of Commissioner. The Commissioner shall have power to examine and investigate into the affairs of every person engaged in the business of insurance in this state in order to determine ,vhether such person has been or is engaged in any unfair method of competition or in any unfair or deceptive act or practice prohibited by Section 3 of this Act.

1. Attached tot-he report of this committee of December 3-7. 1946, was Exhibit B entitled ''An Act Relating to Fnfair Pra(•tices in the Business of In~urance!' Section 4, subsection 9, of that draft contained a paragraph which is herewiih quoted in full: "(9) Requiring as a condition precedent to loaning money upon the security of a mo11ga.ge upon real property, that the owner of the property to whom tl1e money is to be loaned, negotiate any policy of insurance covering such real property through a particular insuranl'e a~ent or broker or brokel"s, provided, however. that this provision shall not prevent the exercise by any insuranc.;e company of its right to approve or di3approve of the insurance company selected by the borrower to underwrite the in­ suranl"e.'' Tlie ('ommittrf' has given serious consideration to the JJriH·tirc folhweci hy some ]enders in ilrnistin:t upon control of the insurim('e m1on r,To1wrty s•1h.ic'd to tl1ese transactions. In some states the practice is alreadv p!'ohihited: br-law sed10n 422 (a) of the New York Penal Code prohibitin.g" snrh :rani;acti,ms in ,: >mwNi,,n with real property is an illust-rntion. The committee frelR that. no distindion ~hou:,J 1,c drawn between transactions involving real or personal propert:,-. In our earlier draft we had incorporated the Jangung-e above quotlc'd. It has h<·l'n rallr,d t" our uttp11l;nn. hrn,·..,,·er. that such a statute affects people and institutions generally in addition to those normally subject to regulation under an in:-uran~t> re~nl,1torr 1-t1111; thH former Section 9 from the present draft be construed as an nbandournent b:, tlie committee of its condemnation of the pr!lctice. 2. In~ert sect.ion numbers of any other ~ections of th

Section 6-Hearings, Witnesses, Appea.rances, Production of Books and Service of Process.

(a) When~ver the Commissioner shall have rea.son to believe th&t any such person has been engaged or is engaging in this state in any unft\ir method of competition or any unfair or deceptive act or practice defined in Section 4, and that a proceeding by him in rtispeet thereto would be to the interest of the public, he shall issue and serve upon such person a statement of the charges in that respect and a notice of a h,aring thereon to be held at a time and place fixed in the notice, which shall not be less than ...... days after the date of th~ service thereof.

(b) At the time and place :fixed for such hearing, sueh person shall have an opportunity to be heard and to show cause why an order should not be made by the Commissioner requiring such person to cease and desist from the acts, methods or practices so complained of, Upon good cause shown, the Commissioner shall permit any person to intervene, appea.r and be heard at such hearing by counsel or in person. (c) Nothing contained in this Act shall require the observance at any such hearing of formal rules of pleading or evidence. (d) The Commissioner, upon such hearing, may administer oaths, examine and crossexamine witnesses, receive oral and documentary evidence, and shall have the power to subpoena witnesses, compel their attendance, and require the production of books, papers, records, correspondence, or other documents which he deems relevant to the inquiry, The Commissioner, upon such hearing, may, and upon the r~uest of any party shall, eause to be made a stenographic record of all the evidence and all the proceedings had at such hearing. If no stenographic record is made and if a judieia.l review is sought, the Commissioner shall prepare a statement of the evidence and proceeding for use on review. In case of a refusal of any person to comply with any subpoena issued hereunder or to testify with respect to any matter conc~rning which he may be lawfully interrogated, the ...... court of ...... county or the county where such party resides, on application of the Commissioner, may issue an order requiring such person to comply with such subpoena and to testify; and any failure to obey any such order of the court may be punish~d by the court as a contempt thereof.

( e) Statements of charges, notices, orders, and other processes of the Commissioner under this Act may be served by anyone duly authorized by the Commissioner, either in the manner provided by law for service of process in civil actions, or by registering and mailing a copy thereof to the Person affected by such statement, notice, order, or other process at his or its residence or principal office or pla.ee of business. The verified return by the person so serving such statement, notice, ord,r, or other process, setting forth the manner of such service, shall be proof of the same, and the return postcard receipt for such statement, notice, order, or other process, registered and mailed as aforesaid, shall be proof of the service of the same. PRoCEEDINGS 397

Section 7-Ceas~ and Desist Orde:s and Modifi.cations Thereof. (a) If, after such hearing, the Com.missioner shall determine that the method of competition or the act or practice in question is defined in section 4 and that the p!;lrson complained of has engaged in such method of competition, act or practice in violation of this act, he shall reduce b.is findings to writing and shall issue and cause to be served upon the person charged with the violation an order requiring such person to ceas!3 and desist from engaging in such method of competition, act or practice. (b) Until the expiration of the time allowed under section 8(a) of this Art for filing a petition for r.eview (by appeal or writ of certiorari) if no such petition has been duly filed within such time or, if a petition for review has been filed within such time, then until the transcript of the record in the proce!3ding has been filed in the ...... court, as hereinafter provided, the Commissioner may at any time, upon such notice and in such manner as he shall deem proper, modify or set a.side in whole or in part any ord~r issued by him under this section. (c) After the expiration of the time allowed for filing such a petition for review if no such petition has been duly filed within such time, the Commissioner may at any time, after notice and opportunity for h~aring, reopen and alter, modify or set aside, in whole or in part, any order issued by him under this section, whenever in his opinion conditions of fact or of law have so changed as to require such action or if the public interest shall so require. Section 8-Judicial Review of Cease and Desist Orders.

(a) Any person required by an order of the Commissioner under section 7 to cease and desist from engaging in any unfair method of competition or any unfair or deceptive act or practice defined in section 4 may obtain a review of such order by filing in the ··················-····-····· court of ...... county, within ...... days from the date of the service of such order, a written petition praying that th~ order of the Commissioner be set aside. A copy of such petition shall be forthwith served upon the Commissioner, and thereupon the Commissioner forthwith shall certify and file in such court a transcript of th!:' entire record in the proceeding, including all the evidence taken and the report and order of the Commissioner. Upon such filing of the petition and transcript such court shall have jurisdiction of the proceeding and of the question deter· mined therein, shall determine whether the filing of such petition shall operate as a stay of such order of the Commissioner, and shall have power to make and enter upon the pleadings, evidence, and proceedings set forth in such transcript a decree modifying, affirming or reversing the order of the Commissioner, in whole or in part. The :findings of the Commissioner as to the facts, if supported by ...... s evidence, shall be con• elusive. (b) To the extent that the order of the Commissioner is affirmed, the court shall thereupon issue its own order commanding obedience to the

S. Insert appropriate language to accommodate to local procedure the el'Fect given Commissioner's determination. 398 PROCEEDINGS terms of such order of the Commissioner. If either party shall apply to the court for leave to adduce additional evidence, and shall show to the satis­ faction of the court that such additional evidence is material and that there were reasonable grounds for the failure to adduce such evidence in the proceeding b~fore the Commissioner, the court may order such additional evidence to be taken before the Commissioner and to be adduced upon the hearing in such manner and upon such terms and conditions as to the court may seem proper. The Commissioner may modify his findings of fa.et, or make new findings by reason of the additional evidence so taken, and he shall file such modified or new findings which, if supported by ------················' evidence shall be conclusive, and his recommendation, if o.ny, for the modi­ fication or setting aside of his original order, with the return of such additional evidence.s (c) A cease and desist order issued by the Commissioner under section 7 shall become final ( 1) Upon the expiration of the time allowed for filing a petition for review if no such petition has been duly filed within such time; except that the Commissioner may thereafter modify or set aside his order to the extent provided in section 7 (b) j or (2) upon the final decision of the court if the court directs that the order of the Commissioner be affirmed or the petition for review dismissed. ( d) No order of the Commissioner under this Act or order of a court to enforce the same shall in any way relieve or absolve any person affected by such order from any liability under any other laws of this state. Section 9-Procedure As to Unfair Methods of Competition and Unfair or Deceptive Acts or Practices Which Are Not Defined. (a) Wh~never the Commissioner shall have reason to believe that any person engaged in the business of insurance is engaging in this state in any method of competition or in any act or practice in the conduct of sueh business which is not defined in section 4, that such method of competition is unfair or that such act or practice is unfair or deceptive and that a proceeding by him in respect thereto would be to the interest of the public, he may issue and serve upon such person a statement of the charges in that respect and a notice of a hearing thereon to be held at a time and place fixed in the notice, which shall not be less than ...... days after the date of the service thereof. Each such hearing shall be conducted in the same manner as the hearings provided for in section 6. Th~ Commis­ sioner shall, after sueh hearing, make a report in writing in which he shall state his findings as to the facts, and he shall serve a copy thereof upon such person. (b) If such r~port charges a violation of this Act and if such method of competition, act or practice has not been discontinued, the Commis­ sioner may, through the Attorney General of this state, at any time after

4. Insert. appropriate language to accommodate to local procedure the effect given Commissioner's determination. 5. In a state where the fina.l judgment, order or decree would not be subject to review by an appellate court provision therefor should be here inserted. PROCEEDIKGS 399

··········------···· days after the service of such report cause a petition to be filed in the ...... court of this state within the district wherein the person resides or has his principal place of business, to enjoin and restrain such p_erson from engaging in such method, act or practice. The Colll't shall have jurisdiction of the proceeding and shall have power to make and enter appropriate orders in connection therewith and to issue such writs as are ancillary to its juris

( c) A transcript of the proceedings before the Commissioner including all evidence taken and the report and findings shall lie filed with such petition. If either party shall apply to the court for leave to adduce ad· ditional evidence and shall show, to the satisfaction of the court, that such additional evidence is material and there were reasonable grounds for the failure to adtluce rnch evidence in the proceeding before the Commissioner the court mav order such additional evidence to be taken before the Com­ missioner an:l to be adduced upon the hearing in such manner and upon such terms ancl cornlitions as to the court may seem proper. The Commis· sioner may modify his findings of fact or make new findings by reason of the allditional evidence so taken, and he shall file such modified or new findings with the return of such additional edUence. (CT) If the C'Ourt finds that the method of competition complained of is unfair or that the act or practice complained of is unfair or deceptive, that the proceeding by the Commissioner with respect thereto is to the interest of the public and that the findings of the Commissioner are supported by the weight of the evidence,s it shall issue its order enjoining and restraining the continuance of such method of competition, act or practice.1 Section JO-Judicial Review by Intervenor. If the report of the Commissioner does not charge a violation of this Act, then any interYenor in the proceedings may within ...... days after the ic;ervice of such report, cause a petition (notice of appeal) (pe~ tition of writ of certiorari)S to be filed in the .. -·· court of ...... county for a review of such report. Upon such review, the court shall have authority to issue appropriate orders and decrees in connection ther.ewith, including, if the court finds that it is to the interest of the public, orders enjoining and restraining the continuance of any method of competition, act or practice which it finds, notwithstanding such report of the Commissi011er, constitutes a violation of this Act.7 Section 11-Penalty. Any person who violates a cease and desist order of the Commissioner under section 7, after it has become final, and while such order is in effl!ct, shall forfeit and pay to the State of ...... a sum not to exceed

6. The rules of evidence vary in different jurisdictions. Appropriate Janguage is to be used, depending upon local rules of evidence. 7. See footnote to Section 8(b). 8, Type of procedure should conform t.o state procedure. 400 P:RCICEEDINGS

$5,000 for eaeh violation, which may be r~oovered in a civil action. In determining the amount of the penalty the question of whether the violation was wilful shall be taken into consideration. Nothing herein shall be construed as limiting a court in enforcing its own orders. S.ection 12-Provisions of Act Additional to Existing Law. The powers vested in the Commissioner by this Act, shall be additional to any other powers to enforce any penalties, :fines or forfeitures authorized by law with respect to the methods, acts and practices hereby declared to be unfair or deceptive. Section 13-Immunity from Prosecution. If any person shall ask to be excused from attending and testifying or from producing any books, papers, records, correspondence or other documents at any hearing on the ground that the testimony or evidence required of him may tend to incriminate him or subject him to a penalty or forfeiture, and shall notwithstanding be directed to give such testimony or produce such evidence, he must none the less comply with such direction, but he shall not thereafter be prosecuted or subjected to any penalty or forf~iture for or on account of any transaction, matter or thing concerning which he may testify or produce evidence pursuant thereto, and no testi­ mony so given or evidence produced shall be received against him upon any criminal action, investigation or proceeding, provid~d, however, that no such individual so testifying shall be exempt from prosecution or punish­ ment for any perjury committed by him while so testifying and the testi­ mony or evidence so given or produced shall be admissible against him upon any criminal action, investigation or proceeding concerning such perjury, nor shall he be exempt from the refusal, revocation or suspension of any license, permission or authority conferred, or to be conferred, pur­ suant to the Insurance Law of this state. Any such individual may execute, acknowledge and file in the office of the Commissioner a. staWlnent expressly waiving such immunity or privilege in r~spect to any transaction, matter or thing specified in such statement and thereupon the testimony of such person or such evidence in relation to sueh transaction, matter or thing may be received or produced before any judge or justice, court, tribunal, grand jury or otherwise, and if so received or produced such individual shall not be entitled to any immunity or privilege on account of any testi­ mony he may so give or evidenc~ so produced. Section 14-Separability Provision. If any provision of this Act, or the application of such provision to any person or circumstances, shall be held invalid, the remainder of the Aet, and the application of such provision to persons or circumstances other than those as to which it is held invalid, shall not be affected thereby.

EXHIBIT ''C'' AN ACT RELATING TO UNFAIR METHODS OF COMPETITION AND UNFA.IR AND DECEPTIVE ACTS AND PRACTICES IN THE BUSINESS OF INSURANCE PROCEEDINGS 401

A J B Draft, December 27, 1946 Matter in square brackets fteleted. Matter italicized "new." Basic draft Commissioners' Report December 3-7, 1946 (sl] Section 1-DeclaratWn of Purpose. The purpose of this Act is to regulate [the] trade practices in the business of insurance in aeeordance with the intent of Congress as expressed in the Act of Congress of March 9, 1945 (Public Law 15, 79th Congress), by d~fi.ning or providing for the determination of [ all acts, methods and practices] all such practices which constitute in this state unfair methods of competition and unfair or deceptive acts [and] or practices [in this state and to prohibit the same] and by prohibiting the trade practices so defined or cktermined. {s2] S~ction 2-Definitions. [As used in this Act] When used in this A.ct: (a) The term "person" shall mean any individual, corporation, as. soeiation, partnership, reciprocal exchange, inter insurer, Lloyds insurer, fraternal benefit society, and any other legal entity engaged in the business of insurance, including agents, brokers and adjusters. (b) ''Commissioner'' shall mean the (''Commissioner'') of Insurance of this state. [s3] Section 3-Unfair Methods of Competition and Unfair [or] and D$"ceptive Acts and Practices Prohibited. No person shall engage in this state in [unfair methods of competition or in unfair or deceptive acts and practices in the conduct of the business of insuranceJ a.ny trade practice which is defined in this Aet or determined pursuant to this Act as an unfair method of competition or a.n unfair or deceptive act or practice in the business of insurance. [s4] Section 4-[Methods, Acts and Practices Which Are Defined Herein As Unfair or Deceptive.] Unfair Methods of Competition and Unfair and Deceptive Acts and Practices Defined. (a) The following are [declared to be] hereby defined as unfair methods of competition and unfair [or] a?l.d deceptive acts and practices in the business of insurance: (1) Misrepres~ntations and False Advertising of Policy Contracts. Making, issuing, circulating, or causing to be made, i8sued or circulated, any estimate, illustration, circular or statement misrepresenting the terms of any policy issued or to be issued or the benefits or advantages promised thereby or the dividends or share of the surplus to be received thereon, or making any false or misleading statement as to the dividends or share of · surplus previously paid on similar policies, or making any misleading representation or any misrepresentation as to the :financial condition of a.ny insurer, or as to the legal reserve system upon which any life insurer operates, or using any name or title of any policy or class of policiea misrepresenting the true nature thereof, or making any misr~presentation 402 PROCEEDINGS to any policy holder insured in any company for the purpose of inducing or tending to induce such policyholder to lapse, forfeit, or surrender his insurance. (2) False Information and Advertising Generally. Making, publish~ ing, disseminating, circulating, or placing before the public, or causing, directly or indirectly, to be made, published, disseminated, circulated, 01; placed beforn the public, in a newspaper, magazine or other publication, or in the form of a notice, circular, pamphlet, letter or poster, or over ari.j radio station, or in any other way, an advertisement, announcement or statement containing any assertion, representation or statement with respect to the business of insurance or with respect to any p,erson in the conduct of his insurance business, which is untrue, deceptive or misleading. (3) Defamation. Making, publishing, disseminating, or circulating, directly or indirectly, or aiding, abetting or encouraging the making, publishing, disseminating or circulating of any oral or written statement or any pamphlet, circular, article or literature which is false, or maliciously critical of or derogatory to the financial condition of an insurer, and which is calculated to injure any person engaged in the business of insnr· ance. (4) Boycott, Coercion and Intimidation. Entering into any agreement to commit, or individually or by any eoneerttd action committing any act of boycott, coercion or intimidation resulting or tending to result in un~ reasonable restraint of, or a monopoly in, the business of insurance. (5) False Financial Stat~ments. Filing with any supervisory or other public official, or making, publishing, disseminating, circulating or deliver· ing to any person, or placing befor~ the public, or causing directly ot indirectly, to be made, published, disseminated, circulated, delivered to any person, or placed before the public, any false statement of financial con­ dition of an insurer with intent to deceive. Making any false entry in any book, report or statement of any insurer with intent to deceive any agent or examiner lawfully appointed to examine into its condition or into any of its affairs, or any public official to which such insurer is required by law to report, or which has authority by law to examine into its condition or into any of its affairs, or, with like intent, wilfully omitting to make a true entry of any material fact pertaining to the business of such insurer in any book, report or statement of such insurer. (6) Stock Operations and Advisory Board Contracts. Issuing or delivering or permitting agents, officers, or employees to issue or deliver, agency company stock or other capital stock, or benefit certificates or shares in any common-law corporation, or i::ecurities or any special or advisory board contracts or other contract~ of any kind promising returns and profits as an inducement to insurance. (7) Unfair discrimination. (a) Making or permitting any unfair discrimination between individuals of the same class and equal expectation of life in the rates charged for any contract of life insurance or of life PROCEEDINGS 403

annuity or in the dividends or other benefits payable thereon, or in a.D.Y -Other of the terms and conditions of such contract, provitled that, in determining the class, consideration may be given to the nature of the .risk, plan of insurance, the actual or expec\ed expense of conducting the business or any other relevant factor.

