H G UC-NRLF Giro State of /New York ITnsurance i)epaitmcnt REPORT ON EXA/niNATION National Automobile Underwriters^ Conference Dated January 5, 191 7 ALBANY B. LYON COMPANY. PRINTERS 1917 ^^ .v^ STATE OF NEW YORK ' " Uneurance Department New York Office: 165 Broadway New York, January 5, 1917 Jesse S. Phillips Superintendent of Insurance Hon. Jesse S. Phielips, Superuifeiideni of Insurance, Albany, Neir YorJr: SiK. — Au exaiuiiiatioii uf the Xatioxae Altomobiee Under- writers' Conference, as provided for under section 141 of the Insurance Law, has just l)een completed and the report is herewith submitted. IIlSTORV Automobile insurance was introduced into the United States by foreign Lloyds about fifteen years ago and is now being written by a large uund>er of nuirine and tire companies. On Decendier 1, l!)Ot>, representatives of aljout a dozen com- panies met in jSTcw A'ork city and formed the " Association of Automobile Underwriters," ado'pting a constitution, rates and policy forms. In June, 1!)11, it was succeeded by the '' Automobile Under- writers' Conference " which, together with several affiliated asso^ ciations, strove to regulate .the business of automobile insurance for a five year period ending about July, 1916, when it was merged, as a local body, into the " N'ational lAiutomobile Underwriters' Con- ference." In this report, the acts and proceedings of the former Automobile Underwriters' Conference are treated as part of the history of the Xational Automobile L'ndenvriters' Conference be- cause the aims and objects as herein described are connnon to both and the histories of the two organizations form one continuous record. The ISTational Automobile Underwriters' Conference is an unin- corporated association of five local " conferences " each with a 9144:6'7 2 '"speoi'fic territoVlal jurisdiction indicated by its name. (See list avtavlied tii.tiiis ruport.) The five Local Conferences are as follows : '1. Eastern Automobile Underwriters' t'onfereiue (formerly tlie " ATitoino- bile Underwriters' Conference"). 2. The Western Automobile Underwriters' Conference. 3. The Pacific Coast Automobile Underwriters' Conference. 4. The New England Automobile Underwriters' Conference. 5. The Southern Automobile Underwriters' Conference. These local conferences are themselves nnincorporated associa- tions of insurance companies transacting" a general fire, marine, or both fire and marine insurance business. Only through afliliation with some one of these local conferences in w^hose territory it does business, can an individual insurance company become a member of the National Conference. The first meeting of the National Conference was held August 24:, iok;. Oegais^izatio^" and Objects The purpose of the organization, as set forth in the constitution, is to •' promote and facilitate scientific underwriting covering all forms of insurance pertaining to automobiles." It is intended : (a) To serve as a medium of excliange of information. (b) To secure the ado|)tion by underwriters of suitable and uniform policy forms and clauses. (c) To investigate class or general hazards and ])rocure and compile statis- tics concerning losses and tlicir causes, with a view to eliminating or reducing the danger of tire and other hazards insured against and to the furtherance of intelligent imdorwriting by its members. (d) To prevent rebating and unfair discrimination. (e) To harmonize insurable values, rates, methods of rating, commissions (including contingent commissions), brokerage, policy lorms and underwriting practices generally. The ^National Conference consists of five delegates from each of the five Lo<^al Conferences. From these delegates the officei's of the J^ational Conference are elected, consisting of a president, a vice-president and a treasurer, the present incumlDeuts being: President Douglas F. Cox. Vice-President -Tohij Marshall. Jr. Treasurer Chas. G. Smith. Secretary L. G. Hodgkins. 3 The Conference carries on its business through the following committees: 1. Executive and Underivriting Committee, consisting of two delegates froan each Local Conference, is charged with the duty of making rates and niles for carrying out the general work of the Conference; also, of adopting policy fonns and clauses. It can thus call for such reports from Local Conferences as it sees fit and has such general powers as are necessary for the furtherance of the objects of the Association. The present membership of the com- mittee consists of: H. F. Sewall .• ; Eastern Conference. C. K, Yungman Eastern Conference. H. R. Cloiigh New England Conference. W. R. Hedge New England Conference J. Marshall, Jr Western Conference. F. J. Sauter Western Conference. M. Dargan Southern Conference. C. J. Neare Southern Conference. J. B. Levison Pacific Coast Conference. T. IT. Anderson Pacific Coast Conference. 2. Committee on Brol-erage and Comntissions, consisting of one delegate from each Local Conference, has jurisdiction over all matters concerning the classifying and standardizing of commis- sions and brokerage. 3. Befcrence Committee, composed of two delegates from each Local Conference, possesses full power to hear and determine: A. Difl"erences between Local Conferences regarding rates, commissions and In-okerages, where the question involves the business methods and practices in the territory of two or more Local Conferences. ]?.. All charges against Local Conferences based upon their obligations as members of the National Conference and their obedience in its rules, laws and regulations. C. All charges against company members of Local Conferences or tlieir olli- cers or agents, relating to rules of the National Conference, or which may relate to acts or business practices occurring in the territorial jurisdiction of more than one Local Conference. D. Any charge pending before a Local Conference wliicli by unanimous con- sent may be referred to the National Conference Reference Committee. E. Appeals from decisions made by Local Conferences. The Reference Committee is thus designed to act as a court to hear and determine questions of violation of the jSTational Confer- ence rules, and to pass upon Ivusiness methods and practices. Like a federal tribunal its jurisdiction attaches when more than one local conference is involved, and its activities are calculated to ad- jiist diiferences which local conferences cannot themselves adjust. It enforces National Conference rules and regulations. To enable this committee to fullill these duties, it is given the power to examine all files and records of a local conference or its members and to examine, undei* oath, the officers and employees of such conferenc-e. And its decisions are nnide effective by its power to enforce proper penalties, including the imposition of fines. Pro- vision is therefore nuule lor a deposit of $2,500 from each Local Conference to be held subject to these fines. Local Coxfeeences The five Local Conferences are unincorporated associations of marine and fire insurance companies, organized to handle the local problems arising in the transaction of automobile insurance busi- ness, and possessing practically a complete local autonomy within their respective jurisdictions. All of these Local Conferences are organized along the same lines with identical constitutions, but with individual sets of rules made by themselves to meet their local ne^ds and approved by the Xational Conference. Membership is open to all duly api)roved underwriters of automobile insurance. Their constitutions provide for ofiicers consisting of a president, vice-president and secretary-treasurer. There is also provided an executive committee consisting of the three officers and nine other members elected by the Local Conference, having general charge of the business and aft'airs of the Conference. It audits accounts, levies assessments, promulgates and enforces all rules with respect to rates, commissions and agencies, and iiiles generally relating to the business of automobile insurance authorized or adopted by the National Conference. It has power to fix and declare special rates under niles of the Xational Conference and to make rules cover- ing local conditions which are not covered by any rule of the N'atipnal Conference. It acts as a Grievance and Arbitration Committee with full power to hear and determine all differences between company members, and all charges against members with respect to rules obligatory on members. xVnd it has concuiTeiit jurisdiction with the Eefer- ence Committee of the jSTational Conference, subject to right of appeal to that Committee, to hear and determine charges against its members relating to rates, policy forms and agents' commissions and brokerage. Like the Reference Committee of the National Conference, it has the power, through the General Manager of the National Board, to examine records and files of a member or its agents ; to examine under oatli the officers, agents and employees of its mem- bers, and to