Mr. Dowdy. We will have to have more hearings on this, it appears. The only difference appears to be a quibbling about words.

Under Mr. McMillan bill (H.R. 18541) if the insurance companies do not come up with a plan that the Superintendent approves, they cannot do business.

In the other bill, it says if you do not accept the plan proposed by the Superintendent, you cannot do business in the District of Columbia. It seems to me you are quibbling with words on that one particular point.

We will include in the record a release and enclosures of Commissioner Washington, dealing with this proposal.

(The release referred to follows:) (News release from the Public Affairs Office, District of Columbia Government, May 3, 1968]

Mayor Walter E. Washington today announced a five-point program to help District of Columbia property owners obtain essential property insurance.

The recent civil disturbances have raised the threat of a critical shortage of insurance protection in the District.

The Mayor's program is designed to marshal the resources of the insurance industry, local businessmen, the Government of the District of Columbia, and concerned citizens in a cooperative effort to resolve the insurance problems of the District.

The President's Insurance Advisory Panel said:

"Without insurance, buildings are let to deteriorate; services, goods and jobs diminish. Efforts to rebuild our nations' inner cities cannot move forward. Communities without insurance are communities without hope."

The Mayor, who recently served as a member of the President's National Advisory Panel on Insurance in Riot-Affected Areas, announced the following steps to help assure adequate insurance protection in the District :

The Mayor has written to all insurance companies doing business in the District of Columbia urging them not to cancel or refuse to renew policies These actions, he said, would be contrary to the public interest. The Mayor stated in the letter that he has been “deeply gratified by the pledge of support and cooperation" already given to him by a number of insurance industry representatives.

To increase the availability of property insurance, the Mayor called for the establishment in the District of a program to provide fair access to insurance requirements ("FAIR Plan"), as recommended by the President's Insurance Advisory Panel. Under the FAIR Plan, no property owner would be denied basic insurance coverage without an inspection of his property. A statement of the specific reasons—based on the inspection—why his property

was not insurable would be required. A FAIR Plan, the Mayor said, will help many property owners obtain adequate insurance in areas where this is now difficult. It will establish fair procedures for evaluation of risks by insurance companies. It will encourage loss-prevention and property-improvement by responsible owners and provide the city with information on areas and properties that have become serious rehabilitation problems.

Legislation is being drafted that would further promote the availability of insurance in the District of Columbia. Under the proposed legislation, insurance company resources could be pooled to minimize risks to individual insurers. The legislation would also authorize the District to participate in a proposed program to provide national reinsurance against losses from civil disorders, as recommended by the President's Insurance Advisory Panel.

To increase the availability of important information on current insurance conditions, the Mayor asked Superintendent Albert F. Jordan to request insurers:

1. To provide periodic reports to the Department of Insurance on the settlement and payment of claims resulting from the recent civil disorders

2. To file periodic reports with the Department on any cancellations and nonrenewals of policies. This information, the Mayor said, would help him in carrying out his overall rebuilding program.

The Mayor announced the creation of a District of Columbia Insurance Advisory Panel to assist him and Superintendent Jordan in developing further solotions to the insurance problems of the District.

The Panel will provide a focus, the Mayor said, for drawing upon the talents and resources of all segments of the community. It will provide a forum for receiving community views and for suggesting means by which insurance can be made more readily available and other insurance problems can be solved. The Panel was asked to consider, among other things, methods of :

Developing programs to train residents of the inner city as insurance agents and brokers, and to fill other jobs in the insurance industry.

Making contractors' surety bonds more readily available.
Channeling insurance industry investment dollars into the inner city.
Increasing the availability of insurance against burglary and theft.

Developing means to assure greater use of loss prevention methods and
devices to reduce losses from burglary, theft, and other crimes.
This cooperative program, the Mayor said, is necessary to meet the insurance
needs of the District. It implements the program recommended by the President's
Insurance Advisory Panel, which has received widespread endorsement. It should

go far toward correcting the serious problems of property insurance availability att in the District of Columbia.