(b) *Making or permitting any unfair discrimination between indi­ viduals of the same class involving essentially the same hazards in the amount of premium, policy fees, or rates charged for any policy or contract of accident or health insurance or in the benefits payable thereunder, or in any of the terms or conditions of such contract, or in any other manner whatever, provided that, in determining th~ class, consideration may be given to the nature of the risk, plan of insurance, the actual or expected expense of conducting the business or any other relevant factor.

(8) Rebates. (a) Except as otherwise expressly provided by law, knowingly permitting or offering to make or making any contract of life insurance, life annuity or accid1mt and health insurance, or agreement as to such contract other than as plainly expressed in the contract issued thereon, or paying or allowing, or giving or offering to pay, allow, or give, directly or indirectly, as inducement to such insurance, or annuity, any rebate [or] of premiums payable on the contract, or any special favor or advantage in the dividends or other benefits thereon, or any valuable consideration or inducement whatever not specified in the contract; or giving, or srlling, or purchasing or offering to give, sell, or purchase as inducement to such insura.D.ce or annuity or in connection therewith, any stocks, bonds, or other securities of any insurance company or other corporation, association, or partnership, or any dividends or profits accrued thereon, or anything of value whatsoever not E-pecified in th~ contract. (b) Nothing in clause 7 or paragraph (a) of clause 8 of this sub­ section shall be construed as illcluding within the definition of discrimination or rebates any of the following practices: (i) paying bonuses to policy~ holders or otherwise abating their premiums in whole or in part out of surplus accumulated from nonparticipating insurane~, provided that any such bonuses or abatement of premiums shall be fair and equitable to policyholders and for the best interests of the company and its policy­ holders; (ii) in the case of life insurance policies issued on the industrial debit plan, making allowance to policyholders who have continuously for a specified period made premium payments directly to an office of the insurer in an amount which fairly represents the savi.ng in collection expense; (iii) readjustment for any one policy year of the rate of premium for a group insurance policy based on the loss or expense ~xperi­ ence thereunder, at the end of the first [year] or [of] any subsequent policy year of insurance thereunder. [which may be made retroactive only for such policy year]. (9) Requiring as a. condition precedent to loaning money upon the 'Security of a. mortgage upon real property, that the owner of the property to whom the money is to be loaned, negotiate any policy of insurance

*In the event that unfair discrimination in connection with accident and health coverage is treated in other statutes the above section should be omitted. 404 PROCEEDINGS covering such real property through a particular insurance agent or broker or brokers, provided, however, that this provision shall not prevent the exercise by any insurance company of its right to approve or disapprove o:f the insurance company seleeted by the borrower to underwrite the insurance. (Note: Ea.ch state may add such additional definitive acts as may be considered necessary or desirable.)

(10) Any violation of any one of Sections ·········-···········, ······················- ...... ••..•...... • 1

(b) The enumeration in this Act of specifie unfair methods of competition and unfair or deceptive acts and practices in the business of insurance is not exclusive or restrictive or intended to limit the powers of the Commissioner or any court of review under the provisions of Section 9 of this Act. [ss5] Section "5-Power of Commissioner .. The Commissioner shall have power to exe.m.in., and investigate into the affairs of every person engaged in the business of insurance ffl thta atate in order to determine whether such p!;irson has been or is engaged in any unfair method of competition or [in] any unfair or deceptWe act or practice prohibited by Section S of this Act.

[ss6] Section 6-[Notice of Hearing] Hearings, Witnesse4, .ilppeara'RC6$, Prod1tctio11, of Books and Service of Proooss. (a) [If] When.ever the Commissioner shall have reason to believe that &ny such person has been. enga,ged or is engaging [in this state] in any unfair method of competition or [in] any unfair or deceptive act or practice [in the conduct of such business as enumerated in subsection (a) of Section 4] defi:ned in secti0'1l 4, and that a proceeding by him in respf'ct thereto would be to the interest [ s] of the public, he shall issue and serve upon such person a statement of th~ charges in tha.t respect and a notice of a hearing thereon to be held at a time and place iixed in the notice, which shall not be less than ---············------·· days [from] after the date of the service th~reof.

[ss7] [ssS] (b) At the time and plac~ fixed for [the] such hearing (before the Commissioner], such person shall have an opportunity to be heard and to show cause why an order should not be made by the Commis­ sioner requiring such person to cease and desist from [ the acts, methods or practices so complained of] en.gagfflg in any method of competition, act or practice corutitiutWg the alleged t1iolation. Upon good cause shown, the Commissioner may p8l'Dlit any person to intervene, appear and be heard at such hearing by CO'lfflsel or m persoo.

[ss7] (e) Nothing contained in this Act shall require the observance at any such hearing of formal rules of pleading or evidence. 1. Insert section numbers of ,my other sections of the Insul'ance Law which it is deemed desirable or necessary to include as an unfair trade practiee. PROCEEDINGS 405

(ss7] [ss13] (d) The Conurussioner, upon such he&ring, may administer oaths, examme and erossexamine witnesses, receive oral and documentary evidence, and shall have the power to subpoena witnesses, compel their attendance, and require the production of books, papers, records, corre· spondence, or other documents which he deems relevant to the inquiry. The Commissioner, upon such hearing, may, and upon the request of any party shall, cause to be made a written record of all the evidence offered or introduced and all the proceedings had at such hearing. In ease of a refusal of any person to comply with any subpoena issued hereunder or to testify with respect to any matter [to] concerning which he may be lawfully interrogated, the ...... court of ...... county or the county where said party resides, on application of the Com· missioner, may issue an order requiring such person to comply with such subpoena and to testify; and any failure to obey any such order of the court may b~ punished by the court as a contempt thereof. [New-taken from ss5 ( f) of the Federal Trade Commission Act]

( e) Statements of charges, notices, orders, and other procpsses of the Commissioner under this Act may be served by anyone duly authorized by the Commissioner, either in the manner provided by law for service of process in civil actions, or by registering and mailing a copy thereof to the person affected by such statement, notice, order, or other process at his or its residence or principal office or place of business. The verified return by th~ person so serving such statement, notice, order, or other proces;s, setting forth the manner of such service, shall be proof of the same, and the return postcard receipt for such statement, notice, order, or other proc!,!sS, registered and mailed as aforesaid, shall be proof of the service of the same.

[ss9] Section 7-[Cease and Desist Order and Review] Cease and Desist Orders and Modifications Thereof. (a) [If after hearing the Commissioner shall determine that the acts, methods or practices which are the subject of the inquiry are defined in subsection (a) of Section 4, and shall be of the opinion that the person complained of has engaged in such acts or practices in violation of the provisions of such subsection.] If, after E,"11,Ch hearing,

[ss9] (e) After the expiration of the time ailowed for filing 81Wh a petiti011, for review [ (notice of appeal) (petition for writ of certiorari)] if no such petition [ (notice of app~al) (petition for such writ)] has been duly filed within such time, the Commissioner may at any time, after notice and opportunity for hearing, reopen and alter, modify, or set aside, in whole or in part, any (report or] order [made or] issutld by him under this section, whenever in his opinion conditions of fact or of law have so changed as to require such action or if the public interest shall so require. [ss9(b)J Section 8-Judioial Review of Cease and Desist Ord·ers. (a) [Any order of the Commissioner directing any person to cease and desist from using any method of competition or act or practice shall be subject to review (here ins~rt language describing scope of review) by (appeal) (writ of certiorari) to (the ...... court) of ...... county. The court shall determine whether the filing of the (appeal) (petition for such writ) shall operate as a stay of such order of the Commissioner. The court may, in disposing of the issue before it, modify, affirm, or reverse the order of the Commissioner in whole or in part.] This subsection has been adapted from the provisions of ss5 ( c) of the Federal Trade Commission Act. Any per,•wn required by an order of the Commissioner under section 7 to cease and desist from engaging in a11J]J unfair method of competition, or any unfair or deceptive act or practice defined i,n section 4 may obtatn a review of such order by filing in the ···············-························· court of .•...... county within ...... days from the date of the service of such order, a written petition praying that the order of the Commissioner be set aside. LI. copy of such petition shall be forthwith served upon the Commissioner, and 'thereupon the Commissioner forthwith shall certify and file in such court a transcript of the entire record ;n the proceeding, including all the evidence taken and the report and order of the Commissioner. Upon such filing ·Of the petition and transcript such court M

2. The rullltS of evidence vary in different jurisdictions. Appropriate language is to be used, depending upon local rules of evidence. PROCEEDINGS 407 lll.odified, the eourt shall issue its own order commanding obedience to the terms of the order of the Commissioner.] To the extent that the order of the Commissioner is affirmed, the oourt shall thereupon issue its own order commanding obedience to the terms of such order of the Commissioner. If either party shall apply to t:he court for leave to adduce additional evi­ dence, and shall show to the satisfacticm of the cour,t that such additional evidence is material and that there were reasanable grounds for the failure to adduce such eddence in the proceeding before the Commissioner, the court may order such additional evidence to be taken before the Com­ missioner and to be a-dduced upon the hearing in such manner and upon Such 'terms and conditions as to the court may seem proper. The Commis­ sioner may modify his findings as to the fa-ct.s, or make new findings by reason of the additional evidence so taken, and he shall file such modified or new findings which, if supported by evidence,2 shall be conclusfoe, and his recommendation, if any, for the modification or setting aside of hi8 original order, with the return of such a-dditiona,l evidence. The judgme'ht and decree of the court in any such case shall be final, except that t,he same shall be subject to revfrw by the ...... court. [ss9(c)] (c) [And] A cea.~e and desist ord~r [of] issued by the Com- missioner [to cease and desist] ~mder section 7 sha1l beeome final (1) upon the expiration of the time allowed under subsection (a) of this section, for :filing a petition for r/;)view [ (notice of appeal} (petition for writ of certiorari)] if no such petition [ (notice of appeal) (petition for such writ)] has been duly filed within such time; except that the Commissioner may thereafter modify or llet aside his order to the extent provided in section 7 (b); or (2) upon [a] the final decision of the court [if a judicial review has been sought of the order of the Commissioner] if the court directs that the order of the Commissioner be affirmed or the petition for review dismissed. [ss9(c)] (d) No order of the Commissioner under thi.~ Act or judgment Of [the] a court to enfor<'e the same shall in any [wise] way relieve or absolve any person affected by such order from any liability under any other laws of this state. Section 9.-[Procedure As to Undefined Methods of Unfair Competition or Deceptive Acts and Practices.] Procedure As to Unfair Methods of Com­ petition and Unfair or Decepti-ve Acts or Practices Which Are Not Defined. [ssll(a)] (a) [If] Whenever the Commissioner shall have reason to belifie that any person engaged in the business of insuranc~ is engaging in this state in any method of competition or in any act or practice in the conduct of such busine1es [other than those enumerated in subsection (a) of section 4 and] which is not defined i..,1, section 4, that such method [is an unfair method] of competition is unfair or that such act or practice is unfair or deceptive and that a proceeding by him in respect thereto would be to the interest of the public, he may, [after a hearing h~ld upon notice as provided in section 6, make a report in writing in which he aha11 state his findings as to the facts and serve a.- copy thereof upon such perosn] '8sue and serve upon such person a statement of the charges in rthat respect 408 PROCEEDINGS and a n.o"ce of a hearing th8'1'eo» to be held at a time and place fi:tecl in the ,wt'lce, which shall tt0t be less than. ·········-··-···-· days after the date of the ser'IJ1Ce thereof. Each 8'UCh hearing shall be oonduoted in tM same manner aa the hearings pro11icled for in seotiOfl, 6. The Comm'88ion61' shall, after such hearing, make a report in writing tn which he shall state his fi1idings as to the facts, and he shall Betve a copy thereof upon su,ih penion.

[ll(b)] (b) If such report charges a violation of this Act and if such method of competition, act or practice has not been discontinued, the Commissioner may, through the Attorney General of this state, at any time after ...... days after the service of such report cause & petition to be :fl.led in the ...... court of this state within the district wherein the person resides or has his principal place of business, to enjoin and restrain such person from engaging in such method, act or practice. The court shall have jurisdiction of the proceeding and shall have power to make and enter appropriate orders in connection therewith and to issue such writs as are ancillary to its jurisdiction or are necessary in its judgment to prevent injury to the public p&lldente lite. [11 ( c) J (c) A transcript of the proceedings be for~ the Commissioner including all evidence taken and the report and findings shall be filed with such petition. If either party shall apply to the court for leave to adduce additional evidence and shall show, to the satisfaction of the court, that such additional evidence is material and there were reasonable grounds for the failure to adduce such evidence in the proce~ding before the Commissioner the court may order such additional evidence to be taken before the Commissioner and to be adduc~d upon the hearing in such manner and upon such terms and conditions as to the court may seem proper. The Commissioner may modify his findings of the facts or make new findings by reason of' the additional evidence so taken, and he shall file such modified or new findings with the return of such additional evidence. [ll(d)] (d) If [in the judgment of the court] the court finds that the method of competition compla.in,a of is un:fair or that the a.et or praciee complained of is unfair or deceptive, that the proceeding by the Commis­ sioner with respect thereto is of interest to the public and that the :findings of the Com.missioner ar~ supported by the weight of the evidenee,s it shall issue its order enjoining and restraining the eontinuanee of such method of eompetition, a.et or praetice. The judgment and deCTee of the court '" any S'UCh case shall be fiMl, ezcept that the same shall be subje(}t to r61i161D by the ••..••...... •.• oourt. [ss9(e)] Section 10-.Judicial Review by Intervenor. If the report of the CommiS8ioner does not charge a. violation of this Act, then any party to the proceeding, including a.ny int~rvenor, may within ·····-················· days after the service of such report, ca.me a petition to be filed in the ···············-·---····· court of ·····-··········· ...... county for a review of [the] such report (of the Com.miesioner]. Upon 81UJh review, tM S. The rules of evidence va.ry in dJtrerent .furisdfotfons. Appropriate language ii to be uaed, depending upon. local rules of evidence. PROCEEDINGS 409 court shall have authonty to iasU6 approprtate orders and decrees in con­ nectwn therewith, ,n.cluding orders en.101n1ng and restram,ng the conhnu­ ance of any method of competition, act or practice which tt fonds, ,wtwith­ standing such report of the Commissiour, constitutes a violation of this A.ct. The judgment and decree of the court in any such case shall be final, except that the same shall be sub je

[s,15] Section 14~[Constitutiona1ity.] Separability Prot1ision. [If any section, subsection, subdivision, paragraph, sentence or clause 9f this Act is held invalid or unconstitutional, such decision shall not affect the remaining portions of this Act.] This clause is suggest~d because there have been repeated judicial con­ structions thereof. If any provision of this Act, or the application of such provision to any person or circumstance, shall be held invalid, the remainder of the Act, and the applica.tion of such provisions to persons or oircumstanceJJ other than those as to which it is held invalid, shall not be affected thereby. Proposed additional clause to be used in Unfair Trade Practices Bill. Section -No Regulation of Rates, Premi'U,m,S or Diuidends. Except to the extent expressly prouided in clauses (7) and (8) of subsection (a) of section 4, nothing in this Act shall be construed to give the Commissioner any power or awthority to regulate, directly or indirectly, any practice with respect to rates or premiums, or any practice with respect to the payment, allowance or return by insurers to policyholders, members or subscribers of dividends, savings or unabsorbed premium deposits.

