signed pledges 1 and 2 as they were bound to do to be able to conduct business at a profit.

It was agreed by the representatives of the New York Exchange that the practices complained of: (1) of excluding Mutuals from membership in the Rating Bureaus; (2) of prohibiting the members of the Exchange from re-insuring with Mutuals; (3) of requiring brokers duly licensed by the State to sign pledges not to do business with Companies authorized by the State of New York to transact business in the State that were not members of the Exchange,― would be abrogated and the resolutions and by-laws under which such action was enforced would be repealed and that the Constitution, By-Laws and Regulations of all the Exchanges in the State of New York would be immediately revised and amended so that Mutuals would be admitted to membership, that the members of the several Exchanges would be permitted to reinsure with them and that the restrictions upon the brokers' activities would be removed.

It was further agreed by the representatives of the Exchange that the Stock Companies would agree — and would in good faith cooperate with the Committee in the enactment of legislation that would require that the rates of premium fixed by these various Exchanges in combination and that the public is required to pay should be thereafter placed under the supervision and control of the Superintendent of Insurance subject to the right of appeal to the Courts by either party. This proposed amendment to the law is to be found among the recommendations of the Committee in the passage of which it expects the cooperation and support of the Stock Companies and their Bureaus in compliance with their agreement.

Your Committee finds that the regulations of the various Exchanges have been amended so far as concerns the removal of the ban upon the Mutuals and that they are being admitted to membership in the Exchange.

The right of appeal to the Courts by either party from the determination of the Superintendent as to rates has been inserted in answer to the testimony of Mr. Whitney, the Manager of the Casualty Bureaus, to the effect that the same power of supervision. applicable to the rates fixed for the Fire Companies should apply to the lines of insurance covered by his Bureau and that the only objection of the members of his Bureau to like supervision was the fear that the Superintendent might fix the rate too low from considerations of political expediency.

CHAPTER 15.

WORKMEN'S COMPENSATION INSURANCE.

When the Legislature made compulsory the compensatory insurance of workingmen against death and injury, it became its duty to provide the means of insurance on the lowest possible terms consistent with the welfare of the workmen so as to make the burden upon industry as light as justice would permit. It was not intended to make of this requirement a money-making venture. This obligation was recognized in creating the State Fund, against the concentrated opposition of the Companies.

The bitter contest of the Companies over the creation of the State Fund resulted in compromise whereby the Companies that were already in the field were permitted to remain in competition with the State Fund.

The private companies have strenuously fought the State Fund. The State Fund sells this insurance for at least 15 per cent less than the rates fixed by the Stock Companies but it does about 9 per cent of the business. The Stock Companies do 70 per cent and the Mutual Companies do the remaining 21 per cent of the business.

The total amount of premiums written in the State of New York in 1920 for Workmen's Compensation Insurance was $43,901,451, of which the Stock Companies did $30,462,898, the Mutuals, $9,640,248, and the State Fund, $3,798,305.

There is no mystery about methods that have been employed against the State Fund and the Mutual Companies. The facts thus established are taken from the records of the Companies themselves; the letters they have written, the propaganda that is being openly distributed by their vast publicity bureaus and the testimony of officers of the National Bureau of Casualty and Surety Underwriters, which came into existence on November 1, 1921, as the successor to the National Workmen's Compensation Bureau.

The Statute limited the authority of these Bureaus to the making of rates. It does not contemplate the uses to which the Bureaus have been put nor the extension of those purposes involved in the new Bureau.

The following provisions from its by-laws constitute the keystone in its campaign against the State Fund and the Mutuals:

"Resolved, That there is a vital difference between State Insurance Funds and all other forms of insurance recoverage and this Bureau and its membership should openly and consistently oppose by all proper means State Insurance Funds as they now exist as well as the establishment of such funds. in States where they do not exist."

Mr. Whitney testified on this subject (P. 6277):

"The Bureau has put itself on record as being opposed to the State Fund in this State. It is opposed to all State Funds."

Resolution No. 17 of the Bureau (P. 6284):

"That it is the duty of the members of the Bureau to act together in an effort to preserve the administration and control of the business of its members; this statement of the right of self-regulation is, however, merely an academic declaration. unless there goes with it a recognition of the obligation of every member to yield immediate, complete and constant obedience to Bureau rules.

