FOURTH DAY. SATURDAY, October 21. THE Convention met at half-past ten o'clock, A. M. The vice-president, Mr. Llywelyn Breese, of Wisconsin, in the chair. Mr. PAINE: I would remark, Mr. President, that we have nothing before this convention in regard to marine insurance. During our vacation I had an interview with the president of a marine insurance office of my state and he, among other things, suggested, that there was one great defect in the marine insurance business, which he wished I would bring before this convention to see if it could not be cured. He caught a man who was insured in his company, who had also secured an insurance in another company, and the vessel being lost, succeeded in collecting both policies, and on examination. he found it was quite a common thing. A man starts, for instance, from Rockland and gets insured there; then goes to Boston, then to New York, then to New Orleans, getting insured in each place, and, taking a cargo of cotton, gets insured in England, then sinks his vessel and collects all the insurances. near as I can find out that hole has always been in existence. It is a little astonishing to my mind that the insurance companies of the country should not have seen it and stopped it. The gentleman of whom I spoke, suggested one or two ways of doing it, but did not approve of either of them. I have worked it out in this way and I now offer it in the shape of a resolution: As "Resolved, That it be recommended to the marine insurance companies to establish at New York, or some other convenient point, an insurance agency, or intelligence office, for the purpose of collecting and preserving for reference, a record of all insurances effected on marine risks in different parts of this and other countries, in order to detect and guard against attempts to defraud underwriters by undisclosed and unauthorized duplicate policies on the same risks." What I propose is this: that there should be opened an intelligence, or an insurance agency office, something like the mercantile agency, where the credit of the merchants of the country are all recorded, and when a person wishes to know the credit of an individual abroad all he has to do is to write to the intelligence office, get his information and pay his dollar or five dollars for it. If this course, which is suggested here, is pursued, and an intelligence office is kept, my suggestion is this: that every marine insurance company in the country, and companies out of the country, should weekly, monthly, or at stated times, report to this agency all the risks which they have upon vessels or their cargoes, not, perhaps, stating the exact amounts, but generally the risks taken; and that these should be kept in a record book of the intelligence office, so that any individual company, when he has a loss reported, can write to the intelligence office and ascertain if any other insurance exists on the same risk. If so, it will be immediately found out, and the man, of course, will lose the benefit of his fraud. The individual who thus applies must, of course, be expected to pay a fee, which fee, in the aggregate, will support the office. I merely bring the matter to the attention of the marine insurance public in order that the proper remedy may be applied to what I regard as a very great evil. I think myself it will result in a great good, and I have no doubt it will be finally adopted. Mr. CALDWELL, of Indiana: The sentiment expressed by the gentleman from Maine (Mr. Paine) in his resolution is undoubtedly good, but I am opposed to this convention undertaking to do too much. Frauds always have been and, I expect, always will be perpertrated, not only upon marine insurance policies but on fire and life policies also. I do not know Mr. GAINES, of Louisiana: I mean no discourtesy to the gentleman but as there was a resolution passed here yesterday that all resolutions after being passed, shall be sent to the appropriate committees, I would suggest that the gentleman is out of order. Mr. CALDWELL: I was merely making a preliminary remark to the motion. The PRESIDENT pro tem: The gentleman from Louisiana (Mr. Gaines) is right. To what committee shall the resolution be referred? Mr. GAINES: To the miscellaneous committee. Mr. CALDWELL: I move that it be laid on the table. The PRESIDENT pro tem: If there is is no objection this resolution will be referred to the committee on miscellaneous matters. Mr. CALDWELL: Does the president (pro tem) mean to decide that I have no right to make a motion that it be laid on the table. That it must imperatively go to that committee? The PRESIDENT pro tem: You can make the motion. There was no motion before the house. Mr. CALDWELL: I made the motion that it be laid on the table. Mr. MILLER, of New York: The motion was made but the chair did not hear it. Mr. PILLSBURY: The motion has not be seconded. The PRESIDENT pro tem: As I understand there is no motion before the house. What is your further pleasure, gentlemen? Mr. MILLER: Mr. President, I suppose the regular order of business is the consideration of the report of the committee on valuations. I do not intend at this time to present any views of my own to the convention, but I merely wish to make a statement. I hope that this subject will be discussed by every person in the convention who has views on the subject, or who has views upon the questions involved, that those views in their minds and in the minds of the different members of the convention may be freely stated. And I wish particularly, and the principal object of my rising at all at this time is, to state that so far as I am concerned, I want it distinctly understood by every member of the convention, that I have no personal pride or feeling involved in this question. I have a delicacy in stating my views upon the subject at this point of time, on account of the committee having recommended that which is the New York standard for valuing life policies-the American Experience table of mortality, and the rate of interest at four and a half