EXHIBIT ' 1 D'' REPORT OF THE SHERMAN ACT SUBCOMMITTEE December 5, 1946 The Conference Committee, after careful consideration of the proposals of the National Association of Independent Insurers, recommended the adoption of the following amendments to the Casualty and Surety and Fire, Marine and Inland Marine Rate Regulatory Bills. Seetion 4(a) of the Casualty Bill is amended to read as follows: (a) Every insurer shall file with the (commissioner) every manual of elassifieations, rules and rates, every rating plan and every modifi.eati_on of any of the foregoing whieh it proposes to use. Every sneh filing shall state the propos~d effective date thereof, and shall indicate the eharaeter and extent of the coverage contemplated. When a filing is not accompanied by the information upon which the insurer supports such filing~ and the (commissioner) does not have sufficient information to determine whether such filing meets the requirements of the A ct, he may require such insurer to furnish the information upon which it supports such filing . .Any filing may be supported by (1) the experience or judgment of the insurer or rating organization making the filing, (£) the experience of other insurers or rating organizOJtiona, or (S) any other factors which the in.mreT or rating organization deems relevant. A :filing and any supporting inform.a• tion shall be open to public insp~ction after the filing becomes effective. Section 4 (a) of the Fire Bill is amended to read as follows: (a) Every insurer shall file with the (commissioner), except as to inland marine risks whieh by general custom of the business are not PROCEEDINGS 411 written accordmg to manual rates or ratmg plans, every manual, minimum, class rate, ratmg schedule or ratmg plan and every other rating rule, and every modification of any of the foregoing which it proposj;ls to use. Every such filing shall state the proposed effective date thereof, and shall indicate the character and extent of the coverage contemplated. When a filing is not accompanied by the informa.tion upon which the insurer supports such filing, and the (commissioner) does not have sufficient informati.on to de­ termine whether such filing meets the requirements of the Act, he may require s1wh insurer to furnish the information upqn which it supports s1ich filing. Any filing may be supported by (1) the experience or jndgment of the insurer or rating organization making the filing, (t) the experience of other insurers or rating organizations, or (3) any ()ther factors which the insurer or ra.ting organization deems relevant. A :filing and any support­ ing information shall be open to public inspection after the filing becomes effective. Specific inland marine rates on risks specially rated, made by a rating organization, shall be filed with th!;l (commissioner). Section 5 of the Casualty Bill is amended by adding thereto the follow­ ing new subsection: (e) No mmwal of classifications, rule, ratin,q pTa.n, rating system, plan of operation or any modification of any of the foregoing which establishes sta,ndards for measuring 'Variations in hazards or expense pro1,isions, or both, shall be di.<:approved if the rates thereby produ.cetl meet the require­ ments of this Act. Section 5 of the Fire Bill is amended by adding thereto the following new subsection: (e) No manual, minimum, class rate, ra.ting schedule. ratin,q plan, rating rule, ra.ting system, plan of operation or any modification of any of the foregoing shall be disapproved if the rates thereby produced meet tJie requirements of this Act. These amendments were offered and adopted for the purpose of a,oiding possibl~ misinterpretation of the intent of the sections amended. The amendmenfa:1 do not represent a departure in principle from the Bi1ls as approved at Portland, Oregon, in June, 1946.

EXHIBIT ''E'' REPORT OF THE SHERMAN ACT SUBCOMMITTEE December 5, 1946 The Conference Committee, after careful consideration of the Proposals of the National A~sociation of Independent Insurers, recommended the adoption of the following amendments to the Casualty and Surety and

Fire1 Marine and Inland Marine Rate Regulatory Bills. Section 4(a) of the Casualty Bill is amended to read as follows: (a) Every insurer shall file with the (commissioner) every manual of classifications, rules and rates, every rating plan and every modification of any of the foregoing which it proposes to use. Every such filing shalt 412 PRoCEEDJNGS state the proposed effective date thereof, and shall indicate the character and extent of the coverage contemplated. When a :filing is not accompanied by the information upon which the insurer supports such filing, and the (commissioner) does not have sufficient information to determine whether such :filing meets the requirements of the Act, he shall require such insurer to furnish the information upon which it supports such filing, and in such event, the waiting period shaU commence as of the date such fflformation is furnished. The information furnis,hed in support of a filing ma,y include (1) the experience or judgment of the insurer or rating organization mak• ing the filing, ($) its interpretation of any statistical data it relies upon, ( 3) the experitmce of other insurers or rating organizations, or ( 4) any other relevant factors. A filing and any supporting information shall be open to public inspection after the filing becomes effective. Section 4 (a) of the Fire Bill is amended to read as follows: (a) Every insurer shall file with the (commissioner), except as to inland marine risks which by general custom of the business are not written according to manual rates or rating plans, every manual, minimum, class rate, rating schedule or rating plan and every other rating rule, and every modification of any of the foregoing which it proposes to use. Every such filing shall state the proposed effective date thereof, and shall indicate the character and extent of the coverag·e contemplated. When a filing is not accompanied by the information upon which the insurer supports such filing, and the (commissioner) does not have sufficient information to determine whether such :filing meets the requirements of the Act, he shall require such insurer to furnish the information upon which it support.s such filing, and in such event, the waiting period shaU commence as of the date wch information is furnished. The information furnished in wpport of a filing may include (1) the experience or judgment of the insurer or rating organization making the filing, (.t) its interpretation of any sta. tistical data it relies upon, ( 3) the experience of other insurers or rating organizations, or (4) any other releva11,t factors. A filing and any supporting information shall be open to public inspection after the filing becomes effective. Specific inland marine rates on risks specially rated, made by a rating organization, shall be :filed with the (commissioner.) Section 5 of the Casualty Bill is amended by adding thereto the following new subsection: (e) No manual of classuications, rul~, rating plan, or any modification of any of the foregoing which establishes standards for measuring varia­ tions in hazards or expense provisions, or both, and which have been filed pur.want to the requirements of Section 4 of this .Act, shall be disapproved if the rates thereby produced meet the requirements of this Act. Section 5 of the Fire Bill is amended by adding thereto the following new subsection: (e) No manual, minimum, class rate, rating schedule, rating plan, rating rule or any modification of any of the foregoing, which has been filed, pursuant to the requirement.1 of Section 4 of this A.ct, shall be dis­ approved if the rates thereby produced meet the requirements of this Act. PRoCEEDINGS 413

These amendments were offered and adopted for the purpose of avoiding possible misinterpretation of the intent of the sections amended. The amend· ments do not represent a departure in principle from the Bills as approved at Portland, Oregon, in June, 1946.

Commissioner Harrington (Massachusetts): Mr. Chairman, I move the adoption of the report if it concurs with the views of the other members of the Committee who are present.

Commissioner McCormack (T~nnessee) : I second the motion.

President Dineen: Is there any discussion or debatef Are you ready for the question f All in favor, signify their approval by saying ''Aye.'' Opposed, ''No.'' The ''Ayes'' have it and it is so order~d. Commissioner Johnson, the Examinations Committee.

Commissioner Sullivan (Washington): Mr. President, I move that tho Federal Legislation Committee as now constituted b~ continued by this Association for one more year.

President Dineen: Do I hear a second T

Commissioner Forbes (Michigan): I'll second it.

President Dineen: Is there any debate f Are you ready for the question f All in favor, signify their approval by saying ''Aye." Opposed, "No." The ''Ayes'' have it and it is so ordered. Commissioner Sullivan, do you want to make a similar motion in connection with the Committee on Rates and Rating Organizations!

Commissioner Sulliva-n (Washington): Yes, I make such a motion.

Commissioner McKenzie (Arkansas): I'll second it.

Presidenrt Dineen.: We have a motion made and seconded that the life of the Committee on Rates and Rating Organizations, with the same membership, be extended for one year. Is there any debat~f All those in favor, signify their approval by saying "Aye." Opposed, "No." The 1 ''Ayes ' have it and it is so ordered. Commissioner Sullivan, may I ask you - this is to refresh my recol· lection - your motion contemplated the same personnel T

Commissioner Bulliuan (Wa.shington) : Yes.

President Dineen: You understand that at our last meeting the Chair- 4H PROCEEDINGS man of the Laws and Legislation Committfle was added to the group, so its membership is seven rather than six,

Commissioner McCorma-ck (Tennessee): Mr. President1 I have no ob; jection to the procedure and happen to be on the Committee, but under the Constitution, the President has appointive powers. I offer no point except to get back to the prnvisions of the Constitution. I am not President now and you are not going to be in a few minutes, but I think we should get back to the Constitution.

President Dineen: We'll say a short prayer on that one.

Commissioner McCormac1~ (Tennessee): You might ask the President to appoint the same peopl~. I am not thinking of you but I am thinking of the motion here on appointing the same people. The Convention could ask the President to appoint the same people.

President Dineen: I never claimed to be a parliamentarian, but I am going to call you on that one. If I recall the history of this thing correctly, the membership of that Committee and its election was made by the Convention at large.

Commissioner Allyn (Connecticut): That is right.

President Dineen: ·we'll have that understood. The President has nothing to do with appointing that committee. I didn't have anything to do with it and my successor won't either, under this motion.

Commissioner Allyn (Connecticut): Mr. President, I wonder if it would be advisable, inasmuch as the Committee is constituted in that way, to authorize th!;l President to till vacanciesf

President Dineen: I will entertain a motion on the two committees to that effect.

Commissioner Allyn (Connecticut): I will so move.

Commissioner Kavanaugh (Colorado): I second the motion.

President Dineen: It has been moved by Commissioner Allyn and seconded by Commissioner Kavanaugh. Is there any debatef Are you ready for the question f All in favor, signify their approval by saying ''Aye.'' Opposed, "No." The "Ayes" have it and it is so order~d. Commissioner Johnson is recognized.

. . . Commissioner Johnson read the report of the Examinations Com· mittee as follows: PROCEEDINGS 415

REPORT OF THE EXAMINATIONS COMMITTEE TO THE NATIONAL ASSOCI,A.TION OF INSURANCE COMMISSIONERS The Examinatiom Committte respectfully submits the :following report: A meeting of the Examinations Committee was held in the Benjamin West Room of the Hotel Haddon Hall at Atlantic City at 10 A. M., June 4, 1947, all members of the Committee being present. Chairman Newell R. Johnson presented a report on all examinations which had been held from November 16, 1946 to May 20, 1947. Upon motion duly made, seconded and carried, it was voted that the report be received and that a copy of the same be transmitted to the head of each department and to the chief examiner of each department. The Chairman then presented a financial report for the period of October 18, 1946_, to May 31, 1947, showing that there had been deposited with the Chairman the amount of $100 and that after necessary expenses had been paid, a balance of 23 cents remained. The report was received and ordered turned over to the Secretary of the Association. The question of microfilming of insurance company records was dis· cussed. Upon motion duly made, seconded and carried, it was voted that the Chairman of the Committee refer this subject by letter to the head of each department for consideration and comment and that :further action be taken on the subject at the December meeting of the Association. The following recommendation was presented by Zone 1: '' It is recommended that the rules relating to the zone examination syst~m be amended to proYide that a copy of each report of examination, when agreed upon and signed by the participating examiners, be forwarded immediately by the Chairman of the Examinations Committee to the In· surance Commissioner of each state in which the company und"'r examina­ tion is admitted to do business, and that where the participating examiners do not agree upon and sign a unanimous report, copies of all majority, minority or other reports which may be signed by one or more participating examiners, shall be forwarded by the Chairman of the Examinations Com­ mittee to each of the states in which the subject company is admitted to do bmdness. It is further recommended that where insolvency is not involved the Chairman of the Examinations Committee be authorized to arrange for and call a hearing upon reasonable notice whenever more than one report is signed by the participating examiners, and that it be recommended to the Insurance Commissioners of the respective states that such reports be treated in confidence and that action thereon be postponeU until the h!;.'!aring called by the Chairman of the Examinations Committee has been con­ cluded." Upon motion duly made, seconded and carried, it was vot~d that the recommendation be adopted and that the Chairman be directed to call a. meeting of the Committee at some central location prior to the Decf;'mber meeting of the Association for the purpose of reviewing the subject of convention examination procedure. The Committee recommends that the item referred to it by the Execu• 416 PROCEEDINGS

tive Committ~e, namely, securities registered in the name of a nominee, be submitted to the Committee on Laws and Legislati$)D. for disposition. Upon motion duly made, seconded and carried, it wa.s voted that the Chail'Dl&ll of the Examinations Committee appoint a subcommittef' composed of three members to review the procedure of examiners' expenses and per diem and report to the Committee at the December meeting.

EXAMINATIONS CALLED FROM MAY 16, TO NOVEMBER 15, 1946, INCLUSIVE Company Located States or Zones Participating

ALABAMA Mutual Savings Ufe Jns. Co. Decatur Ga. Allstatea Life Ins, Co, Montgomery Md.

CALIFORNIA Pacific National Fire Ins. Co. San F ranclsco Z I waived Pa. Nebr.

COLORADO

National Farmers Union Life N.D. Ore. Asa'n, } Denver

CONNECTICUT Phoenix Mutual Life Ina. Co. Hartford N.C. Iowa Connecticut Fire Ina. Co. Hartford R.I. Miss. Minn. Nebr. (Omitted from previous report) IWNOIS Protection Mutual Fire Ina. Co, Chicago Z 1 waived Pa. Z 3 waived Great Central Mutual Ins. Co. Peoria Ohio Z 3 waived Millers National Ins. Co. } Chicago Z f waived Pa. Ga. Ark. Z 6 Illinois fire Ina. Co, waived North American Union Life } Chicago Ohio Z 3 waived Assur. Soc. Supreme Liberty Ins. Co. Chicago Md. Ky.

INDIANA Hoosier Casualty Co. Indianapolis W.Va. Iowa

IOWA Lutheran Mutual Life Waverly Pa. Mich. Tex.

KANSAS

Farmers Alliance Ins. Co. } McPherson Mo. Alliance MutUal Ca,. Co. PROCEEDINGS 417

Company Located States or Zones Participating Central States Fire Ins. Co. Wichita RI. Miss. Mmn. Nebr. (Omitted from previous report) LOUISIANA Lafayette Fire Ins. Co. New Orleans Tex.

MASSACHUSETTS Springfield Fire & Marine Ins. } Co. New England Fire Ins, Co. Springfield Ohio Mich. N.M. Sentinel Fire Ins. Co. New England Casualty Co,

MICHIGAN Great~West Life Assurance Co. Winnipeg. Canada Ohio Mo. Cal. Auto Owners Ins, Co, Lansing Ohio National Casualty Co, Detroit Z 1 waived Pa. Ky. Tex. Ariz. Manufacturers Life Ina. Co, Toronto, Canada Z I waived Pa. Wash. Michigan Fire & Marine Ins. Co. Detroit Mass. Ohio N.M. Women's Benefit Association Port Huron Z I waived D.C. Ala. Wyo. Cal. Federal Life & Casualty Co. Detroit Z I waived D.C, Ala. Z 6 waived Preferred Ins. Co. Grand Rapids Ohio

MINNESOTA Modern Life Ins. Co. St. Paul Fla. Tex. Minneapolis Fire & Marine } Minneapolis Conn. Miss. Nebr, Ins. Co. (Omitted from previous report) NEBRASKA Supreme Forest Woodmen Circle Omaha Pa. Mo. Iowa National American Fire Ins. Co. Omaha S.D. Cal. American Reserve Life Ins, Co. Omaha Iowa

NEW JERSEY Universal Ins. Co. } Flemington Pa. Z 6 waived Universal Indemnity Ins. Co. NEW YORK Home Life Ins. Co. New York City Pa. Mo. Incl. Commonwealth Ins. Co. North British & Mercantile New York City Ga. N.D. Nebr. Idaho Pa. Ins. Co. American Home Fire Asaur. Co. New York City Pa. Miss. Tes.. Clobe & Rutgers Fire Ins. Co. l 418 PROCEEDINGS

Company Located States or Zones Participating General Exchange Ins. Corp. Motors Ins. Corp. } New York City Ind. Ark. Preferred Accident lns. Co. City Protective Indemnity Co. } New York Pa. Ind. Z 6 waived NORTH CAROLINA Southern Fire Ins. Co. Durham Va. OHIO Ohio Casualty Ins. Co. Ohio Ins. Co, } Hamilton Z 1 waived Ky. Mich. Okla. Cal. Ohio Farmers Ins. Co. Ohio Farmers Indemnity Co. } LeRoy Mich. Z 6 waived PENNSYLVANIA American Aviation & General Ins. Co. } Reading Ky. Nebr, Mont. Fidelity Mutual Life Ins, Co, Philadelphia Z 1 waived W.Va. Ala, Ind. Ark. Z 6 waived Coal Operators Casualty Co. Greem.burg Ky. Serb National Federation Pittsburgh Mich. Calvert Fire Ins. Co. Philadelphia Md. Fla. Ariz. Philadelphia Manufacturers Mut. Fire } Philadelphia Z 1 waived Mich. Ins. Co. of State of Pa. Philadelphia N.Y. Miss. Tex. RHODE ISLAND Providence Washington Ins, } Co, Providence Ga. Cal Anchor Ins. Co. Equitable Fire & Marine Ins. Co. Providence Conn. Miss. Minn. Nebr. (Omitted from previous report) TEXAS United Fidelity Life Ins. Co. DaHas Z 6 waived Trinity Universal Ins. Co. Security National Fire Ina. Co. } DaUas Ohio Fla. American General Ins, Co, Houston Mias. Traders & General Ins. Co. Dallas La. Highway Ins. Underwriters Austin La.

VIRGINIA Continental Life Ins. Co. D.C. WASHINGTON United Pacihc Ins. Co. Tacoma III. Z S waived Ore.

WEST VIRGINIA Conservative Life Ins. Co. Wheeling Tex. Cal. PROCEEDINGS 419

RespectfuJJy submitted, EXAMINATIONS COMMITTEE Newell R. Johnson, Chm. George A. Bowles C. A. Gough Seth B. Thompson James M. McCormack Owen G. Jackson George B. Butler David A. Forbes

Com-missioner Johnson (Minnesota): I move th~ adoption of the report.

Commissioner Sullivan (WaP.hington): I second the motion.

President Dineen: Is there any debatef AI1 in favor, signify their approval by saying "Aye." Opposed, "No." The "Ayes" have it and it is so ordered.

