In the State of Texas, where this broke, do you recall the figure there that they found which seemed to represent a gross misclassification in the higher rate?

Mr. BARNARD. To the best of my knowledge, it was not expressed in percentages when we were there.

Senator MONRONEY. Has there been to your knowledge any information forthcoming from these insurance companies who have by their refunds admitted these overcharges to furnish you or the State commissioners with whom you have talked, or others, what the comparative proportion of the preferred class I rate was to the class II rate on their books?

Mr. BARNARD. I think we have not been furnished that information. In fact, I am quite confident that the only communication we have had from any of these companies was sent to the National Better Business Bureau a considerable period of time ago. That letter is reproduced in the National Better Business Bureau's bulletin, and then it may be interesting to know-Mr. Backman may be able to give you the details-that the National Bureau was visited a short time ago by Mr. William Wilson, vice president of Universal CIT, who admitted everything that had been said in our bulletin, and said he had no fault to find with it, that it was substantially true.

Senator MONRONEY. I believe for the purpose of the record, and to keep it straight, that-is Mr. Wilson here?

Mr. BARNARD. No; he is vice president of Universal CIT. Senator MONRONEY. But Mr. Backman, who was in on the conference, is here to testify and will testify later today?

Mr. BARNARD. That is correct.

Senator MONRONEY. Do you think it conceivable that these great companies operating into the hundreds of millions of dollars would not know at this time what the percentage of their classifications were, State by State, in the years in question from 1951 to 1955?

Mr. BARNARD. I would think with any legitimate underwriter that would be a part of their daily business, and they should know, and in my opinion probably do know.

Senator MONRONEY. This committee, for the information of the hearing, has through its staff made repeated attempts at getting a breakdown State by State on the proportion of preferred risks for the years 1950 to 1955. We have not received those from any of the companies up to this time, although inquiries have been directed. Instead the figures that are supplied us have been the figures from

1955 on.

Now, after this matter was discovered in the State of Texas, and after it became the subject of the Better Business Bureau's attention, were steps taken then to verify the numbers that were entitled to the preference class I rate, or the higher rate in class II?

Mr. BARNARD. In Texas do you mean?

Senator MONRONEY. No; throughout the country.

Mr. BARNARD. Oh, yes.

Senator MONRONEY. In general your complaint doesn't lodge against the current practices, because after this was exposed in Texas, and other places, then the matter they have done now what they should have been doing before in requiring definite information from each insured on whether his prorate would have been the class I or class II rate.

Mr. BARNARD. I think it would be highly unlikely that any of these companies now were misclassifying. I think they were all very much shaken by the evidence and apparently are being quite cautious.

Senator MONRONEY. You referred a while ago to the Association of Insurance Commissioners, and the lack of replies that you had received from them in your inquiry. Why do you feel this matter has been left dangling or obscure or in many States subject to no amount of publicity at all which might have indicated to the policyholders that they would be entitled to refunds from these overcharges?

Mr. BARNARD. My own personal opinion is that the majority of the commissioners were ashamed of the record and feared to go to the public with the facts. They certainly did not give the facts to us. In fact, the great majority of them didn't even reply to our letter.

Senator MONRONEY. Was there any publicity attendant to the socalled resolution that was passed by the insurance commissioners in their New York City meeting to which you refer in your statement? Mr. BARNARD. My recollection is that there was some publicity and it appeared in small articles in various publications.

Senator MONRONEY. Mostly in the trade press?

Mr. BARNARD. I think mostly in the trade press.

Senator MONRONEY. And the information that has gotten to the public has been pretty generally through the activities of the better business bureaus in the various cities where they felt refunds were due but not being properly made or made in the numbers, or with the attention that they should; is that right?

Mr. BARNARD. Yes; I would think so.

Senator MONRONEY. Now, are you-or will you, Mr. Backman, testify as to the circularization of the policyholders for that period in 1955 where it was done?

Mr. BARNARD. I am sure he will. We have some doubts as a committee whether the merely unsupported word of any of these companies that they have circularized all of the policyholders as they were directed, whether they have done that. I think it would be very interesting to ascertain that fact.

Senator MONRONEY. Well, it is your position, then, that instead of this matter in many States, although some have pursued it with great vigor and officially through their own examiners and through their own staffs, that in a good many States it was left purely to the voluntary and unsupervised activities of the offending companies, themselves, to notify what policyholders they desired to notify that there might be an adjustment in their rate that they had paid?

Mr. BARNARD. That is right. Of course, they were ordered to make the refunds on people they had discovered had been misclassified, but a mere general order unsupervised and unfollowed up, we think that has not reached but a percentage of them.

Senator MONRONEY. But they were ordered only by their National Association of Insurance Commissioners?

Mr. BARNARD. No; in many cases they were ordered by their insurance commissioners.

Senator MONRONEY. The insurance commissioner.

Mr. BARNARD. However, there is evidence that in some cases there has been no circularization and in still others almost nothing in refunds.

