Mr. DOBBINS. Could you agree that these 38 companies might be located somewhere else, but technically be here in the District of Columbia? Mr. HUBBARD. No, sir. I say this, that any company that is operating in the District of Columbia at the present time is or should be licensed and incorporated in some State in the United States, and if that State has a proper insurance department and proper insurance regulations, it will be taken care of right from that State, just as we are in New York State. I have a great deal of data that I would like to submit. I would like also to have the opportunity of discussing the constitutionality of this provision, which I think I can show the committee is unconstitutional, but I appreciate that there is no time now for that. I am hoping, however, that we may have further hearings, at which all of these matters may be taken up. Mr. ASHBROOK. You believe that a general law would be more desirable to affect all business that may misuse the mails? Mr. HUBBARD. Exactly. Certainly there is fraud being carried out in other lines of business besides the insurance business; and, as a matter of fact, if you take the two classes of business, general business and the insurance business, there is no more strictly regulated business in the world than is insurance; and if they need some penal statute for the insurance business, how much more do they need it for general business which is not so strictly regulated? Mr. ROMJUE. Would you mind specifying some things that you think would be proper to go into this that would enable the Federal Government to catch the criminals? Mr. HUBBARD. We would be glad to do that if we have sufficient time. Mr. ROMJUE. If you do that, we will appreciate it. Mr. HUBBARD. We will be glad to do it. Mr. HEINEMAN. Mr. Chairman Mr. ASHBROOK. Your name, please? Mr. HEINEMAN. M. J. Heineman, representing the Presbyterian Ministers' Fund Life Insurance Association, of Philadelphia. I would like to ask a question. I noticed that in the discussion you have had here, the Commissioner for this District said that he was willing that church organizations should be exempt from the provisions of this bill. Our organization is interdenominational, although it has a distinctly denominational name. At the present time we insure ministers of all Protestant denominations. Inasmuch as we are not under direct ecclesiastical control, but extend our business to all denominations, I am wondering if we would come under that exemption? I understood that the attitude of the committee and of the District of Columbia Commissioner was somewhat friendly toward the church organizations, and ours is an interchurch organization. Mr. ASHBROOK. I do not think there is any doubt but that this committee is of the same mind. We have no desire to interfere with the business of a corporation that has a good record and is performing a useful service. Mr. HEINEMAN. I represent the Presbyterian Ministers' Fund, incorporated in 1759, and we have all of those years behind us of legitimate business. We are the oldest life-insurance business in this country and in the world, and so I feel that such a law as is proposed here would be a hardship for us. We are doing a mailorder business, but that is just among ministers of all Protestant denominations. We want to obey the laws, but we feel that it would be a very great hardship to us to cause an increase in our rates, and we would have to if we had to follow the provisions of this proposed bill. I hope that we shall be excused. Mr. ASHBROOK. You are excused, and you can go home without STATEMENT OF HON. W. I. NOLAN, OF MINNEAPOLIS, MINN., REPRESENTING MINNESOTA COMMERCIAL MEN'S ASSOCIA- TION Mr. NOLAN. Mr. Chairman and members of the committee, I wish to make a very brief statement at this time. Mr. Hubbard, I think, has presented the case of the traveling men's association, and I hope that in the future we will have the privilege of going into a more extended discussion. I represent the Minnesota Commercial Men's Association. It is a cooperative association. It has been in existence for 30 years. It has a fine record. It was organized under the laws of Minnesota, which are very stringent. It provides a service and benefits for a class of people who otherwise would probably not be covered by that kind of insurance, because it conducts its business with a very light expense load, and we feel that if this law should be passed it would put our organization out of business, and we hope, and I know, that the committee will give this matter very careful consideration. I want to say that we are in sympathy with the purpose of this legislation, but believe that to accomplish that purpose you are going to destroy some very legitimate organizations. Mr. ASHBROOK. Who next wishes to be heard, or are you all satisfied? Mr. NEEDHAM. I do not know whether the committee is going to adjourn right away or not. Mr. ASHBROOK. Pretty soon. STATEMENT OF D. J. NEEDHAM, REPRESENTING THE AMERICAN BANKERS' ASSOCIATION Mr. NEEDHAM. Mr. Chairman and gentlemen of the committee, my name is D. J. Needham, and I represent the American Bankers" Association. That association is in sympathy with the underlying principle as represented by this bill, to get out of business the "flyby-night" insurance companies who fleece the public, so to speak. Mr. Baum, who is in charge of our insurance department, would like to say just a few words to you, and I have asked him to be very brief, knowing that you gentlemen are on the verge of adjournment. STATEMENT OF JAMES E. BAUM, REPRESENTING THE AMERICAN BANKERS' ASSOCIATION Mr. BAUM. Mr. Chairman and gentlemen of the committee, as Mr. Needham has said, the American Bankers' Association, which represents more than 13,000 incorporated banks and trust companies in this country, is squarely behind any measures of law giving the Postal Department a stronger grip on these unscrupulous or questionable companies, whether they be life, accident, health, casualty, surety, fire, or marine. In my opinion, however, this bill does not do that. In the banking field alone, it has been our experience with bank insurance, that, with the exception of a few States, the State regulatory powers vested in the insurance departments are not so stringent in 34 or 35 States as they might be. In other words, I think that some of the fraudulent or unscrupulous companies could comply with the laws in quite a few States and circumvent the law as now written on the bill. But the principle underlying this bill, so far as its effect upon bank