The Hard Facts A COMPARISON OF CREDIT INSURANCE PREMIUM IN-COME, CLAIMS PAYMENTS, AND COMMISSIONS TO COMPANIES DURING THE FOUR-YEAR PERIOD 1951-54.* Bakers Health and Accident Insurance Company Dallas, Texas Year Premium Income Claims Paid Percent of Commissions Percent of Premiums to Agents Premiums 1951 $2,554,616.47 $126,170.18 4.9% $2,287,228.37 89.5% 1952 3,013,299.46 212,472.71 7.0 2,711,969.61 89.9 1953 2,478,184.31 234,834.41 9.4 2,203,521.34 88.9 1954 2,208,873.95 191,221.81 8.6 1,877,542.86 84.9 Totals $10,254,974.19 $764,699.11 7.4% $9,080,262.18 88.5% Home Life and. Accident Insurance Company Dallas, Texas Year Premium Claims Percent of Income Paid Premiums 1951 $ 484,902.58 $ 41,702.94 8.6% 1952 3,457,014.35 129,648.50 3.7 1953 3,709,798.46 162,074.42 4.3 1954 3,207,673.29 238,346.34 7.4 Totals $10,859,388.68 $571,772.20 5.2% * Compiled by The’ Texas Observer from annual statements .of the companies required by the Board of Insurance Commissioners of Texas. \(Excludes companies’ own overhead and profit. Commissions . to Agents $ 438,077.19 3,085,758.37 3;313,696.12 2,823,250.33 $9,660,782:01 Percent of Premiums 90.3% 89..2 89.3, 88.0 88.9% Lots of companies Sell life insurance BUT IL INDUSTRIES LIFE SELLS MORE INSURANCE SETS MORE RECORDS AND IS FRIENDLIER Than Most. affiliated with Western Indemnity Life Insurance Company Home Office : 5011 Fannin, Houstot -7exas AGENCIES THROUGHOUT’ ‘TEXAS Agents’ Commissions High in Texas Credit Insurance was named as the representative. of Texas credit insurance companies. Titus of Bankers Health has lobbied in the Legislature for credit insurance protection under state laws. He is known as the “king” or “granddaddy” of credit insurance. In another Titus company, Big State, payments to agents were 79.6 percent of the premium income in 1954, and payments of claims on the policies were 3.8 percent of what the policyholders paid in that year. State records show that of the. $846,000 paid, . in on premiums in this smaller Titus company, $33,006 went for claims and $674,531. went to the lenders and agents who sold the insurance to the borrowers. When Atty. Gen. John Ben ‘Shepperd appointed his ‘grievance committee” of the smallloan industry last year, he included Wright Titus among the original five members. Shepperd’s office turns over complaints from borroWers about mistreatment from small lenders to this committee if the complaining borrowers consent. Continental American Life Insurance Company of Houston, S. B. Greenfield, president, was formed in 1952. In 1953 it listed 41 loan and insurance companies for which it was providing credit insurance. Its 1954 annual statement to the board showed premium income of $1,466,046, of which $21,668, or 1.5. percent, was paid out for claims, .and $1,239,808, or 71.5 percent, was pa id to the policywriting offices. One of the newer Texas companies is American Guaranty Life, Health, ,and Accident of Austin. Just licensed by the board this year, it has not yet filed an annual report, but Jack Millard, its executive vice-president, .told the Observer in Austin that “we figure that 85 percent is the maximum commission you grant; sometimes it will run as little as 75 or 80 percent” “In other states they don’t allow that much commission,” Millard said. “But if the insurance’ companies want to handle it that way, there’s ample funds there for everybody concerned. We like it because it encourages the lending agent to do legalized business.” Otherwise, . he said, a lot of lenders wOuld.operate illegally. “We have always paid 100 percent of our claims,” Millard said. These average about ten percent, with the company taking the other five percent for its overhead and profit, Ile said. “If all the companies are paying 100 percent of the claims they are giving the public a service. If all the companies are paying … thdse poor souls get sick or die it’s a great relief to their families to know their debit bal pang of Springfield, Ohio ; had a premium income of $5,892,688, with 34.9 percent going for claims and 37.4 percent for commissions. Some company officials object to statistics abOut the ratio of paid claims and commissions to total pre! mium income. They maintain that “earned premium income” is the proper base. When this point was raised in the 1952 credit insurance -hearing of the Board of Insurance Commissioners, Paul Connor of the board, staff replied that the high commissions being paid out showed that on the face Of it certain Texas companies could not pay more claims later. A company spokesman replied that the commissions would, be reducd if the claims increased. \(Since most Texas credit `insurance is shortterm; usually connected with loans for three months or less, the earned-VerSpot Checks An Observer reporter went to San Antonio and checked two concentrations of small loan firms on parallel streets in downtown Safi Antonia- the 300 blocks of Navarro and_Presa. They call the section along Presa Street “Little Wall Street.” The Navarro Street section has been known to have been.alluded to as “Stickers’ Row.” An employed San Antonio housewife who walks to work past the loan’ offices on Navarro every morning told’ the Observer she frequently sees -Mexican women with their..children entering and leaving the. offices. The check provided some clues to, how credit insurance works in pra’ctice. “Don’t go too hard on us,” said one loan office manager there. “If they paid off in three months, why :we would make a haul, but they don’t.’