Mr. JORDAN. We have asked Senate Appropriations for three additional ones

Senator MONRONEY. Is part of that to get these refunds?

Mr. JORDAN. To send them out wherever necessary in an outside company.

Senator MONRONEY. There is nothing in the outside examination that is going to help the people now if any of these people have been overcharged. There is no way to get the names or how to circularize them, or how to get the money back to them. The only thing you can do is maybe if the examination comes up bad, you can revoke the charter of the company to operate.

Mr. JORDAN. You see, sir, that is a very powerful incentive for the company to do right, this fear of disclosure, and the revoking of the license on the part of the District of Columbia.

Senator MONRONEY. But you can get the ratio of class I and class II policies on the part of these companies.

Mr. JORDAN. I can ask them and they will furnish me the information.

Senator MONRONEY. Will you do that so we will have a yardstick to apply against the nationwide yardstick?

Mr. JORDAN. Senator, I will be glad to do anything in the world that I can do that you want me to.

Senator MONRONEY. You have been very cooperative within the limits of the information that you have, but this committee has been trying for months to get a breakdown, State by State, on the percentages of these class I and class II classifications, and we are still without it up to this good hour. I don't know how we are going to gage the amount of refunds that might be due, and the amount of overcharges unless we can set those States up as 3 or 4 States that we have information on that show that there were tremendously large percentages, 98.3 percent, 98 percent in class II, when the nationwide average is only 22.5 percent.

Mr. JORDAN. Would the chairman be willing to have Mr. Busby write to us outlining specifically in detail what we can do to assist? Senator MONRONEY. We will certainly do that.

Mr. BUSBY. I would like to ask one question now.

You state you are unable to go in there because of the cost of doing this. Didn't you state earlier that the insurance companies paid your people directly when they were making these examinations?

Mr. JORDAN. Sir, aside from the amount of expense, we simply could not spare taking a man off his present work to send him out for this length of time. Who would do the work he is now doing?

Mr. BUSBY. Then it is not a matter of expense. The companies do pay your people directly and it is not a matter of expense, therefore, to get these figures. Is that correct?

Mr. JORDAN. That is right, it is a matter of manpower.

Mr. BUSBY. I would like to ask one more question.

You read, through the press, in the third quarter of 1955, of the refunds which had been made by certain companies which did business here in Washington, D. C.?

Mr. JORDAN. As I remember, that referred to only one company making refunds.

Mr. BUSBY. You found that Service Fire Insurance Co. actually owed, and did repay, nine thousand and some odd dollars in the

District of Columbia. You say that one or two complaints had been directed against Calvert on misclassification?

Mr. JORDAN. Not at that time. What I had in mind was last Friday I inquired of the gentleman in my office who ordinarily receives such complaints what complaints he had on companies other than Service.. He said none, except in the case of Calvert he had three. One of them involved a person outside our jurisdiction.

Mr. BUSBY. Go ahead.

Mr. JORDAN. I will tell what happened. It appeared, on analysis as to one man, the man had been undercharged rather than overcharged. As to the two overcharged, he called it to the attention of the company and they very promptly and courteously made the appropriate refunds.

Mr. BUSBY. You don't know of any other refunds except for Service that have been made in the District of Columbia for misclassification? Mr. JORDAN. I don't know specifically as to the District of Columbia. I do know from this report on Calvert that the company made a sizable amount. I was just going to say, according to the report, there was a review of the classes of business by States. An examination of the report says, at page 47, subsequent to the date of this examination, the company has returned premiums due to misclassification in the amount of $448,161.62.

Senator MONRONEY. That is Calvert?

Mr. JORDAN. Yes, sir.

Senator MONRONEY. How much?

Mr. JORDAN. $448,161.62.

Senator MONRONEY. What was the date of that report?

Mr. JORDAN. The report is dated June 13, 1956.

Senator MONRONEY. Subsequent to that our figures show that they have refunded now, Calvert, $2,273,809.05.

Mr. JORDAN. What they mean by the "as of date," was December 31, 1955.