insurance is concerned, is that the mere qualification or authorization of a casualty, surety, fire, or marine company in a State in which the property or bank is located, if that can be defined, means the safety, the soundness, and the adequacy of protection. I submit that our experience in the last 5 years particularly has not borne out that theory in practice. I have here, if you will permit me to file it, a photostatic copy of a letter from the New York State Insurance Department, marked "Exhibit B", which lists in detail 379 unpaid bank claims which were filed prior to April 29, 1933, against the National Surety Co., the total amount of these claims aggregating $3,206,090. They are still unpaid, although the National Surety Co. is licensed in every State and complies with the laws in every State; and, to a lesser extent, there were 8 or 10 other companies that also were filed against, and there are many hundreds of bank claims still unpaid. The great tragedy of that is that the large majority of the banks on this list, which is the only detailed list that I have, but it is authentic, are small banks. Therefore we feel that any legislation which requires banks to obtain bonds from companies duly qualified or authorized to do business in these States is predicated upon an unsound theory. In the public interest, a sound banking structure demands a free and open market for insurance to safeguard depositors no less than stockholders. To the large metropolitan banks and trust companies, adequate insurance protection, in respect to both the amount and breadth of coverage, is not available in the domesticinsurance market. As custodians and trustees of public and private funds and securities, I think that this committee will agree that banks must not be circumscribed in their selection of underwriters, particularly with regard to their credit risk and capacity to provide the broad coverage that many banks require. It happens that the principal competitive market for the forms of insurance required by banks is available only through underwriters who operate on a basis not in keeping with the requirements of some State laws. This makes it practically impossible for them to qualify, and if this market should be denied banks, the companies which would be favored by this type of legislation would have.com plete control of the market and they could force upon banks narrower coverage at rates that may be unfair. Mr. WITHROW. How many of our banks are being given coverage by a foreign company, like Lloyds? Mr. BAUM. I am not sure. We have never favored-it is against the policy of our association, and has been for 46 years or more, to favor in any way or endorse or to single out any one underwriter against another, whether domestic companies or foreign underwriters, and your question I cannot answer exactly except to say that it is somewhere between 200 and 400 banks out of more than 16,000 banks. Mr. WITHROW. The reason that I asked that question is that I happen to be a director in a small bank, and I recall that our bank president stated that it was desirable that they have this coverage, that it gave them a greater coverage than a domestic company would,. and that a great many banks are doing that and have done it for a long time. Mr. BAUM. Well, it will not take long to briefly give you the history of it. Beginning about 30 or 35 years ago, the insurance committee of the American Bankers' Association tried to develop what was then a novelty, namely, a banker's blanket bond, which would put under the one broad contract all of the risks which had been theretofore insured separately, and more expensively, so that instead of having $5,000 coverage on this employee and $10,000 on another, they would have a coverage of $50,000, which would cover everybody at $50,000, and every risk. We tried for 4 years to get the American companies to write such a form, and we failed. We went abroad, to the only other market that we could go, and that was London Lloyds, and a bond' was written in 60 days. Then, within a few months after that, the American companies wrote blanket bonds, and it has been that way ever since. We go to the American companies to get a bond broadened, or rates adjusted, and we are turned down as regularly as we go to them, except once in the last 25 years, and then we go to Lloyds, but not until after we have exhausted the American market, and we get what we want abroad, and the American companies, a few months afterwards, grant us what we have been granted abroad. Mr. BRUNNER. But they are just as safe in an American company as with Lloyds, or perhaps safer? Mr. BAUM. I think, so far as the limits of the bond is concerned, or the credit risk; yes; in most cases. Lloyds are by far the oldest insurance market, and by far the strongest in the world, and I want to go into the record another exhibit, which shows what the domestic surety companies think of Lloyds. We have no brief for Lloyds or any other underwriter, but I wish to submit photostatic copy of a letter dated March 8, 1935, marked "Exhibit A ", from the State of New York Insurance Department at Albany, addressed to me, and attached to which is a detailed list of reinsurance premiums paid to London Lloyds by these American companies for reinsurance during the year 1934, the reinsurance premiums totaling $4,855,930.54. (The two exhibits submitted by the witness are as follows:) EXHIBIT A STATE OF NEW YORK, INSURANCE DEPARTMENT, Mr. J. E. BAUM, The American Bankers' Association, New York, N. Y. Albany, March 8, 1935. DEAR SIR: In reference to reinsurances carried by companies authorized in New York, we enclose lists of companies showing business with Lloyds, London, during 1934, as desired in your letter of January 9, 1935. Very truly yours, Total reinsurance premiums, $4,855,930.54. THOMAS J. CULLEN, First Deputy Superintendent. New York fire and marine reinsurance with Lloyds, London, during 1934 Other State fire and marine licensed in New York-Reinsurances with Lloyd's, Fidelity and Guaranty, Maryland_. General Insurance Co. of America, Washington_-_ Insurance Company of North America, Pennsylvania_. Insurance Company of State of Pennsylvania___ Mechanics and Traders, Connecticut__ Merchants and Manufacturers, New Jersey. Monarch, Ohio.. National Security, Nebraska_- $451, 855.39 15, 513. 41 29, 154. 05 17, 592. 32 4, 196. 66 36, 434. 19 4, 227.00 865. 20 10, 067. 98 172. 12 3, 586.99 37, 687.26 20, 655. 02 150.00 57, 344.80 2,101,007.82 284, 696.70* 224, 370. 08 16, 675. 43 2, 108.00 212, 872. 63 6, 009. 86 |