… Three nights a Week I go into their I.see how they live, it’s awful.” At United Finance Service; 319 Navarro, Miss Olga. Rodriguez, a clerk, told the Observe? reporterwho identified himself as such:”you have to take the insurance with Ais or you can’t get the loan.” She said the credit insurance policy with American Guaranty Life, Health, and .Accident In . suranee Co. is “the only one we have.” She confirmed that the total charge on $50 for three months is $17.80 there. \(The. Texas credit insurance law requires lenders to give borrowers an . One manager on Navarro Street said his note, too, is $67.80 on a $S0 3-month loan. He told the reporter about a $2 service charge and $14.70 in insurance premiumsbut broke off before showing the balance of the charges and thought better of it, send ing the reporter across the street to Phil Kenton, manager of Navarro Fig natice, 303 Navarro, and president of the San Antonio Association of Small Loan Companies. Kenton referred the reporter to Cummins who is also a pastapresident of the San Antonio association, but Kenton did Confirm that loan companies’ charges in San Antonio are .”all practically the same they might vary twenty or thirty cents in a loan.” T. D. Berry, manager of Berry Finance Co., 314 Presa Street, told the reporter “I don’t see that it’s any concern of yours unless you’re gonna make a loan.” ,177ININ/ Frank Schnitz, a gentle and mannerly appearing man, manages Ace Loans, 313 Presa. He said his charge for a $50 three-month loan is $17.80. \(“It’s standard, they all have the same his borrowers have an ‘option to buy their “credit insurance” elsewhere. “Well, that’s a hard question to answer,” he said. “I couldn’t handle a loan without it, if you know what I mean. ,I never had it to. come up; somebody say I want to go down the street and take _the insurance with a friend, I’d be in a spot.”` What happens when a supplicating borrower says he doesn’t want the credit insurance ? Schnitz was asked. “‘Well, a man says, NO, I don’t need that, I’ve got hospitalization already, I say, yes, you’ve got insurance, but that doesn’t cover the loan.” Does he, Schnitz, keep 85 percent of the “premiums” he collects on credit insurance ? “That’s about right,” he said. The reporter expressed the thought that was surely a high commission. Schnitz laughed appreciatively. `Certainly’ Lewis Terrazos, manager of Atlantic Finance next door to Ace Loans, was asked if he requires credit insurance as a condition of granting a loan, “Yes, state law requires it,” he said. “We can’t operate without it.” Does Atlantic Finance require a policy taken out with Atlantic Finance before granting a loan ? “You have to get it where you buy the loanI believe so,” said Terrazos. Another man in the office took exception. “We don’t know fOr sure,” he. said. Terrazos, too, confirmed his company’s total charge on a three-month $50 loan is $17.80. Contacted later, Cummins said that the credit insurance companies want a lower commission for the loan coin, panics than the prevailing 85 percent, but, he says, “the companies have been so competitive in trying to sign up agentsthey will offer higher commissions to sign up the lenders.” He said the credit insurance companies “cut each others’ throats all the time” in this manner. “Human nature being as it is,” he said, “certain lender agents are greedy -but we do not advocate high commissions, where it is proof in itself that the company cannot.pay its just claims.” He said he would favor state regulation of the commissions, “provided mation.” No ‘one more than the small loan .association wants the public to accept the small loan business “like they do other business,” Cummins said. In effect, Cummins was asked, is not “credit insurance” an income supplement for the Texas small loan companies? “Certainly! Certainly’!” replied the loan company association officer. “It’s just a natural human trait.” R.D. The Texas “Observer, Page Jan. 25, 1956 ance is clearedand they get substantial income benefits, too.” How, Millard was asked, do the Texas companies make sure the:borrowers get what: is due them in claims? “Before, you see, the company would make out the check to the lending company ‘and/or’ the borroWer. That was the practice, and I sure don’t know where the money was going to. But if it. is going on now it is in isolated casesnow it’s just ‘and’ the borrower, and the borrower has got to endorse the check before it can be cashed,’ In 30 days .we’ll have . that `and/or’ completely .outlawed.” He saidthe fact that the borrower has a..copy his insurance policy assures .;his right that ,he will get what money is coming to him. The Observer spot-checked two large -interstate credit insurance companies’ recofds in 1954 . for comparative purposes. Old ‘Republic of Chicago took in $14,280,103, of which 33.2 percent was paid out to claimants and 32.7 percent ; as commissions to agents. Credit Life Insurance Corn
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