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There are other features perhaps in the bill which would prevent the District from taking full advantage of the National Re-Insurance Program.
Mr. Dowdy. What is the other bill you were going to discuss ?
Mr. KNEIPP. The Brasco-O’Konski bill. This bill goes part way toward allowing the District to participate in the national program but not quite so far as does Title II of the Housing bill. For that reason the District recommends against the enactment of 17607 or the Brasco Bill.
Finally, I did not hear whether you would offer for the record the letter of transmittal submitted by the District Government under date of May 31, 1968, forwarding to the Speaker the draft bill which has been introduced as H.R. 17647. The District supports that draft bill and recommends its enactment.
Mr. Dowdy. That was placed in the record. There were three letters and that was one of them. There is a letter of May 31 and others.
Mr. HECHINGER. Mr. Chairman, just in very much of a layman's language I have seen the difference between the so-called model bill and the Title 11 of the omnibus bill. There are three things involved. One, there is no force to make the setup that the bill purports to provide, contrary to the Omnibus Housing Bill which is mandatory.
Secondly, the provisions within the bill are subject only to the veto of the Commissioner of Insurance.
Thirdly, the Commissioner is made a free agent.
If I am not mistaken, Mr. Kneipp, I believe the Commissioner, the Mayor of the District, has indicated he will appoint the Commissioner of Insurance to be the authority to administer this reinsurance act.
However, within the bill, as I understand it, there is some removal, it makes him a free agent, which is undesirable in relationship to a major department head being under the Mayor.
Mr. KNEIPP. The Mayor has indicated, and I do not recall whether it was a letter to the Senate or this body, that he intends to delegate to the Superintendent of Insurance, in like manner as he has delegated all other power relating to insurance that are vested in the Commissioner today under existing law, the Mayor intends to delegate to the Superintendent of Insurance the authority which is vested in the Mayor by either the Tydings bill or Title il of the Housing there is just a matter of really conforming with the scheme of the reorganization of the District Government under which all powers are vested in the Commissioner of the District of Columbia with authority to delegate those powers to various administrators of one kind or another.
Obviously, I think, there is every intention that the Commissioner fully intends to delegate to the Superintendent of Insurance the authority contained in the Title 11. However, just as a practical matter all of these powers are placed in the Commissioner with authority to delegate rather than to create a separate statutory entity as the socalled model bill would do. (See appendix, p. 51.)
Mr. Dowdy. You mentioned there is no compulsion in the model bill with regard to insurance companies joining in the insurance placement plan.
Mr. KNEIPP. No provision for fine, no
Mr. Dowdy. It states within thirty days after the date of this act all insurers shall establish an industry placement facility to take care of this.
As a condition of his authority to transact such kinds of insurance each insurer shall participate in such industry placement facility.
It also says the program may also provide for the assessment of all members in amounts sufficient to operate the facility.
Within thirty days after the effective date of the act all insurers shall establish a joint reinsurance association. Every insurer shall be a member of that asociation and that association shall be authorized to assume and cede reinsurance, and so on.
Mr. KNEIPP. It does not
Mr. Dowdy. I think this is a FAIR Plan. It is the same thing. If you call it a FAIR Plan rather than a placement what is the difference! If they don't join in it and can't do business in the District of Columbia what is the difference?
Mr. DENENBERG. There have been extensive studies in the last few years on the problem of the insurance regulator. One of the things all these studies indicate is that it is a mistake to give the regulator the soie power either to throw the company out of the state or to let it do business there. There ought to be a better way to arrive at a proper agreement and get what has to be done done. That is the essential idea of the Patten, Tydings and Diggs bills. It permits the industry to come up with the proper program but if they do not the Commissioner can promulgate one and hope it will work.
There is a situation where the Commissioner has an either/or proposition, either you do it or we throw you out. That is what the other bills boil down to.
There is no way to get some level of action on the Commissioner's part. He either has to take what the industry gives him or throw them out. He cannot come up with what has to be done.
Mr. Dowdy. In the final windup if they do not do it they are thrown out.
