STATEMENT OF REV. HENRY L. WRISTON, MANAGER MINISTERS' MUTUAL LIFE INSURANCE CO., BOSTON, MASS.

Reverend WRISTON. My name is Henry L. Wriston, and I am the manager of the Ministers' Mutual Life Insurance Co., of Boston. Fifty-seven years ago a group of Methodist ministers in Boston incorporated this company. One of the incorporators was the late John W. Hamilton, for many years a resident of Boston. For some 40 years it has insured Methodist ministers only, and insured a large percent of those who graduated from the Boston University School of Theology, and who went all over the world. So we found ourselves represented in practically every State and in six or seven foreign countries where our missionaries have gone.

We have a record of 57 years with never a contest of a claim. We have never employed a lawyer to adjust a claim. We have a small company, and we register and qualify under the strict insurance laws of Massachusetts; and this bill, of course, would put us out of business. I thank you.

Mr. ASHBROOK. We will now hear Mr. Marshall, the superintendent of insurance in the District of Columbia.

STATEMENT OF J. A. MARSHALL, SUPERINTENDENT OF INSURANCE, DISTRICT OF COLUMBIA

Mr. MARSHALL. Mr. Chairman and gentlemen, I have a communication here this morning from Mr. Dan C. Boney, president of the National Convention of Insurance Commissioners, and I believe that if you will permit me to read it, it may have a tendency to clarify some of the questions that are in the minds of the gentlemen present [reading]:

I note with considerable interest that H. R. 6452 has been introduced in the House of Representatives and which has as its purpose the elimination of the use of the mails to insurance companies for purposes of soliciting business in States in which they are not licensed nor authorized to do business.

This question has been given considerable attention by the National Convention of Insurance Commissioners in an effort to eliminate this unethical practice which, in a good many instances, has caused considerable loss to unsuspecting policyholders. Our principal difficulty has been with the assessment life associations that organize on a shoestring basis in States where such so-called "nonprofit associations" are exempt from the insurance regulatory laws or where the laws are not sufficiently broad to include such associations under departmental supervision, and once established in such States, they do an enormous business exclusively by mail solicitation in States other than that in I which they are domiciled. They are careful to limit the maximum amount payable under their certificates or contracts to less than $3,000 in order to avoid jurisdiction of the Federal courts; and as they have no process agent in the foreign State where the policyholder resides, you can appreciate the expense and difficulty that the policyholder would encounter should he undertake to bring criminal action in the foreign State of domicile of the association. These associations are cognizant of this difficulty and are often very arbitrary in the payment of claims if they are paid at all.

This State as well as several others has endeavored to seek relief through the Federal criminal courts on charges for defrauding through the mails, but, as you know, this is a rather expensive and long-drawn-out remedy and has not proven successful, and in reality does not offer proper remedy as it does not stop the nefarious practice of these associations. After several years' discussion of the subject on the part of the members of the National Convention of Insurance Commissioners the national convention, at its December meeting in : St. Petersburg, adopted a resolution urging that Congress take some action to

remedy the situation by denying to these unlicensed companies the use of the mails for the purpose of soliciting business, and I am enclosing a copy of the resolution as adopted.

Inasmuch as you are conveniently located, I wish to especially urge you to exert every effort to see that the merits of this bill are properly presented to the Committee on the Post Office and Post Roads to which the bill was referred, as I think its passage will effectively destroy the present unethical practice on the part of these associations that is costing the citizens of the various States an enormous amount of money annually.

I might say in addition to that, Mr. Chairman, that so far as life organizations are concerned, one of the biggest difficulties that the insurance departments of the various States encounter is the fact that these associations do not set themselves up as insurance organizations. They claim, and I believe that in one or two States their claim has been sustained by the courts, that inasmuch as they do not sell insurance directly, but rather sell memberships, the insurance feature is rather incidental, and I might add that under an assessment plan they do not come in under the supervision of the insurance department.

At your previous hearing, I attempted to make it clear that there was no disposition on the part of the various insurance commissioners to work a hardship upon those organizations who confined their activities solely to the operation of church organizations, church insurance either on the individual or on the property.

Briefly there is another phase of this bill that I would like to touch on, and that is the question of passing State legislation appointing the head of the insurance department of the service of process. We have that law in the District of Coumbia, but these organizations that everybody is so desirous of curtailing in their activities pay no more attention to that provision of law than they do to the others. They just ignore it absolutely.