Senator MONRONEY. And those only for the policies in effect in 1955?

Mr. BARNARD. June 30, 1955. In fact, Senator, that is in the resolution of the National Association of Insurance Commissioners.

Senator MONRONEY. In other words, the National Association of Insurance Commissioners made no effort to go beyond that one particular date?

Mr. BARNARD. They specifically limited their efforts to that date. Senator MONRONEY. I understand Mr. Backman will have the full copy of that resolution which was passed in New York, which then would have cut out those having policies from dates in force previous to June 30, 1955?

Mr. BARNARD. That is correct.

Senator MONRONEY. Of course, no evidence is obtainable up to now as to the extent of misclassification, State by State, and unless the insurance commissioners have been privately advised of it, it is quite difficult to assemble that on a nationwide basis; is it not?

Mr. BARNARD. True. What made us a little skeptical was their collective unwillingness even to reply to our letter. They just ignored it. Some States answered, but did not reveal the name by any offenders. On the other hand, Massachusetts did an outstanding job, and so did Connecticut, but I think Connecticut was among the number that gave no names.

Is that right, Mr. Backman?

Mr. BACKMAN. Yes.

Senator MONRONEY. But they did diligently follow up and double check?

Mr. BARNARD. Apparently with great diligence.

Senator MONRONEY. I think our figures show that Connecticut received the highest proportion of refunds to letters sent out of any State in the Union. We have those figures available.

Mr. BARNARD. I understand some States even adopted the innovation of telling the companies that if they wanted the forms notarized they would have to pay the notary fees themselves.

Senator MONRONEY. Connecticut had 65.1 percent of the refunds sent out in percentage to letters mailed. The nationwide average that we have this is for Service Fire--was 22.8 percent refunds as to letters sent out. But your feeling is that the general misclassification was not limited to a high number in one State and a low number in another, but would have generally followed the nationwide average of 20 to 25 percent properly classified at the higher rate?

Mr. BARNARD. That is what we were informed; yes.

Senator MONRONEY. I see.

Senator Payne?

Senator PAYNE. I have no questions.

Senator MONRONEY. You will remain here, will you, Mr. Barnard? We don't want to duplicate the things in Mr. Backman's statement, and we may return to you for other questions.

The next witness is Mr. Allan E. Backman, executive vice president of the National Better Business Bureau.

Mr. Backman, in keeping with the pattern we have set, would you raise your right hand?

Will you solemnly swear the testimony you are about to give in this hearing will be the truth, the whole truth, and nothing but the truth? Mr. BACKMAN. I do.

Senator MONRONEY. Thank you, Mr. Backman. I appreciate the time and effort that you have expended in bringing this complaint and matter before our committee, and we are delighted to have your

statement.

TESTIMONY OF ALLAN E. BACKMAN, EXECUTIVE VICE PRESIDENT, NATIONAL BETTER BUSINESS BUREAU, INC.

Mr. BACKMAN. Senator Monroney, Senator Payne, the National Better Business Bureau is a nonprofit organization which business established in 1912 to protect itself and the public from business practices which are fraudulent, misleading, or unfair, where such practices exist on a national or regional scale. Expressing the will of legitimate business to deal fairly with its customers, the bureau thereby seeks to build and maintain public confidence in business.

It is impossible to achieve this objective without removing those things which cause public distrust of business. The chief objectives of the National Better Business Bureau have therefore been: (a) To discourage and eliminate from the buyer-seller relationship practices which cause legitimate consumer complaints; (b) to strive for better consumer satisfaction by encouraging accurate representation of products, securities, and services. In these endeavors, it cooperates with the 108 local better business bureaus in the United States and Canada, and serves them on national problems affecting their communities. Each bureau is autonomous, independently financed and governed, but all cooperate in the public interest.

The national bureau is a member of the Association of Better Business Bureaus and serves on a number of association committees which are concerned with problems of both national and local significance. For example, Mr. Kenneth B. Willson, our president, or his predecessor, have been members of the association's committee on installment contracts since its inception.

The collection, from American motorists, of millions of dollars in overcharges resulting from misclassification of collision insurance on financed automobiles was a business practice which it was within the objectives of the National Better Business Bureau to investigate and expose. It existed nationwide, was contrary to the public interest, and vigorous bureau action to combat the practice and help to repair the damage already done was clearly demanded for the protection of both legitimate business and the public.

As. Mr. Barnard has already explained, these overcharges have been based on misclassification of the risks insured and these misclassifications have resulted from failure to obtain elementary rating information from the car purchaser. When purchasing an automobile it is, of course, no more than prudent and a sound business practice to insure the vehicle against financial loss. If the car is purchased on time the dealer, finance company, or bank which finances the unpaid balance, will usually require that, as a minimum, fire, theft, and collision insurance be taken out as protection to itself as well as to the automobile purchaser. The rates which the insur