This letter approves the pending bill, and it covers the point raised by Mr. Romjue in connection with the use of newspapers in soliciting by these so-called "fly-by-night" companies. The letter says:

STATE OF OHIO, DIVISION OF INSURANCE,
DEPARTMENT OF COMMERCE,
Columbus, March 11, 1935.

Hon. WILLIAM A. ASHBROOK,

House of Representatives, Washington, D. C.

DEAR SIR: Our attention has been called to House Resolution 6452, Mr. Hobbs, of Alabama, which will shortly be heard in the Committee on the Post Office and Post Roads.

The division of insurance, Department of Commerce of the State of Ohio, is very much interested in this legislation and we would very much like to see this resolution enacted into law. We have had so much trouble with unauthorized insurance companies, associations, etc., most of which are pure rackets, and we have ourselves caused to be introduced into the legislature, a bill which will make it a misdemeanor for anyone to knowingly publish or distribute any advertisement for such an organization.

All of the legitimate insurance agents in the State of Ohio are vitally interested in this measure and, without exception, they would heartily approve your support of these measures.

Will you please use your influence in assisting in the passing of this legislation?

With kindest regards, we are
Yours very truly,

ROBERT L. BOWEN, Superintendent of Insurance. By RAYMOND RHOADS, Assistant to the Superintendent. Mr. MARSHALL. I should like to read into the record part of an article in The Fraternal Age, March 1935, under the caption "The Competition Which Annoys the Field Today." It says [reading]:

Several months ago the Fraternal Age printed a list of unlicensed concerns which had been prepared by the insurance department of Pennsylvania. The department, having in mind its responsibility to the citizens of the State, attempted to warn them against patronizing such concerns. Since they were not licensed, the patrons would have to go to other States to collect benefits. And the mere fact that they were not licensed convinced the department that they could not meet the requirements of the State. That meant that they were unreliable, unsound, or simply swindles.

At the annual meeting of the national convention of insurance commissioners, held in St. Petersburg, Fla., in December, the commissioners of the various States gave a great deal of attention in their discussions to the unlicensed concerns problem. Most of the inquiries coming into the departments were about such so-called "insurance companies."

BEYOND THE REACH OF LAW

These bootleggers of insurance occupy a peculiar position which is outside the law and beyond the reach of the law. It is impossible for the insurance department of any State to reach over the border for the crooks, and the crooks usually make a practice of operating in foreign States. If one of their agents is apprehended, he can be prosecuted. Insurance Superintendent Palmer has made a special effort to throw such people in jail. He has proceeded promptly against the concerns found in Illinois, and the new code under consideration has special provisions which will enable the department to handle the situation in a better manner.

The depression is the cause of such concerns springing up. They sell cheap policies. Those that are supposed to be operated by reliable people have fixed their rates so low that they can never meet their obligations. That causes them in the early stages to pay a claim in full, like Ponzi paying 50 percent interest. Of course it is done for advertising. A correspondent in Missouri writes that one of the concerns selling $1,000 at age of 50 for $6 a year recently paid a claim in his community, and now it is almost impossible to sell sound, legal-reserve fraternal insurance there. "It is the worst competition we have," he says.

DOWNRIGHT SWINDLES

Most of the concerns are downright swindles. Their premium receipts are used for expenses or salaries or profits, and the result is unpaid claims or settlements for ridiculous amounts-far less than the face of the policy.

Fraternal field workers have much legitimate competition to meet without this distressing fraudulent kind. But it can be met. In the first place, any offering of insurance is not safe insurance unless the concern offering it is licensed by the State insurance department of the State in which business is solicited. If the legal-reserve fraternal field worker will have the citizen solicited write to his State department, he will receive the facts. Or the field worker can write to the department and obtain an opinion. what an insurance department is for.

That is

Mr. ASHBROOK. If there is no further inquiry of Mr. Marshall and he has nothing further to say, if there are any gentlemen who live outside of the city and their return would make it inconvenient for them, I suggest that we give them the privilege of being heard at this time.

STATEMENT OF BRADFORD B. LOCKE

Mr. ASHBROOK. The next witness is Mr. Bradford B. Locke.

Mr. LOCKE. I am executive vice president of the Church Life Insurance Corporation and vice president and secretary of the Church Properties Fire Insurance Corporation, 20 Exchange Place, New York City.

