The members, of course, are scattered throughout the country. Their organization does not maintain a force of general agents and special agents and local agents with whom they must split the premium, so-called. They do not, like the stock companies, pay from 35 to 60 percent out of the insurance premium in commissions. That is saved to themselves. Their premiums, or deposits--which is the proper word, because they have no premium-are based upon rates such as you might charge in the way of premiums. When at the end of the year it has been determined what the actual cost of their insuring of one another is, then refunds are made, out of which they have saved in the last several many millions of dollars for themselves, and this saving has made possible the continuing of that sort of business in many instances.

Now this bill does very directly affect our organization, because they cannot, under the laws of some States, be licensed to do business. They do not maintain State agencies in all of the several States. They are today licensed in some 30 out of 48 States, and they are licensed wherever they can be; but it necessarily would be impossible for them to comply with all of the laws of all of the States, especially when you may have laws that are no better than the laws in Louisiana, under which there arose in the supreme court the case of Allguyer v. Louisiana, with which you are familiar.

I am not going to argue the constitutionality of this act at this time, but I would like permission to file a brief memorandum of the authorities, with one copy for every member of your committee; and I shall do that within such time as you may afterward suggest to me, but certainly within the next 10 days, if that is agreeable to you. Mr. ASHBROOK. We will be very glad to have it.

Mr. ZIMMERMAN. I do want to say this, however, that the purpose of this bill is not necessarily to put a stop to fraud and to fraudulent enterprises that are using the mails. For instance, our company is licensed in Illinois, and there is no State I know of that has very much better laws than Illinois. Our insurance commissioner is a man of great responsibility; and we feel, being licensed in Illinois, we ought to be permitted to have our members write letters which may affect insurance. Now you will recall that in the Allguyer case the evidence was that a man in New Orleans wrote a letter to an insurance company licensed to do business in New York describing certain bales of cotton in a shipment, which was all he had to do upon his open marine policy, to put the insurance into effect, and that constituted the offense. And it would constitute an offense under this law, if you please, for one of our subscribers even to write a letter to our home office in Chicago, if he wrote from the State of New York, where we had not been licensed or in which we were not permitted by some peculiarities of the business, or omissions in their laws, to do business in their State. And the supreme court there held that was unconstitutional under the fourteenth amendment, because it was a State law. Here it would be equally unconstitutional under the fifth amendment, because it is an act of Congress.

The thing positively cannot go on if it is going to affect groups of insurers and small business enterprises, and we are only a small percentage. There are at least 15,000, outside of our own group of some 2,600, that handle their self insurance in this same way, and 1 am sure you never intended in the effort, perhaps, to relieve our

local companies from the unfair competition of such groups as Lloyds of London, to affect groups like our own; but it seems to me there is a perfectly simple method for the stock insurance companies, if they desire to compete with groups that, because of the hard times, must necessarily save commissions, whereby the stock companies could just as well say, "Come and buy your insurance over the counter from us, or send in an application for insurance by mail, and we will appreciate the fact that no agent has earned a commission and will allow your premium to you less the commission we ordinarily pay.' And when that time has come, then the stock companies may come in here with clean hands and say, "We are now on a basis of fair competition with those who found their rates so high that they necessarily must insure themselves."

I ask you gentlemen just seriously to consider those things and let me mention them very briefly in the brief I will file.

May I add: Who are the so-called "fly-by-nights" that the bill is directed against? Lloyds of London is the only one thus far named. Do they really exist? If so, and their existence is threatened by this bill, are they amongst those who are protesting its approval by the committee? Can it be any of those that have appeared here?

Is it not time that the committee be furnished with a list of these so-called "fly-by-night" companies, so that this committee may know wheter they are few or many; so that they may be scrutinized to determine their methods? Unless and until that is done, how can this committee know whether or not they exist; whether or not the name is a cloak behind which the great old-time stock insurance companies are masking their efforts to eliminate competition from the mutuals, fraternals, reciprocals, and other groups of cooperatives who have eliminated unconscionable profits and wasteful commissions, which the old-line stock companies have been collecting?

I thank you very much for your courtesy and patience this morning. STATEMENT OF L. W. DE GAST, GENERAL SECRETARY, Y. M. C. A., WASHINGTON, D. C.