impose proper penalties and fines. The company members of the Local Conferences, on their part, pledge themselves to submit all their disputes, growing out of the rules of the National Conference, to the Eeference Committee of the N'ational Conference, and to submit all disputes, growing out of local rules, to the Executive Committee of the Local Conference. Each member agrees to observe all provisions of the constitution and rules of the National Conference and its Local Conference, and to carry out the decisions and awards of the two committees. Rules Local Conferences are permitted to promulgate and enforce their own rules covering local conditions insofar as they do not conflict Avith those of the N'ational Conference. These include rules regarding agents, granting of rebates, commissions, conmiit- tees, hearing and determining of charges against members, etc. The Xational Conference in its rules has established a standard set of definitions of agents as follows. (a) Department Manager: Representative having exclusive authority over more than one state but less than United States. (b) ^tate Agent: Eepresentative having exclusive authority over not less than one state. (c) District Agent: Representative who is appointed by the company in good faith to supervise and have exclusive jurisdiction over a territory less than a state, to whom all local agents in that territory report. (d) Local Agent: Any local representative reporting to one of the above, or to a Home Office or Branch Office. The various local conferences (with the ap]n-oval of the Xational Conference) have adopted various rules limiting the number of 6 agents and establishing commissions in their respective territory as follows : Eastern Conference: Agents, maximum commission 20% Brokers, maximum commission 15% District Agents, maximum commission 25% Exceptions: Cities of Buffalo, Rochester, Syracuse, Baltimore, Philadelphia, Pittsburg; Agents, maximum commission 25% Brokers, maximum commission 15% Xew York Metropolitan District: Ag-enfs, maximum commission 25% Brokers, maximum commission 20% Philadelphia and Pittsburg ^Metropolitan District: District Agents, maximum commission • 30% Neiv England Conference: Agents, maximum commission 20% Brokers, maximum commission 15% Exceptions: Cities of Portland, Providence, Bridgeport, Hartford and New Haven : Ag-ents, maximum commission 25% Brokers, maximum commission 15% Boston and various suburbs: Agents and Brokers, maximum commission 20% Southern Conference: Agents, maximum commission 20% Brokers, maximum commission 15% ^\^ est em Conference: Agents, niaxinuuii commission 20% Brokers, iiia.xiiiunii commission 15% Exceptions: Cities of Chicago, Cleveland, Cincinnati, St. Louis, Kansas City, ^Minneapolis. Lansing, Grand Rapids, St. Paul, Milwaukee, Detroit, Indianapolis, Omaha, etc.: AgTuts, maxiiuum commission 25% Pacific Coast Conference: Agents, maximum commission 15% Brokers, maximum commission 10% Exceptions: San Francisco, one agent allowed xmlimited commission: Los Angeles, Pasadena. Oakland. Salt Lake City, Portland; Agents, maximum commission 20% Brokers, maximum commission 15% Seattle, Tacoma: Ag-ents, maximum commission 25% Brokers, maximum commission 15% FlISrANCIAL The j^ational Conference obtains its income by assessments upon the five Local Conferences, such assessment being fixed by the National Conference. The receipts and disbursements since the organization of the JSTational Conference, August 24, 1916, to November 10, 1910, follow: Receipts: Assessments $14,230 00 Bank interest 2 95 $14,232 95 Dishiirsements: Salaries $2,355 99 Furniture 512 75 Rent 333 32 Printing and stationery 373 22 Postage, telephone and telegraph 100 26 Traveling expenses 33 57 Miscellaneous 63 58 3,772 69 Cash balance $10,460 26 The books of account of the Conference consist of a cash book and an assessment book. While the number of entries is now small, such records suffice for the time being. But with the increase in the number of items as the Conference grows, it will be increas- ingly difficult to take oft' a financial statement unless the accounts are properly classified in a ledger. Assurances have been re- ceived from the General ]\ranager of the Conference that such a record will be installed on Tannary 1, 1917. Affiliations Co-operative relations are maintained between this Conference and the Workmen's Compensation Service Bureau since many casualty insurance companies write collision and property damage insurance, which is also written by some of the members of this Conference. Representatives of both organizations meet for the discussion and settlement of questions of mutual interest, particu- larly that of rates. "Wliile the commission allowances are some- what different, the Conference follows the rates promulgated by 8 the Bureau and uses the same forms of policies and endorsements covering this class of business. A statistical committee of the Compensation Bureau has been co-operating with the Conference in drawing up and distributing forms for obtaining rate statistics for these lines of business. Moreover, the two organizations are now working to establish a general information service to aid the companies in detecting un- desirable risks, and thev co-operate in preparing and publishing a list price manual, and a manual of rules and rates. Policy Forms and Features There are three general policy forms used in the writing of automobile insurance, as follows: 1. Valued foiins; 2. Xon-valued forms; 3. Standard fire forms. The " valued " and '' non-valued " forms have been prescribed, while the use of the "^ standard fire " fonn has been approved by the l^ational Conference. The " valued " form is similar to the " non-valued " form, and is considered desirable because the value of the property insured is fixed at the date the policy is issued and losses are adjusted according to this value. It is more in demand for city use, especially when it covers the theft feature, (considered more hazardous in cities), and eliminates, to a certain extent, any controversy at the date of loss as the insurance carried is agreed to be the value of the car. This " valued •' form, however, is pro- hibited in some territories where the lack of inspection facilities may encourage the writing of grossly overvalued risks. In fact, some companies refuse to write valued policies at all. And in rural communities where the theft hazard is a less important factor, this form is much less used than the " non-valued " form with the theft clause eliminated, or the '' standard fire " insur- ance policy, both of which are written at a lower rate. The " standard fire " insurance form is sometimes used by fire companies, and is written at the same rates as the " non-valued " fire and transportation policy. It does not cover the transporta- tion hazard, however, which the other form covers. The above described forms are used in providing different kinds of coverage for private pleasure cars, commercial trucks and electric automobiles, as follows : After January 1, 1917 (1) Valued (2) Non-Valued Form A, covering Fire, Theft and Form B, covering Fire Theft and Transportation, and containing an Transportation. automatic Reinstatement clause. Form C, covering Fire and Transpor- tation. The principal features of the above forms are briefly described as follows: Fire : Covers against loss or damage bv fire from any cause whatsoever, and from lightn um. Transportation : Covers against loss while being transported in any conveyance by land ot water through stranding, sinking, collision, burning, or derailment of such conveyance; also against general average and salvage charges for which the assured is legally liable. Theft: Covers loss or damage by theft, robbery or pilferage, excepting by any persons in the assured's household or in his employment, and excepting also the wrongful secretion by a mortgagor or vendee in possession under mortgage, conditional sale, or lease agreement ; and excepting, in any ease, the theft of tools and repair equipment. Rehistatement Clause: This is found only in the " valued " fonus, and provides that the company's liability is reduced by any loss or damage, whether covered by insurance or not, until repairs are completed, when the policy attaches for the original amount without additional premium charge. Valued Clause: The automobile insured (body, machine and equipment) is valued at the sum insured. In event of loss or damage, adjust- ment is made on the basis of the ao-reed value. 