The Nonpartisan Leader Newspaper, May 4, 1916, Page 8

e &5 e b » I ' ' [ TRY [§ & oS hi.c v ¢ o b [ 1 EIGE Waste in Fire Insu L Western Department THE NORTHERN ASSURANCE COMPANY LIMITED - of London [ B Editor Nonpartisan Leader, Fargo, N. D. I have before me your issue of March 23, and note a leading article in the issue headed “Good Profit in Insurance,” and while some of the figures given. in the article are cor- rect, the deductions that you make from them. are so misleading that I am giving you a little information which may be of use to you, and may change your views regarding ~the “enormous” profits which you think the stock companies have made out of the fire insurance business in the state of North Dakota. According to the records at hand of business in North Dakota from 1890 to 1914, inclusive, a period of twenty- five years, 135 stock companies doing business in the state wrote premiums of $28,5602,649, and paid in losses the sum of $16,957,178—a loss. ratio of 59% per cent. Your article under review, I presume, is intended to cover also the- 1915 business of the fire insurance companies, but those statistics are not available to me and I cannot use them. However, you say in your article that 573 per cent of the premlums col- lected came back to the state to pay for fire losses, and the companies re- tained 42 per cent of the money they collected, to . pay ' commissions ~ to agents, and the cost of doing business and dividends. If you can show where dividends were earned on the business in North Dakota of the steck fire insurance companies during the past twenty- five years, you will be doing wonders. ‘NO MONEY IN INSURANCE, SAYS COMPANY MANAGER zens of your state during »c the twenty: five years the sum of $16,957.173 for . .|° losses. They also paid to citizens of . | your state commissions to agents on- the business: for. twenty-five years, at . an average rate of 17% per cent, the sum of $4,987,946. They - also paid salaries dnd expenses of supervising special .agents estimated for the 185 companies for twenty-five years, say, at $1,000 per annum each, the sum of $3,375,000. They also paid to the state the taxation for twenty-five years, the state tax being 23 per cent, or.some $712,563. If you will take the twenty-five years premiums and deduct the los- ses, the commissions paid to agents, residents of the state, salaries and expenses of special agents in the state, and the state taxes, it will ap- pear: at once that the companies have paid out in the state of North Dakota for losses and legitimate expenses $2,489,857 less than they have re- ceived. ; But this is not all. The business of 1914, that is, the premiums writ- ten by the companies in the state were $2,495,378. You-must bear in mind that the end of the year:the companies. had on their books unex- . pired business, and the unearned pre- . timated at 70 per cent of éf: . miums on policies in force at the end of the year necessary to protect the outstanding liability under those poli- cies which run for various it~ = up to five years, and conserva 4 . "3 remiums, would mean the wsu. of D "~ $1,746,746. which would leave a bal- ance in favor of the insurance com- Eanies for the privilege of doing usiness in your state of $743,093. Again we are short of -actual re-: . sults of the business to the companies. The above figures represent simply ™ the money received in your state and the money paid out-in your state’ .To bring the figures to show the net should be added for overhead charg-: - _es of the home offiice for supervision, ete., at least 5 “per cent of the - premiums written, which would ‘mean " additi ‘ an tional “burden companies “of $1,425,126, making a " net 0ss to the companies for a period /- of twenty-five years of $682,083. “~'We rather beli “you will “ex: ‘amine the ' stati . & little - mor closely, you will; as a matter of fair- Chicago, April 10, 1916.. to_citizens or residents of your state. ‘*ufil : of: loss ‘to the: ‘ " Per cent increase Rfii}oads%-zz A ness to the insurance fg_afemity, cor- —33 : THE NONPARTISAN LEADER . Fifty Per Cent Margin is Not Enough; rect the statements.you haye made in. your article of March 23rd. Yours very truly. J. C. CORBET Manager ANOTHER WAY OF LOOKING AT THIS SET OF FACTS Mr. J. C. Corbet, : Manager, Northern Assurance Company, Limited, Chicago, Ill. > Dear Sir: A Your letter of April 10 regarding the Leader’s article on insurance re- ceived. We wish to thank you for taking the trouble to give us your side of the question and assure you we wish to be entirely fair to the in- surance companies as well as to the - people of North Dakota in anything we publish along ‘this line. We en- deavor to stick to the actual facts. ‘We notice you say the insurance companies have paid 59 per cent of the premiums they have collected in North Dakota in the last 25 years, not including 1915, for fire losses. ‘League sped) This is W. L. Stewart’s farm near Brampton. . Mr. Stewart drove the .sixteen miles, and also saw to it that the League speak- ers were well taken care of during their overnight in a'few days'with League organizers in the field. A Tax Compariso - A Letter to the Leader and an Answer ~If you read our ai'ticle carefully you noted. we gave the figures for every year . the insurance. companies di business. in the state, including. 