per cent. I wish merely in addition to this statement, to say that I hope every member of the convention will be influenced only by reasons which go to the merits of the question, and not by personal reasons or influences. For myself, I am yet open to conviction. I am free to say that I have not heard as much discussion on this subject as I desire. I hope to hear more. Although some of the members of the convention expressed apprehension lest we should have too much discussion, that was and is the least of my fear. I say let us open the doors and invite discussion. If the members of the convention are not prepared to discuss, let us hear those who have thought more, and studied more deeply on the subject than they have. We have heard several eminent gentlemen; others are here in the room now; others in the city, and for my own part, I could listen for hours with great pleasure, and I doubt not with profit to the views of these gentlemen. I see a gentleman here in the room now who is acknowledged as an eminent authority, who has devoted years of time to this subject, and whose judgment is entitled to respect, and to whom we could all listen, I doubt not, with profit. Now, gentlemen, I only make this explanation because one member of the convention, at least, called upon me for views. I am not ready to give my views, gentlemen, if I had any, but only to thus preliminarily state to you that because the committee has reported New York standard, I desire rather to defer expressing my views; and because I want every person in this convention to test this subject for himself, and upon its merits; and not because New York has taken one standard and Massachusetts another, to express any preference between states. That is of no earthly consequence. Gentlemen, bear in mind that you have here the most important question in hand which any insurance convention, or any body of men discussing insurance subjects, has ever handled. The great subject which lies at the foundation of insurance is now under discussion; and if we cannot arrive at conclusions satisfactory to ourselves at this time, let us take more time. Let us not put forth any result as the work of this convention which will not be satisfactory to every member of it. That is my view of the propriety of the occasion and of the importance of the subject. For myself, what I want to do is this. I want to find just where the line of safety lies. I want to find just what standard of reserve is sufficient full and complete to protect the public against loss or danger, and I don't want to go a bit below that. Let us have this subject fully ventilated, and let us decide it upon its merits and upon no other consideration. Let us turn a deaf ear to the solicitations of any company, or the officers or agents of any company which are not founded upon reason, logic and facts. Let us, gentlemen, consult the interests of everybody; first, the great insuring public, and then, equally, fairly and impartially, not only the great, but the small and the weak companies-stock, mutual and all. And when we shall have done this, I think we shall have arrived at a conclusion that will give us all satisfaction. At some future time, and after hearing a more full discussion from others, if we can procure that, I shall be pleased to state the conclusions at which I have arrived, Mr. FACKLER, for Tennessee: I should like to make a few remarks. Yesterday I tried to obtain some remarks from Mr. Homans, knowing positively that he had some remarks to make, but a feeling of generosity on his part kept him from using much of my time, because he knew that I thought of making some remarks myself. But I can assure the gentlemen present, especially in view of the remarks just made by the superintendent of New York, that they will receive some very valuable suggestions, I have no doubt, if some gentleman will give Mr. Homans time to make the address. It has been asserted by 'some of the gentlemen who have addressed us that life insurance companies of the past have realized a rate of interest only a little higher than four or four and a half per cent, and it has been supported by an array of figures which seems to give a great deal of force to their arguments. Now before I show the mistake in the argument on which their conclusions are based, I wish to ask how it is that savings banks which invest their money at great disadvantage, as compared with life insurance companies, are able to pay their depositors seven per cent, while, on the showing of these gentlemen, the life insurance companies only earn five per cent. Savings banks have to invest their money, so to say, on call. At any moment they may be required to pay out all their assets. Life insurance companies, on the other hand, can make long investments which always pay the highest rate of interest. As is very ably remarked by the gentleman from Maine (Mr. Paine), who addressed us yesterday, investments give a low rate of interest in proportion to the ease of conversion, and we know that many of the best insurance companies now invest almost entirely in bond and mortgage, which is not very easy of conversion, simply because they can realize a high rate of interest thereon, while on investments which gave a low rate of interest because they are so easily convertible, the rate of interest is comparatively low. I think that these facts ought to shake the confidence of gentlemen in those conclusions, for certainly the management of life insurance companies is very poor, if they realize from two to three per cent less than savings banks. I have analyzed one of the statements contained in Mr. Barnes' address, taking the first company, which happens to be the American Popular. Mr. Barnes has included in the assets several items on which the company should not be charged with the collecting of interest-interest being already virtually included, or no interest being required to be collected; I refer to deferred premiums and to a portion of the premiums over-due. Deferred premiums, as every practical