10 Non-Yalued Clause: The liability of the company is fixed at the actual cash value of the property at the time loss or damage occurs, such value being subject to proper depreciation charge, and not to exceed actual cost of repairing or replacing; provision is made for appointing ap- praisers, if necessary, in fixing such values. Exclusions: All of the above-described forms provide that the company is not liable for loss or damage to (a) Wearing apparel, personal effects or extra bodies, or (b) Caused by invasion, riot or military power. Eiders and Endorsements The Conference provides for the use of various riders and en- dorsements which may limit, reduce or extend the coverage, and which may therefore increase or decrease the premium charge. But it has adopted no forms, riders, or endorsements covering lia- bility arising from personal injuries, this class of business known as Liability insurance being written by casualty companies and not by fire or marine companies which compose the membership of this Conference. Some of the more important riders used by the Conference are described as follows: Collision Clause: Covers damage sustained to the machine insured, by collision with another automobile, vehicle, or object, excluding damage to tires (unless total damage to machine exceeds $200), excluding damage caused by striking any portion of the roadbed, or striking rails, or ties of street, steam or electric railroads, and excluding coverage while in any race or speed contest, or while being driven by a minor. This clause is known as the " full coverage " clause. Another form of collision rider is called the " deductible average clause," and provides for the payment of each claim in excess of $25 only. Property Damage : This endorsement covers the amount for which the assured may become liable for damage to property through collision of as- 11 sured's automobile with any other aiitoinobile, vehicle or object. It fixes the liability of the company to value of property destroyed, or cost to repair, and limits gross liabilities for any one collision to the amount stated in the endorsement. Fire Extinguishing Devices: The assured agrees to carry at all times, attached to the auto- mobile, at least one fire extinguisher approved by the Underwriters' Laboratory of the National Board of Fire Underwriters. A reduc- tion in premium is allowed under this rider. Special Forms: Other forms may be submitted and approved by the Executive Committee. Special forms are very generally submitted by appli- cants for a special rate upon manufacturers' risks and Ciuite fre- quently upon taxicab risks. These forms restrict and specify exact coverage, and rates depend considerably upon the particular form desired. Tornado, Eartliquahe, Explosion and Accidental and External Discharge or Leakage of Water: An endorsement providing for this coverage, either in whole or in part, may now be attached to the policy at a rate, for the entire coverage, of 10c. The earthquake and leakage features are ap- parently of little actual value, but tornado coverage in certain sec- tions of the country w^here this hazard exists, appears to be desir- able. And in these sections, the rate will be much higher for this particular kind of coverage. This endorsement goes into effect in January, 1917. Personal Effects Clause: After January, 1917, the policy may be extended to cover per- sonal effects, a specific amount being insured, at the same rate as charged on the automobile. However, theft, robbery and pilferage of such effects will not be covered. Livery and Renting Endorsemient: Upon payment of an additional premium of one per cent., an endorsement may be attached to the policy, gTanting permission 12 4o j:ent, or le^^e tjt tt?^ tire aiilomubile coTered, ^t carrving jDas- sengers for compensation, on condition that the anioimt of insur- ance is reduced at the rate of two and one-half per cent, a month. European Privilege Clause: In consideration of one-half per cent, additional premium, the policy may be extended to cover the automobiles while in Great Britain or Continent of Europe; also while being transported by land or water within these limits including the risk of one trip by regular line steamer under certain fixed conditions. Dealers' Open Policy Rider: Creates a special form of policy applicable to dealers only. It covers alj automobiles, bodies, chassis, tops or other equipment o^^^led by assured and held for sale from time delivered to him and until delivered to purchaser, renewable annually. Rates ix Effect Befoee Jaxuary 1, 1917 Fire, Transportation and Theft Since the organization of the various automobile conferences, several schedules of rates have been promulgated, such schedules having been modified and revised to meet changing conditions of the automobile business. The more important elements contribut- ing to these changes have been the different classes of automobiles (namely, pleasure, commercial, dealers, manufacturers, taxicabs, etc. ) and the change in the price of cars. The revisions in the rates have in the main, shown a tendency to increase the rates on lower-priced cars, and decrease the rates on higher-priced cars — a tendency based on the theory that the cheaper the car, the poorer the construction — thus increasing the physicial hazard — and the less care it receives, thus increasing the moral hazard. The regular schedule of rates now in use for the Eastern Con- ference, became effective January 1, 1916, and will be in force up to January 1, 1917. They are as follows : 13 Bates for Full Form and Restricted Form of Policy Gasoline and Steam Pleasure and Commercial Type Cars Original list price of automobile when new, excluding cost of additional equipment and extra bodies. Class A, S3 , 500 and up Class B, $2,100 Class C, $1,200 Class D, $700 Class E, $699 and under This year and next year models. Last year models. Year before last models. Three years old models. Insure for Not to Exceed Actual Cost Full form . . Restricted form Full form . . Restricted form $1 50 1 00 Amount of insur- ance at option of company Amount of insur- ance at option of company Full form . . Restricted form / Full form \ Restricted form Full form . . Restricted form $2 25 1 75 Amount of insur- ance at option of company $3 25 2 75 Amount of insur- ance at option of company $5 00 4 50 $1 75 1 00 $1 75 1 00 $2 00 1 00 $2 00 1 00 Insure for Not More Th.\n 80% of original price 70% of original price $2 50 1 75 60% of original price $2 75 1 75 60% of original price $3 00 2 00 Insure for Not More Th.\n 50%, of original price $3 00 2 25 50% of original price $3 25 2 50 40% of original price $3 75 2 75 40%. of original price $4 00 3 00 Insure for Not More Than 40%, of original price 40% of original price $4 25 3 50 30% of original price $4 75 3 75 30% of original price $5 00 4 00 Insure for Not More Than 30% of original price $5 25 4 50 30% of original price 30% of original price 30% of original price $6 00 5 00 Full form covering fire, theft and transportation — minimum premium $10.00. Restricted form, same as full form, with endorsement attached eliminating theft and valued feature. Note. — Above rates are for $25.00 deductible feature in theft policies. There is a separate schedule of rates for Electric Automobiles, ranging from one aiid one-fourth per cent, for this and next jear models, to two and one-fourth per cent, for older than three-year models, a reduction of one-fourth per cent, being allowed for the restricted form. There is also a schedule for Dealers' Automobiles ranging from two and one-fourth per cent, for the highest price cars to U\o and three^fourths per cent, for the lowest. 14 All of these rates are annual rates. As shown above, the sched- ule divides automobiles into five classes according to list price, the divisions between classes being arbitraiy and apparently having contemplated gi-ouping cars according to the make. Each of these classes is sub-divided into five divisions by age of car, and the amount of insurance indicated for each price classification and age classification. The older the car, the smaller the percentage of its value can be insured. Models of current year and next year may be insured for any amount not exceeding actual cost; cars valued at $3,500 and up (Class A cars) may carry any amount of insurance regardless of age, (not exceeding actual cost, of course). Ijut limitation is placed upon the amount of insurance which may be written on cars of last year's model and older, falling under all other price classes, such limitation varying under the different classes and ages of models. Xone of these rates were based upon statistics gathered for the purpose, although the experience of individual companies w^as used. And there are no records or statistics in the files of the Con- ference which would indicate whether these rates were equitable or just. A special form of policy is used covering Dealers' Automobiles, furnishing coverage from the time the dealer obtains the car until he disposes of it. The rates indicated above, for this form of policy, are slightly highei- than the average rates shown in the regular schedule. However, pro rata cancellation at the request of the assured is pennitted, instead of applying the customary short rates under such circumstances. And when the initial premium on any dealers' risk amounts to at least $500, such risk may be specially rated and written upon a special policy form. Speciat. Rates