At a recent second meeting with representatives of the insurance industry, the peserta Mayor asked the insurance industry, on a voluntary basis, to carry out the FAIR The Plan. The insurance representatives are to report back promptly to Mr. Jordon

on their views for implementing a FAIR Plan. They pledged their assistance in working toward the Mayor's overall insurance goals.

Represented at this meeting were: Firemen's Insurance Company of D.C.;

National Association of Insurance Agents; Jefferson & American Home Insurpintis ance Companies; D.C. Association of Insurance Agents; Insurance Company of

North America, Washington, D.C.; National Association of Independent In

surers; Insurance Company of North America; American Mutual Insurance e Alliance; Kemper Insurance Group; National Association of Mutual Insurance ETTER Agents.

(Attachments: Copy of proposed FAIR Plan, copy of Letter to Executive Biss Officers of all insurance companies licensed to do business in the District of




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This plan is designed to make insurance available for all dwelling, mercantile and other biuldings, and their contents, located within the District of Columbia, which meet reasonable underwriting standards, regardless of general area location. If a property meets, or is improved to meet reasonable underwriting standards, insurance will be available at standard premiums. Risk eligibility

This plan applies to all property risks except automobile risks.
This plan applies to applications for the following insurance coverage :

1. Fire and Extended Coverage
2. Vandalism and Malicious Mischief

3. Such other property insurance coverages for such types, classes, and locations of property as may be designated by the Mayor.

The plan

1. No application for insurance of a risk embraced within this plan will be denied insurance by any agent, broker, or company authorized to do business in the District of Columbia unless there has been a physical inspection of the premises and a determination by the company, based on that inspection, that issuance of coverage violates reasonable underwriting standards at the applicable premium rate.

2. If the inspection discloses that the property is not insurable at standard rates, the owner will be advised by, or on behalf of, the company of the specific improvements or repairs which must be made to meet reasonable underwriting standards at standard rates.

3. Physical inspections will be made available by the inspection staff of the Insurance Rating Bureau of the District of Columbia. The insurance company

or its authorized representative may make additional inspections if reasonally required to obtain the necessary underwriting information for the type of insurance requested.

4. The insured or applicant for insurance shall not be required to pay any fee for inspection under the plan.

5. Insurance may be refused only for specific conditions or other satisfactory reasons revealed by the inspection and action report.

6. At least twenty days' written notice will be given prior to cancellation o: nonrenewal of insurance of risks eligible under this plan, except in case of non payment of premium or evidence of incendiarism, to allow time for an application for new coverage to be made under the plan.

7. No risk shall be written at an excess rate or by a non-admitted company unless the property has been declined by an admitted company at standard rates, based on information obtained from an inspection or other sources. Application and inspection procedure

1. All requests for inspections under this plan shall be made to the Insurance Rating Bureau of the District of Columbia.

2. An application for inspection can be made by a property owner or his rep resentative or by an insurance company, agent or broker. The application need not be made in writing but the written permission of the property owner or his representative may be required at the time an inspection is made.

3. The property owner or his representative may be present and accompany the inspector during the inspection but no one other than the owner of the property to be insured or his representative shall be required to be present.

4. An application for inspection of the contents of a building may be made on the same basis as inspections for buildings eligible under the plan.

5. A report will be made for each building or risk inspected. This report shall cover pertinent structural and occupancy features as well as the general condition of the building and surrounding structures.

6. The inspection will be made and the report filed as described below within a reasonable time (generally less than ten days) after the request is received. Procedure after inspection

1. After the inspection a copy of the inspection form will be sent to the company or to the all-industry placement facility as designated by the person requesting the inspection. If a company designation is not made, the inspection form will be retained by the inspection bureau until the information is requested by a company. This form will: Indicate pertinent features of the risk-construction, maintenance, occupancy and surrounding property-as revealed by the inspection.