1915,: and, that in those years, which cover a longer period than yours, the loss ratio was 571% per cent. Undoubtedly through oversight you misquoted the figures we give, which are official, for 1915. In that year the loss ratio was only 42 per cent, 58 per cent of the premiums collect- - ed being retained by the companies, instead of 4212 per cent as you state. Your own company has been one of the most profitable businesses in this state during the last six years— 1909-1914 inclusive—having in those years collected premiums in* North Dakota amounting to $171,678.36 and having paid fire losses of only $81,509.75. This shows you Have re-j. tained 53 per cent of the premiums* you have collected in this state and turned back to the state to pay fire losses only 47 per cent. S We note you figure a net.loss to the insurance companies for 25 years business in North Dakota amounting to $682,033. If.this is true it proves vou will ‘see stay. - He plans to pu ~. More Figures Showing How the State Board “Equalized” the Burden in Richland County Figures on 12 townships in Rich- land county obtained. by the Leader illustrate how the work of the state board . of equalization on the current taxes worked out in that district. These townships as a whole had taxes of railroads increased only from $1,335,684 to $1,624,329, while real estate taxes were increased from $2,728,049 to $3,629,697 in the same townships. " - The increase for the railroads was a little less than 22: per cent, while the real estate increase was 33 per cent. The Leader has given data to' show how the state board, which con- sists of Governor Hanna, State Aud- itor Jorgenson and other' office hold- ers at Bismarck, wanted to raise the valuation of the entire state about 20 per cent, so they ‘could ‘get more money for state expenses. They did it in the state as a whole by letting every class of property except farm lands; continue to bear the same or a - less proportion of the total valuation .work and putting a greater proportional in- crease on farm lands. HEAVIEST ON FARM LANDS For every dollar of increased taxes the board will obtain from all other gi%pzerty farm lands will have to pay ' The Leader has traced out how the t of' the state board affects specific townships and has given the- figures for several counties. Twelve-: townships in Richland - county are given herewith. How railroads were fayored and real- estate soaked is graphically shown :in - Brightwood township in this county. Railroads were increased - in' valuation from $104,329 to $123,284 to meet the state administration’s 'demand for = more reyenue, but real estate in this town- ship was increased from $106,818 to $144,938. Other townships of the 12 given show practically the same in- creases in the two classes of property; . railroad and real estate. : .7 RICHLAND COUNTY - - s : .. Taxation Values S Railroads =~ = " * < Rea 1914 - 01916 Yosi1914 b - $71,667 $80,856 -+ $380,136 71,209 -~ 80,315 242,860 116,374 +138;020 167,061 194,879 = 129,212 £72,665 88,603 104,329 112,027 o 128,470 e £ 1160,268 3,264 LU s 109,899 140,566 +7307,14 $1,385,684 = $1,624,329 et _Per: cent increase Lands—3 - with a paid up capi 7 inefficient than 0 e our . contention- beyond a doubt— namely, that.the insurance business is conducted on. such an extravagant basis and in so wasteful a manner . that it' needs state regulation ‘and supervision = the worst way. The people should not be forced to stand the unheard of costs of doing business that you state exist, which cause a loss to. the companies of over $680,~ 000. in this state in 25 years, despite the fact that fire losses have only been 57% per cent of the premiums }clollgcted in this state since state- 00d. - NO MATTER WHO GETS IT; PEOPLE PAY THE COST You state the various items that go to make up the cost of doing business in the insurance field and your fig- ures may be accurate. It remains nevertheless that since statehood the companiesin North Dakota had a margin on which to do business of 42% per cent of the premiums col- wlected. That is, sufficient rates have been charged to give the companies this per centage over: and above fire losses paid. Can you tell us of any other legititimate business extant that requires a margin of over 40 per cent on which to do business and then reports a loss after using up that margin, as you report? In the case of your own company the margin it has to do business on in North Dakota has been, in the last six years, 53 per cent. It has had 63 per cent of all the premiums it collected in this state to pay agents, taxes and other costs of doing business. If it has not paid dividends in large amounts . it is conducted in a most wasteful manner; or else the conditions under .which - the insurance business is con- ducted are such that they are in ur- gent need of reform through state regulation: 4 % SR If you" will again read our article t we quote official fig-" aking sub: profits, des; their stupendou doing. S i +. We have not -before- us financial. _ statements: of your own company.of & - later date than 1912 and 1913, but the figures for these years of the Nor- .thern Assurance company, Limited; of London, show a rather prosperous condition, to say the least. The total assets of your company for 1912 were $5,56_4,625.§2 and the total liabilities, ‘not including capital “stock and sur- plus, were $3,208,541.53. That ‘year, tal stock of only: $200,000, your company had a surplus of $1,883,480.58. The figures for 1913 for your company- also are interest- ing. You had total assets of $5,547,= 294.56 and.total liabilities, not includ- ing capital and surplus, of $3,042,- 096.97 for that year, The capital stock was the same, only $200,000, and yet the surplus was $1,895,754.37. dWe d.l;av_e not !:‘}ile figg}fes on the. divi- ends you paid in these tw » We would be “tiom 12 you will furni sh the data. SHOULD WELCOME HELP TO CUT OUT WASTES ‘While your system of bookkeeping and figuring may prove that insurance 18 ‘written at a loss; the data on your company shows rather that the busi- @ ness has been exceedingly profitable. Again let us state that we do not . question your figures as to the cost _of conducting the insurance business, but if it:is true that the costs are . such as you state, the business is con. ductedon ‘a.basis more wasteful any we know of, and it cries out f y . the your letter and' this rhe‘;) s Thanieing glad to publish them if .- -