on Commercial Fleets In cases where insurance of $15,000 or more is desired on a number of commercial cars (called a commercial fleet), a special rate may be allowed in the Eastern Conference as per the follow- ing schedule : Commercial Car Schedule Commercial cars for this special schedule are classified accord- ing to business in which such cars are employed, as follows : 15 Class 1. Wholesale delivery and transportation of heavy merchandise. Class 2. Retail delivery and transportation of light merchandise. Class 3. Express wagons, mail wagons, moving vans, and cars engaged as common carriers or in the carrying of goods of others for hire. Group A — Gasoline Cars, $2,500 and Over (Chassis Price) : On cars of model not more than two years older than current year (i. e. 1914, 1915, 1916 and 1917 models in calendar year 1916), charge following rates: Road Bate Inside Rate Class 1 56 2/3 tariff fire rate Class 2 90 1/2 tariff fire rate Class 3 1 .25 1/3 tariff fire rate On cars of model more than two years old (1913 and older in calendar year 1916) add 15% of above road rate for each additional year of age. Group B — Gasoline Cars Under $2,500 (Chassis Price) : On cars of model not more than one year older than current year (i. e. 1915, 1916 and 1917 mod,els in calendar year 1916), charge the following rates : Road Rate Inside Rate Class 1 75 2/3 tariff fire rate Class 2 1 .20 1/2 tariff fire rate Class 3 1 .65 1/3 tariff fire rate On cars of model more than one year old (1914 and okler in calendar year 1916) add 15% of above road rate for each additional year of age. Group C — All Electrics: Road Rate Inside Rate Class 1 42 2/3 tariff fire rate Class 2 69 1/2 tariff fire rate Class 3 86 1/3 tariff fire rate The amount of insurance is left to the discretion of the underwriters. Allowance for fire only form (commercial trucks) : This and next year's cars, 1 ton and over 10c All other cars 5c Amendments to Schedules for Eating Automobiles of the Private Pleasure Type in Connection with Schedules of Automobile Trucl'S Belonging to Public Service Corporations Where all property covered is housed in buildings of approved fireproof construction and equipped with an approved system of automatic sprinkler, the following schedule may be used: 1. Fifty per cent, of rate shown on Rate Sheet for Private Pleasure Type of Vehicles. 16 2. Seventy-five per cent, of firie rate on contents of garage where habitually housed. 3. Twenty per cent, of rate under Xo. 1 if allowance has l)een made in rate under No. 2 for superior construction or protection. 4. Ten per cent, deduction for approved repair shop. The above rates are annual and provide fnll coverage. An analysis of the schednle shows that the cars are divided into three main business classifications, each of which is sub-divided into electric and gasoline cars — the gasoline cars being further shown in two groups, one including cars listing at $2,500 or over, and the other group including cars costing less than $2,500. The three elements affecting the rate under this schedule are the class, cost and age of car. The basis of the rate is subi-divided into a road rate (that is while actually in service) and the inside rate (that is while stored in the garage). There are no records or statistics bearing out the road rate factor. The inside rate is based upon the actual fire rate applying to the garage where the cars are housed, a percentage of such fire rate being specified for each class of cars, such percentage being based upon the theory that Class 1 cars are housed twoi-thirds of the time and therefore are rated at two-thirds of the tariff fire rate, that Class 2 cars are housed one^half of the time and therefore are rated at one-half of the fire tariff rate, etc. The rates shown in this special schedule are generally lower than the commercial car rates shown in the regular commercial and pleasure car schedule previously shown. Since the tariff fire rate affects the ultimate rate on this class of cars, the lower or higher such fire rate is, the lower or higher the commercial car rate will be. In fact, it is possible that the fire rate may be so high that the re- sulting premium is greater, based upon this special schedule, than it would be, based upou the regular schedule which is not affected by any fluctuation in the fire rate. At this date, therefore, there exist two schedules under which commercial car fleets may be rated — the regailar schedule for " Gasoline and Steam Pleasure and Commercial Type Cars," and the special '' Commercial Car Fleet " schedule. There is no close relation between the two schedules, and any single fleet figured upon the two schedules will result in different rates. This may 17 result in a possible violation of the provisions of section 141 of tlie Insurance Law, provided some fleet is rated under the regular schedule, which may com23ly with all specifications and require- ments necessarv to be rated under the special fleet schedule. In such an instance, two risks of " essentially the same hazards and having substantially the same degree of protection against fire " would be difl^erently rated, and would result in " unfair discrim- ination." A further possible '' unfair discrimination " results from the limitation of the application of the " commercial fleet " schedule to fleets, the insurance upon which shall aggregate at least $15,000. While it may be possible that fleets upon which the insurance would amount to $15,000 or more receive better care and are better housed than smaller fleets, the actual diiference in the hazard has no eftect upon the application of this schedule, the amount of insurance carried being the only factor absolutely permitting the application of this schedule. This is an apparent violation of sec- tion 141, since it results in an unfair discrimination between risks of essentially the same hazard, -in that fleets, the insurance upon which amounts to less than $15,000, are rated higher than fleets insured for $15,000 or more, although practically no difference in hazards may exist. In the application for a special rate upon any commercial car fleet, the statement is required that the insurance desired is upon all commercial cars owned by the applicant in any given location and district, and the use of this special schedule is not contem- plated unless all such cars are included in the coverage. The sched- ule is not applied to a portion of a fleet, even though the insurance on such portion would amount to $15,000 or more. This condition may be a violation of section 141 of the Insurance Law, one of whose provisions is that no association shall fix or make any schedule of rates which is to, or may apply to any risk within this State on the condition that the whole amount of insurance on such risk shall be placed at such rates. Special Rates on Manufactukers' Cars and Taxicabs At the present time, each Local Conference, according to its own rules, permits the fixing of special rates and the approval of special 18 forms of policies on si^ecific risks on cars owTied by automobile manufacturers, and on taxicabs where one individual, finn or corporation owns or operates a certain mininuim number of such taxicabs. A special committee, one of whose members is generally the applicant, is appointed to consider every individual application, which committee recommends a rate and policy fonn covering the particular risk. Such rate and form is thereafter bulletined to all interested members. The rates upon manufacturers' cars are generally based upon the expected annual output af the factories, nimiber of cars stored in any one locality and length of time they remain in the manu- facturers' possession. The main elements affecting such rates are the prevailing fire rates on the premises where cars are stored, the amount at hazard in any one particular place, valuation placed on each car, and theft coverage or elimination. Since the policy form demanded on the various manufacturers' risks differ considerably in their conditions, the rate applicable to any one form is dependent to a large extent upon the underwriters' judginent, there being practically no experience covering any one fonn of policy, and, consequently, no rate or policy necessarily bears any fixed relation to another rate or policy. Special rates covering taxicabs (and applying likewise to livery cars, busses, etc.) are made up by the Local Conferences in the same manner as manufacturers' rates. The general rules recom- mended a rate (for the Eastern Conference) of not less than two and one-half per cent, on taxicabs, but provided for a special rate where a single individual, firm or corporation owns or operates more than twenty such vehicles. There is no fixed methotl of ar- riving at these special rates, but they are presumably more or less affected by the list prices of each car, make and condition, disci- pline of employees, limit of liability for any one loss, and any previous underwriting experience of the risk. The greatest effect, however, results from the road rate, the extent to which used on the road, and the age of the machine. In some instances, taxicabs are insured as contents, under the regular fire policy covering the building where they are stored, no coverage being carried upon the road risk. In that event, the rates are the regular fire rates over which the Conference has no supervision. 