2. The company will promptly determine if the property meets reasonable underwriting standards at the applicable premium rate. The company may :

a. Agree to write the coverage

b. Agree to write the coverage if certain improvements are made. The required improvements must be clearly specified in an action report.

c. Decline to write the coverage. The reason for declination must be clearls specified in an action report. 3. In all cases, the company must promptly notify the Insurance Rating Bureau of the District of Columbia of its decision and return to it the inspection and action reports to be kept on file by the rating bureau.

4. If the company declines the risk or agrees to write it on condition that the property be improved as requested, the company shall also promptly send a cops of the inspection and action reports to the applicant for insurance and the De partment of Insurance.

5. If the company agrees to write only a portion of the amount of insurance requested the all-industry placement facility shall use its best efforts to assist the producer in obtaining the remaining coverage from another company.

6. The Insurance Rating Bureau of the District of Columbia shall submit to the Department of Insurance quarterly reports setting forth by the individnal company, the number of risks inspected under the plan, the number of risks accepted, the number of risks conditionally approved and reinspections made. and the number of risks declined and other information in the form requested by the Department of Insurance.

7. Daily reports for policies written under this plan shall be plainly marked so that proper records can be kept.

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Agents and brokers

1. No agent, broker, or other producer shall be penalized in any way by an insurance company for submitting applications for insurance under the plan to the all-industry placement facility or to the company.

2. Losses on property insured under the plan shall not reduce the producer's contingent commission income from premiums written on other property nor shall such losses be included in calculating losses on business submitted by the producer.

3. Any agent or broker may submit an application for insurance on property under the plan to an all-industry placement facility. The all-industry placement facility will seek to place the insurance up to the full insurable value of the building, if requested, less any deductibles, percentage participation clauses or other amounts necessary to meet special problems of insurability, on an equitable basis with one or more companies participating in this plan.

4. Commissions shall be paid to the originating agent or broker on business placed through the efforts of the all-industry placement facility reasonably commensurate with the normal commission scale.

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Washington, D.C. DEAR SIR: I appreciate greatly the opportunity to meet with representatives of the insurance industry on April 10, 1968, so quickly after our recent disorders and I was deeply gratified by the pledge of support and cooperation that I received at that meeting. Property damage, as we all are painfully aware, was severe during those several days of civil disorder. I have been assured that you are taking every possible action to see that all claims are equitably and promptly settled. I want to assure you that the Government of the District of Columbia is taking immediate steps to initiate a rebuilding process that will eliminate to the maximum degree possible the problems that plagued these areas before the disturbances.

While these measures are being carried forward, it is essential to maintain an adequate insurance market for property and casualty coverage. I understand well the pressures on insurance companies to attempt to avoid losses a rising from civil disturbances, but response to such pressure in the form of cancellations of fire or casualty insurance policies would be a source of great hardship at this time, and I believe contrary to the public interest. I, therefore, seek your assistance in preventing cancellation or nonrenewal as a response to the recent disorders and also in working actively to meet the insurance needs of the city.

I am sure you know that Congress is now considering the National Insurance Development Corporation Act of 1968 which is designed to implement the recommendations of the President's National Advisory Panel on Insurance in RiotAffected Areas, on which I served. This legislation is intended to assure an adequate insurance market in such areas by providing financial back-up for very large riot losses, together with a number of other measures.

I respectfully request and sincerely hope that you will give your full coperation to Insurance Superintendent Albert F. Jordan in establishing a viable FAIR Plan for the District of Columbia along the lines recommended by the President's National Advisory Panel on Insurance, and I urge you to take any other steps necessary to provide adequate insurance in the District of Columbia.

