On December 12, 1914, the Missouri Association of Local Fire Insurance Agents met at St. Louis and drafted an address to the insurance agents of the state. The contents of this address are interesting. Said address was as follows:

"The Missouri Actuarial Bureau filed its complete rating of the state on December 9, and in the opinion of our counsel, Charles W. Bates, of St. Louis, all companies represented by the Missouri Actuarial Bureau are compelled, under the Oliver rating law, to charge the filed rates.

"It is unfortunate that the rates of the Missouri Actuarial Bureau should have become obligatory on companies and agents before amendments and rerating already demonstrated to be necessary could have been made by the bureau. Every agent in the State of Missouri should endeavor to explain to his policy holders that this condition of unreasonably high rates on some risks is only temporary, that it will probably be corrected by the bureau itself, but if not so corrected, the state will order the corrections made in due time.

"Nothing should be allowed to cloud the main fact that the hope of the Missouri policy-holders rests in the Oliver rating law. That law, if let alone, will:

"First-Control the machinery for making insurance rate throughout the state, and will keep those rates at a level satisfactory to the public.

"Second-Distribute the insurance tax equitably as between man and man in Missouri, and compel all insurance transaction to be public.

"Third-It will start Missouri on the only road toward permanently cheap fire insurance. Because what is burned up in the state must be paid for, plus expenses of conducting the business, and every honest, careful premium payer is interested in having the man with the dangerous risk compelled to make his risk safe, or pay adequately for the hazard he inflicts upon the jointly contributed insurance fund.

"Should the rate of the Missouri Actuarial Bureau finally fail to reasonably satisfy public opinion throughout the state, the insurance superintendent will (after the present legal maneuvering is over) make necessary adjustments in the rates."

The superintendent stated that the companies had acted in bad faith throughout all negotiations he had had with them; that when the Rating Act was before the Legislature in 1911, the fire insurance agents, who championed the bill, represented that it would result in saving hundreds of thousands of dollars to the people; that from his investigation he was convinced that, instead of saving the people money, it would greatly increase the premium income of the companies and result in the exaction of excessive rates, and that it was absolutely impossible for any one to determine the cost price of insurance under the various classifications submitted because the statistics covering the experiences of the companies under such classification could not be secured. Concerning the address of the local agents association, above set forth, the superintendent stated, "I have known for some time that the motive in securing the passage of the Oliver bill was not to secure cheaper insurance for the property owners, but to secure rates which would be mandatory on every insurer, so that the agents could hold their business and not lose it to competitors. I think the result of the whole agitation will be the repeal of the Rating Act and the substitution in its stead of a strong anti-trust statute forcing competition upon the companies and agents."

*

In 1913, the Oliver law was repealed and a drastic amendment, known as the Orr law, was enacted to the anti-trust law, making it prima facie evidence of violation, if any company or agent in writing insurance used or consulted any rate book, paper or card. In consequence of this, the companies suspended business in the State April 30, 1913.

The loss of protection was soon felt by the business and financial interests of the State, and although the State officials threatened prosecution and penalties, the companies declared that so long as the legislative status remained unchanged it was impossible for them to write business in the State. The business interests of Missouri finally intervened in self protection, and after a number of conferences, an agreement was reached with the State officials by which business was resumed August 12, 1913.

The stipulation with the state authorities declared that the prima facie section of the Orr law was illegal and void; provided for the dismissal of all suits begun against the companies, provided 75 per cent of the companies returned to the state; and permitted them to use the actuarial bureau rates provided there was no illegal agreement to enforce them. The attorney general also agreed to dismiss suits against those companies that asserted their Missouri business had been conducted at a loss and therefore they did not desire to return.

In considering the Missouri situation and agitation, it is well to bear in mind that while the insurance department was directed, under the law, to make investigations of the general basis schedules, that no appropriation was made by the legislature for that purpose. Also that the companies undoubtedly did all in their power to withhold their experiences on the various classes of risks and did many other things in order to prevent a proper administration of the Oliver law and the companies so conducted themselves despite the fact that the agents of the state of Missouri procured the passage of the law.

Governor Major promised to appoint a commission of business men, with E. F. Goltra, who had been instrumental in securing the settlement, as chairman, to draft an up-to-date code of insurance laws. This commission held hearings throughout the state, and recently made a report recommending remedial legislation.

The loss ratio in Missouri during all this period is shown by the following tabulation of the premiums and losses:

The commission submits herewith a copy of the Oliver Rating Law appended, hereto, as Exhibit 4. (Repealed, 1913.)

The Missouri Rating bill which recently passed the Missouri legislature and is now the law in that state provides briefly as follows:

"Rating bureaus, both joint and those of individual companies, must maintain written records showing rate charges and credits. Such records must be open to public inspection and copies must be filed with the insurance superintendent.

“A bureau maintained by more than one company must admit to membership any companies that wish to join.

"Agreements among companies to use or refrain from using the rates of any bureau forbidden.

"Make-up of rate must be furnished with each policy.

"Bureaus subject to examination and visitation by superintendent. "Rates may be changed, but increases must be filed ten days before they take effect. Increases, to take effect, must be approved by the superintendent.