19 While the files of the Eastern Conference show the details and conditions, fire rates, etc., pertaining to each special rate, there is no fixed method of working" out such special rate and the records do not reveal to what extent the diiferent factors may have affected the rate. It would appear that the judgment of the special rate committee has a great effect upon these special rates, and as all these rates are not devised by the same conmiittee, there can he no a;bsolute uniformity in the resultant rates. There is an apparent violation of section 141 of the Insurance Law, due to the restriction of these special taxicab rates to risks covering more than twenty cars. Application for such rates involv- ing less than twenty cars have been made but rates refused for that reason. The law prohibits any unfair discrimination between risks of essentially the same hazard. The hazard of the risk does not affect the eligibility for these special rates, the only condition imposed being in regard to the number of machines to l>e covered. Attention to this apparent discrimination was called in the re- port upon the Automobile Underwriters' Conference dated Decem- ber 30, 1911, and while the Conference recognized this condition, as indicated in the report of the Executive Committee to the Con- ference, dated Febniary 28, 1912, and therein recommended some provision be made to uniformly rate risks of the same class and hazard, no action was then taken to remedy this condition. At a subsequent date, December 11, 1915, attention was again directed to this matter, and to the possibility of unfair discrimina- tion occurring in the rating of commercial fleets upon the two dif- ferent schedules, namely, the regular " pleasure and commercial car " schedule and the special " conuuercial car fleet " schedule, as explained before — together with the possible violation of the law in the restriction of the application of this special " commercial car fleet " schedule to fleets whose insurance must aggregate $15,000. Attention was also directed to the possible violation of the law in requiring all cars of any fleet to be insured in order to secure the special rate, the law not pennitting the making of a rate conditioned on the placing of all the insurance at such rate. To investigate these criticisms, a " Special Rate ' ■ Committee was appointed by the President of the Xational Automobile Con- ference which made a report at the ann\ial meeting of the Confer- 20 ence November 16, 1916, whereby it iinanimouslj recommended that the Conference discontinue its present method of special rating, and use instead certain class rates for these various risks. l^othing came of this effort, however, as the recommendations of the Committee were not adopted. The possibilities of the viola- tions of section 141, therefore, still exist and nothing has been done to this date to remove such apparent discriminations. Eates in Force After January 1, 1917 One of the objects sought in the organization of a national con- ference like this was the establishment of fair, adequate and scien- tific rates. As hereinbefore stated, there are no general conference statistics in existence as a basis for such rates, although steps are being taken to remedy this situation. The Conference, however, considered it necessary to revise the regular rates so that they would reflect more adequately the individual experience of the company members. And this revision was made to take effect January 1, 1917, along the lines hereinbefore indicated — a de- crease in the rates on the more expensive cars, and an increase in rates on lower priced cars. A new commercial truck scJiedule was adopted, thus separating it from the private pleasure car schedule. The schedules follow : 21 T. C 02 GS w bC ^03 O.S CD M IM —li-i c a gg ■*05 10 (Nt^ I ro'S "E 8 12s a SI ^ -" « ° c c H c S 3 3 o n iill £ 3 aS St5 £"2 3 i ■5« £ > C > ■5 I o £ o = 00 c ^5 ■ - X c J= — -r h r. a I q 3 ■5 I 5^ 22 These rates provide full theft coverage, thereby eliminating the $25 deductible feature (whereby $25 is deducted from each and every loss). The minimum premium is abolished. A comparison of this new Private Pleasure Car Schedule with the one now in force, shows that the classifications of the list prices of cars have been changed. Class E, instead of including cars listed at $699 and under, now comprises cars costing $799 and under; Class D, previously headed $700 to $1,199, now reads $800 to $1,399 ; Class C, formerly $1,200 to $2,099, now reads $1,400 to $2,499 ; Class B, previously $2,100 to $3,499, now reads $2,500 to $3,499; 'Class A containing the highest price cars, re- mains unchanged. Moreover, the rates for the three lowest price classifications have been increased so that cars of this year's model, valued between $1,400 and $2,499, which had previously taken a rate of $1.75, will now rate at $2 ; cars valued between $800 and $1,399, previ- ously $2, will now be $2.75 and cars classified at $799 and under, the lowest priced, and hence most widely used cars, formerly rated at $2, will now have to pay $3.75. The increases affect most of the models. The rates, how^ever, on the two classes of higher priced cars, have been decreased for the older models, so that a three year old model valued at $3,500 and up, and formerly rated at $3.25, will now be rated at $2.75, and three year old Class B cars decreased from $4 to $3.50. Another factor tending to increase still further the rates on the lower priced cars, is the change in the list price classification men- tioned above. The result of this change is approximately as follows : 1. Three of the lowest price pleasure type models previously classified in the $700 to $1,199 classification, and rated at $2 for full coverage, would have been increased to $2.75 if they had re- mained in their old price classification ; but on account of being shifted to the low^est classification ($799 and under), Avill now be rated at $3.75 — a change from $2 to $3.75. 2. In the former $1,200 to $2,099 classification were forty-two models of various pleasure type cars. In addition to the increase in the rate on these models from $1.75 for full coverage, to $2, fourteen of the lowest priced and most widely used of these models, by being shifted to the next lower price classification ($800 to $1,399), will now be rated at $:2.75 or a change in rate from $1.75 to $2.Y5. 3. In the fonner $2,100 to $3,499 classification, were thirty models. Without any change in ]3rice classification, these would have taken the same rates as before — namely $1.75 for full cover- age on new models. Kine of these models, however, will now be rated up to $2. The changes in the above schedule as heretofore, are not sup- ported by any general statistics in the possession of the K'ational Conference but only by experience of individual companies. Theft Losses — Pleasuke Caes According to the Manager of the Conference, the individual ex- perience of the companies has shown an unusually high loss ratio for theft coverage on cheaper pleasvire cars. It is asserted that such cars, because of their uniform construction and appearance, with the consequent lack of distinguishing features, are almost impossible to recover when stolen, and are easily disposed of by thieves. The Conference has attempted to reflect this individual experience in the new rates, since they make the theft coverage the most expensive feature of the policy — at least in the lower price classifications of the newer models. For example, in Class E ($799 and under), a charge of $1 is indicated for fire and trans- portation, while the addition of theft coverage increases the rate to $3.50. In Class D ($800 to $1,399), addition of theft coverage in- creases the rate from $1 to $2.50. In Class C ($1,400 to $2,499), from $1 to $1.75. In Class B ($2,500 to $3,499), from $1 to $1.50. In Class A ($3,500 and up), from $1 to $1.25. The theft hazard, according to the General Manager of the Con- ference, is becoming so serious that in addition to various steps taken by the companies to aid in recovering stolen cars, the Confer- ence is considering the allowance of certain rate reductions to en- courage the use by the assured, of standard and approved auto- 24 mobile locking devices as a protection against theft. In fact, it has been proposed to allow fifteen per cent, of the theft premium for the installation of a locking device approved by the Under- writers' Laboratories, which proposal will doubtless be adopted by the jSTational Conference. The following schedule shows the charges made for theft