This statement is made to your committee in behalf of the Church Pension Fund of the Protestant Episcopal Church and its wholly owned subsidiary, the Church Life Insurance Corporation, and its affiliate, the Church Properties Fire Insurance Corporation, all of which were established for and are administered in the interests of the Protestant Episcopal Church in the United States. The provisions of H. R. 6452 introduced in the House of Representatives on March 6, 1935, and referred to the Committee on the Post Office and Post Roads, seriously affect the interests of our organizations I have named and of the church in whose interest the organizations I have named are maintained.

The church pension fund is the official pension system of the Protestant Episcopal Church and was established by the general convention of the church in 1916 to provide pensions and other forms of support for the clergy, their wives and minor children. It has been in successful operation since its inception and now has assets in excess of $31,000,000. It is paying pensions at an annual rate of over $1,160,000. It is supported by pension assessments payable by every parish, mission, and other ecclesiastical organization throughout the church, such pension assessments amounting to more than $1,000,000 a year.

The Church Life Insurance Corporation was established in 1922 by the trustees of the Church Pension Fund as a wholly owned subsidiary. The Church Pension Fund owns all of the capital stock at an original cost of $155,000. The corporation now has assets in excess of $2,400,000 of which its capital and surplus amounts to more than $1,000,000.

It has insurance in force in an amount exceeding $18,000,000, together with annuity contracts calling for annual payments in excess of $112,000. It employs no agents, writing all of its business by

mail. As a result, it is able to offer extremely low rates which are the same as those used by the Bureau of War Risk Insurance. In addition, it has paid substantial annual refunds to policyholders regularly since 1924. It is administered under the guidance of an outstanding board of directors, including such prominent business men at Mr. Stephen Baker, Mr. J. P. Morgan, Mr. William Fellowes Morgan, the Honorable Frank L. Polk, Mr. Allen Wardwell, and others. Having been established for the benefit of the church, it restricts itself to the writing of life insurance and annuities only for clergymen of the Protestant Episcopal Church and their families, and the lay workers of the church and their families. It thus does not enter into general competition with other insurance companies. The Church Properties Fire Insurance Corporation is an affiliate in which the Church Pension Fund has an indirect interest to the extent of $240,000. It was incorporated in 1929 by a group of gentlemen who are interested in the affairs of the church, many of whom are also trustees of the Church Pension Fund. Those names above are also directors of the Church Properties Fire Insurance Corporation, together with others prominent in the business world. It has assets of approximately $480,000, of which the surplus to policyholders is $360,000. It has over $65,000,000 of insurance in force and there are over 2,400 individual churches, together with other institutions connected with the church which have taken advantage of its facilities. Under its bylaws it is restricted to insurance on the property of the Protestant Episcopal Church, being organized solely for that purpose. It conducts a large part of its business by mail although it is now entered in 10 States, in which about two-thirds of its insurance is in force. In such States it maintains agents who are usually diocesan officials to whom a small commission is paid for the benefit of the diocese. In all other States its business is conducted by mail from the head office in New York. Because of the fact that its agents' expenses are reduced to a minimum and because it restricts itself to insurance on the property of the Protestant Episcopal Church, thereby getting a wide spread and eliminating the catastrophic risk, it has been able to reduce very substantially the cost of insurance for the church, thereby releasing this saving for the use of the church in furthering its spiritual work. In every State except two the corporation has been able to reduce rates from 10 percent below tariff to 20.27 percent below tariff.

In addition, its arrangements permit churches to take out policies on the lowest premium basis but to pay premiums only in quarterly installments, without interest, thus representing an additional saving and assisting parish treasurers in balancing their budgets. By restricting itself to the property of the Protestant Episcopal Church it does not go into general competition with other insurance companies. In most towns it cannot possibly have more than one risk, which, of course, has an almost negligible effect upon the commissions of fire-insurance agents in that territory. In fact, many agents who are vestrymen of churches have placed the insurance of their churches with the Church Properties Fire Insurance Corporation because of the savings involved.