"Rating inspectors must be licensed, and their promises of reductions for improvements are binding.

"Discrimination between risks of essentially the same hazards is for

bidden.

"Published rates must be adhered to.

"If experience shows a profit 'in excess of what is reasonable,' the superintendent may order a reduction. If a reduction is ordered the companies may designate the classes, but if they delay thirty days, the superintendent shall designate the classes to be reduced. A court review of reduction orders is granted.

"Discrimination in commissions because of companies represented by agent is forbidden.

"Specific provision that no anti-trust act shall be repealed by rating law. "Companies and their officers, agents, directors or representatives liable for violation of the act. Penalty, fine of $500 or imprisonment, or both."

KENTUCKY.

In January, 1911, the Louisville Board of Trade ordered the appointment of a Special Fire Insurance Committee to investigate the subject of fire insurance rates. Mr. S. Zorn was made chairman of this committee. The causes which resulted in the appointment of this committee were as follows: In 1908 the city of Louisville expended about $600,000 in improving the city water equipment facilities. It was claimed that the fire hazard had been greatly reduced thereby and that the increased fire insurance rates which had been in force since the Baltimore conflagration should be removed. Decreases were promised through the early application of the Dean Schedule. Additional work was performed to comply with requests made by the National Board of Fire Underwriters. Early in 1911 it was discovered that the same high fire insurance rates were still in force with no indication of an early reduction. Hence, the appointment of said committee by the Louisville Board of Trade.

The Louisville Board of Fire Underwriters refused information called for by the committee bearing upon their system of rate making, claiming that such data was private property and could not be reviewed by those in other lines of business, and maintained that investigation of fire insurance rates was not among the duties assigned to the insurance commissioner. After some litigation the entire matter was referred to the legislature. A state-wide campaign was carried on prior to the passage of the bill. The committee represented to the public that the Dean Schedule was being applied in Kentucky outside of Louisville, on a basis that made every rate exactly one-third higher than that charged for a precisely similar risk in Ohio, Indiana, Illinois, Missouri and Kansas.

In March, 1912, the State Rate Insurance Law of Kentucky was approved. This law created a state insurance board, composed of the insurance commissioner of the state and two other citizens to be appointed by the auditor of public accounts, which was authorized to determine the correctness of the general basis schedules in use, and to make such changes as would make the general basis schedules reasonable. The schedules issued by the board, and the rates made thereby, were to be the legal and obligatory rates. This was known as the Zorn Law and passed the Kentucky Senate unanimously. When this bill was before the governor in Kentucky, Judge Bates, counsel for the Western Union, stated that, in his opinion, the law was unconstitutional and that the state had no right to fix the rates for fire insurance.

The law declared that, within thirty days after it took effect, every fire insurance company licensed to do business in the state must file with the secretary of the board two copies of every general basis schedule then being applied in the state, showing all charges and credits, terms, privileges, riders and conditions, which in any wise effect rates or cost of insurance on property in the state, and also two copies of, (a) every book of published specific estimates of rates with inserts showing revisions; (b) every printed rate card; and, (c) a statement showing every specific rate not given in such book or in said cards.

This board was organized and ordered reductions in rates on dwellings, tobacco risks, and other classes. The insurance companies contested the constitutionality of the law in the Federal court, and the decision against them was appealed to the United States Supreme Court, where it was joined with the similar Kansas case. In the meantime, it was claimed that the companies were resisting reductions in rates ordered by the board. The companies claimed that the reductions proposed in rates on dwellings and contents amounted to 33% per cent, that the loss ratio for thirty-two years amounted to 58 per cent, and that for the year 1911 it amounted to 68.6 per cent. The decrease was ordered to take effect December 1, 1912. Later the reductions ordered were to take effect March 15, 1913; later the reduced rates on dwellings "officially" took effect on November 1, 1913.

It developed that some of the legislators thought they were voting for lower insurance rates through competition, whereas competition was eliminated by the law. General turmoil prevailed in the state. Some of the companies instructed their agents not to write dwelling business except farm dwellings.

In 1914 a more drastic state rating law was enacted, called the GlennGreene law. The insurance companies gave warning that if it were enacted, they would be unable to do business in the state, but the bill was passed in February, 1914.

As soon as the bill was signed by the governor, the companies suspended business, and a condition, similar to that existing in Missouri the previous year, developed. Similar threats were made by the state officials, but the companies declined to attempt to do business under what were regarded as impossible conditions, and the business interests of the state were finally compelled to intervene. Politics, as in Missouri, had its hand in the attitude of the state board.

A series of conferences were held running over a long period of time, business was greatly disturbed and the issues of the war which began in January, 1911, were compromised and certain reductions in rates conceded and as a result of which the companies resumed business in June, 1914. Under the agreement made between the state officials and the business men's committee and representatives of the fire insurance companies, the GlennGreene Law was held to be unconstitutional, the drastic features of the Zorn Law were set aside, and the principle was established that the companies have the right to make rates which will insure them a reasonable profit. As in Missouri, a commission was appointed to draft a new code of insurance laws. The courts promptly held the Glenn-Greene Law unconstitutional, and the state officials announced that the decision would not be appealed.