You can be assured that the Government of the District of Columbia making every effort to provide the kind of environment on which a sound insurance market depends. Sincerely yours,

(Subsequently, the following additional statement was submitted
for the record by Mr. Denenberg:)


JULY 18, 1968.
Mr. Chairman and Members of the Subcommittee : My name is Herbert S.
Denenberg. I am the Harry J. Loman Professor of Property and Liability Insur-
ance at the Wharton School of Finance of the University of Pennsylvania. I was


Research Director and Special Counsel to the President's National Advisory Panel on Insurance in Riot-Affected Areas, on which Mayor Washington served as a Panel member. Currently, I am serving as a Consultant on Insurance to the District of Columbia. It is in my capacity as Consultant that I speak on behalf of the District today.

There is a serious lack of basic property insurance in the District of Columbia. Testimony during the hearings on S. 3556, which is identical to HR 17647 now before this Committee, disclosed that many property owners in the District of Columbia could not buy adequate property insurance before the recent civil dis. orders and that since then the problem has considerably worsened.

Insurance is a basic necessity for a property owner. It can prevent a disastrous occurrence from becoming a permanent tragedy. Insurance is also essential to the flow of credit and private investment into the District. Without insurance, homeowners cannot borrow to improve their property. New businesses cannot be started, existing ones cannot expand, and businesses destroyed as the result of civil disorder cannot be reestablished. Adequate insurance is necessary to prevent property deterioration. It is critical to the success of every private, Federal and District of Columbia program to revitalize the city and provide more goods, sery. ices, and jobs and better housing for its citizens and thus to alleviate the conditions that have led to social unrest.

The report of the President's National Advisory Panel on Insurance released last January 28 amply demonstrated that there was a serious shortage of insurance in our Nation's cities and that this shortage had reached critical proportions. Our survey of 3,000 Urban core homeowners and businessmen in six cities disclosed that over 40% of the businessmen and close to 30% of the homeowners had serious property insurance problems. Many who were uninsured said they could not buy insurance at any price. Others said they could not afford the price. Many of those who did have some insurance said they were paying too much or their coverage was inadequate. Past riots in a city, however, were not the sole cause of the problem. Our survey showed that the problem was serious not only in Detroit and Newark which had suffered riots, but also in St. Louis where there were no riots. Other evidence demonstrated that the property insurance problem had long preceded the riots that had focused national attention on the problem.

All available evidence from the District of Columbia demonstrated that the problems here were as serious as in any major U.S. city. For example, a Washington, D.C. insurance agent told the Insurance Panel :

“Our estimate of the number of cancellations in the blighted areas and the number of clients for whom we were unable to furnish insurance are probably 90 percent or more.” 1

A Washington, D.C. Trade Association told the Panel :

“Restaurants * * * are unable to obtain fire and extended coverage. Our organization represents twenty large chains and we are thinking about self-insurance because we cannot obtain insurance.

A questionnaire to 300 liquor stores indicated that 40 percent have no insurance or negligible amounts."

A Washington, D.C. banker told the Insurance Panel last fall :

“* * * placing any property insurance in center city areas, including and excluding blighted areas, is not an easy matter. Companies are concerned about risks that are exposed to any type of factor that could be called adverse. Our city has not experienced a riot per se, but underwriters are conscious of the threat." 3

The disorder the underwriters feared has now occured and evidence gathered by the District of Columbia Department of Insurance since the disorder indicates that the city's insurance problems have considerably worsened.

The May 10, 1968 "Report of City Council Public Hearings on the Rebuilding and Recovery of Washington, D.C. from the Civil Disturbances of 1968" further confirms the findings of the Panel and the Insurance Department. That report states:

"Negroes cannot get insurance on an equal basis and, at times, cannot get insurance at all. Similarly, merchants who would locate in predominantly Negro

1 "Meeting the Insurance Crisis of Our Cities; A Report by the President's National Advisory Panel on Insurance in Riot-Affected Areas" (hereinafter referred to as “Advisory Panel Report"), at 119.

2 11. at 118-119. * Id. at 119.

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