Commissioner McCormack (Tennessee): Just as a matter of the record, Mr. President, I want it to show in the record of Proceedings that the State of Tennessee r~quests the Examinations Committee to make a study of the procedure of examinations pertaining to the f'acts on the Status War Clauses and Result War Clauses and their application in the various companies

President Dineen: It wiII bfl so noted.

Commissioner Harrington (Massachusetts): Mr. President, I move reconsideration of the report of the Fire and Marine Committee for the purpose of amending it so that the review of the New York Department on the C1assification of Fire Insurance Risks may be made a permanent record of the Association. I move reconsideration for that purpose.

President Dineen: Do I hear a 13econdf

Commissioner Larson (Florida): I 'II second H.

President Dineen: The motion has been made and seconded that re­ consideration be given the report of the Fire and Marine Committee. All thos~ in favor, signify their approval by saying "Aye." Opposed, "No." The '' Ayes 11 have it and it is so ordered,

Commissioner Harrington (Massachusetts): Now, I move the adoption of the report of the Fire and Marine Committee with the fo1lowing amend­ ment: That we change the last sentence of the third paragraph on page 2 to read as follows: "Copies were presented to the various State Insurance Departments and will be made available to the industry at cost. In addition, the New York Insuran~ Department has agreed to :file 10 copies with the 420 PRoCEEDINGS

Secretary to be permanently retained for reference purposes.'' I move the adoption of the amendment.

President Dffleen: Do I hear a second to that motion f

Commissioner Larson (Florida): Second,

Presid·ent Dineen: Any debatet All in favor, signify their approval by saying ''Aye.'' Opposed, ''No.'' The ''Ayes'' have it and it is so ordered. Commissioner Bowles, are you ready with your resolutions f

Commissioner Bowles (Virginia): Commissioner White, a member of the Committee, will present the report.

, •. Commissioner White read Resolution No. 1 as follows: WHEREAS, when th, National Association of Insurance Commissioners accepted the cordial invitation to hold its 78th annual meeting at Atlantic City, N. J., this world-famous seaside resort, it had no misgivings as to the well-known hospitality for which this city and the State of New Jersey had established a reputation. Our records show, to our dismay and chagrin, that in our 78 years, this Association has held annual meetings in the principal cities of 26 states, the District of Columbia, twice in the Dominion of Canada, but never before in the sovereign state of New .Jersey. This, it appears, is an unwarranted neglect on our part, and w~ wish now to attempt to make a.mends, and to express to the fuUest extent our sincere apologies, and at the same time to record our gratitude and appreciation for the unparalleled cordiality shown us during this meeting. NOW, THEREFORE, BE IT RESOLVED, that this Association of~ fieially express to our hosts, Honorable Lawrence B. Carey, Commissioner of Banking and Insurance of New Jer~ey, Honorable C. A. Gough, Deputy Commissioner, their many associates, to· Mr. Carrol M. Shanks, president of the Prudential Insurance Company of America, chairman of the General Committee, to the insurance companies of New J!:'rsey, the several insurance organizations of this state, the many committee chairmen and ladies and their aides, and the insurance men of Atlantic City, our earnest thanks and appreciation for their unsurpassed efforts in our behalf.

Commissi()1ter Wh,te (MissisBippi): Mr. President, I move the adoption of this resolution.

Commissioner Benjamffl (South Carolina): I second the motion.

Pre81dent D,nem: All in favor, signify their approval by saying "Aye." Opposed, "No." It is so orderf'd.

Commissioner White read a resolution as follows: PROCEEDINGS 421

WHEREAS, the National Association of Insuranee Commissioners in annual meetmg assembled at Atlantic City, New Jersey, was honored by the presencyi of the Honorable Alfred E. Driscoll, Governor of the State of New Jersey, as guest and speaker at the banquet on the evening of June 3rd. NOW, THEREFORE, BE IT RESOLVED, that we express our deep appreciation to His Excellency the Governor for this kindly act on his part, and that a copy of this resolution be forwarded by the Secretary to His Excellency at Trenton.

Commissioner White (Mississippi): I move the adoption of this resolu~ tion.

Commissioner Sullivan (Washington): I second the motion.

President Dineen: All in favor, signify their approval by saying "Aye." Opposed, "No." The "Ayes 11 have it and it is so ordered.

• . • Commissioner White read a resolution as follows: WHEREAS, the 78th annual meeting of the National Association of Insurance Commissioners has been most fortunate to have been afforded, during this, the first gathering in Atlantic City, the superb facilities, for its many sessions, as provided by the management of the Chalfonte-lladdon Hall. NOW, THEREFORE, BE IT RESOLVED, that this Association ex­ press to the management of the Chalfonte-Haddon Hall, its many assistants, and helpers, its sincere gratitude and thanks, for the genteel courtesy and fine service extended us during our stay.

Commissioner White (Mississippi): I move the adoption of the resolu- tion.

Commissioner Thompson (Oregon): I second the Motion.

President Dineen: All in favor, signify their approval by saying ''Aye.'' Opposed, ''No.'' The ''Ayes'' have it and it is so ordered.

. , . Commissioner White read a resolution as follows: WHEREAS, the Honorable James Victor Barry, former Commissioner of Insurance of the State of Michigan has passed away since our last meeting, and WHEREAS, during his term of office as Commissioner he took a most constructive part in the work of this Association, serving it as president in 1906, and in ma.ny other capacities. After his term of ~rvice as Com· missioner he was a regular attendant at the meetings of this Association and was beloved and respected by all those who knew him, 422 PROCEEDINGS

NOW, THEREFORE, BE IT RESOLVED BY THE NATIONAL AS· SOCIATION OF INSURANCE COMMISSIONERS, that we express our gr~at loss at the passing of Honorable James Victor Barry, and that we convey our deepest sympathy to the members of his family, and BE IT FURTHER RESOLVED, that the Secretary be instructed to send a copy of this resolution to the members of his family.

Commissioner White (Mississippi): Mr. President, I move the adoption of this resolution.

Commissioner Sullivan (Washington): I second the motion.

P.resident Dineen: All in favor, signify their approval by saying u Aye." Opposed, "No." The ' 1 Ayes" have it and it is so ordered.

Commissioner White read a resolution as follows:

COLONEL .JOHN G. EMERY Commissioner of Insurance, State of Michigan, 1039-1940

WHEREAS, the National Association of Insurance Commissioners is grieved to note the passing of one of its members in the person of Colonel John G. Emery, Commissioner of the State of Michigan in 1939 and 1940, and

WHEREAS, Colonel Emery rendered to his country and his state a dignified, efficient and honorable service, and

WHEREAS, he served one term as National Commander of the American Legion, and

WHEREAS, by his charming personality, his warmhearted friendli­ ness, his genuine interest in his fellow men and his selfless devotion to his country and his state, he had won £or himself the highest regard of his associates,

THEREFORE, BE IT RESOLVED, that the State of Michigan and the nation at large having sustained a great loss in his passing, this Association take this opportunity of expressing its high regard for our depart~d friend and member, and

BE IT FURTHER RESOLVED, that a copy of this resolution be spread upon the minutes of this Association, and the Seereta.ry be instructed to transmit a copy thereof to the bereaved family.

Commis81ioner White (Mississippi): Mr. President, I move the adoption of the resolution.

Commissioner Forbes (Michigan): I second the motion. PROCEEDINGS 423

President Dineen: All m favor, sigmfy their approval by saying "Aye." Opposed, "No." The motion 1s carried unammously.

. . . Commissioner White r~ad a resolution as follows:

WHEREAS, the membership of the National Association of Insurance

Commissioners has been deeply saddened by the unexpected passing1 during its delib!;!rations in this 78th annllll,1 meeting, of Albert N. Butler, Who for m.any years has been a close and endeared friend of many of us, and whose long experience and training in insurance, gave him an insight into a.nd an understanding of our affairs, which knowledge h~ generously con­ tributed to our enlightment, and sound benefit to our councils. To us he will always occupy a special place in our memory as our beloved ('AI" Butler, a man with a strong and abiding faith in his fellowman, and a capacity for friendship and compassion enjoyed by few. He was a devoted husband and father, blessed with an adoring family, love of which his own life was testimony.

Mr. Butler had a distinguished career in his chosen business. He was appoint~d to the position of Stenographer in the State of New York Insurance Department in 1913. In 1915, he was appointed as an Examiner, subsequently becoming Chief Examiner of the Fire and Marine Bureau of the Department in 1925. In May of 1932, Mr. Butler was appointed as a Deputy Superintendent, from which position he resigned to become a Vice-President of the firm of Corroon and Reynolds, Inc., which position he held at the date of his death.

NOW, THEREFORE, BE IT RESOLVED, that the National Associa­ tion of Insurance Commissioners, in annual meeting, do spread upon its minutes this resolution in memory of our dear departed friend, and with instructions that a copy of this resolution be forwarded, with our sympathy, love and affection to the family of Albert N. Butler and business associates.

Commissioner White (Mississippi): Mr. President, I move the adoption of this resolution.

Commissioner McCormack (Tennessee): I second the motion, with the suggestion that we adopt it by a rising silent vote. (All stand)

President Di~ieen: It is carried •

. . • Commissioner White read a resolution as follows: WHEREAS, the Honorable Thomas Blaine Donaldson, former Com• missioner of Insurance of the Commonwealth of P~nnsylvania, has passed on since our last meeting, and

WHEREAS, during his long and active career as Insurance Com­ missioner he served as president of this Association in 1922, and following his official term he attended meetings of this association and contributed 424 PROCEEDINGS liberally of his fine talents. He had served his native state most ca.pably, and his rare personality was a joy and privilege to his legion of friends. NOW, THEREFORE, BE IT RESOLVED by the National Association of Insurance Commissioners that we record our sorrow on the passing of Honorable Thomas Blaille Donaldson, and that we express our sincere sympathy to the members of his family.

BE IT FURTHER RESOLVED, that the Secretary be instructed to send a copy of this resolution to t~ members of his family.

Commissioner White (Mississippi) : Mr. President, I move the adoption of this resolution.

President Dineen: Is there a second 7

Commissioner Sullivan (Washington) : Second.

President Dineen: Ia there any debatef All in favor, signify their approval by saying ''Aye.'' Opposed, ''No.'' The ''Ayes'' have it and' it is so ordered.

. . • Commissioner White read a resolution as follows:

WHEREAS, the National Association of Insurance Commissioners, at its 78th annual meeting at Atlantic City, N. J., has missed the pr~sence during its deliberations, because of illness, of one of its esteemed associ­ ates, the Honorable Oscar W. Carlson, Commissioner of Insurance of the State of Utah, a member of our Executive Committee. NOW, THEREFORE, BE IT RESOLVED, that this Association direct its Secretary to send a telegram to Commissioner Carlson, ~xtending to him our sincere sympathy, and wishing him an early and complete recovery from his illness.

Commissioner White (Mississippi): Mr. President, I move thj, adoption of this resolution.

Commissioner Thompson (Oregon): I second the motion.

President Dffleen: Is there any debate1 All in favor, signify their approval by saying "Aye." Opposed, "No." The "Ayes" have it; it is so ordered.

• , , Commissioner White read a resolution as follows:

WHEREAS, the National Association of Insurance Commissioners was most delightfully ente:rte.ined on the evening of June 3rd by the Home Office Mixed Chorus of The Prudential Insurance Company o:f America, PROCEEDINGS 425

NOW, THEREOFRE, BE IT RESOLVED, that we express our sincere appreciation to the members of the chorus, and

BE IT FURTHER RESOLVED, that the Secretary be directed to send their Director a copy of this resolution.

Commissioner White (Mississippi): Mr. President, I move the adoption of this resolution.

Commissioner Benjamin (South Carolina): Second the motion.

President Dineen: All in :favor, signify their approval by saying "Ay!;!." Opposed, "No." The "Ayes" have it and it is so ordered.

. • • Commissioner White read a resolution as follows: WHEREAS, the National Association of Insurance C_ommissioners is ever mindful of the uniform courtesies extended us by the press; NOW, THEREFORE, BE IT RESOLVED, that we express our ap­ preciation to the representatives of the press for their attendance and :for the very full and fair publicity given to the meetings of this Associa­ tion.

Commissioner White (Mississippi): I move the adoption of this resolu­ tion, Mr. President.

Commissioner McKenzie (Arkansas): I second the motion.

President Dineen: It is carried.

. . . Commissioner White read a resolution as follows:

WEEKLY UNDERWRITER RESOLUTION WHEREAS, the Weekly Underwriter since 1916 has published the rulings promulgated by the several Insurance Departments and has fur­ nished each department printed copies of such rulings, together with a subject index, without charge to the departments; and WHEREAS, the rulings have proven to be of very great value to the several departments as an aid to uniformity in departmental rulings, THEREFORE, BE IT RESOLVED, that this Association recommends to its newly enrolled membtrs the continuation of the practice of sending all rulings as soon as promulgated to the Weekly Underwriter as the central clearing house for this information, to the end that this compli· mentary S!;lrvice to the Insurance Departments may be as prompt, complete and aeeurate as possible.

Commissioner White (Mississippi) : I move its adoption, Mr. President. 426 PROCEEDINGS

Commissi,oner SullWa.n (Washington): I second the motion.

President Dineen: There is only one thing which occurs to me about this. With the enlarged Secretariat, the thought occurred to me that while we appreciate this very much, we don't want to adopt any resolution that is going to conflict with that. Would you ,entertain a suggestion that you amend this to provide that this is to be done until the secretariat is under wayf This is off the eu:fl'. I don't want to be in a position where we are usmg some official organ as a substitute for our own organization.

Commissioner White (Mississippi): Mr. President, I had in mind that th~ Weekly Underwriter and the Secretary, when he is installed, would confer about this and see if they can work something out on it.

President Dineen: Well, with that understanding, I think we are ready for the question. All in favor, signify their approval by saying ''Aye.'' Opposed, ''No. 11 The ''Ayes" have it and it is so ordered .

• • . Commissioner White read a resolution as follows: WHEREAS, the members of the National Association of Insurance Commissioners have been most efficiently and courteously assisted by Miss Matilda Mitchley and Miss Mary Keeley of the New York Department and by Mrs. Dorothy Maulseid and Mrs. Marjorie Riddle of the Atlantic City Convention Bureau, and WHEREAS, their presence and assistance have contributed much to the success of this meeting, NOW, THEREFORE, BE IT RESOLVED by the National Association of Insurance Commissioners that w~ express our appreciation to Miss Matilda Mitchley, Miss Mary Keeley, Mrs. Dorothy Maulseid, and Mrs. Marjorie Riddle for their capable and efficient service.

Commissioner White (Mississippi) : I move the adoption of this resolu­ tion.

Commissioner McCormack (Tennessee) : I second the motion.

President Dineen: Carried . .Jesse, when it ce.me to reading those names, you were like the Irish­ man; if you didn't knock 'em down, you staggered 'em.

Commissioner White (Mississippi): Mr. President, may I say a word here about an ex-Commissioner of Mississippi that we didn't have on this list, if it is agreeable with Chairman Bowlesf Honorable .J. H. Johnson of Clarksdale, who undoubtedly is rem~mbered by a number of those of yon who served with him, has been critically ill. I understand that Colonel Johnson is showing some improvement. I just wonder if it would be in PROCEEDINGS 427 order to have the Secretary send him a telegram What do you think about it, Chairman Bowles f

Commissioner Bowles (Virginia): I am sorry, Commissioner White, that I overlooked that. You mentioned it to me but it was overlooked and right now I hope a resolution can be formulated and a copy sent to hIB family.

President Dineen: The resolution has been drawn and I now am entertaining a motion that it be executed. Commissioner Johnson, will you make the motion 1

Commissioner Johnsen,, (Minnesota): I so mov~.

Commissioner McCormack (Tennessee): I second the motion.

President Dineen: Is there any debatef AU in favor, signify their approval by saying ''Aye.'' Opposed, ''No.'' The ''Ayes'' have it and the contract is executed. Thanks ever so much, Jesse. That was a fine job. Now, I want to get one thing straight here. ,vhen we get squared a.way, we are going to have an executive session here for the election of officers and when that happens, I am going to ask you people to do some­ thing that you never have done before. As soon as we deelare the executive session, we would like to have the gentlemen of the 11th, 12th and 18th estates start for the door in a bee line and keep right on going, so we won't lose a minute. In the meantime, before we wind up, I want to say we are Vf!ry happy to have had you all here. I think you have conducted yourselves admirably. There have been no assaults that I know of. I checked this morning with the Chief of Police of Atlantic City and there hasn't been a single fellow from this convention lodged in the jail and it is a fine endorsement of the insurance business! Are there any more questions to come before this convention before we go into executive session for the election of o:ffi.cersf If there isn't, we a.re going into executive session and will you please carry out my admonition of speedy departure for the gate! Al., will you serve as cus­ todian of the gates, please.

EXECUTIVE SESSION The executive session will be deelared in ordtir and the Chair will recognize Commissioner Parkinson.

Secretary Parkinson (Illinois): Gentlemen, I want to call attention to a situation that has developed over a pi:iriod of years. A number of years ago, many years ago, we began printing our Proceedings. The fee was set as. $1.50 for those who wished to purchase copies in addition to those that 428 PRoCEEDINGS

are furnished, of course, to State Departments. Last year, it cost $5.04 to print the Proceedings and it cost $2.40 per copy to provide for the report­ ing. I think if the members of the industry and others outside the State Departments desire those copies, they should at least pay the cost of individual copies, so I am going to make a motion that the price of Proceedings for the 1946 Proceedings be established at $5.00 and that the Secretary and President be authorized to make an appropriate charge for subsequent issues to provide for the cost of printing if the cost of printing the 78th Proceedings is not properly covered by the fee of $5.00.