Year.

The loss ratio in the state during this period of agitation was as follows:

Loss

1909

1910

1911

1912

1913

If there be any lesson from the study of the Missouri and Kansas insurance wars, it is that a better understanding must take the place of present actual ignorance on the part of both the underwriters and the public. Both sides yielded in Kentucky for the good of business and the state. Neither side knew whether it was wholly right or wrong when the agitation began. The public prejudice was sincere. The companies, fearing confiscation, were unduly and unrighteously stubborn. Both lost thousands. The former knows more about insurance. The latter knows that organized sentiment is a material factor.

The commission submits a copy of the present Kentucky Law appended hereto as Exhibit 5.

BALTIMORE.

In the report of the Fire Rate Investigating Committee of the Merchants and Manufacturers' Association of Baltimore, which was issued in June, 1911, it was recommended: First, that there should be a material reduction in rates on dwellings and contents. Second, that hereafter, whenever 'relief' is granted, either the rate at which it is granted shall at once be made the published rate for all risks of that class or that that particular rate be suspended entirely and the companies left free to accept that class of risk at any rate they individually see fit to grant. Third, that the underwriters be asked to give representation on their board to the principal trade bodies, say to two members selected by the Board of Trade. Fourth, that the trade bodies establish and maintain an insurance adjustment department, composed of an expert or experts skilled in such adjustments, whose duty it shall be to keep rates constantly under surveilance, to keep posted as to similar rates elsewhere and to represent Baltimore policy-holders in any co-operative steps taken elsewhere. With this department might also be filed the duplicate copies of schedules, ratings, etc., established by the underwriters, the cost of the department to be defrayed by fees to be charged for individual service rendered.

The charges which resulted in the activities of this investigating committee was that the Association of Fire Underwriters of Baltimore was banded together to prevent competition in rates; and that rates for fire insurance were discriminatory against Baltimore. The report of the committee practically substantiated the said charges and recommended that the rates on dwellings be reduced so as to correspond with those prevailing in other cities.

The Kentucky agitation was embittered and rendered difficult to adjust or compromise by reason of the hostile and unwise attitude of the Louisville Board of Underwriters. The Association of Fire Underwriters of Baltimore did not assume an attitude of hostility or indifference toward the investigating committee. Their treatment of the committee is described in the report as "co-operative, which was frank, willing and courteous." Hundreds of thousands of dollars and much valuable time might have been saved to the companies and citizens of Kentucky if the Board of Underwriters of Louisville had conducted themselves differently. In the above comparison is a lesson which the Chicago Board and the Inspection Bureau of Illinois might heed during future developments of the rate inquiry in Illinois.

This committee also demanded that "relief," which had been granted to special interests, should apply to all similar risks, and stated that the "relief system" under which the published rate was greatly cut in favor of a particular applicant was bad in principle, and indefensible in practice, and almost equally injurious to the companies and the general public.

This committee concluded that, "as to the rates on business risks as a whole, the facts do not show that Baltimore is suffering from discrimination." It reported, however, that dwelling rates were "both absolutely and relatively much too high," and should be “very materially reduced." This was vitally important as dwelling risks from the best and most lucrative part of "preferred" fire insurance business.

The Baltimore committee, as to the complaint against the Association of Fire Underwriters that by preventing competition as to rates, it created a monopoly, reported that said board absolutely controlled the fixing of rates to be charged by the companies represented by its members. It concluded, that absolute and uncontrolled competition in insurance rates is incompatible with the principles of fire insurance as now developed and conducted, and that to insure uniformity, some means of rate regulation is indispensable, and to prevent over-charging some system of governmental supervision seems equally indispensable. A discussion of the comparative merits of "company boards" and "agent boards" is set forth. Fire insurance is of more than local scope, and "company boards" might better meet the demand of equality between the states; however, the committee determined that Baltimore would fare better with a board made up of its own citizens.

The chairman of this commission found great difficulty in ascertaining what had become of this report, and on March 12, 1915, wrote to the Merchants' and Manufacturers' Association of Baltimore and requested a copy of the report and also information as to "whether or not the Baltimore Fire Underwriters did reduce the rates on dwellings and did refrain from discriminating in favor of certain special interests." A reply was received to this letter on March 15th from the secretary of the said association, forwarding the report and making the following comment: "The rates in certain districts have been reduced, due to the installation of high pressure service, but on dwellings they remain the same."

At a hearing held by the Attorney General of Maryland on Wednesday, June 28, 1911, on the question of the legal status of the Association of the Fire Underwriters of Maryland, it was stated that its business was fixing and upholding of insurance rates in Maryland, and that its membership includes 123 of the 126 insurance companies doing business in the state.

It was also stated during the hearing that one of the largest companies in the country was willing to write dwelling-house insurance at one-half the rate prescribed by the association, but that the association would not permit the company to lower the rates it had fixed. According to its own answers to the investigating committee, the association did not have the statistics or other information necessary for the making of proper rates.