Mr. DE GAST. Mr. Chairman and members of the committee, I represent the Employed Officers' Alliance, which is an organization among Y. M. C. A. secretaries in the United States and Canada, and they have 2,340 members.

I have filed a brief with the secretary of the committee and I just ask that that be put in the record and that the members of the committee read that brief, as I think that explains it in full.

Mr. ASHBROOK. I think I handed the stenographer your brief.
Mr. DE GAST. Yes, sir.

STATEMENT OF EARL C. MILLS, REPRESENTING IOWA STATE TRAVELING MEN'S ASSOCIATION, DES MOINES, IOWA

Mr. MILLS. Mr. Chairman and gentlemen of the committee: Following the suggestion made by your chairman, I will not say a great deal about the company itself. I do want to say this, however, that it is the oldest company of its kind in existence. It was organized 55 years ago. It grew to about 90,000 and, during the depression, has gone back now to about 65,000.

You have heard from our three Congressmen who are here, so it is not necessary for me to establish the good standing of that company in the State of Iowa and elsewhere, and I will not do that.

We of this association have avoided flooding this committee with letters. We know what that means and we know, in the press of business, that is not what you want. I have brought along, however, letters received from our policyholders whose claims were paid during the months of February and March and I am asking you to take my word for it that there is not a letter there of complaint, and it is all of the letters except those that simply acknowledge the payment of their claims. I want to offer them for the record.

I also want to offer to you our statement from January 1, 1934, to December 31, 1934, which shows we returned into the pockets of our policyholders during that year 81 percent and, during the last 5 years, we returned 86 percent; that we did business, on an average, at a cost of 14 percent. And that covers everything. It even covers the amount we put into our reserve, and 86 percent was paid back to the policyholders. And I want to say that that 5-year average is the lowest 5-year average in our existence, due to the tremendous increase in accidents due to the automobile.

IOWA STATE TRAVELING MENS ASSOCIATION, DES MOINES, Iowa

Eighty-one percent of amount paid in by members returned in benefits.
In last 5 years, 86 percent returned to members.

Expense on claims, including attorney fees and medical examiners, 4 percent

of claims. Of amount received from members 3% percent.

Administration expense 14 percent of amount paid in by members.

I offer these letters for your consideration.

Mr. ASHBROOK. May I inquire how many letters there are and is it important

Mr. MILLS. It is important and, in view of the fact we have not flooded you with letters, I would like to offer them.

Mr. ASHBROOK. I was going to suggest I think the members of this committee will accept your blanket statement of facts you have mentioned as facts that are incorporated in those letters and, while we want to be as considerate as we can of your wishes, yet judging from the folders you have there on the table-about how many letters have you?

Mr. MILLS. I would suppose there are 50 or 60, not to exceed that. Mr. ROMJUE. Are they similar letters?

Mr. MILLS. Quite so.

Mr. ROMJUE. Would it be all right to put in two or three of them? Mr. MILLS. I would be glad to segregate a few of them and do that. Mr. ROмJUE. And any other letters of a similar nature can be referred to by name.

Mr. ASHBROOK. Might I suggest that you prepare and hand to the stenographer the names of those policyholders and their addresses, and the substance of their letters, because it would surely make a voluminous record to incorporate all those letters.

Mr. MILLS. I would be glad to lighten your labors in any way possible, and I will accept your suggestion.

Mr. DOBBINS. I take it the objection to including all of them is the expense of printing the record, and I wonder if it would not suit Mr. Mills' purpose if he left them for the inspection of the committee, without requesting that they be printed.

Mr. MILLS. I would like to do that, and to ask that they not be printed. That is the purpose of offering them, so that you may examine them.

Mr. GOODWIN. May I ask how many policyholders you have?

Mr. MILLS. We have now between 62,000 and 65,000. Our highest number was close to 90,000; then, when the depression hit all of the companies, it reduced our membership.

Mr. DOBBINS. In how many States are you authorized by law to do business?

Mr. MILLS. We are not authorized to do business in any State, except the State of Iowa.

Mr. DOBBINS. Of course you do not pay all of the claims that are made against you; you have some that are disputed?

Mr. MILLS. Yes; that is true.