Commissioner Johnson (Minnesota): Mr. President, I would like to amend the motion and change the figure from $5.00 to $10.00.

Commissioner Harrington (Massachusetts) : I second the motion.

President Dineen: That strikes a responsive chord. All in favor, signify their approval by saying "Aye." Opposed, "No." The ''Ayes" have it. We are going to call for the report of the Zone Chairman. We had some of them yesterday and in order to speed this thing up, you needn't rise, I will just call off the different zones and you just give me the name of the zone chairman and the member of the Executive Committee, even though you did it yesterday.

Zone 11 who is the Chairman f ( Commissioner Ellery Allyn, and Com­ missioner Knowlton on the Executive Committee) Zone 2. ( Commissioner Malone of Pennsylvania elected as a member of the Executive Committee and Commissioner Bowles as Chairman) Zone 3. (Zone Chairman to be ~eta.ined until the next meeting, some time in July, is Commissioner Jackson; member of the Executive Committee, announced yesterday, Hon. Wade Martin resigned and is running for Governor and we elj!cted Commissioner J ease White to represent our Zone on the Executive Committee) Zone 4. (Commissioner Pearson, Chairman, and Com.missioner Duel of Wisconsin a member of the Executive Committee) Zone 5. ( Com.missioner McKenzie, Zone Chairman; Commissioner Kava­ naugh, member of the Executive Committee) Zone 6. (Executive Committee member is Commissioner William A. Sullivan; Zone Chairma.n, Commissioner Seth Thompson)

President DiMen: I guess we are now ready for the election of officers, the President being :6.rst, and I will entertain a motion by Commissioner Harrington.

CommMBtOner Haffington (Massachusetts): Mr. President, I arise fo-r the purpose of placing in nomination a gentleman who has served long in this Association, and served well. He has a genial personality; he is au PRoCEEDINGS 429

admirable host, as we have all learned by actual experience. He is intelli· gent, has a fine background of insurance knowledge, has been an able administrator and long continued in office in his native state. To know him is to love him and his contributions to the aetivities of this Associa· tion have been manifold. It is a great pleasure for me, as an East Coaster, to plaee in nomination the name of Seth Thompson of Oregon from the West Coast.

President Dineen: You know, it would be a shocking thing now to think that no one would second it. Can we prevent such a eatastrophef I will recognize my dinner partner of last evening first.

Commissioner Dickey (Oklahoma): Oklahoma. desires the pleasure o:f s_econding the nomination of Hon, Seth Thompson of Oregon for President.

Commissioner Shield (Ohio): Mr. Chairman, I feel that a. newcomer in this organization ean make no more auspieious start than to second the nomination already made.

Commissioner Downey (California): Mr. Chairman, California is de­ lighted to second the nomination of Commissioner Thompson.

Commissioner Sullivan (Washington): I move th.e nominations be closed.

Commi&sioner Jackson (Missouri): Zone 3 seconds the nomination.

President Dineen: I will entertain a motion that the nominations be closed.

Commissioner Sullfoan (Washington): I so move, and that the Secre­ tary east the ballot.

Commissioner Forbes (Michigan): I second the motion.

President Dineen: All in favor, signify their approval by saying "Aye." Opposed, "No." My God, Seth, you're in! (Laughter and applause) (The ballot was duly east by the Secretary and CommissiOile? Thompson was declared elected Pl'esident.) I '11 ask Commissioner George Benjamin and Commissioner Lee Shield to eseort you to the Chair, and remember, boys, don't trip him .

. . . Commissioners Benjamin and Shield escorted President-elect Thompson to the platform. ••• O. K., gentlemen, the next order of business is the e1eetion of a Vice· President, and the Chair will entertain a motion by Commissioner Sullivan, the German immigrant from Beattle, Washintgon. 430 PROCEEDINGS

Commissfone'1' Sullivan (Washington): Mr. President and members of the National Association of Insurance Commissioners: Coming, as I do, from the great Northwest, 3,200 miles away from the home state of the gentleman that I am going to present to you for your Vice-President, we people in the Northwest have watch~d carefully the work that Commissioner Larson has done for this Association and I had great pleasure in nominating him at the last meeting of this Association for Chairman of the Executive Committee. He is going to be our Host Commissioner in December in Florida and this Association, gentlemen, will make no mistake in elevating the Hon, J. Edwin Larson of Florida, the State Treasurer and Commissioner of Insurance of the great State of Florida, to the Vice-Presidency. I have pleasure in nominating Commissioner Larson £or this office.

President Dineen: I recognize the Silver Fox from Connecticut,

Commissioner .tlllyn (Connecticut): Representing Zone 1, I take great delight in seconding the nomination of the gentleman from Florida and assur~ him that we look forward with a great deal of pleasure to being with him in December.

Secretary Parkinson (Illinois): Mr. Chairman, I would like to second the nomination 0£ Commissioner Larson. I am very happy to be able to do so.

President Dineen: I will entertain a motion now to close the nomina~ tions.

C-Ommissioner Harrington (Massachusetts): I so move, and that the Secretary be instructed to east a unanimous ballot.

Commissioner .Li.Jlyn (Connecticut): I second the motion.

President Dinern: All in favor, signify their approval by saying ''Aye.'' Opposed, ''No.'' Commissioner Larson, you 're in. (The Secretary east the ballot and Com.missioner Larson was declared elected) Now, I want a eoupl~ of strong men to walk up here with you. Com­ missioner Johnson and Commissioner George Bowles, could you escort him right to the threshold heref

•.. Commissioners Johnson and Bowles escorted Vice-President-e18et Larson to the platform. . . .

The next order of business is the election of a Chairman of the Execu­ tive .Committee, and the Chair will recognize Commissioner Gough of New Jersey. PROCEEDINGS 431

Commissioner Go-ugh (New .Jersey): Mr. President, it is a distinct privilege for me, in the presence of my Commissioner, especially, to give you one who has been a conspicuously active and energetic member of this Association now for several years. I have served on different commit~ tees with him, and there is no necessity of enlarging upon his qualifications for this position. I therefore give you the Commissioner from the State of Michigan, Hon. David A. Forbes.

President Dineen: Do I hear a second to the motion!

Commissioner .JfcKenzie (Arkansas): Arkansas would like to second the nomination of Commissioner David Forbes.

President Dineen: If I don't hear any other motions, or names, I will entertam a motion to close the nominations.

Commissioner S1tllivan (Washington): I move the nominations be closed and the Secretary cast the unanimous ballot.

Commissioner Benjamin (South Carolina): I second the motion.

President Dineen: All in favor of the motion, signify their approval by saying '' Aye. ' ' Opposed, ''No. '' The '' Ayes ' ' ha Ye it and it is so ordered. (The ballot was duly cast by the Secretary and Commissioner Forbes was declared elected Chairman of the Executive Committee) Where is the victim T I'll have to ask a committee to escort him up. Commissioner Jack McKenzie, this will be good; I'll have you go right around the back; Commissioner Jack McKenzie and Commissioner John P~arson, will you escort this man up to the altar here, so I can give him the last rites of the churchf Can somebody sing ''Poor Jud Is Dead'' from Oklahoma, as we lead him up the aisleT

•.. Applause as Commissioners McKenzie and Pearson escort Chairman­ elect Forbes to the platform....

Now, gentl!;lmen, the next order of business is the election of a Seere· tary, and the Chair will recognize Commissioner Parkinson.

Secretary Parkinson (Illinois): Mr. President and gentlemen: It gives me a great deal of pleasure to nominate one of our colleagues that we all know has served faithfully in many positions of responsibility in this organization. I am sure no one deserves it more and can serve us better than the Commissioner from North Carolina, and I present the name of William P. Hodges for the office of Secretary.

President Dineen: Do I hear a second to the nomination! 432 PRoCEEDlNGS

Commis8ioner Bowles (Virginia): Mr. President, when I came to thia Convention, I thought it was going to be my happy privilege to place in nomination the present Secretary, but some changes seem to have taken place since we have been here and w,a are convinced that we have more than one man who can fill these important positions. I think it was very magnanimous on the part of Commissioner Parkinson, because he has ren· dered a gr~at service since he has been Secretary. He has so endea.recl himself to the membership of this Association that I think it must have been a hard decision for somebody to make, but, anyhow, a great many things have happened here this time to bring order out of chaos and I don't know any man who has eontribut~d more to that end than has Commissioner Parkinson and Commissioner Hodges from North Carolina in working this matter out, I would say maybe betw~n themselves. Of course, Bill Hodges is going to make an excellent man. It is but an end to a troublesome matter that has been before us for some years in the discussion of what somebody has termed the Central Office. I believe this is going to be a happy solution of it, This may be an epoch in the history of this Association. We are living not only in an atomic age, but w~ are living, of course, in a rapidly changing age, when the responsibilities of this office are going to grow and, in order for it to be the office that we anticipate, we need a young man of the qualifications and experience that Commissioner Hodges happily possesses. H~ is a career man. He came up through the insurance office down in North Carolina with one of the most beloved. Commissioners of this Associ&• tion, Dan Boney, whom everybody loved. He was Deputy Commissioner down there under Dan for a number of years and after Dan died, he b'3eame Commissioner. He is a lawyer by profession and, of course, that will serve him in good stead in the operation and the management of this high office. It would take a long time for me to stand up here and tell you all of Bill Hodges' qualifications. He is a man that we all are relying upon to build this office of Secretary and Treasurer to the point where it will be of great value in the preparation and Eafe-keeping of the records that have been r~ferred to iu this meeting as having been kept somewhat disjoiutedly and, when they were most needed, sometimes it was hard to get them together. I venture to say from now on there will be no such trouble 88 that under thi:, administration of Commissioner Hodges. From now on, we are going to know, and know promptly, what the Commissioners of the various states request, and they will get that information promptly. It gives me a. very great deal of pleasure to second the nomination of Bill Hodg~s, and I definitely appreciate, as a neighboring state, the magnanimous spirit in which all of the Com.missioners here have cooperated to select a man that I think will add a great deal to the unification and the progress and the advancement of this Assoeiation. (Applause)

Presiil61lt Dineen: Thank you, Commissioner Bowles. The Chair will recognize the golfer from Minnesota. PROCEEDINGS 433

CommMS10ner Joh'tl,Son (Minnesota): I would like the privilege of not only seeondmg the nomination of Bill Hodges, but likewise to pledge the support of Minnesota in all his activities in this expanded program, and to let him know that he can have anything he wants when he wants it.

President Dineen: Thank you, sir.

Commissioner Harrington (Massa.chu5;etts): Massachusetts would like to second the nomination of Bill Hodges for Secretary of this Association, and the Silver Fox from the fust zone says, '' Make it the first zone.''

Commissioner McCormack (Tennessee): Mr. President, Tennessee, speaking in this instance at the request of all members of Zone 3, desires to second the nomination of Bill Hodges.

Commissioner Sullivan (Washington): Washington, representing Zone 6, seconds the nomination.

Commissioner Johnson (Minnesota.): I move the nominations be closed and the Secretary cast the unanimous ballot.

Comm~sioner Sullivan (Washington) : I second the motion.

President D-ineen: All in favor, signify by saying ''Aye.'' Opposed, ''No.'' The ''Ayes'' have it. (The ballot was duly east and Commissioner Hodges was declared elected Secretary and Treasurer) William, we 'II have you come up. I want a small feliow to escort you up. Wait a minute, I want Commissioner Butler and Commissioner Har­ rington, the tough guy from Massachusetts, to do this opera.tion.

. . . Commissioners Butler and Harrington escorted Secretary-elect Hodges to the platform. • . • We are now ready to proceed with the selection of three members of the Executive Committee at large1 and the Chair will recognize Commis­ sioner Allyn of the State of Connecticut.

Commissioner .Allyn (Connecticut): Mr. President, I only regret that I do not possess the command of :flowing English and the oratorical ability so that I could properly nominate a man who possesses them in such high degree and has so rec.ently proven it. So, Jacking these talents, I will pro­ ceed to nominate the gentleman from the Old Dominion, Commissioner Bowles of Virginia, for this position. (Applause)

President Dineen: Do I hear a second t

Commis.floner Johmon (Minnesota) : I second the nomination \134 PROCEEDINGS

Commissioner Harrington (Massachusetts): Massachusetts seconds the nomination.

President Dineen: Do I hear a motion to close the nomination.sf

Commissioner Sullivan (Washington) : I move the nominations be closed and the Secretary cast the ballot.

President Dineen: Do you want to nominate all three of them and do it enmasse, on the production line basis'I' That is No. 1. I will entertain nominations now on the s~eond one, and the Chair will recognize Com­ missioner Pearson of Indiana.

Commissioner Pearson (Indiana): Mr. President and gentlemen: The State of Texas is a very large state, the largest state we have in this country, and they do things in a large way. When they have a farm down there, it is a ranch; when the have an oil W!;lll, it is a gusher. I have been informed by Commissioner Newell Johnson in our Zone meeting recentJy that one of the worries of the State of Minnesota is that Texas is trying to claim to be the birthplace of Paul Bunyan. When it came to the appointment of an insurance commissioner, they followed the -regular procedure and they appointed a large man, large in st&ture, large in a sense of hum.or, large in his ability, and it gives me great pleasure to nominate Commissioner George Butler of T!;)xas.

Commissioner Dickey (Oklahoma): Mr. President, Oklahoma wishes to second the nomination of the Hon. Commissioner Butler from Texas County, that foremost county Of Oklahoma. (Laughter)

President Dineen: Well, boys, I hate to jimmy up this nomination, but there is going to be trouble on this one. What has happened is that we intended to nominate for this position the biggest man in the convention, but the Governor of California put in a bigger guy. We'll take care of that next year.

Now, for the third member of the Executive Committ!;le at fa.rge, the Chairman will recognize Commissioner Bowles of Virginia.

Commissioner Bowles (Virginia): Mr. President, if I may be per• mitted to deviate for just a moment to explain why my friend here probably said such kindly things about me, I happened to be sitting with him at the banquet the other night and I enjoyed very much, of course1 the honor. It seemed kind of like I was sitting at the right hand of God, you know -

President Dineen: That is always true when you have Yankees on hand.

Commissioner Bowles (Virginia) : Of course, the conversation kind of PROCEEDINGS 435 drifted &round and, being down in Dixie, Wt got to talking about families and I asked him if he was related to the Allens in Richmond. He told me he had some very distinguished Allens down there that were lawyers. Well, it seems he was a little ashamed of that. Well, I said the best family of Allens that I thought we had down in Virginia engaged in a little gu:n fracas down them some years ago and s.hot up a court, killed the judge, the Commonwealth attorney, and two ot three jurors. He was, I think, slightly irritated. The judge had given him a 30-day sentence in jail for stealing a pint of liquor and the old man said, ' 'I just ain't gwine. '' I was tj.'llling my friend about the Allens down there and he said, "Hell, George! I would rather be an Allen in a Virginia penitentiary than to be a Chester Bowles in Connecticut." (Laughter) Now, Mr. President, it is with real pleasure, and I am talking about a genuine pleasure now, that I place in nomination for a member of the Executive Committee, Commissioner Parkinson from the State of Illinois.

Commissioner McCormack (Tennessee): Mr. President, Zone 3, always doing things in a Democratic way, caucused and decided to support for the Executive Committee, our Chairman, Commissioner Jackson of the State of Missouri. As we all know, the scene changes from hour to hour. We now :find that the nomination of Commissioner Jackson, who was a winner, might interfere with the carrying out of a p1an to keep th,e friendship, the fine feeling of friendship, the ability and the intellect of one of our finest Commissioners of Insurance on our Executive Committee. We just can't get along without having Parky, as I like to call him, Commissioner Parkinson, on this Executive Committee, and for that reason, and that reason alone, and without any fear of defeat on the part of our candidate, I want to second the nomination of Commissioner Parkinson and to state that we will not place in nomination, with the will of all members of. Zone 3, Commissioner Jackson of Missouri. (Applause)

President Dineen: That is very kind of you, sir. I will now entertain a motion to close the nominations.

Commissioner Johnson (Minnesota): I so move.

Commissioner Benjamin (South Carolina): I second the motion,

Commissioner Johnson (Minnesota): I'll add to my motion that the Secr!;:ltary cast the ballot.

