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GIFT OF 
 

 State 
 Insurance 
 
 . 
 
 
 CRITICISM BY 
 
 ;urance and Investment News 
 
 REPLY BY 
 
 HARRIS WEINSTOCK 
 
 Member Industrial Accident Commission of the 
 State of California 
 
Extracts from Insurance and Investment 
 
 News Article Published Under Date 
 
 November 12, 1914 
 
 
 "Insurance managers and general agents, not to men- 
 tion the local agents and brokers, have been much per- 
 turbed of late by the appearance of a circular from the 
 California State Compensation Fund, signed by its mana- 
 ger, Mr. Claude Fellows, setting forth the fact that . all 
 holders of the Fund's compensation policies would receive 
 a refund of 15 per cent of their premiums." 
 
 "It is indeed a surprising thing to men in the big 
 liability and compensation game that the Fund, which is 
 no more nor less than an insurance company, in the first 
 making, not out of the cradle, so to speak, should dare 
 do so hazardous a thing, without rhyme or reason, or any 
 basis in business and surely none in insurance ethics." 
 
 "Why the State Fund at all? What the necessity of 
 such a financial scheme and the organization? Could not 
 the large insurance companies, with their great assets and 
 lawful reserve, take care of the situation in a far more 
 efficient manner at a less percentage of expense?" 
 
 "The barefaced circular of the State Fund, as of Octo- 
 ber 19th, eradicates it from the list of conservative* and 
 properly managed insurance carriers. The letter smacks of 
 the 'get-rich-quick' type, and a careful perusal of the figures 
 stamps it so." 
 
 "Use their" own figure's/' ^'pfl^ the statutory require- 
 ments of reserve, f rom ' wKich ' th*<?y are exempt (and just 
 why, heaytri SHOW'S- ;a*s; *K it is. p/!op*er; f or one it is proper 
 for both), ah3 a'ftef atfplyltig tiki's pf per reserve deduction 
 note the result. We have a true surplus of some $67,020.40, 
 as against their false figures of $124,020.40. Follow this 
 by taking 15 per cent (as promised the policyholders) of 
 the premiums written, and you might be surprised to find 
 an actual deficit of $2,300 to pay the rebate." 
 
 "If it did not mean the actual pilfering of a fund set 
 aside to protect industrial cripples, it would be indeed a 
 joke." 
 
Why The State Fund? 
 
 BY 
 
 HARRIS WEINSTOCK 
 
 Presumably, the writer of the article published in the 
 Los Angeles "Insurance and Investment News" is an 
 alleged insurance expert, but as a matter of fact he is 
 speaking out of the fullness of his ignorance of the situa- 
 tion rather than from his knowledge of it. He pertinently 
 asks "Why the State Fund at all?" 
 
 The State Compensation Insurance Fund was created 
 by the Legislature to protect employers against excessive 
 insurance rates, and to insure the injured workers prompt 
 and equitable settlements. When the measure was before 
 the Legislature stock company representatives contended 
 that its passage would result in an increase in the compen- 
 sation rates quoted under the Roseberry Act. When the 
 State "Fund" entered the field, however, these rates were 
 reduced 25 per cent on the average. This was the first 
 advantage employers derived from the intervention of State 
 insurance. 
 
 Next comes the announcement that the State purposes 
 returning 15 per cent of all premiums earned on January 
 1st, making in all a difference in favor of policyholders 
 of about 40 per cent. And 15 per cent is only the first 
 return. There is likely to be a substantial further refund 
 to 1914 policyholders after the reserves are applied against 
 the actual losses as provided by law. This seems to me to 
 answer the question, "Why the State Fund at all?" 
 
 The critic evidently is not aware of the fact that the 
 15 per cent refund simply represents a saving through 
 the State's lower expense cost; that the return is to be 
 made only on premiums earned and not on the unearned 
 portion ; and that the refund can and will be made without 
 affecting the appropriation of the Legislature. Instead, 
 reserves will be maintained on the same basis as required 
 of corporate insurance carriers and a considerable addi- 
 tional catastrophe fund set aside. In other words, the 
 State has conducted its business at an expense of about 
 one fourth that of the stock companies and the saving 
 rightfully belongs to the policyholders. It appears, there- 
 fore, that our critic is wasting Tiis sympathies upon the 
 industrial cripples whose funds the Commission is charged 
 with "pilfering" and who are being thoroughly protected by 
 the State Compensation Insurance Fund. 
 
 If, as the writer of the article referred to states, the 
 large insurance companies can take care of the situation 
 in a far more efficient manner and at less percentage of 
 expense they have not thus far been able to demonstrate it. 
 
In addition to low operating cost, during the first nine 
 months, the State "Fund" handled about 3,000 accident 
 cases, only eleven of which cases were referred to the 
 Industrial Commission for hearing a record of very nearly 
 100 per cent satisfaction to employers and workers. 
 
 "Figures" (properly handled) "do not lie," but as 
 manipulated by our critic they may be badly abused. He 
 refers to a deficit to pay the return promised. We recently 
 invited corporate company representatives to make a minut . 
 inspection of the records of the "Fund" to prove that the 
 return can be made without disturbing appropriation Oi 
 reserves, but on the contrary leaving a substantial addition 
 to the catastrophe surplus. To date the invitation ha 
 not been accepted and we further challenge any of oui 
 corporate competitors to show a better record of IO*A 
 operating cost and efficient service than made by the State 
 Compensation Insurance Fund. 
 
 HARRIS WEINSTOCK, 
 Member Industrial Accident Commission 
 
 State Compensation Insurance Finn 
 
 OF THE 
 
 STATE OF CALIFORNIA 
 
 Executive Offices 
 
 525 Market Street: San Francisco 
 
 C. W. FELLOWS, Manager 
 
 Branch Offices 
 415 Syndicate Building, 1440 Broadway, Oakland 
 
 C. I. BLOTCKY, Resident Special Agent 
 
 ,W. I. HoUingsworth Building, Los Angeles 
 
 W. L. McCONNELL, District Manager 
 
 542 Spreckels Building, San Diego 
 
 G. E. HOME, Resident Special Agent 
 
 The State Fund invests only in California Securities approved by the] 
 Attorney General. 
 
 , It does not require employers to refer injured employees to certain 
 '> specified physicians. 
 
 It selects its risks carefully and does not assume hazards beyond its safe 
 carrying. 
 
 Its inspection and merit .rating.service is unexcelled. 
 
GENERAL LIBRARY - U.C. BERKELEY 
 
 8000202103 
 
 393678 
 
 
 UNIVERSITY OF CALIFORNIA LIBRARY 
 
 UNIVERSITY OF CALIFORNIA LIBRARY 
 BERKELEY 
 
 Return to desk from which borrowed. 
 This book is DUE on the last date stamped below. 
 
 20Nov'48j 
 
 SC' 
 
 2e 
 
 17Apr'58JN 
 
 31958 
 
 APR Q4 1996