Mr. DOBBINS. In the event of such dispute, do you require the claimant to come to Iowa to sue you, or do you accept service in other States?

Mr. MILLS. No; they must sue in Iowa and it is due to that fact that we do not have to qualify in the different States. It would be impossible, because assessment health and accident insurance is done away with in most of the States, and you could not do that.

As to the service end of it, let me just call your attention to one thing the last case I tried, about 3 weeks ago, which was sued on in Missouri. They had no jurisdiction in Missouri, and we did not appear. The attorney drew the petition, made the summons, appeared on the return day with his decree and it was signed. The decree provided for a judgment of $5,000, $2,500 for the plaintiff's attorney and $1,000 for vexatious delay; so, when the judgment arrived in Iowa to be sued on, it was an $8,500 judgment on a $5,000 policy.

Mr. ASHBROOK. May I inquire of you what percent of contested claims you have at this time?"

Mr. MILLS. We have four suits pending, that is all; two on appeal in which we are the appellee in both of them.

Mr. DOBBINS. That is cases, of course, where the people came to Iowa to sue you; they are all pending in Iowa?

Mr. MILLS. Yes; that are pending in Iowa, or they brought suit elsewhere and then sued on the judgments in Iowa.

Mr. DOBBINS. In how many States do you do business?

Mr. MILLS. In all of the States.

Mr. ASHBROOK. Do I understand you only have at this time four suits pending in court?

Mr. MILLS. Four suits.

Mr. ASHBROOK. Does that include cases outside of the State of Iowa-you only have knowledge of four cases?

Mr. MILLS. That is all. We only have 4 cases and 2 have been tried in Iowa that are now on appeal, which makes 6, and we are the appellee in both of those cases. These four cases I speak of are brought there in Iowa, where the proper jurisdiction is, and we are sued in Iowa by the policyholder outside of the State.

Mr. DOBBINS. You also resist payment of judgments obtained in other States and never do pay them?

Mr. MILLS. Certainly, because they never had jurisdiction, and there is a decision of the United States Supreme Court to that effect. Mr. DOBBINS. And you always questioned the jurisdiction where they brought suit in other States?

Mr. MILLS. Yes; and always advised them that the only place to sue was in Iowa. If they insisted on going ahead-they were disputes in the first instance, of course-claims that we did not think were just. We pay our claims, and the only ones we do not pay are the ones we think are unjust. And if they have a claim that there is any justice in it at all, they do not hesitate to come to Iowa to sue. I wish to submit that Judge Van Valkenburg, in the Tomlinson case, says:

It is true that it is less convenient and probably more expensive for the plaintiff to prosecute her action in Iowa, where valid service can readily be procured. Nevertheless, this is one of the incidents of doing business with a foreign insurance company of the character of this defendant, which does business almost, if not quite exclusively, with commercial travelers who live in widely separated localities. It may be doubted whether the burden imposed upon the entire membership of such an association, depending as it does entirely upon moderate assessments for the payment of losses as the result of being compelled to defend presumably in every State in the Union, would not outweigh the physical and financial inconvenience of the individual beneficiary.

And we say it does, and that these penalty laws, the vexatious delay laws, and the laws permitting them to tax 50 percent on the policy as the plaintiff's attorney fee, in addition to having to hire your own counsel outside of the State-that then you have a strong temptation and a very strong club to make you pay out of funds that are trust funds claims that are unjust, when you sit down and figure it out from a dollars and cents standpoint.

We have handled these funds for 55 years as trust funds and it is no object to us to reject a claim; it does not profit us anything at all. We pay the just claims and are glad to do it, and we are doing business at a cost of 14 percent. Any why, gentlemen, that 14 percent includes all of our overhead and includes what we set aside as a reserve fund, and that is nearly doubled in the old line companies by their agency premiums, direct agencies, and on their renewals. They run, on an average, 30 percent; they run from 16 to 60 percent and they average, according to Best, about 30 percent and, on top of that, they have the same sort of overhead that we have.

Mr. GOODWIN. Now may I direct a question to you while you are on that?

Mr. MILLS. Certainly.

Mr. GOODWIN. Let us take a hypothetical case. You handle accident benefits in the United States?