Now, inasmuch as someone intimated here this morning that this law was merely an attempt to pull somebody's chestnuts out of the fire, I want to make it clear, for the record, that that is absolutely not so. The insurance commissioners in their convention, as Mr. Boney has signified in his letter, were unanimous in their opinion in December, at St. Petersburg, that some sort of legislation was needed, some relief from the Federal Congress to help out in a job that our State laws are unable to accomplish.

Mr. ASHBROOK. Then the intent of this law was merely to reach irresponsible concerns and persons, and to prevent them from doing business?

Mr. MARSHALL. That is the only intent, sir.

Mr. THOMAS. Is there any question in your mind but what this bill, as written, would hinder a great many of these legitimate organizations from doing business, and in other instances, as has been borne out in the testimony, would actually put some of these organizations out of business?

Mr. MARSHALL. That is such a broad question that I do not believe I am qualified to say. I may say this to you, sir, that the expense of coming within the jurisdiction of the States is relatively small. Arizona, I believe, has a terrifically high filing fee. The reason for it I do not know. I think it is $200, but it is the only State in the United States that has such an excessive filing fee.

The filing fees run from $10, as is the case in the District of Columbia here, to $25, which is the highest one outside of Arizona. The tax on collectible premiums, I think it is safe to say, would not average more than 2 percent.

Mr. THOMAS. Then if it did do that, if it did make it difficult for some of the legitimate organizations to do business, and put others out of business, would you still be in favor of this piece of legislation? Mr. MARSHALL. I think that we would have to know something about the proportion. I think this, sir, that if this type of legislation will injure one company, and through that injury cause 101 illegitimate companies to go out of business, then I think it is good legislation.

Mr. HARTLEY. But that is not the testimony here. The testimony here indicates that it would be just the reverse.

Mr. MARSHALL. I cannot say about that, because I have not heard all of it.

Mr. HARTLEY. I think it does.

Mr. MARSHALL. The question of agencies and all that, and the question of a man being on his vacation and having a premium receipt returned to him on his vacation, has no bearing on that question, because everyone knows that that type of business is all written on a leeway of 60 or 90 days, and there is not a chance in a million that a man off on a vacation will sit down and write a letter. That is piffle.

Mr. HARTLEY. You do agree, however, that this law would put these fraternal and church organizations out of business?

Mr. MARSHALL. As written it would-it would not put the fraternals out, and I made it clear the other day that the insurance commissioners never thought of doing that to the church organizations. We have had so little contact with the church organizations that we did not think about them, and any amendment that will exempt those organizations is perfectly acceptable to the insurance commissioners. Mr. HARTLEY. Did you listen to the testimony of the marine underwriters' representative?

Mr. MARSHALL. Part of it; yes, sir.

Mr. HARTLEY. Would it not severely affect them, and the brotherhoods that were represented here the other day, in connection with their brotherhood insurance companies?

Mr. MARSHALL. Yes and no. The one thing that we have to be careful of in this thing is that if regulation is passed it ought not to be left in such shape that it will be possible for a group of sharpshooters to set themselves up writing class insurance.

Now, we have no objection to the legitimate classes, most certainly, but it is very easy to organize a company that would include any particular group that you wish to pick out.

Mr. HARTLEY. You do not feel that this could be better handled by the States themselves?

Mr. MARSHALL. I think that the States are absolutely inadequately equipped to handle it. I think that that is evidenced by the very fact that it is expensive for a policyholder who has a claim to attempt to collect it, and by the lack of inclination on the part of an organization that has no desire to come within the regulatory measures of the State to do anything about it. They are just going to ignore that, the same as all the others.

Mr. HARTLEY. Has the insurance commissioner of the District of Columbia had any cases of fraudulent companies in the District called to his attention?

Mr. MARSHALL. Local companies in the District?

Mr. HARTLEY. Yes.

Mr. MARSHALL. We have none. As long as I am in that office I will not permit them to organize.

Mr. HARTLEY. The law here is sufficient to give you authority to keep them out of the District, to prevent them from doing business? Mr. MARSHALL. Not from keeping them out but prevent their organization in the District. But the District of Columbia is flooded today with mail-order concerns who have nothing except nice literature. There is one concern in Illinois which claims that it has 250,000 members in its organization, and I had one of their solicitors put in jail last July.