Mr. DENENBERG. That is the procedure. I think the experience of all insurance regulation in the last few years demonstrates you get more satisfactory results if you do not face that alternative and if the Commissioner can come up with a program and not say either you come up with it or we throw you out.
Mr. MCMILLAN. Mr. Chairman?
Mr. McMILLAN. What worries me about this bill more than anything else is this: Is it not a fact that you are bypassing the present District of Columbia Superintendent of Insurance in all this new proposal that you tacked on to the Banking and Currency bill?
Mr. DENENBERG. The Mayor already indicated in a letter to the Senate Committee that he intends to delegate this responsibility to the Superintendent of Insurance and there is no idea to by-pass anyone. The idea was just to stay in conformity with Congressional reorganization.
Mr. McMillan. I think everyone knows that practically every bill we pass relating to insurance in the District is used as a model throughout the United States.
If in the preparation of this bill, the authors by-passes the Superintendent Insurance of the District, why won't the Federal Government
by-pass the State Insurance Commissioner in my State in the same manner?
Mr. DENENBERG. I think one of the things that is clear is that each state has to work out its own problems. As a matter of fact, I think the history up to this point indicates that the Diggs bill, the Tydings bill, Title 11, are those which have appropriate procedures.
On the question of the authority, that is a question of local interest and that will be resolved, if necessary.
Mr. MCMILLAN. That is my main objection to the Tydings bill, the fact that it seemed to completely by-pass the D.C. Superintendent of Insurance. I think he has done an outstanding job as Superintendent of Insurance in Washington. It has been a difficult job, too, since practically all the large insurance companies have offices here.
If it does not by-pass the Superintendent of Insurance, that is a different picture.
Mr. DENENBERG. It is simply in conformity with the present Reorganization Act.
Mr. KNEIPP. The form of the so-called Tydings Bill, Title 11 of the Housing Bill, is precisely the form which has been before this Committee in other types of legislation where the Committee has vested in the Comissioner certain functions with authority to delegate up to whomever in the District Government it should be administered by.
In this case the Commissioner indicated he will delegate functions to the Superintendent of Insurance so he is on the record.
Mr. MCMILLAN. I didn't receive a letter on that subject. It may have been sent to the Senate, but I have not seen
Thank you, Mr. Chairman.
Mr. DENENBERG. I have a prepared statement which will take about 15 minutes. Should I summarize it?
Mr. Dowdy. All right.
Mr. DENENBERG. Of the four bills before this Committee, the O'Konski and Brasco bill, in addition to the problems which already have been pointed out, failed to provide for a FAIR Plan and they failed to
a provide for an industry placement facility. These are called for in the National Act and called for in the Hughes Panel.
Mr. Downy. Those things are called for in the so-called model bill.
Mr. DENENBERG. Called for in the Diggs bill and Title 11 of the Patten amendments.
They are not in the O'Konski bill and the Brasco bill.
Now I will turn to the McMillan bill. There are several problems there that no one has vet mentioned.
One is that the McMillan bill fails to provide for a FAIR Plan just as the O’Konski bill does.
It provides for an industry placement facility but there is no provision for agents and brokers to utilize the placement facility.
There is a provision in there that may permit payment of ordinary losses and it also calls for diligent effort before reaching the inspection or industry placement facility which is contrary to the national act.
The Diggs bill and Title II of the Patten bill we feel is the only one that is consistent with the national program. It is the only one consistent with the Hughes Panel report, and it is also in the areas in controversy consistent with the New Jersey, Virginia, and New York
legislation that has passed, and the District feels it is the only one that will permit the District to move forward in properly solving the insurance problems.
Mr. MCMILLAN. I discussed this matter with the counsel and I think he should speak on that.
Mr. GARBER. When you say this bill or the model bill does not call for any FAIR Plan, will you show us what you mean in light of the plain language of Section 6 ?
Mr. DENENBERG. There is a FAIR Plan and industry placement facility in the joint association contemplated by the National Act and by the Hughes Panel.
Mr. Dowdy. What does the FAIR Plan do that the industry placement facility would not do in the bill?
Mr. DENENBERG. The FAIR Plan requires that no one can be turned down on insurance or sold insurance at surcharge rates without an inspection of his property and without the insured coming forward and either giving him some reason for not insuring him or giving him the insurance
This is in the National bill and in the Hughes Panel. It is not in H.R. 18541.