Senator MONRONEY. Then that way all of the records disappear and there is no way in the world that anybody can secure information on who to refund. These pile up into voluminous records on the individual cases, and so we just find ourselves washing out completely the chance to recover overcharges if we have to rely on this type of inspection. That is why we think it is up to the Insurance Commissioner to aggressively find out, before these records are destroyed, whether anyone else in the District of Columbia, other than those you mention, have been refunded voluntarily and without a chance for your Department to investigate and see whether the number of letters-which were 1,281-were sent to all of those who might have been erroneously misclassified.

On some of these other companies that write a considerable amount of insurance in the District of Columbia, we feel that some action should be taken other than that which has just been taken voluntarily by the company. In other words, we have in our compilation on Calvert Fire Insurance Co., they showed that they have made, out of $71,000 worth of business written in the District of Columbia for 1954 that is merely a gage-made 210-plus from policyholders. We don't have the percentage. The total amount refunded for all years, 1950-56, totals $9,261.

And are now you satisfied that all refunds due to the District of Columbia policyholders have been made?

Mr. JORDAN. Sir, if I had to bet on the subject, I would bet that this company, now speaking of Service, has honestly tried to make these refunds, and I am saying that not because I know them well, because I do not, but I think they would be plain stupid to try to deceive me about what they have done. Because if they have lied to me—I have told them and I will tell you and I will tell anybody, I will revoke their license. I don't think they would take a chance on that.

Senator MONRONEY. You don't think it would help in securing more refunds to circularize the mailing list which must be available now, at least to the 1,281-under your own signature as insurance commissioner for the District of Columbia-to inquire?

Mr. JORDAN. Do you mean to write to the same people that they wrote to?

Senator MONRONEY. That is right. The insurance commissioner of Massachusetts did it, and the returns went up about 3 to 1 on the followup letter. He doublechecked to be sure the list included all of the potential class II risks.

Mr. JORDAN. As I remember his testimony, he uncovered a good deal of this by the examination of agencies there.

Senator MONRONEY. Very little on agencies, the big refunds were on the circularizing of a large number of the class II policyholders.

Mr. JORDAN. As I remember, he testified he went to several agencies and brokers there and he also went to New York City and examined American Plan and a couple of other organizations.

Senator MONRONEY. And you are satisfied that the plan approving the proposal made to the Association of Insurance Commissioners in New York, adopted in December 1955, was the best plan to be used for these refunds; is that correct?

Mr. JORDAN. I don't know that that

Senator MONRONEY. You weren't there?

Mr. JORDAN. I was not at the convention. There was a time I attended regularly. I was a member of the executive committee at one time. In recent years we have had no money in our appropriation for that purpose. I think it is fair to say that if I had been a member of that committee, I probably would have signed that resolution.

Senator MONRONEY. I see. I have no further questions. Do you, Mr. Busby?

Mr. BUSBY. No.

Senator PAYNE. No questions.

Senator MONRONEY. Thank you, Mr. Jordan, for your appearance here. Thank you, Mr. Stout. You will be excused subject, perhaps, to recall.

Mr. JORDAN. Do I understand that the chairman wishes further information?

Senator MONRONEY. Well, we would like very much to have you attempt to ascertain the ratio of class I and class II policies for the out-of-State companies who are licensed to do business in the District of Columbia for the years 1950 through 1955.

Mr. STOUT. That is for the District of Columbia business?
Senator MONRONEY. Yes.

Mr. JORDAN. Are you speaking of all companies, or just for the companies named here? Of course, some companies write practically

none of this business. Some write none at all. Do you mean all of the companies, or just the ones mentioned here?

Senator MONRONEY. All of the members of the N. A. U. A.

Mr. JORDAN. All right, sir.

Senator MONRONEY. We don't want to overburden your work with minutia, but we certainly would like to have those mentioned, and we do not wish to excuse anybody else whose ratio might show there was some degree of overcharge, but we do recognize the physical limitations in going into the hundred or two hundred.

Mr. JORDAN. Sir, I don't want to talk poverty, but I have in my office today only one person. We are so shorthanded, with sickness and one thing and another.

Senator MONRONEY. I recognize the difficulties. Isn't that one of the difficulties that all of the State insurance commissioners have in trying to enforce the matter with vast amounts of insurance, and rate structures, and very limited funds to conduct independent activities on their own to be sure the customers are not overcharged?