Mr. WITHROW. With all due respect to the ministers' associations, and so forth, do we not have to consider such companies, we will say, as those that take care of mutual insurance? It so happens that I am an ordinary pill roller, and we have a company organized under the laws of the State of Massachusetts which gives a certain kind of insurance at a lower rate. Should they not be in this class that are exempted?

Mr. MARSHALL. By all means; church organizations.
Mr. WITHROW. It is not a church.

Mr. MARSHALL. But you included the church in your question. As to mutual organizations, we have no quarrel with them as long as they are on the up and up. There are many mutual organizations. We have here in the District of Columbia one of the biggest mutual life insurance companies in the country, the Acacia. No one has any quarrel with them, because they are operating on a legitimate basis. It is the fellow who does not operate on a legitimate basis that we are trying to catch, and I am not prepared to say what the proper remedy is, but I do know that we need something.

Mr. HUBBARD. My name is Hubbard, representing the International Federation of Commercial Travelers' Insurance Organizations. May I ask the speaker a question?

Mr. ASHBROOK. Yes.

Mr. HUBBARD. I was interested in the remarks of the commissioner with reference to Washington, D. C., and I have heard quite a little comment made with reference to the article that appeared in the March number of the Readers' Digest, that there are 38 companies on a fly-by-night basis here under the scrutiny of the commissioner's office, and I am wondering whether the activities of those 38 companies could not very adequately be controlled right here in Washington, rather than having it taken care of by the other 47 or 48 States in the Union.

Mr. MARSHALL. I would say, in answer to that question, that while I have no desire to get into a quarrel with the press in any manner, shape, or form, the information which is contained in the Readers' Digest is cockeyed. It is not so and never was so. There were approximately that number of organizations which were operating under that old Trades Union Act passed by Congress back about Civil War time, and which was later on repealed, and one of the

provisions of that act was that these companies should maintain their home office in the District of Columbia. While they operated, to all intents and purposes, as District of Columbia organizations, they were not in the District of Columbia. They were down in Louisiana and Texas and all over the country, and they were not at any time strictly insurance organizations. They were of the type of society, or association, or whatever you choose to call them, that we are trying to throw some regulation around. A very sharp gentleman picked up that old bill and saw in it an opportunity, by strict interpretation of it, for them to write insurance, and they proceeded to do it.

Does that answer your question?

Mr. HUBBARD. I think so.

Mr. REED. Would you object to telling the committee whether the insurance commissioners endorse in principle the Cartwright bill? Mr. MARSHALL. No; they do not.

Mr. REED. Do they endorse the terms of this particular bill?

Mr. MARSHALL. Taking recognition of the shortness of time, I will waive the preamble and read the meat of this resolution which was adopted in St. Petersburg in December:

Be it further resolved, The National Convention of Insurance Commissioners recommends that appropriate Federal legislation be enacted providing in substance that the United States mails may not be used to solicit or transact insurance business in any State unless the insurer has first designated an agent upon whom service of process may be had in such State.

Mr. REED. Thank you.

Mr. ASHBROOK. That meets your requirements and your suggestion?

Mr. REED. Yes.

Mr. MARSHALL. As I view it, that is not strong enough, because the fellow who is not going to meet the other regulations of the statute is not going to pay any attention to this. At least, that is our experience here.

Mr. DOBBINS. I should like to ask the commissioner this question: If you can get service on one of these companies in your State and the company has no assets, how much better off are you?

Mr. MARSHALL. Not a bit.. If they have nothing, it is just a piece of paper.

Mr. ASHBROOK. Thank you very much.

(At this point, a gentleman rose.)

Mr. ASHBROOK. Would you like to speak, briefly?

STATEMENT OF M. W. HOBART, SECRETARY MINISTERS' LIFE AND CASUALTY UNION, MINNEAPOLIS, MINN.

Mr. HOBART. Our association was incorporated in 1900, and consists of clergymen of all faiths, Catholic, Protesant, and Jewish, and was established with the purpose of providing national coverage for that special group, and we feel that we do provide a necessary

service.

The situation with respect to the clergy is such that, as to its occupational risk, its moral rating, and so forth, it is possible to furnish this coverage at low cost, and low cost is essential to that rather underpaid group.

128691-35-5