cover- age, Avhich are already included in the Private Pleasure Car Schedule previously shown, but are here separated for better analysis : PLEASURE VEHICLES— (THEFT ONLY) After January 1, 1917. List price of vehicles Class A, $3 , 500 and up Class B, S2,500 to $3,499 Class C, $1,400 to $2,499 Class D, $800 to $1,399 Class E. $799 and under This and next year's models. $0 25 25 25 25 25 $0 50 50 50 50 50 $0 75 50 50 50 $1 50 1 25 1 00 75 82 50 This and last year's models 2 00 1 00 Three vear old models 75 75 An analysis of these charges shows that the rates are highest for the cheaper models (indicating the greater theft hazard), and de- crease as the car gi'ows older. Apparently the hazard is con- sidered less for the older than the newer cars. In the case of higher priced cars, the theft hazard is comparatively small, (owing, it is stated, to the constant use of private chauffeurs), and is prac- tically the same regardless of the age of the car. Fire Losses — Pleasure Cars The fire experience, for all models and classes of cars, has been uniformly good, according to the Manager and the rates for this coverage have been kept the same for the cheaper models and have even been decreased for the higher priced cars. It will be noticed that in cars of " this and next year's models," a uniform fire rate of $1, regardless of value of car, was in force in the previous schedule and is still retained in the new schedule. This rate increases with the increasing age of the car. It will also be noticed that the fire rates are higher for the cheaper models than 25 for the higher priced cars — due, it is claimed, tO' the greater fire •hazard from cheaper engines. The differential between the valued and non-valued forms of policies is 25 cents, regardless of price or age of car. Commercial Truck Eates Under the new schedule of rates effective after January 1, 1917, the Commercial Truck rates which were formerly included with Pleasure Car rates, will henceforth be promulgated in a separate schedule, as follows: 26 Cj fe §te-s § 8^2 ' g 8KS ? 8{2S '1 g 8S8 s-"- •=•& cgc.^ •o'R S"^ ^ •o'^ 0^^ ^ ■o-a go^ s§-| S5-3 ^■3 65-3 O^ 3-a 5:1 °:l ^ z i z o o Z z < i •ol 8^^ g ol ■ol t2g^ ■o'E gS2 10 ou; o a >5S s £S-3 £?-3 ^■3 ^o fa iz 1 s§5 c |z g| b: o - s z o.S '1 1 - g Z §1 a 1 Z g:| 1 2 §s:f: «; S8§ g S8g ,0 ?,g§ 08 n S'^^ 1 *3a 8^- g ■oi WMfN 1 "ol S^^ '' a e4 o z a i 11 3 i a 3 5 b, KS? o ° ° 1 1 ~^ S8g g 8SS g K§5 g gS2 12 e# '' -c'i 99 " •o^ g^" ■o'E gcc. -oK g^^ ^1 £5-3 £5-3 £§"3 eg O s < ^ 1 1 °;| «<% 5 o 1 1 a SS "B^->> Kg;? °^ 'o| S8S 1 ^ 8Kg ftl K§;s i^ |iil e© " ol «l» 3§i| «« lilt ^ Oo £ 3 ao IJ 11 iii§ Ij&g n d : c e C c o ^0 s c5 d^ c5 C.2 dJ : •5 i IH O fc. c til ° o = III III I i^i pJ c-3 ; 1^1 i^t 1 Hi T)£ ■" 1^^ is a g a o)t3 C Ot3 C a — C > "g>> X ^ci ^ C H ^ifi ^ii ^ii C3 O O ^ O O "3 o o ■300 "3 & >2Z >ZZ >ZZ >zz >zz 1 -^=^ -^cifi ^oi.-^ ^^i« ^^ici S ^ s fe is T) 2 i -o ■§ .2 O 73 ■0 05 1 i 1 s 1 o 1 1 ' O Z O H H ^ 27 The separation of the commercial truck rates from the pleasure car rates was effected because the committee believed that the ex- perience on the one diverged to a considerable extent from the ex- perience on the other. A general comparison of the two new schedules shows, for example, that the fire rates on commercial trucks are higher than those fixed for " Pleasure cars," while the theft rates are considierably lower, especially for the cheaper models. The committee decided, after an examination of the avail- able data which indicated that comparatively few trucks were stolen, that the theft rates on commercial trucks should be materi- ally decreased. The following nominal charges for theft coverage only have been provided in the new rates : COMMERCIAL VEHICLES— (THEFT ONLY) After January 1, 1017 Class A, S3, 500 and up Class B, $2,500 Class C, «1,400 to $2,499 Class D, $800 Class E. $799 and under All models (regardless of age) . In both of the new schedules been fixed as follows : rates for second-hand cars have 1. "New cars" — add 10c to rates shown in each class. 2. "One year old cars" — add 25c to rates shown in each class. 3. " Two year old cars " — add 50c to rates shown in each class. 4. "Three year old cars" — add 75c to rates shown in each class. 5. " Four year old and older cars " — add $1.00 to rates shown in each class. Rates for Elect ric Automohiles have been changed slightly. They are as follows: ELECTEIC AUTOMOBILES— (PLEASURE AND COMMERCIAL) Ye/ve op Model VALUED FIRE, THEFT AND TRANSPORTATION NON-VALUED FIRE, THEFT AND TRANSPORTATION NON-VALUED FIRE AND TRANSPORTATION New Second hand New Second hand New Second hand This and next year's models. . . . This and last year's models Year before last models $1 25 1 50 1 75 2 00 2 25 $1 30 1 90 2 20 2 50 $1 00 1 25 1 50 1 75 2 00 $1 05 1 35 1 65 1 95 2 25 $0 90 1 15 1 40 1 65 1 90 $0 95 1 25 1 55 1 85 Older models 2 15 28 The rates for Dealers' AutomohUes have been fixed as follows: 1. Xon-valued fire and transportation policy: Charge building contents fire rate. Minimum rate 1%. 2. Non-valued fire, transportation and thpft: Add 25c to fire rate required for non-valued fire policy. Minimum rate 1.15%. 3. Valued fire, transportation and theft policy: Add 10c to rate required above for non-valued policy. Minmum rate 1.25%. Second Hand Cars: Charge 1% additional to above rates. Cancellations: Pro rata cancellations allowed provided a niimimum charge of $1.00 is secured for all cars listing .$1,200 and over, and ..30 for all cars listing under $1,200. It is also provided that where the dealer has more than one storage or selling location in any one city or town, the bnilding contents rate of the highest rated location must be charged. The rate schedules shown above, have, up to this time, been pro- mnlgated only for the Eastern and Xew England Conferences. Schedules have also been prepared for the other three Conferences and will be definitely adojited as soon as they are approved by the Local Conferences and the Xational Conference. Such rates will not be the same as those already promulgated but will probably provide for a differential to allow for special conditions in the ter- ritory of the other Local Conferences. COLLISIOX AND PeOPERTY DaMAGE RaTES Most of the collision and property damage insurance is written by casualty companies. The rates, therefore, for this class of busi- ness have been promulgated for the use of such companies, by the Workmen's Compensation Service Bureau; and these rates have been adopted by the fire and marine companies composing the membership of the Conference. For collision rates, private pleasure cars have been classified ac- cording to manufacture, list price and model, and flat rates have been established for the " deductible average " and " full cover- age" forms, (described previously under "Policy Forms"). These rates range from $28 for Class lA to $200 for Class Z in $5 and $10 gradations, covering the " deductible average " form. The " full coverage " form demands a $35 additional charge for each class. Livery vehicles are rated the same as private pleasure cars pins twenty per cent, additional. Public cm^s other than livery 29 ^Bhicles are rated at four per cent, of list price, and plus $35 for " full coverage " form. Commercial cars are rated at two and two- fifths per cent, of list price and plus $35 for " full coverage " form. It will thus be noted that all collision rates are based upon the list price of the car. In casualty companies, the maximum liability is limited only by the cost of the car, and therefore full insurance up to the list price is afforded for these rates. However, fire policies usually limit the liability to the amount specified in the policy, and such limit is not, in every instance, the actual list price of the car. That is, a car listed at $5,000 may be insured for only $-1,000 and the rate would be based upon the list price of $5,000, although only $4,000 proi- tection was afforded. Property damage rates for private pleasure automobiles are based upon the horsepow^er of the car, and apply to $1,000 of in- surance, four per cent additional being added for each $100 of insurance in excess of the $1,000. In applying these rates, six groups of districts have been defined and schedules of rates adopted for each district, as follows : Sched- ule Territory 16-horsepower machine 60-horseiDOwer machine 1 2 Chicago (commercial cars) , Greatef New York (Per $1,000) $8 15 5 65 5 65 8 15 5 65 4 90 (Per $1,000) 825 90 21 65 3 Boston and vicinity 18 65 4 23 40 5 6 Albany, Baltimore, Buffalo, Cleveland, Cincinnati, De- troit, Jersey City, Indianapolis, Pittsburg, Milwaukee, etc.. and country sections of various states All other territory 20 15 14 95 It will be noted from the above table that the higher rates are charged in the large cities, and more thickly settled sections of the countiy (except Tennessee, Kentucky and Alabama). Collision rates, on the other hand, are obtained from one sched- ule for all sections of the country. It