Mr. JORDAN. I think almost all of them, sir, are in a much better shape that we are in the matter of having examiners available for outside work. Maybe we are better than they are in some other respects, but we do not and have not in recent years sent an examiner outside the District of Columbia.

Senator MONRONEY. Thank you very much for your appearance here. We had hoped to get to Mr. Risque, of the Service Fire Insurance Co., the vice president, this morning.

We would like, if it is suitable to him and agreeable, to hear him at 2 o'clock this afternoon nad give everyone a chance to have lunch. Is Mr. Risque here?

Mr. RISQUE. Yes; that would be agreeable.

Senator MONRONEY. We want to get to you today.

We will meet in G-16, that is the committee hearing room of the Interstate and Foreign Commerce Committee, at 2 o'clock.

Thank you very much.

The committee is recessed until 2.

(Whereupon, at 12: 40 p. m., a recess was taken until 2 p. m. of the same day.)

AFTERNOON SESSION

Senator MONRONEY. The Subcommittee on Automobile Marketing will resume its sitting.

We have Mr. Risque with the Service Fire Insurance Co. with us. We apologize for not being able to reach you this morning. I hope you were not unduly inconvenienced.

Mr. RISQUE. No, sir.

Senator MONRONEY. We would like, if you are willing, to have you, as all other witnesses have been, under oath.

If you will state your name, please?

Mr. RISQUE. My name is J. Page Risque, vice president of Service Fire Insurance Co.

Senator MONRONEY. Do you solemnly swear that the testimony you are about to give in this hearing will be the truth, the whole truth, and nothing but the truth, so help you God?

Mr. RISQUE. I do.

TESTIMONY OF J. PAGE RISQUE, VICE PRESIDENT OF SERVICE FIRE INSURANCE CO.

Senator MONRONEY. I believe you have a prepared statement. Mr. RISQUE. Yes. I would like to say at the outset Mr. Chervenak, our president, has been seriously ill with a blood ailment and I appreciate the committee's letting me testify in his stead.

Senator MONRONEY. We were sorry to hear of his illness and we do not at any time wish to endanger anyone's health by requiring them to be here when they are unable. I am sure because of your close relationship with Mr. Chervenak, and your long service with the company in this matter, that you will be able to supply the information that the committee desires to have.

Mr. RISQUE. That is correct. I believe that I have been very close to this for the past year and a half and I think I am as familiar with it as anyone else.

Senator MONRONEY. You have a statement, so you can proceed in your own way. Perhaps you would like to complete your statement before questions are asked.

Mr. RISQUE. Yes, sir; I would.

Classification of collision insurance into different rating groups began on a limited basis in 1950. By the end of 1953, slightly more than half the States had adopted rating plans involving three classifications with significant differentials in rates. From the outset, Service Fire made provision to supply the necessary forms and information so that its risks would be rated in accordance with the approved rating plans. Nevertheless, hindsight showed that the initial rating procedures, while believed to be sufficient, were in practice inadequate to assure fully accurate rating.

When the matter of misclassification came to light through examination of State insurance examiners, it had been assumed that only a few companies were involved in the problem. Subsequent examination, however, revealed that misclassifications had been widespread in the insurance industry and were by no means confined to the companies first determined to have been involved. Correction of procedures, therefore, became an industry problem, not merely a problem for a small number of companies.

Service Fire was the first of the companies affected by the problem to eliminate misclassification by requiring, beginning July 1, 1955, a rating statement in connection with every policy issued. Service Fire was also the first company to propose to State regulatory authorities a plan for making refunds to any policyholders determined to have been misclassified. Payment of refunds under this plan was completed almost a year ago.

The classification of Service Fire collision policies has been accurate, and their distribution within the various rating classes consistent with industry averages, for almost 2 years now. State insurance departments have determined that the company has adhered to the revised rating procedures it established as of July 1, 1955, and that its policies are being properly classified and rated. An analysis of the distribution of the company's current business, for example, shows that 67 percent of its business is in the class I category and 23 percent in class II. This compares favorably with a recent check of the