President Dineen: Are you ready for the question t All in favor, signify their approval by saying "Aye." All opposed, "No." The "Ayes" have it.. (The ballot was duly cast and Commissioners Bowles, Butler and Parkin­ son were declared elected to the Executive Committee) 436 PROCEEDINGS

I will ask those three gentlemen to totter to the stage. Commissioner Parkinson is here already. Commissioner Jim McCormack, you have been through this thing before. Have I forgotten anythingf It seems to me the new President is supposed to step up here, isn't he f

Commisrioner McCormack (Tennessee): You have overlooked one thing, but that is the result of your due modesty. At this stage, the National Association of Insurance Commissioners should place on the record a Word of testimonial pertaining to an excellent presiding officer. In the period of time that Bob Dineen came into the ranks of this Association and took over the heavy responsibilities of office in the great insurance State of New Yol'k - and when I say that, New York is a great insurance ata.te - he has been making an impression upon this Association, Taking advantage of his excellent legal baekgrowid, he has approached the many insurance problems of his state in a.n unusually able manner, going from good at the beginning to better as he goes along. He has used courage - and sometimes we ftnd courage not aa frequently as we should - in facing problems of high importance. I think I know what Bob Dineen has done. I have disagreed with him on detail many times. He probably has been right more times than I ha.ve been right. That is not important. But there has been no time, either as President of this Association or as Super­ intendent of the great State of New York, that Bob Dineen has not been progressively and actively for sound supervision of companies and in favor of the public interest in regard to insurance matters. Bob, you have honored this Association by the way you have conducted the affairs of the New York Iusurance Department and you have honored and served us by the method that you have conducted the affairs of the National Association of Insurance Commissioners, and I move at this time a rising vote of appreciation to Bob Dineen for the service h,, has rendered. (Prolonged applause as all stand)

President Dffleen: Thank you, sir. Well, gentlemen, I appreciate this very much. I always like to think that any Insurance Commissioner is a public servant and during the time that I served in your ranks here, of course, I was the serva.nt of this Association and, you know, it is an interesting thing, as you look through our ranks here, we have got some pretty good people in this organization, and they ha.ve been good to work with, and now that my ttnm of duty ia over and my swan song is here, I want to say to the new officers that anything I ea.n do to help you gentlemen, I want to do. I want to say particularly to Bill Hodges, and George Bowl~a, too, that I am gratified at this development in connection with the enlarging of the facilities of the Secretariat. I am going to do everything that I can to help it. I think that we are coming towards an era when that wu inevitable and I just have the feeling that - and I am going to be- quite forthright about it - I think there is much less turnover -among the Southem Com· PROCEEDINGS 437 missioners than there 18 among the N orthem Commissioners. There ought to be some continwty in that particular assignment and when we looked over the ranks, there were many men from the South eminently qualified for the assignment, but I have got to confess to you that my :first love in this respect was Bill Hodges. He is young a.nd vigorous and he is honest; he has great capacity, one that far exceeds any that I may possess, for friendship and for the ability to get along with people. I think he has a real opportunity and I just like to feel that during my term of office, this step was taken. I agree with George Bowles that the delay in working out some of the details was wise. It improved the ultimate plan worked out. I want to compliment the members of that Committee, who did a grand job in working out the details. I also want to express my appreciation to Commission~r Parkinson, who served as the Secretary during my term of office and carried on his chores faithfully and well. And while I am on the subject, I will have to tell you that one day my old friend, Commissioner Jim McCormack., said to me that a man would be a much better President if he served a tour of duty as the Chairman of the Executive Committee. At the time, I couldn't quite see that, but, Jim, I have to say this much to you. As I look back in retrospect, I think there was a whale of a lot of common sense to it, and I would just b~ stupid if I didn't recognize the yeoman efforts of our friend, Com· missioner Ed. Larson, and the job that he has done as Chairman. Then, whi]e we are here, I wanted to do one other thing, too, and if I didn't do it * * * and that is to express my gratitude and appreciation to Commissioner Seth Thompson, because if you p~ople will recall, he stepped aside to let me advance into the Presidency. I thought that was a fine demonstration of friendship and showed a disposition upon his part to preserve amity and cooperation within the Association. I am happy that God spared me and I am here upon this occasion to let him know in public how much I appreciate it. With that, gentlemen, I complete my chores and I will step down into the ranks. Incidentally, in doing that, I think one of the healthiest things in this Association is the continued turnover in officers. I think it would be a mistake to have Past Presidents, of which I am one, dominating any organization of this kind, because that would be a mistake, in my humble opinion. I think you have to give these younger men an opportunity to step in, and when I say young, I don't mean in terms of years; I mean in terms of service, to step in and keep this a progressive and growing organization. Thank you very much, and, Mr. New President, if you will step up here, I will present you as my last function and let you bring the meeting to an end o:r to say anything else that you eare to say beforp yon do. (Applause)

President-Elect Thomps

Of course, it is with a good deal of humility that I accept the honor that has been con:(erred this morning. I know that all the other officers have exactly the same feeling of responsibility that I do. We all need the earnest and generous aid and assistance that each department in this organization can givt}, and, if I may speak for the others, we deeply appreciate this opportunity to serve the organization which has proven its worth to each of us in our own Departments throughout the periods during which we have served. I would just like to take this privilege, if I may, if Commissioner Georg13 Bowles will permit, of calling attention to a certain incident that occurred in his state and that was repeated by the Virginia judge. I don't know how many are old enough to remember him on the Orpheum Circuit years ago, but he had a number of delightful stories about what happened on the bench in Virginia, and this was a story about a colonel who waB visiting at the penitentiary. It has to do with these remarks about our Secretary not being just exactly confined, but this remark about '' from now on" for this young man reminds me of this story. As the colonel was going through this institution in Virginia, he saw an old darkey whom he had known for a long while and he went over to him and said, '' Sam, I'm surprised. What are you doing in here f'' Sam said, "Pve had an awful lot of trouble since I last saw you, Boss.'' The colonel said, ''Why, what happened T'' "Well," he said, "last year I was down on tide,vater a-workin' down there and I got into an altercation with another nigger and I leaned a crowbar up against his head and he went off and died on me." The colonel said, "Why, Sam, that's murder_ What did they put you in here for, for lifef" "No, no, boss, not for life; just from now on." So, Bill, I hope we haven't sentenced you to this position from now on, but I do know that we are going to have a very happy relationship in this official staff and we urge and beseech the cooperation of every department that we may thereby have a successful administration during the coming year. Is there anything more to eome before the meetingf

Commissioner McCormack (Tennessee): Mr. President, first, congratu­ lations, and then just an announcement. And I mean that, without elaborat­ ing on these g.entlemen 's time. Zone 3, in its name, but inviting any interested commissioner, but without trying to make too big an affair out of it, is going to conduet a rating school that will be held with the cooperation of Commissioner George Bowles, out of Zone 3 but in the good State of Virginia, at Richmond. We selected that state because for some years it had had a method of regulating rates, yet without the large statistical set-up that some of the completely rated states have had. I PtWt'~,LDIXLi-> 439 simply wanted to take this opp01tumty to announce that, so that 1£ any of the state departments want to make arrangements to attend, 1t will be a pay-as-you-go proposition, that is, each man will take care of his own expenses. And it is kind of a self-sustaining proposition. We are receiving th~ cooperation of not only the Virginia Department but we will call upon other states having rating departments, such as Louisiana, and we hope 'l'exrn, and New York and other states with rating departments, and the Lureaus themselves. It should be a step forward in what Frank Harrington has been talking about, and Chris Gough, and that is implementing the rating program. I just thought it might be helpful. We don't know the date, but it will be announced in publications and all of the Commissioners will receive a. letter from the State of Florida. The Chairmanship of it is in Florida. If you will address communications to either Commissioner Owen Jackson in Missouri or to Commissioner Larson in Florida, you will get the infor­ mation, but all commissioners will be notified by mail.

President-Elect Thompson (Oregon): Thank you, Commissioner Mc­ t.,'ormack.

Before we aJjourn, may I ask that the newly-e1ected officers and members of the Executive Committee and the Past Presidents confer a. moment on the rostrum with the President after the felicitations have been extended.

l recognize Commissioner Carey.

CommissfoneT Carey (New Jersey): Mr. President, I just want you to know that the Committee for Arrangements wi11 pr~sent to you, and we wi11 feel highly complimented if you will use it officially, a gavel, and it will be here later on and we wil1 send it to you. We feel complim.,ented with you, sir.

President-Elect Thompson (Oregon): Thank you very kindly, Com­ missioner Carey, and your Committee.

Secretary Parkinson (Illinois): Mr. Presidtmt, as a matter of pro­ cedure, in order to be sure we will have no difficulty, I move that the authority be conveyed to the proper persons to transfer the bank ,account of the Association to th~ newly-elected Secretary and Treasurer, and that he be authorized to select a bank for depository of the account and to draw the necessary cheeks on behalf of the Association.

Commissioner Harrington (Massachusetts): I sec.and the motion.

President·Elect Thompson (Oregon): It has been moved and seconded that the proper procedure be undertaken to transfer the aeeounts of the Association from the previous Secretary, Commissioner Parkinson, to the 440 PROCECDINGS newly-el.ected Secretary, Commissioner Hodges. All in favor of the motion, 1 signify by saying ''Aye. ' Contrary minded, ''No.'' It is carried. Are there any other matters to come before this meeting!

Commissioner Johnson (Minnesota): Mr. President, in that report of the Examinations Committee, I omitted stating in that that at the time the Examinations Committee meeting is held, every Commissioner will be notified. We would like to have as many there as possible. You will rec.all there was a recommendation in there that there be a committee hearing before December, of the Examinatiomi Committee. I failed b state that every commissioner will be notified and invited.

President-Elect Thompson (Oregon): Th~ announcement will be noted. Is there anything else to come before this meetingT

President Dineen: One other final announcement, that Commissioner .Tohnson of Minnesota and Commissioner Stone of Nebraska will meet in this room as soon as this short session on the stage is ended.

President-Elect Thompson (Oregon): Let's have all the members of the Executive Committee on the stage. (Applause as they all come up)

Is there anything else to come before this meeting! If not, w~ will entertain a motion to adjourn the 78th Convention of the National Aseoei&­ tiou of Insurance Commissioners.

Commissioner Shield (Ohio): I move we adjourn.

Commissioner McCormack (Tennessee): I second the motion,

President-Elect Thompson (Oregon): All those in favor, signify by saying ''Aye.'' We stand adjourned .

. . . Final adjournment, •. , CONVENTION RECORD.

The following is a Record of Officers and List of Places st which the National Convention of Insurance Commissioners has been held since its organization.

Beasion. Place of Meeting. President. Vice-President Secretary.

1, 1871 New York, N. Y·-··--­ Geo. W. M Iler, N. Y, __ ·------L. Breeze, Wis ..·---·---·---­ H. S. Olcott, N. Y. 2, 1871 New York, N. Y·-···---­ Goo. W. ~I Iler, N. Y .• _ --··--·-- L. Breeze, Wis,----·--·--·· H. S. Olcott, N. Y. 3, 1872 New Yo1·k, N. Y,--·-----· Geo. ·w. ~I lier, N. Y ..- ----·---- L. Breeze, \Vis·------·-----·---· H. S. Olcott, N. Y. 4, 1873 Boston, :Mass .. ______L. Breeze, \Vis ..----··------·--- J. \V. Foard, Cal..--·------··· 0. Pillsbury, N. H. 5, 1874 Detroit, Mich ...... ·--·-·· 0. W. Chapman, N. Y·-···----·· S. H. Rowe, Mieh.. ------0. Pillsbury, N. H. 6, 1875 New York, N. Y.------­ 0. W. Chapman, N. y ______S. H. Rowe, Mich·-··-··------0. Pillsbury, N. H. 7, 1876 Harrisburg, Pa·--··------S. H. Rowe, Mich·------····· 0. Pillsbury, N. H--·----·-·------­ S. H. Rhodes, Mass. 8, 1877 St. Paul, Minn._. ______S. H. Rowe, Mich,------·- 0. Pillsbury, N. H·------S. H. Rhodes. :Mass. 9, 1878 Providence, R. I··-··-·--- 0. T. \Velch, Kas. 10, 1879 St. Louis, Jlfo .• ______,_ 8: im:i~~: :: ~::::::=:::~--::::= t ~: ri~irn: :t:::::::=::=::=:::: 0. T. \Veleh, Kas. 11, 1880 Chicago, lll.-...... ------A. R. McGill, Minn ..------· J. L. Clarke, Mass ...... ----··---·-·-·­ 0. 'l'. \Veleh, Kas. 12, 1881 Detroit, Mich. ______J. L. Clarke, Mass.------·----- P. L. Spooner, Wis·--·------O. T. Welch, Kas. 13, lf\82 Niagara Falls, N. Y ...... J. L. Clarke, Mass------·--·------J. A. McCall, Jr., N. Y. ______,, __ O. T. V{eleh, Kas. 14, 1883 Columbus, Ohio. ______0. Pillsbury, N. H ...... _, _____ .. C. P. Swigert, III--·--·------J. W. Brooks, Conn. 15, 1884 Chicago, Ill ..... ______,J. A. i',lcCall, Jr., N. Y ------O. H. Moore, Ohio·------C. P. Swigert, Ill. 16, 1885 Chicago, Ill...... ______.1. ,\. I'-IcCall, Jr., N. Y ...... _. E. Pringle, Mieh.------·---·-.. C. P. Swigert, Ill. 17, 1886 St. Paul, Minn ...... -----·- C. P. Swige11, Ill,------H. J. Reinmund, Ohio------·-··­ C. Shandrew, Minn. 18, J 887 Niagara Falls, N. Y,--­ J. K. Tarbox, Mass, 1------.. - 8. R. Cross, R. R. B. Brinkerhoff, Ohio. I"' 1.------· 19, 1888 Matlison, Wis ------1 P. Cheek, Jr., ·wis·------··- ____ 0. R. Flyer, Conn.------J. A. McEwen, Ohio. 20, 1889 Denver, Colo. ·······------0. R. Flyer, Conn.------·----· S. E. Kemp, Ohio______Geo. n. Luper, Pa. 21, 1890 Cleveland, Ohio ______1:eo. S. Morrill, Il!afls ..- ...... ---- S. E. Kemp, Ohio------· Geo. D. Luper, Pa. 22, l891 St. J,(mis, Mo .• _ .. _____ .. CI1a.a. D. Ellerbe, Mo ...---·---,...- .. Geo. B. Luper, Pa .• ______...... ,_ Chas. n. Allen, Neb. 23, 1892 St. Paul, Minn .. ______Geo. n. Luper, Pa ...... -...... ·wm. H. Kinder, Ohio.---·------·---- J. J. Brinkerhoff, JII. 24, 1893 Chicago, Ill .... ______John C. Linehan. N. H·---·-·------_ C. N. Smith, Minn.·-····----··-·---- J, J. Brinkerhoff, Ill. 25, 1894 Alexandria Bay, N. Y.­ Jas. F. Pierce, N. Y------.---- B. K. Durfee, Il]. ______J. J. Brinkerhoff, Ill. 26, Jt-95 Mackinac Isl., Mieh.---­ B. K. Durfee, 111.------· W. M. Hahn, Ohio---····-····-··--· Fred L. Cutting, Mass. 27, 1896 Philatlelphia, Pa. ·····--·· W. M. Halm. Ohio, 3.-...... -- ,Tas. R. Waddill, 1fo ...------·· Fred L. Cutting, lllai.s. 28, 1897 Old Pt. Comfort, Va. __ _ Jas, R. Waddill, Mo., 4--···-·------Stephen \V. Carr, Maine------·· Fred L. Cutting, Mass., 5.

1. Mr. Tarbox died before the Convention assembled. The Hon. Oliver Pillsbury, of New Hampshire, was chosen to preside over the Convention. 2. Elected, hut resii;.ued before acting 1n Convention in 1891, and J. J. Brinkerhoff, of Illinois, was chosen in llis stead. 8, Out of offic<' i.t date of Convention, Jas. R. "raddill, of Missouri, elected to preside. 4, Out of oflic<1 nt date of Convention, Stephen \V. Carr, of Maine, elected to preside. ... 5. Not in attendance, J. J. Brinkerhoff chosen as Secretary pro tern. ..~ CONVENTION RECORD.---Continued .. ..~

Session. Place of Meeting. President. Vice-President Secretary.

29, 1898 Milwaukee, Wis.-··-···· Stephen W. Carr, Maine.-..- .. W. A. Fricke, Wis.·--·----·-··-· Fred L. CuUing, MaM., 6. so. 1899 Detroit, Mich.·-·-··--··· Elmer H. Dearth, Minn, 7---···· Milo D. Campbell, Mich·-··-·--·· J. J. Brinkerhofl', Ill. Bl, 1900 Hartford, Conn.-··-···· Ed. T. Orear, Mo·-··-···-··-·· W. S. Matthews, Ohio-·------· J. J, Brinkerholf', Ill. 32, 1901 Buft'alo, N. Y.-·-···--·· J. A. 0. Shaughnessy, Minn., 8 E. L. Bco.fl.eld, Conn·-·-·-·-·· J. J, Brinkerhofl', Ill. 33, 1902 Columbus, Ohio-······--- W. H. Hart, Ind·-··--···-···-·· F. A. Howland, Vt..-··-·······-···· J. J. Brinkerhoff, Ill. 34, 1903 Baltimore, Md.--··-··- A. L Vorys, Ohio-..·-·-············· John L. Bacon, Vt·-··-··--·-··­ J. J. DrinkerhofP, Ill. 35, 1904 Indianapolis, Ind .. - ..-.. John L. Bacon, Vt.·-····-···-···· James V. Barry, Mich--·-·-··­ J. J. Brinkerhofl', Ill. 36, 1905 Bretton Woods, N. H .. _ Frederick L. Cutting, Mass.·-···­ Jamea V. Barry, Mich-·-··-··­ J, J, Brinkerhoff, Ill. S7, 1906 Washlngton, D. C ... --···· James V. Barry, MiclL----···· Theron Upson, Conn·-·-··-··-·· J. J. Brinkerhofl', Ill. 38, 1907 Richmond, Va·-··-··-·· Geo. H. Adams, N. H·-··-···­ Reau E. Folk, Tenn·-·-··-·········· J. J, Brinkerhoff, Ill. 89, 1908 Detroit. Mich .• ---··-·· Reau E. Folk, Tenn.---·-··-···· B. F. Carroll, Iowa-··-·-·-···· J. J, Brinkerhoff', Ill. 40, 1909 Colorado Spgs., Colo._.. B. F. Crouse, Md·-··-··-·-·-·· F. W. Potter, Ill--··-··-··-··-·- J. A. Hartigan, Minn. 41, 1910 Mobile, AJa ...... _. ____ John A. Hartigan, Minn ...... - .. Engene J. MeGivney, La,--··-·· H. R. Cunningham, Mont. 42, 1911 Milwaukee, Wis.-··-··· Joseph Button, Va·-·--·­ T. H. Macdonald, Conn., 9-··-···· H. R. Cunningham, Mont. 43, 1912 Spokane, Wash·------·- F. W. Potter, Ill-·---·· Frank H. Hardison, MaH.---····-·­ F. H. McMaster, S. 0., 10. i 44, 1913 Burlington, Vt·-··-·- Frank H. Hardison, Mass·--·· leL James R. Young, N. C·-··-···· .F. H. McMaster, 8. O. 2d. Willard Done, Utah-..---·· 45, 1914 Asheville, N. C--····-····- James R. Young, N. C--··-··· 1st. Willard Done, Utah, 11-··-·· F. H. McMaeter, 8. C. 2d. J. S. Dar.st, W. Va·-···------­ I 46, 1915 Del Monte, Cal.. ...-··--··· John S. Darst. W. Va·-·-···· lst. Burton Marudleld, Conn·-··---- F. H. McMaster, 8. C. 2d. John T. Winship, Mich.---·-···· "' 47, 1916 Richmond, Va. __ ----- Burton Mansfl.eld, Conn·-·-· 1st. John T. Winship, Mich·-··-·· F. H. MeMaster, 8. C. 2d W. C. Taylor, N. Dakota·-········ 4'8, 1917 St. Paul, Minn .. _.-··---·-·· Jesse 8. Phillips, N. Y.----···· 1st. John T. Winship, Mich·-··--·· F. H. MeMaster, 8. C. 2d. Emory H. English, Iowa...... _ .. 49, 1918 Denver, Colo .. _ ...... _.... Emory H. English, Iowa, 12...... 1st. Robt. J. Merrm, N. H., 13._.. F. H. McMaster, S. 0., 15. 2d. M. J. Cleary, Wis., 14......