Mr. McMILLAN. Who will subsidize this insurance, the Federal Gorernment, the District Government, or who?
Mr. DENENBERG. What insurance, sir? Mr. McMILLAN. I am talking about private companies not taking it. If they do not, the Government will.
Mr. DENENBERG. Under the FAIR Plan the only people getting insurance are those with insurable property and no subsidy will be necessary. This is sound property which can be insured and the company
should insure it and are now able to insure it. Mr. McMillan. It has been only two months since the riots caused all this trouble. I think we should take a little time and go a little slow before we pass something we know so little about. I don't know what the rush is.
We certainly cannot hold sufficient hearings on this proposal in such brief time.
The reason I object to hanging this legislation on to some other bill is because we have had no bill before us.
Mr. HECHINGER. In regard to the timing, I must again point out, as I did earlier, that the rate of cancellation within our city and the need to rebuild is really tied so vitally into some reinsurance plan and some enabling act to tie us into this because we are losing the insurance possibility in these various areas and peripheral areas and it is spreading. This is the urgency.
Mr. McMILLAN. If we do not get law enforcement in Washington, we will lose not only the businesses, but hotels and motels and everything else.
I certainly favor helping out these people. I want to see to it that they get insurance. I want an insurance plan where the Federal Gorernment and the District Government will not have to pick up all the tabs.
Mr. GARBER. On page 2, paragraph 4, how do you interpret that? It states one of the purposes of the bill is to establish a FAIR Plan, fair access to insurance requirements.
Do you assume there will be no plan established? Is that what your assumption is?
Mr. DENENBERG. The problem is that it mentions a FAIR Plan but does not prescribe any procedures for developing it or does not even describe it. It simply uses the term “FAIR Plan”. Unlike other legislation it fails to spell out what a FAIR Plan is.
Mr. GARBER. Is a FAIR Plan described in the National Act?
Mr. GARBER. If a FAIR Plan were described would that be adequate?
Mr. DENENBERG. It mentions a FAIR Plan and then it says inspection is provided for. That is all it does.
According to this the FAIR Plan would be simply the inspection but there is a lot more to the FAIR Plan that is not spelled out in this legislation at all.
This legislation would give you a FAIR Plan which would not meet the national requirements and that is in fact not a FAIR Plan at all.
Mr. GARBER. You are saying in effect that any FAIR Plan here which was developed would not be adequate to enable the insurers to cooperate on the basis of the National Act?
Mr. DENENBERG. That is correct. The FAIR Plan called for in this bill is not even a FAIR Plan. It is inconsistent with the Hughes Panel report and inconsistent with the national legislation.
Mr. GARBER. If a FAIR Plan pursuant to the purposes of this Act is developed in accordance with the provisions of the National Act, does that serve the purpose ?
Mr. DENENBERG. You are saying you can ignore this legislation and develop one on a voluntary basis or under the Federal legislation? The idea of the local legislation is to spell out the particular problems of the local jurisdiction and how they will be solved. That is what the Diggs bill does and that is what the Patten bill does and what Title 11 does.
18541 mentions a FAIR Plan. It does not spell out the appropriate procedure for the FAIR Plan. What it spells out is inadequate in terms of the national legislation and is contrary to the Hughes Panel report.
Mr. GARBER. Suppose this bill were an Act and a FAIR Plan were proposed. Would not the Commissioner and the Superintendent of Insurance have the discretion in this case to see that the FAIR Plan was adequate ?
Mr. DENENBERG. Not under this bill. It simply does not have the authority in H.R. 18541.
Mr. GARBER. The Subcommittee Chairman pointed out that he has the authority either to permit them to do business in accordance with that approved plan or not to do business.
Mr. DENENBERG. No, actually he does not under 18541. This fails to give him the authority.
The whole idea of the legislation is to create a national bill and then to permit each local jurisdiction to spell out what it wants done on the local level.
The problem with 18541 is that it does not spell this out. It would be a useless act to pass this bill if it does not provide for the things that have to be provided contemplated by the National Act.