"With such obedience the Bureau can successfully combat every effort toward undue control from any outside source. Without such obedience outside control is probably inevi table." (Italics ours.)

The theory on which these potential competitors in this field of insurance amongst Stock Companies have been permitted in combination to fix the rates on the various classes of Workmen's Compensation Insurance instead of being required, as are other businesses, to compete between themselves, involves, of course, the strict adherence by them to the rates thus fixed. The law requires that the rates shall be adequate but provides no machinery for safeguarding the public against their being excessive or in the direction of regulating or supervising them.

When at the time of the organization of the State Fund the private companies were allowed to remain in the field, it surely was not contemplated that they would be permitted to combine to destroy the State Fund.

The business that would naturally come to the State Fund is diverted in three principal ways:

1. The manufacturers, contractors, merchants and other business men who are required to take Workmen's Compensation In

surance also take accident, public liability, plate glass, automobile, burglary, credit and the various other classes of insurance that are dealt in by the Stock Companies. All of these lines are unregulated in the State of New York. None of them is subject to any supervision or control whatever. The Companies in combination make whatever rates they choose and the public must pay them or go without insurance.

The testimony taken before your Committee shows instance after instance (and hundreds of others could have been submitted if time permitted) in which the unregulated lines were reduced, sometimes by one-half and more of the total amount of the prescribed rate to induce the customer to buy Workmen's Compensation Insurance from that particular Company. In other words, the Workmen's Compensation rate was indirectly cut below the actual cost of doing the business through rebates on the unregulated lines which the State Fund is not permitted to write.

This readily accounts for the inability of the State Fund to make headway notwithstanding its apparently superior attractions. Mr. Marcy Feder who was from 1910 to 1917 one of the Examiners for the State Superintendent of Insurance testified to eleven illustrative instances of this form of rate-cutting. In one instance the Royal Indemnity Company, a member of the Bureau wrote a risk for the S. M. Bixby Co., for 80 cents per $100 of payroll, the legal rate for which was $1.80. In another case the Aetna Company wrote a bond for the Dohler Die Casting Company in 1919 at $1.60 per $100 for which the legal rate was $2.60. In still another case the Ocean Accident & Guaranty Corporation wrote a 6-year policy on the same sort of unregulated risk (automobile trucking insurance) for the Ward Baking Company in which there was a reduction from the Bureau rate of $350,000 over a period of six years.

It is not difficult to understand why it has been impossible for the State Fund to secure any considerable business under these circumstances. The Bureau members can almost afford in writing large risks to give away the insurance on Workmen's Compensation Insurance in order to destroy the State Fund by concessions of this character on the unregulated lines in which neither the State Fund nor the Mutuals are permitted to compete.

Mr. Whitney (P. 6349) admits that this cutting of the public liability or accident rates has been engaged in by the members of

the Bureau as a means of securing compensation insurance at the expense of the State Fund and that if the rates for public liability were regulated the State Fund would be in a better position to get business.

(Mr. Whitney):

"The Mutuals in New York State are, I think, to some extent doing public liability insurance; my understanding is that at least one company is doing public liability insurance, that is, insurance of companies for injuries done to the public. I know that cutting the public liability rates has been done to some extent so as to get the compensation insurance and the public liability insurance from the same customer, but I do not understand that it is done by stock companies any more than by the others.

"If all these rates were regulated (p. 6150), I think the State Fund would probably be in better position to get business in Compensation Insurance as against the Stock Companies and as against the Mutual Companies. The State Fund does the business for less money than the Stock Companies. In the past it has been done for at least 15 per cent less. I think there is a possibility that the State Fund is at a great disadvantage because of the ability of the Stock Companies to under-cut them on Compensation through the concessions that the Stock Companies and the Mutual Companies make in public liability and other lines and the regulation of all these lines would put an end to that sort of discrimination in compensation.

"If the State Fund (p. 6259) had the monopoly of this insurance it could do business much cheaper. Instead of saving 15 per cent to the people of the State it would probably save 30 per cent or more.

"I have a reason other than self-interest for contending that these Companies (the Stock Companies) ought to be permitted to do Workmen's Compensation when it is mandatory and when the State could do the business for less than one-half of what these people do it if left alone in the field" (p. 6458).

2. The Stock Companies' Bureau, the State Fund and the Mutuals together make the rates on Workmen's Compensa