6. Elected, but declined, J, J. Brinkerhofl' chosen in his stead. 7. Out of office at date of Convention. Ed. T. Orear, of Missouri elected to preside. 8. Out of office at date of Convention, W. H. Hart, of Indiana, elected to preside. 9. Elected at Mobile, bnt out of office at date of Milwaukee Convention. Vacancy not filled until general election. 10. Elected in March, 1912, to succeed Mr. Cunningham, who had resigned. 11. Elected, but resigned before acting in Convention. 12. Elected, but resigned in January, 1918. 1S. Elected, but resigned in November, 1917. 14. Elected 1st Vice-President at adjourned meeting in December, 1917, to succeed R. J. Merrill, resigned and elected PreBident b7 the Executive Committee in Jam1ary, 1918. Prea:ided at Denver, 1918. 15. Elected, but resigned in December, 1017. Joseph Bnttoa, of Virginia, elected, at adjourned meeting in December, 1917. CONVENTION RECORD.--Contlo.ued

Session. Place of Meeting. President. Vice-President Secretary

50, 1919 Hartford, Conn.-·----- C. W, Fairchild, Colo.-. 1st. Jos. G. Brown, Vt_ Joseph Button, v. ·----- 2d. Jfrank II. Ellsworth, Mich.-- 51, 1920 Bever]y Hills, Cal.-..- Jos. G. Brown, Vt.--- ··----·· 1st. F. H. Ellsworth, Mtch lf:i ____ Joseph Button, Va 17.______2d. J. B. Sanborn, Minn , 52, 1921 Louisville, KY------· F. H. Ellsworth, Mich., 1st. A. L. Harty, Mo., 18------· Joseph Button, Va 2d. T. B. Donaldson, Penn, 19_ 53. 1922 Swampscott, Mass.-······ Thos. B. Donaldson, Pa.-•. _.. 1st. Platt Whitman, Wis._ - - Joseph Button, Va 2d. IL o. Fishback, Wash- 54, 1928 Minneapolis, Minn, ____ Platt Whitman, Wis., 20___ ··-·- 1st. H. o. Fishback, Wash, 21_ Joseph Button, Va 2d. J. c. Luning, Fla., 22•... 55, 1934. 8eattle, ¥lash.------··----· H. 0. Fishback, Wash. _____ ..... 1st. J. C. Luning_____ -· - Joseph Button, Va 2d. S. W. McCulloch, Penn - - 56, 1925 Snn Antonio, Tex.------J. C. Luning, Fla.------1st. S. W. McCulloeh, Penn·- -- Joseph Button, Va 2d. B. T. Bullion, Ark __ ---- 57, 1926 Los Angeles, Calif.. _ ..... w. R. Kendrick, Iowa, 23----- 1st. T. M. Henry, M188 ·----·- .. Joseph Button, Va 24,______2d. T. >I. Baldwin, D. C- -·- 58, 1927 Cincinnati, Ohio ------Harry L. Conn, Ohio, 1st. A. 8. Caldwell, Tenn Joseph Button. Va 2d. C. R. Detrick, Ca.hf_ - -- Caldwelt______- - .... 1928 Rapid City, 8 . D,-----· A. 8. ···-··· 1st. C. R. Detrick, Cahf __ Joseph Button, Va 25 __ 2d. James A. Beha, N. Y ---:_-:.:_ 60, 1929 Toronto, Canada-.. ·-·· C. R. Detrick, Calif., ·---·· 1st. James A. Beha, N. Y , 26 ... _ Joseph Button, Va 2d. H. P. Dunham, Conn, 27 - ·- 61, 1930 Hartford, Conn.-··-----· H. P. Dunham, Conn·--·-···- 1st. C. C. Wysong, Ind , 28 _ A 8 Caldwell, Tonn 2d. Jess G. Read, Okla -·

16. Elected, but re3igned in June, 1920. 17. Elected, but resigned in June, 1921. 18. Elected Pre8ident by the Executive Committee in June, 1921. l're:,ided at Louisville, 1921 19. Elected l~irst Vice-President by the Executive Committee in June, 1921. 20. Elected, but resigned July 1, 1923. 21. Elected President by Executive Committee in July, 1923. Presided at Minnoapolis, 1923 22. Elected First Vice-President by Eucutive Committee in July, 1923. 23. Elected, but resigned in January, 1926, and Harry L. Conn, Ohio, was elected in his stead and presided at Los Angeles 24. Elected, but resigned in April, 1927, and A. S. Caldwell was elected in his stead and presided at Cmcmnah 25. Elected, but resigned in April, 1929. 26. Resigned January 1, 1929. 27. Elected First Vice-President and then President and presidetl at Toronto. 28. C. C. Wysong, Ind., elected First Vice-President and Jes3 G. Read, Okla., Second Vlce-Preatdent CONVENTION RECORD.-Contlnued

Seuion. l?lace of Meeting. President. Vice-Preaident Secret.arr,

29 ___ 61, 19SO Hartford, Conn.---·- C. C. Wysong, Ind. 1st. Jess G. Read, Caldwell, Tenn_ Lee,Okla·------Ore_ so ______. A. s. Oregon______s1 ______2nd. Clare A. 62, 1931 Portland, Jess G_ Read, Ok1a. 1st. Chas. D. Livingston, Mich. 32 ___ A. 8. Caldwell, Tenn_ Texas______2nd. W. A. Tarver, Tex. SIL ____ 63, 1932 Dallas, Chas. D. Livingston, Mich.-- 1st_ w. A. Tarver, TeX------·- Jess G. Read, Okla. Texas______34______2nd. Garfield W_ Brown, Minn·------1932 Dallas, w. A. Tarver, T,x. 1st. Garfield W. Brown, Minn.____ Jess G. Read, Okla. ••• 2nd. Dan 0. Boney, N. c. _____ 64, 1933 Chicago, llL------·· Gar.field W. Brown, :Minn.---··-·- 1st. Dan C. Boney$ N. C------·· Jess G. Read, Okla. 1st. Geo. S. Van. chaick, N. Y.- 65, 1934 St. Petersburg, Fla·---· GarAeld w_ Brown, Ilfinn.---·-·--- 1st. Dan C. Boney, N. C.------····-y __ J,,. G. Read, Okla. c .. ______2nd. Goo. s. Van Schaick, N. 66, 1935 Seattle, Wash .. ~----··-·--- Dan C. Honey, N. 1st. Geo. S. Van Schaie~ N. Y .. __ Jess G. Read, Okla. 2nd. Merton L. Brown, ass. ____ Minn. ______Wash. ______111. ______67, 1986 St. Pa~. Wm. A. Sullivan, 1st. Ernest Palmer, .Tei;is G. Read, Okla. 2nd. Geo. A. Bowles, Va·----· 1937 Philadelphia, Pa.------Ernest Pahner, 111 ______Quebec, Canada .. ______Geo. A. Bowles,Va.•...•... -···---··- Jess G. Read, Okla. •••69, 1938 George A. Bowles, Va·-···------Samuel L. Carpenter, Jr., Cali!. 85. Jess G. Read, Okla. 70, 1939 San Francisco, Calif.---··-· Hartford, Conn. ______!<"rank N. Julian, Ala·---·-·-- Arthur J. Harn, Wyoming ------J,,. G. Read, Okla. 71. 1940 C. Clarence Neslen, Utah ______John C. Blackall, Conn,-----··- Jesa G. Read, Okla. 72, 194,l Detroit, Mich.·-·----·--·-Colo ..______.John C. Blackall, Conn.• __ Charles Hobbs, Kansas----·--· Jess G. Read, Okla. 73. 1942 Denver, Charles Hobbs, I"' Kansas-·---·-····· John Sharpe Williams, Ill, Miss .. _ Jess G. Read, Okla. 74, 1943 Boston, Chicago. Mass·---····---rn ______John Sharpe Willianu1, III, Miu. C. F. J. Harrington, Mass·---··-·- Jess G. Read, Olda. 75, 1944 C. F. J. Harrington, Mass. __ Newell R. Johnson, Minn.-... --- Jess G. Read, Okla. 76. 1945 St. Paul, Minn·--···-- Newell R. Johnson, Minn. ____ James M. McCormack, Tenn·---······ JeH G. Read, Okla. 77, 1946' Portland, Ore. ····-·--···-- James M. McCormack, Tenn, _____ Edward L. Scheu1ler, Mo. 36.·--·-··-· Jess G. Read, Okla. 78, y ______Robert E. Dineen, N. Y .. ·---·-··--·· 1947 Atlantic City, N, J .. _._ Robert E. Dineen, N. Seth B. Thompson, 0.-...... • --··· ··- Jess G. Read, Okla. 37 N. P. Parkinson, Ill. 38 29. Elected President at Hartford, 1930. Resigned in January 19Bl. 30. Elected 2nd Vice-President at Hartford, 1980. Served until early part of 1931. Bl. Elected President by Executive Conunittee in January 1981. 82. Elected by Executive Committee in 1931. 33. Elected by Executive CommitLee in 1931. 84.. Elected at Dallas in 19S2 and served until early in 1933. 85. Elected at Philadelphia, Pa. in 1937. Resigned early in 1988. Be, Resigned Oetober, 194&. 37. Died July 20, 1946. 38. Elected by Executive Committee, September, 194.6. I N D EX

A Accident and Health, Committee on, Report of 38 Accident and Health, Committee ou, Report of 354 Address: General Carl Spaatz .. 32 William H. Lucas .. ····································· 66 Gustav Michelson 66 Robert E. Dineen ...... 67 Bernard M. Culver .. 68 Honorable Homer Ferguson 69 Address of Welcome: To New York, Honorable Robert E. Dineen ...... 7 To Atlantic City, New Jersey, Honorable Louis Cunningham .. 288 To New Jersey, Honorable Lawrence B. Carey ...... 289 To New Jersey, Mr. Carl Shanks, New Jersey Insurance Industry .. 289 Address, Response to Welcome, J. Edwin Larson ...... S Honorable Seth B. Thompson .. 291

Allyn1 W. Ellery, Pr~sents, Report of, Life Insurance Committee ...... ,,.50 Presents, Report of, Life Insurance Committee ...... 3i2 Seconds Nomination of J, Edwin Lar:,:on for Vice·President ...... 430 Nominates George A. Bowles to Executive Committee ... .433 Amendment to Constitution ...... 306 Auditing Committee, Appointment of ...... 15 Auditing Committee, Report of ...... 330

B Barry, James Victor, Memorial to ...... 421 Blanks Committee, Report of Subcommittee No. 2 ...... 27 Blanks Committee, Report of ...... 279 Blanks Committee, Report of ...... 318 Bowles, George A., Appointment on, Resolutions Committee ...... 24 Elected to Executive Committee ...... 283 Appointed on, Resolutions Committee ...... 329 Presents, Report of, Casualty and Surety Committee ...... 353 Presents, Report of, Resolutions Committee ...... 420 Seconds Nomination of William P. Hodges for Secretary.Treasurer. .432 Elected to Executive Committee ...... 434 Bullion, Bruce T ., Memorial to ...... 43 Butler, Albert N., Memorial to ...... 423 Butler, George E., Presents, Report of, Laws and Legislation Committ~e.. 357 Elected to Executive Committee ...... 434 By-Laws and Constitution ...... •...... 3 By-Laws and Constitution, Amendment to ...... 306 44U INDEX

C

Carey, Honorab~ Lawrence B., Address of Welcome to New Jersey ...... 289 Carlson, Oscar W., Resolution to ...... 424 Carroll, J. Austin, Presents, Report of, Fire and Marine Committee ...... 78 Casualty and Surety Committee, Report of ...... 353 Central Office Committee, Report of ...... 45 Central Office Committe.e, Discussion on ...... 263 Central Office Committee, Report of ...... 316 Constitution and By-Laws······--························------·--·------··········------3 Constitution and By-Laws, Amendment to ------····························-·······--···-306 Cravey, Zack D., Appointment on, Fire Prevention Committee --················ 41 Culver, Bernard M., Address ····················-----···········------··········-······------······-·· 68 Cunningham, Honorable Louis, Address of Welcome to Atlantie City, New Jersey ······-···------·-····------··---,. .... ·····-·-----·······------·····-288 Committee on, Accident and Health, Report of ------·····--·-········--····---·-----····- 38 Accident and Health, Report of ······------·-·······-···-----····--·-·-············--·····-----354 Auditing, Appointment of -······-----······-· ·········-----···------······ 15 Auditing, Appointment of ·---···-·······--··········-----············------·------···-305 Auditing, Report of ·········-·--·······------·········-·····-·····--·············-············------330 Blanks, Report of Subcommittee No. 2 ····-···-·················-····-···············--· 27 Blanks, Report of ---·····------··········-----····--·-···--······-·--···············--·-········--·······279 Blanks, Report of ·····-············--·······················--···········--···-·-··········--··-·------318 Casualty and Surety, Report of ------·········-····--····-········---········--·----······353 Central Office, Report of ...... ··--··-----····-···-··-·······---- 45 Central Office, Discussion on ····-···-·-··············-······································--···-263 Central Office, Report of ___ ····-······-····-·-·············································316 Examinations, Report of ...... ····-·····-············------·····--····-···---··-···-239 Examinations, Report of ·-··············-·------······-----·········-----·-·····-----·-······------415 Executive, Report of ··················---········--···--····-·········-·····-······-····-·········--···· 17 Executive, Report of ---··········---···· ·-··--·-·-·····--·-----·---····-----·--·····------·········-··· 25 Executive, Report of ········-····· ··············· ...... 261 Executive, Report of ········---······ ··········-····--····------·-·····----··------·······312 Federal Legislation, Report of . ----················-····--·····-----·············----·····-141 Federal Legislation, Report of ······--·····--·······---······--·--········---·····------172 Federal Legislation, Report of -············----··········-----············-··················-213 Federal Legislation, Report of ····-···············-··········-······-····················-····380 Fire and Marine, Report of ·····-·····-···--·······-···············-·········-··················· 78 Exhibit A-Report of Sp~eial Subcommittee ················-··············· 79 Exhibit B-Report of Committee for Definition and Interpre­ tation of Underwriting Powers ······------·-·-·······-···-···········---·····-106 Exhibit A-Joint Committee on Interpretation and Complaint Nationwide Definition and Interpretation of the Insurance Powers of Marine and Transportation Underwriters ...... _..... 123 INDEX 447