insurance man knows, contain their interest in themselves, and when a company reports $100,000 of deferred premiums as in its assets at the close of the year due during the ensuing year, it is absurd to require that that company should realize interest on those deferred premiums when there is interest included in them already. I think, therefore, that deferred premiums should have been omitted from the assets which that gentleman has made up with so much care and labor. Further, the premiums in the hands of agents are largely composed of items never collected. The reports of life insurance companies are not sent in until about two months after the close of the year, when a company has had time to collect nearly all the premiums that ever will be paid, and those stated as overdue are generally premiums that never are collected afterwards, the companies not liking to strike them off because the policies may be restored, and then they would have to erase the cancellation, and there would be trouble in other ways. But if premiums are never collected, there certainly is no interest due on them. If the premiums are paid some time after they are due, then there is a loss of some few months' interest, but the charge that the interest on the whole amount is lost is entirely wrong. In the case of the American Popular, I have found with these assumptions that the interest actually realized was something over five and one third per cent instead of less than four per cent as Mr. Barnes has argued. I have taken this particular case because it is shorter than the others, and is the first in order; but the same principles apply to all the cases that he has adduced, and will bring up the average interest realized, from one to one and a half per cent. As between the four and four and a half standards, the question is simply one of relative safety. There is no more absolute safety in a four per cent than in a four and a half standard. The question is, can the states agree on a uniform standard! There are different standards now in use, and one side has got to yield for an agreement. Now which side can yield with the greatest ease? Not the states requiring a four and a half per cent reserve, for if they raise their standard to four per cent suddenly, many of the companies which have been reserving under the present laws will be shown to be impaired, and will have to stop making dividends for some years-for one or two years, at least. On the other hand, if the four per cent states should reduce their standard to four and a half, it would make no necessary change in the condition of their companies. The commissioner from the state of Massachusetts assures us that his state companies and the insured prefer the four per cent standard. That being the case, the companies there will continue to reserve on the four per cent just as many companies do in New York. There is no reason why the lowering of the governmental standard should lower the private standard of the company. There are a great many things in which the private standard is far above the governmental standard, and it is very often unwise to push the governmental standard too high. It is better to leave something to private judgment. The government must not require too much. Again. It is certainly clear that for many years to come the standard at four and a half will be quite safe. If it appear to be unsafe some ten or twenty years hence, it will be a very easy matter to raise it gradually to four per cent, or even higher, because it is clearly possible that interest may fall to three per cent, and the four cent standard, even, would not then be safe. In case it should be the sense of the convention that it is best to adopt the four per cent standard, I wish to impress on you the importance of making the change gradually. I think that a sudden decrease in the rate would be a breach of faith with the companies now reserving on a four and a half per cent basis, and would be contrary to sound public policy. If the rate is lowered there should be a provision for a gradual change; the difference between the two modes of valuation has been shown to be something like eight per cent on the total reserve, and the provision should be that at the next valuation the four and a half per cent reserve should be increased by about two per cent; and that total amount should be the governmental requirement for that year. The next year four per cent should be added to the four and one half per cent reserve, and that should be the standard for that year; the next year, six per cent added to the governmental standard, and the following year the governmental standard made four per cent in full. In that way the change may be brought about without any trouble, and I think that it is certainly desirable to avoid disturbance in the condition of companies. Anything of that kind 'njures public confidence in the institution. I agree most cordially with the remarks of Mr. Bryant yesterday in regard to the winding up of companies. I think it is a thing that never should be done if possible, as long as a company has over a thousand members. It is certainly the greatest calamity that can happen to the persons insured. The company can be carried on just as well by its own officers, under proper governmental supervision to see that there is no peculation of the funds, and in the course of time the company will probably become entirely solvent, under the present rates of interest. I am in favor of the principle of gross valuation in some form or other. Net valuation is certainly very desirable, and very applicable in the great majority of cases, but I think that no action should be taken against any company until a gross valuation has been applied to it in some form or other. While the present rates are six per cent and over, it certainly seems absurd to wind up a company on a theoretical assumption of only four per cent. Why not take its actual premiums receivable less one-sixth for expenses-provided that the actual expenses do not exceed that |