No individual owns any of the stock of the corporation except that each of the 15 directors is required by the laws of the State

of New York to own a minimum of 5 shares each, representing an investment of $750 on the part of each director. In order to preclude the possibility of any director deriving a profit from the successful operation of the corporation, aside from possible dividends which he may receive on his 5 shares of stock, every director is required to sign an agreement that, upon ceasing to be a director he will sell back his qualifying shares at exactly what he paid for them, or less. All of the balance of the shares is owned by the Parish Securities Corporation, of which the bulk of the preferred stock is owned by the Church Pension Fund. All of the common stock of the Parish Securities Corporation is owned by the Associated Parishes of the Episcopal Church, which is a nonstock charitable corporation administered by a board of trustees. It will be seen, therefore, that as the Church Properties Fire Insurance Corporation progresses, its excess profits will come into the possession of the Associated Parishes of the Episcopal Church, which was established for the purpose of receiving such profits and of donating them to the church for its use in carrying on its work.

If all the property of the Protestant Episcopal Church stood in one name, it would be to its advantage to carry its own insurance in the same way that many large industrial corporations carry their insurance and in the same way that the United States Government carries its insurance. Unfortunately, however, the property of the Protestant Episcopal Church is in the name of the individual parishes or dioceses. The Church Properties Fire Insurance Corporation was established as a means by which the church could, in effect, carry its own insurance and have the advantages of the corresponding savings. A similar organization in the Church of England has been in existence for many years and, as a result of its operations, it is able to make large annual appropriations for the use of the Church of England.

All of the above organizations are incorporated under the laws of the State of New York. They are administered under the full supervision of the superintendent of insurance of the State of New York, who is required to examine their affairs periodically in accordance with the law. Except in the case of the Church Properties Fire Insurance Corporation, none of the above organizations is entered in any other State although their business may be considered as national in scope. They have not avoided entering other States for the purpose of escaping such taxation as these States may impose or for any other purpose aside from the fact that if they should enter all of the States of the Union, they could not be operated on a basis as advantageous to those for whose benefit they were established.

I believe that it is generally recognized that the insurance department of the State of New York imposes regulations which are equal to or more stringent than those of any other State. Therefore, the policyholders of the Church Properties Fire Insurance Corporation and of the Church Life Insurance Corporation are assured of supervision which is of the highest order. I understand that the proposed bill is partly designed for the protection of the public against the dangers of dealing with organizations which are not subject to adequate supervision and which are financially unsound. No one, of

course, except those who are financially interested in such organizations can protest this object. In behalf of the organizations which I represent, however, and which enjoy the highest possible rating not only in regard to their financial status but in regard to the outstanding ability of their boards of trustees and directors, I respectfully submit that the proposed legislation should be so amended in order not to undermine or affect adversely such organizations as the Church Pension Fund, the Church Life Insurance Corporation, and the Church Properties Fire Insurance Corporation, which are administered solely for the benefit of the church and which have behind them a history of successful operation and which hold an important place in the life and structure of the Protestant Episcopal Church. To hamper or possibly destroy these organizations by the adoption of legislation which is not primarily designed to affect them would, I can assure you, have a disastrous effect of the life and the organization of a church which has been a pioneer in establishing these agencies, all of which are interrelated, to aid the church in the carrying on of its work effectively.

In behalf of these organizations I feel that is the only protest I can make against the bill insofar as it affects us. Personally, it seems to me that to pass broad legislation of this sort in order to eliminate those that are imposing upon the public is something like killing a gnat with a sledge hammer. It seems to me that it is going to strike at a great many who are conducting a legitimate business not only for churches but in many other ways in order to correct the difficulty with which the insurance commissioners are apparently faced.

It seems to me that if an insurance company is licensed in any State which is properly supervised, it would be pretty difficult for che superintendent of insurance in that State to accept the suggescion that the company is not being properly supervised. I do not quite follow that.

In the case about which Mr. Hobbs spoke, the company having arranged its deposit through the process of increasing the value of an apartment house, I do not know what the superinendent of insurance was doing when he allowed that to happen. That is difficult for me to follow, and it seems to me that what the bill should get at is the proper supervision of insurance companies and not the ching that they solicit by mail.

We are entered in 10 States. We should like to be entered in others, but if we do so it means on account of the arrangement in that State that every church in the State insuring with us will pay 20 percent more on its premium. The State of Pennsylvania would be glad to have us enter, and we would be glad to do so, but if we should enter we must charge the tariff rates or maintain our own rate bureau at a cost of $12,000 or $15,000 a year, which we could not do.

We are restricting ourselves to the church field, which is not large, and we cannot do that. That is the only reason why we cannot enter in the State of Pennsylvania. It is not because we do not comply with the State laws.

It is difficult for me to see exactly why this solicitation of business by mail is going to solve the problem. What ought to be done is to