would seem that if country risks are specially classified in regard to property damage rates, such preferred classification should also be made for collision rates. While admitting the general theory that there is greaier hazard under both these coverages in congested centers, the Association contends that the additional cost of settling the country collision 30 losses on account of inferior facilities, offsets to a veiy larae extent the lesser probability of accident. Public vehicle rates are established according to the above dis- tricts and are based upon carrying capacity. Comirtercial cars are rated according to the nature of the busi- ness and the territory in which they operate. In August, 1916, a Conunittee was appointed by the National Conference to join with the Autouiobile Connnittee of the Work- men's Compensation Service Bureau for the puii^ose of recommend- ing to the companies new rules and rates for the writing of prop- erty damage and collision insurance. This joint committee has had several meetings and has recommended various uniform rules and definitions as to coverage and rates, but no action has as yet been taken on such recommendations. Attitude Towaeu Competitors Organizations like this Conference are subject to more or less competition from non-members. While some such competition has always existed, it has never become serious enough to require drastic action, although company members have been permitted to reduce rates to meet local competition collision and property dam- age insurance in Missouri. As the success of a conference like this depends upon the co-op- eration of the gTeatest possible number of companies in the busi- ness, efforts have been made and are now being made to induce new members to join the Conference, or at least adhere to Confer- ence rules and rates. In any event the control of the business by the Conference (at least in the Eastern and Xew England Confer- ences) bids fair to become complete, insofar as the members them- selves live up to Conference rules, since only about six fire com- panies writing automo'l)ile insurance in these territories are non- Conference companies. And where the Conference has furnished rates to non-members, even such companies have quite generally adhered to these rates. In accordance with the usual practice of organizations like this, Conference companies are not permitted to reinsure any automo- bile business for a non-member, unless such non-member reinsures its entire automobile writings for the purpose of discontinuing the business. 31 The interests of the Conference companies clash with those of other companies in the writing of property damage and collision in- surance. Although the bulk of this business now goes to the casu- alty companies, the Conference uses the rates promulgated by the casualty bureau, and works in harmony with it, even to the extent of allowing company members to unite with casualty companies in reducing rates to meet local competition of non-board companies. The effect upon rates of the actual and potential competition of non-Conference companies, cannot of course be determined. But any attempts to raise rates are usually met by some objection on the part of members to the effect that non-Conference companies may secure the business if such rates are raised. Statistics One of the objects of the JSTational Automobile Underwriters' Conference is to further intelligent underwriting by its members. This necessarily involves the gathering and tabulation of proper experience statistics for the making of rates. Up to the date of this examination, no statistics have been compiled which could justify the rates now in use or those to be ]3romulgated after January 1, 1917, owing largely to the unstable character of the Conferences in the past. While members of various committees which have promulgated or revised rates may have used the experience of individual com- panies, all rates adopted were apparently based more upon " under- writing judgment " of the members than upon any data or statis- tics collected from the company members. Each revision of the regular schedules of rates has shown a tend- ency to reduce the rates on the higher priced cars and to increase the rates on the lower priced cars, although no statistics exist in the Conference records to warrant such action. Moreover, some underwriters contend that risks located in country districts and small towns are less hazardous than risks located in cities, and this opinion is reflected in the lower property damage rates allowed for country districts. jSTeither this Conference, nor the local Eastern Conference has obtained any statistics which would indicate any difference in hazard between risks situated in different localities. While the entire lack of statistics in the records of the former 32 Automobile Underwriters' Conference was criticized in the ex- amination of that organization by this Department in December, 1911, and reiterated in December, 1915, no serious efforts have been exerted to correct this condition, until the organization of the present N"ational Conference in August, 1916. At that time, the Manager of the Conference made an attempt to obtain experience statistics from individual companies for rate-making purposes. Few companies responded and he found it impossible to combine the figures to anv extent owing to the lack of uniformity in their compilation. Statistical blanks were accordingly prepared calling for experi- ence from January 1, 1917, and are now^ being distributed among the companies. But such returns will not be available until June With the regular schedule of rates promulgated by the Confer- ence generally in the hands of the agents and brokers, little occasion arises for the questioning of the make-up of any general rate, on the part of an assured or his agent. But there is always the possibility of inquiries arising concerning special rates, and special schedules which originate at Conference headquarters and the elements of which are not actually known to agents or brokers. As a matter of fact, various assureds or their representatives have appeared at the office of the Eastern Conference upon several occasions and in- quired about the make-up of special rates applicable to commercial fleets. In each case, the application has been produced and checked back to the commercial fleet schedule. In the matter of special rates on manufacturers' risks and taxicabs, however, the Conference records are incomplete as to the actual make-up of the rate covering this class of risks, and it is therefore impossible to obtain a complete explanation of the make-up of the rate. This condition does not conform to section 141, providing that every rating organization shall keep a careful record of its proceedings, and shall furnish upon demand to any person upon whose property or risk a rate has been made, full information as to such rate. Adjustment Bureau According to many underwriters of automobile insurance, ex- cessive competition has adversely affected even the settling of 33 losses, so that there is now considerable competition in making nn- justitiably liberal settlements to get and hold business — especially collision insurance. This overpayment of claims, according to these insurers, is becoming a more and more widespread menace to the business because of the inadequacy of the rates to cover such excessive loss payments. In the belief that the elimination of excessive competition in rates and policy provisions should be supplemented by the elimi- nation of competition in the payment (or over-payment) of claims, and that one would be almost useless without the other, the Local Conferences have adopted a provision in their constitution provid- ing for the establishment of a bureau for the common adjustment of losses in each Local Conference. At present, each company member of a Local Conference adjusts its own losses, and many of them are put to considerable expense in efforts to prevent fraudulent claims and to recover stolen cars. The Adjustment Bureau is de- signed to obtain more effective action in the equitable adjustment of claims, in the prevention of fraudulent claims, and in the re- covery of stolen cars. Hence each member will be obligated to report every loss promptly, with such detailed information as may be required by the Adjustment Bureau. These reports will be indexed and filed by the Bureau for the benefit of the members of the Local Confer- ence. In fact, there is already in existence in the Eastern Confer- ence, a system of reporting losses and claims, established by the former Automobile Underwriters' Conference. This system aids the adjuster, after a loss has occurred, in detecting fake claims, iden- tifying stolen cars, preventing multiple collection for the same loss, and investigating the past record of the assured. Each loss cr claim is reported, on a card, giving full jnirticulars, and these cards are indexed as to assureds and cars. This service