Exh1b1t B-Jomt Committee on Interpretn.t10n and Complaint Nationwide Deftmhon and Interpretation of the Insurance Powers of Marine and Transportation Underwriters ------130 Exhibit C-Joint Committee on Interpretation and Complaint Nationwide Definition and Interpretation of the Insurance Powers of Marine and Transportation Underwriters ------135 Fire and Marine, Report of ······-···--·-····------·---·-·-----···-···············--····359 Fir!:! Prevention, Report of ------··-···------··········--····-····--············-··-······ 40 Fire Prevention, Report of ···················-····--·······-····-··-·········------·········------356 Fraternal, Report of ------·-············------····-······-----·-········----·············---238 Laws and Legislation, Report of ·-····················-··.. ···-·-··········-·--···············357 Life, Report of ···------·---····--···------·········--··--·-·--·--···---·········------250 Life, Report of ··················------····················-····---···········-··-·-····--····-··-·-····~ 72 Multiple Line Coverage, Report of ····················----··········-········--··-········--365 Rates and Rating Organizations, Report of ·-······················--··--·····-·····-141 Rates and Rating Organizations, Report of ·······---·······························-172 Rat~s and Rating Organizations, Report of -·······················--····--·········-213 Rates and Rating Organizations, Report of ·········-·························-····-380 Real Estate, Report of Special Committee ...... ------······------·-··--············ 63 Real Estate, Report of ····-··--·-·--····--····--····-···········------···----·····------········---363 Resolutions, Appointment of ····--·····-·······---·---·-·············-··········-·-·····-······· 24 Resolutions, Report of -·····-··-···························--················-·····-············-····· 42 Resolution No. 1, Honorable Jess G. Read -----······-··-···-·······--········ 42 Resolution No. 2, Honorable Bruce T. Bullion ·-····----····-·····--·-······ 43 Resolution No. 3, New York Insurance Industry ...... •... 44 Resolutions, Appointment of ··········---····------·--····----··--····--····-···-·······329 Resolutions, R-eport of ·······-·······························----············-·······················420 Social Security, Report of ·-······---·····-·--················································-····· 77 Taxation, Report of ------·--·-···--·········································-························· 78 Uniform Accounting, Report of ····-····-·-·······----·······--·····--·········-··············· 41 Valuation of Securities, Report of------···--···--··············----··--····--···-······· .. ··· 39 Valuation of Securities, Report of --······-··-····----·····························------····330 Workmen's Compensation, Report of ····-····-----···-····-··-··------··-········ 50 Exhibit A-Special Committee, R-eport of ···---······-························· 51 Exhibit B-Actuarial Committee, Report of -----····--··················-··- 60 Workmen's Compensation, Report of ···-····--··························-·················345 Exhibit A ·················-···········································································346 Exhibit B ···············-········-····-························-······-·························--····349 448 INDEX

D

Davis, Shelby, Appointment on Auditing Committee ·····················-············· 15 Definition and Interpretation of Underwriting Powers, Exhibit B ...... 106 Exhibit A-Joint Committee on Interpretation and Complaint­ Nationwide De.1inition and Interpretation of Insuring Powers of Marine and Transportation Underwriters ...... 123 Exhibit B ··········----······················-·-·-·-·-··············-···················--···············-··-130 Exhibit C ·······················-·············································································135 Dickey, Donald F., Seconds Nomination of Seth B. Thompson for President ······················-··---····················-·······································----429 Seconds Nomination of George E. Butler to Executive Committee ..434 Dinl'en, Robert E., Address of Welcome, Mid·Winter Meeting, 1946 ...... 7 Introduction of General Carl Spaatz ...... 32 Presents, Report of, Valuation of Securities Committee ·················- 39 President's Address, Annual Meeting, 1947 ...... 296 Presents, Report of, Valuations of Securities Committee ...... 330 Donaldson, Thomas Blaine, Memorial to ·················-·····································423 Downey, Wallace K., Seconds Nomination of Seth B. Thompson for President ·······························-·······-· ..·······································-····-···429 Dressel, Walter, Elected to Executive Committee ...... 18 Duel, Morvin, Elected to Executive Committ~ ...... 428

E

Election of Officers ···························································-······················-····-···428 Emery, Colonel John G., Memorial to ···················--··-·································---422 Examinations Committee, Report of ·····························-··················--··········239 Examinations Committee, Report of ···········--···-··············-························-···415 Executive Committee, Report of ·····························-·······························-········ 17 Executive Committee, Report of ·····························-··························-············· 25 Executive Committee, Report of ·····-·····················-···············-························.261 Executive Committee, Report of ·····································-·························-·-·····312

F

Federal Legislation Committee, Report of -···············-···-······-···-·············-141 All Industry Subcommittee, Report of --·············-······························--·144 Federal Trade Commission Act, Report of Subcommittee, March 11-15, 1946 ·······················-··········-····································-········-····--144 Federal Trade Commission Act, Report of Subcommittee, Sept. 18-19, 1945 ·····-··········-·····--······-··············-···-··········-··················--147 Federal Trade Commission Act, R;eport of Subcommittee, Oct. 18, 1945 ·····-································-············································-··········-····148 INDEX 449

All Industry Committee on Robinson-Patman Act ·····-···· ...... 153 Exhibit A-Report of Subcommittee ·····-·················································153 Exhibit B-Supplementary Report of Subcommittee on Robinson· Patman Act ·················-································································-····-166 Exhibit C-Supplementary Report of Subcommittee on Robinson- Patman Act ...... 170 Federal Legislation and Rat~s and Rating Organizations, Joint Commit- tees Report •...... •...... •...... •...... 172 Report of Subcommittee on Robinson-Patman Act to AU-Industry Committee ...... ••...... •...••...... ••...... 177 Exhibit B-Supplementary Report on Robinson-Patman Act ...... 190 Exhibit G-Supplementary Report on Robinson-Patman Act ...... 194 Exhibit D-An Act Relating to Unfair Practices in Busilless of Insurance •...... •...... 195 Exhibit E-An Act R~lating to Unfair Practices in Business of Insurance ...... •...... 201 Exhibit F-An Act Relative to the Filing and Approval of Forms of Policies of Accident and Health Insurance ...... 205 Exhibit G-Memorandum ...... 211 Federal Legislation and Rates and Rating Organizations Committees, Joint Reports ...... 213 Exhibit A-Proposed Amendment to Law for Personal Accident and Health Insurance ...... •...... 218 Exhibit B-An Act Relating to Unfair Practices in the Business of Insurance ······················-···-····························-·······························219 Exhibit G-Report of Sherman Act Subcommittee ...... 226 Supplementary Report ••...... •..•...... 228 An Act Relating to Unfair Practices in the Business of Insurance, Revision, December 3rd ·······························-·····································230 F~deral Legislation and Rates and Rating Organizations Committee, Joint Reports ·································································-·····················380 Chicago Meeting, January 21-25, 1947 ...... 381 Minority Report ·····-··························-·························································390 Exhibit A-Proposed Amendment to Law for Personal Accident and Health Insurance ··-·························-·········································391 Exhibit B-An Act Relating to Unfair Practices in Business of Insurance ······························-····-·········-·············································392 Exhibit C-An Act Relating to Unfair Methods of Competition .... 400 Exhibit D-Report of Sherman Act Subcommittee ·······················-···410 Exhibit E-Report of Sherman Aet Subcommittee ...... 411 Ferguson, Honorable Homer, Address ···········-····································--········· 69 Fire and Marine Committee, Report of ...... •...... •...... 78 450 INDEX

Exhibit A-Report of Special Subcommittee ··········-············---·-·····----···· 79 Exhibit B-Report of Committee for Definition and Interpretation of Underwriting Powers ······--····-····------·················--··········----······106 Exhibit A-Joint Committee on Interpretation and Complaint­ Nationwide Definition and Interpretation of the Insuranee Powers of Marine and Transportation Underwriters ...... 123 Exhibit B-Joint Committee on Interpretation and Complaint­ Nationwide Definition and Interpretation of the Insurance Powtrs of Marine and Transportation Underwriters ...... 166 Exhibit C-Joint Committee on Interpretation and Complaint­ Nationwide Definition and Interpretation of the Insurance Powers of Marine and Transportation Underwriters ...... 170 Fire and Marine Committee, Report of ...... 359 Fire Prevention Committee, Report of ...... 40 Fire Prevention Committee, Report of ...... 356 Fischer, Charles R., Presents, Report of, Social Security Committee ...... 77 Forbes, David A., Presents, Report of, Central Office Committee ...... 45 Presents, Report of, Central Office Committee ...... 316 Fraternal Committee, Report of ...... 238

G Garrison, Maynard, Appointment on, Auditing Committee ...... 15 Gibbs, Joe P., Presents, Report of, Uniform Accounting Committee ...... 41 Gough, Christopher A., Presents, Zone 1 Report ...... 370 Nominat~s David A. Forbes for Chairman of Executive Committee.. 431

Gwat1ney1 L. L., Jr., Appointed on, Resolutions Committee ...... 329

H

Harrington, Charles F. J., Presents, Report of, Rates and Rating Or· ganizations ...... 141 Presents, Report of, Federal Legislation Committee ...... 141 Presents, Joint Reports of, ~ederal Legislation and Rates and Rating Organizations Committees ·············································-··-·172 Presents, Amendment to, Constitution ...... 306 Presents, Report of, Multiple Line Coverage Committee ············-······365 Presents, Joint Reports of, F~deral Legislation and Rates and Rating Organizations Committees ...... 380 Nominates Seth B. Thompson :for President ...... 428 Hodder, Donald R., Presents, Re,port of, Taxation Committee ·········-········· 78 Hodges, William P., Presents, Report of, Workmen's Compensation Com· mitt~e ...... 50 Presents, Report of, Workmen's Compensation Committee .. ~ ...... - ..-345 Elected Secretary-Treasurer ...... 433 INDEX 451

I Insurance Federation of New York, Incorporated; Luncheon ...... 66

Invocat10n1 M1d-Wmter Meetmg, 1946 ·····-······------·-· ··- -·----····· ·······-····-····· 7 Invocation, Annual Meeting, 1947, Reverend Robert C. Pederson ______287

J

Jackson, Owen G., Presents, Zone 3 Report····------·---..--·· .371 Johnson, Newell R., Presents, Report of, Examinations Committee ...... 239 Presents, Report of, Examinations Committee --····-----·--··--.... ···-···----415

K

Kavanaugh, Luke J., Appointment on, Auditing Committee············---···---··· 15 Appointment on, Auditing Committee ····························--·····················---305 Presents, Report of, Auditing Committ!:'e ·······-·····-·····--············-----··········330 Elected to Executive Committee --····--····--····--····------····-······-····--·····-····----428 Knowlton, Donald, Presents, Report of, Accident and Health Commit- tee ------·-····-··-·····------·-········-··--·-··--·-···-----·······--·------··------··· 38 Appointment on, Resolutions Committee ··--·····························-·············· 24 Pres~nts, Report of, Accident and Health Committee ...... 354 Elected to Executive Committee ------···---·······----428

L

Larson, J, Edwin, Response to Welcome ·········-·-················------8 Presents, Report of, Executive Committee ------··--·····--·-····-- 17 Presents, Report of, Executive Committee ...... 261 Presents, Report of, Executive Committee ·····-················------312 Elected Vice-President -----···------··········--··-······-·-···-·····-··---·····------430 Laws and Legislation Committee, Report of ---·····-··------357 Life Insurance Committee, Report of ------··········------·-···-·······------··········--250 Life Insurance Committee, Report of -·-·------·------····------372 Lucas, '\Villiam H., Address ····--·········--··········-·················································· 66 Luncheon Session, Insurance Federation of New York, IncorpomteJ ---··· 66

Mc

McCormack, James M., Nominates N. P. Parkinson to Executive Com· mittee --····-···----·-··-·····------··········--····--·------··-----······------··················-435 McKenzie, Jack G., Presents, Report of I Fhe Prevention Committeee ____ 355 Seconds Nomination of David A. Forbes for Chairman of Executive Committee ·····································································--··------···---431

M

Malone, James F., Jr., Elected to Executive Committee ---·-··················-----428 452 INDEX

Michelson, Gustav, Address ················································-·········-·-·-··········· 66 Morrill, Thomas, Report of ··········---~---··············································--············· 21 Appointment on, Auditing Committee ...... 305 Multiple Line Coverage Committee, Report of ...... •.....•...... 365

N

Neel, Grt'gg L., Presents, Report of, Special Committee on Real Estate .. 63 New York Insurance Industry, Resolution to ...... 44:

p

Parkinson, N. P., Roll Cell, Mid-Winter Meeting, 1946 ·······················---- 9 Presents, Report of, Secretary-Treasurer ·······················-················-····· 15 Elected Secretary-Treasurer ·················-···········-····································- 18 Roll Call, Annual Meeting, 194 7 ·····-·····-·········································-·······292 Presents, Report of, Secretary-Treasurer ...... 304 Nominates William P. Hodges for Secretary-Treasurer ...... 431 Elected to Executive Committee ...... 435 Pederson, Reverend Robert C., Invocation, Annual Meeting, 1947 ...... 287 Perkins, Alfred W., Presents, Report of, Fire Prevention Committee-...... 40 Pierson, John D., Presents, Report of, Real Estate Committee ...... 363 Nominates George E. Butler to Executive Committee ...... 434 Presid~nt 's Address, Annual Meeting, 1947, Robert E. Dineen ·····--····-·····296

R

Rates and Rating Organizations Committee, Report of ...... 141 Rates and Rating Organizations and Federal Legislations, Joint Report of ······································································-··············-··················-172 Report of Subcommittee on Robinson-Patman Act to All-Industry Committee ······--·-···················································································177 Exhibit B-Supplementary Report of Robinson-Patman Act ·········-·--190 Exhibit C-Supplementary Report of Robinson-Patman Act ...... 194 Exhibit D-An Act Relating to Unfair Practices in Business of Insurance ··········-···············································································-195 Exhibit E-An Act Relating to Unfair Practices in Business of Insurance ------·····-····---·--··--···················--········-·---·······························-201 Exhibit F-An Act Relative to the Filing and Approval of Forms of Policies of Accident and Health Insurance ...... 205 Exhibit G-Memorandum ...... 211 Rates and Bating Organizations and Federal Legislation Committees, Joint Reports ···············-·····························································------213 Exhibit A-Proposed Amendment to Law :for Personal Accident and Health Insurance ··-···········-·-············-·--······--·····-·--·-·····-····-······-218 Exhibit B-An Act Relating to Unfair Practices in the Business of Insurance ·············································--······-······--······-·········-·······219 Exhibit C-Report of Sherman Act Subeommittee ·······---··--···--·-·······226 Suppl~mental Report ·························································-··············-······.228 INDEX 453

An Aet Relating to Unfair Practices in the Business of Insurance, Revision, December 3rd ·····-················-··················-···················-····-230 Rates and Rating Organizations and Federal Legislation Committee, Joint Reports of ····················································-···························-380 Chicago Meeting, January 21-25, 1947 ...... 381 Minority Report ...... 390 Exhibit A-Proposed Amendment to Law for Personal Accident and Health Insurance ...... 391 Exhibit B-An Act Relating to Unfair Practices in Business of Insurance ·······-······----·-----·-··-···------····------·-----·-·------392 Exhibit C-An Act Relating to Unfair Methods of Competition _____ .400 Exhibit D-Report of Sherman Act Subcommittee ··-···------·--····----410 Exhibit E-Report of Sherman Act Subcommittee ------411 Read, Jess G., Memorial to ------· 42 Real Estate Committee, Report of Special Committee ------·------·-·· 63 Real Estate Committee, Report of ------·------···--···--···-·------·····-···-·····-··------363 Resolutions Committee, Appointment of ···------··------·--···---···----·---·-·····----··-·· 24 Resolutions Committee, Report of ····--·-·--···-----·------··--···------··-···--····------· 42 Resolution No. l, Honorable Jess G. Read······------··---·------·----·------42 Resolution No. 2, Honorable Bruce T, Bullion ····--····------·····------·····--·-· 43 Resolution No. 3, New York Insurance Industry-----···-···------·---····--··--· 44 Resolutions Committee, Appointment of ·--·····------·---···------329 Resolutions Committee, Report of ----··------·--·------·--···------····----420 Robinson, Walter A., Presents, Report of, Blanks Committee ···------···---279 Roll Call of States, Provinces of Canada, Mid-Winter Meeting, 1946 ··---- 9 Roll Call of States, Provinces of Canada, Annual Meeting, 1947 ·----·--·-·---292

s

Secretary-Treasurer, Report of --·------·--····--···-···--·-····-·------15 Secretary-Treasurer, Election of ---·------·----····------·------18 Secr~tary-Treasurer, Report of ·----·--·--······-·------304 Secretary-Treasurer, Election of ------·------·-··--······------····--··------··------433 Shanks, Carl M-, Address of Welcome, New Jersey Insurance Industry __ 289 Shield, W. Lee, Seconds Nomination, Seth B. Thompson for President .... 429 Social Security Committee, Report of ·-·------··------·-----·--···------.. 77 Spaatz, General Carl, Address -·····--····-····------·------·------· 32 Subcommittee No. 2, Blanks, Report of ------··------··------·------27 Sullivan, William A., Presents, Report of, Fraternal Committee ------238 Elected to Executive Committee ··------··------····---·······--·-·------.428 454 INDEX

T

Taxation Committee, Report of --··-·---···························------...... 78 Thompson, Seth B., Response to Welcome --·----·············--··-·······················------291 Presents, Zone 6 Report ...... 371 Elected President ...... 429 Treasurer-Secretary, Report of ...... 15 Treasur~r-Secretary, Election of ······------· .. ·····------·········--·······-········ 18 Treasurer-Secretary, Report of ------·------· .. ·----·------304 Treasurer-Secretary, Election of ------.. -···------····------433

u

Uniform Accounting Committee, Report of ···------··------·-··-- 41

V

Valuations of Securities Committee, Report of --··-···-····-···· ········------······-·-- 39 Valuations of Securities Committee, Report of ------·······------····------····330

w

W!iite, Jesse L., Appointment on, Resolutions Committee ------·-··-·-· 24 Appointment on, Resolutions Committee --····--··········--········-···················329 Presents, Report of, Fire and Marine Committee ·····--·····------··········359 Electrd to Executive Committee ··········--········--·····-········----··················----428 Workmen's Compensation Committee, Report of---·-·······------············· 50 Exhibit A-Special Committee, Report of ------···------······-----·········· 51 Exhibit B-Actuarial Committee, Report of -----·--·--·------·-····-·····---···--· 60 Workmen's Compensation Committee, Report of --····-----·------345 Exhibit A ...... 346 Exhibit B ...... 349

z

Zone Reports ·····•········································································ ...... 370 Zone Rrports ------·-···-·-····--·------·----···---·-······-··-···----·------····-·-----·------428