is n(»w available to members as an underwriting aid to enable them to de- termine the desirability or undesirability of a risk. TXFORMATION AND SeEVICE BuREAU Initial steps have been taken in the organization of an Informa- tion and Service Bureau under the direct charge of the General Manager of the National Conference. This is desioned to furnish 34 an interchange of helpful information among the various Local Conferences with respect to undesirable risks and weaknesses in present underwriting methods ; to provide a legislative service, which will keep members informed regarding proposed legislation in the different states relating to the automobile business, and de- signed to take care that unwise legislation is not permitted to go on the statute books, in default; to obtain and combine proper experience data so as to make possible an intelligent analysis of past underwriting results and so form a solid founda- tion for future rates ; to continue the issuance of list price manuals to members, and to perform other services of a similar character as the necessity arises. Summary From the foregoing report it can be seen that earnest efforts are being made to organize an effective national body to regiilate and control the business of automobile insurance carried on by fire and marine companies throughout the country. Standard policies have been drawn up, commissions are being regulated, rules for the con- duct of the business established, a service and infonnation bureau started, and rates promulgated. By a system of local autonomy combined with a species of national control, it is hoped to elimi- nate, as far as possible, general upheavals and cut-throat competi- tion which have proven so disastrous to the liability field. But the right to organize along these lines and maintain rates, cari-ying with it as it does a degree of monopolistic power, involves the obligation to justify every activity in the light of reason. Particular attention, therefore, is directed to the following mat- ters, dealt with in detail in the foregoing report : Under " Special Rates on Commercial Fleets," provision should be made to remove the possibility of '' unfair discrimination " wdiich might arise from rating commercial fleets upon the two different schedules, namely, the regular " Commercial Truck " Schedule, and the special " Commercial Fleet " Schedule. More- over, the restriction of the application of this special fleet schedule to fleets whose insurance must amount to $15,000 is an apparent violation of section 141, and results in " unfair discrimination " which should be removed. This same objection may be raised in 35 regard to policies covering dealers' risks with an initial premium of at least $500, which are likewise entitled to special rating. Under " Special Eates on Commercial Fleets," attention is di- rected to the possible violation of the provisions of section 141 due to requiring all cars of any fleet to be insured by members of the Conference in order to secure this special rate, this section of the law not permitting the making of a rate conditioned on the placing of all the insurance at such rate with the members of the Confer- ence. Under " Special Rates on Manufacturers' Cars and Taxicabs," it will be noted that although attention was called to the report on examination of the former Automobile Underwriters' Conference in December, 1011, to the unfair discrimination caused by speci- ally rating risks involving twenty ta:xicabs or more, no steps have been taken to remove such unfair discrimination, and the same condition still exists. Moreover, it is necessary to file more complete information as to the make-up of all special rates, in order that the Conference may conform to the law, as stated in section 141, requiring the furnishing of full information as to any rate, upon demand, to any person upon whose property or risk the rate has been made. Referred to under '' Statistics." At this date, there exist no statistics compiled either by the former or the present Conference, available to establish rates or to test the fairness or adequacy of ex- isting rates. It thus appears that the former Automobile Under- writers' Conference and the present National Conference have di- rected .their efforts toward maintaining rates which have been pro- mulgated rather haphazardly , and the justice of which cannot be sustained by any general statistics Avhatever — dependence having been placed more upon the individual underwriter's judgment and experience. Intelligent and serious efforts are now being made to remedy this situation. The following exhibits are attached to this report: (1) List of Members; (2) Territorial Division. Respectfully submitted, JNIakcy Feder, Examiner. 36 STATE OF NEW YOEK, County of New Yobk, Marcy Fedtr, being duly sworn, deposes and says that the foregoing report subscribed by him, being an amendment of the one subscribed and sworn to on date of January 20, 1917, is true to the best of his knowledge and belief. ilARCY FeDEB. Subscribed and sworn to before me this 27th day of March, 1917. Edwabd J. O'Dea, [ Seal.] Notary Public, Bronx County. Certificate filed in N. Y. County. I Members of National Conference Aetna Accident and Liability Co Hartford, Conn. Aetna Insurance Co Hartford, Conn. Alliance Assurance Co New York, N. Y. Alliance Insurance Co Philadelphia, Pa. American and Foreign Marine Insurance Co New York, N. Y. American Central Insurance Co St. Louis, Mo. American Insurance Co. of Newark Newark, N. J. Atlas Assurance Co New York, N. Y. Automobile Insurance Co. of Hartford Hartford, Conn. Boston Insurance Co Boston, Mass. British and Foreign Marine Insurance Co New \ork, X. Y. British and Foreign Marine Insurance Co Philadelphia, Pa. Clay, Henry, Fire Insurance Co Lexington, Ky. Columbia Insurance Co New York, N. Y. Commercial Union Assurance Co New York, N. Y. Commercial Union of New York Xe'W York, N. Y. Commonwealth Insurance Co New York, N. Y. Connecticut Fire Insurance Co Hartford, Conn. Continental Fire Insurance Co New York, N. Y. Federal Insurance Co New York, N. Y.» Fidelity-Phenix Insurance Co New York, N. Y. Firemans Fund Insurance Co New York, N. Y. Equitable Fire and Marine Insurance Co Providence, R. I. German American Insurance Co New York, N. Y. Glens Falls Insurance Co Glens Falls, N. Y. Globe and Rutgers Fire Insurance Co New York, N. Y. Hand-in-Hand Underwriters New York, N. Y. Hanover Fire Insurance Co New York, N. Y. Hartford Fire Insurance Co Hartford, Conn. Home Insurance Co New York, N. Y. Indemnity Mutual Marine Assurance Co New York, N. Y. Insurance Co. of North America Philadelphia, Pa. Insurance Co. of State of Pennsylvania New York, N. Y. 37 Liverpool and Ltnidon and CIoIk' Insuiain^e Co New ^ ork, N. Y. London and Lancashire Fire Insurance ( o Hartford, Conn. Mannheim Insurance Co New York, N. Y. Marine Insurance Co New York, N. Y. Maryland Motor Car Insurance Co Baltimore, Md. Massachusetts Fire and Marine Insurance Co Boston, Mass. Mercantile Insurance Co New York, N. Y. Michigan Commercial Insurance Co Lansing, Mich. Milwaukee Mecluinics Insurance Co Milwaukee, Wis. National-Ben Franklin Insurance Co Pittsburgh, Pa. National Fire Insurance Co. . .' Hartford, Cunn. Newark Fire Insurance Co Newark, N. J. Niagara Fire Insurance Co New York, N. Y. Nord-Deutsche Insurance Co New York, N. Y. North British and Mercantile Insurance Co New Y'ork, N. Y. Norwich Union Fire Insurance Society -New Y'ork, N. Y. Ociean Marine Insurance Co New York. N. Y. Old Colony Insurance Co Boston, Mass. Orient Insurance Co Hartford, Conn. Palatine Insurance Co New York, N. Y. Pennsylvania Fire Insurance Co Philadelphia, Pa. Phoenix Assurance Co New York, N. Y. Phoeni.x: Insurance Co Hartford, Conn. Providence ^Vashington Insurance Co Providence, E. I. Prussian National Insurance Co Chicago, 111. Queen Insurance Co ' Chicago, 111. Queen Insurance Co New York, N. Y. Reliance Marine Insurance Co New York, N. Y. Royal Exchange Assurance Co New York, N. Y. Royal Insurance Co New York. N. Y. Royal Insurance Co. (Field & Cowlcs) , . . .85 Water St., Boston. Royal Insurance Co KU) West Jackson ]51vd. Chicago, 111. Royal Insurance Co Atlanta, Ga. Safe Guard Insurance Co Hartford, Conn. Scottish Uilion and National Insurance Co Hartford, Conn. St. Paul Fire and Marine Insurance Co St. Paul, Minn. Seal Insurance Co New York, N. Y'. Springfield Fire and INIarine Insurance Co Springfield, Mass. Stuyvesant Insurance Co New York, N. Y. Thames and INIersey Marine Insurance Co ^. . New York, N. Y. Tokio Marine Insurance Co New York, N. Y. Union Assurance Co New York, N. Y. Union Marine Insurance Co New York, N. Y. United States Lloyds New York, N. Y. Westchester Fire Insurance Co New York, N. Y. Williamsburgh City Fire Insurance Co New York, N. Y'. . ^ r^pc^k o1 any Bldg. 400, ""-„ |i,orn\a Bldg. AOO, » ■=" |i,orn\a UnwersUV of Ca^> g^^ ,g98 UnWetsuv "■ g^gOA-ABao ^ -- "^;rtdoeda.e ^ ^ 914467 ff/1 ■ THE UNIVERSITY OF CALIFORNIA LIBRARY