Verhovayak Lapja, 1950 (33. évfolyam, 1-12. szám)
1950 / Verhovay Journal
PAGE 10 Verhovay Journal January 18, 1950 Can Politicians Run An Insurance Business? By JAMES F. MALONE, Jr. Insurance Commissioner of Pennsylvania MR. MALONE has an answer. He compares the fine record of free enterprise insurance with the several ventures of politicians in insurance and the United Mine Workers in a pension fund. Experienced insurance men and women must make ends meet, while political insurance operators must depend upon taxpayers’ money. This is an excerpt of an address given at the banquet of the 38th annual meeting of the Pennsylvania Fraternal Congress at Pittsburgh, reprinted, in part, from THE FRATERNAL AGE, December 1949, issue. I do not believe there is anything on the minds of the American people today more important than the product that is sold by fraternal life insurance societies of this country: that product is FINANCIAL SECURITY. I think you will agree with me that the average American has security on his mind more than any subject! at the present time. We hear so much today about Security that sometimes we are prone to believe that financial security is something that has just become into being during recent years, but man’s desire for financial security is as old as time itself. It is more prevalent on the minds of the American people today because of the fact that in the short period of 170 years this country has come to the place where it is the wealthiest, the most powerful nation on the face of the earth. Some 25 or 30 years ago, the people of this country experienced a tremendous depression. It was then that most of the people of this country began to pay more attention to financial security than they had at any time in the past. Now we have reached the place where we want security for the future, and we want it for ourselves at old age, and for our families in the event we are taken away from them prematurely. I think, if we read the history of this country, we can come to only one conclusion; that is, the American people have always gotten what they wanted. It may take a little time, but they have always gotten what they wanted. The American people are going to get financial security. I think they are entitled to it. The economy of this country is sufficient to get the American people the security they want and the security they deserve. The important thing to you and me in the insurance business is the medium through which they get this financial security. Cannot Get Something For Nothing There are a lot of people in this country who have the false idea that it is the Government’s job to provide security for the American people. Some are sincere in their belief, but most of the people who advocate programs of this kind know it is a deceptive move. They realize that the centralization of power and federal control means regimentation, not the security of the American people. There are some people who are sincere but misguided, but what is more unfortunate, there are people in this country, men and women who are in public office, and candidates for public office, of both political parties who have seized upon this desire on the part of the people for security to appeal to them merely for the purpose of getting office. They tell them this without giving any consideration to what they are saying or attempting to do, and what will be the effect on the long range security of the people. I want to say to you that the Government cannot provide security for us, and you cannot get! something for nothing in this country or any other country. In fact, we get back to the statement that you get just about what you pay for in this country and no more. It Is Your Money Why cannot the Government provide this security that the American people want so badly? For several reasons, in my judgment: First, the only place the Government has to get money is from the tax payer, the person for whose security they are going to provide. The government has no fantastic or ma- t gical way to provide it. It is your own money you pay into the Government for this so-called security — you then take the money from one pocket and put it into another — but it is your money. That is exactly the reason the Government cannot provide security for us, because the Government does not have people who are skilled in the art of providing sound substantial financial security. The only people who can provide security are the people who are in the system of free enterprise in this country today — you people, whether operating for profit or not, — you people in the life insurance business. If you need a doctor, you do not call a plumber; if you need a lawyer you do not call an electrician; if you want security, go to the people who have demonstrated over many years that they know how to provide security for the American people, the thing you cannot get from the Government. Let me give you an example. I know that all of you people in the life insurance business, just as everybody in the commercial field and insurance departments of this country, have all had questions regarding the National Service-Life Insurance war risk. Veterans have come to you, or written to the Insurance Department, after they have exhausted their own methods of getting information from the bureau in Washington about their insurance. The veterans write to me saying they wrote 15 or 20 letters in an effort to get some information about their war risk insurance. Once in a while they get a form letter stating that they are investigating it, — but they do not get the information. That does not happen with fraternal or old line life-insurance companies, because your business is to guide your certificate holders, and if you do not keep them happy you do not hold them long. NSLI As An Example Let us look at the other angle; all of you have been asked, “How can the National Service Life Insurance pay a bonus of $2,800,000,000? Why cannot life insurance companies do that?” Probably that question has puzzled a lot of people. I tried to get the answer. I am giving it to you for the purpose of showing that the Government cannot provide this security. In the first place, when the Government decided that they were going to write this insurance, they planned to charge the service men with the premium required to cover ordinary civilian risk and agreed to pay out of the taxpayer’s money the excess cost of all death and disability claims traceable to the extra hazards of military or naval service. The insurance was provided on a net cost basis, with all expenses of administration paid by the taxpayers, — that is, the general funds of the Treasury of the United States. The cost of the insurance fell under cost, administration expenses, interest, subsidies and tax exemptions. Excess mortality and disability costs — at a very liberal interpretation — was placed on the extra hazards of military service with the result that 87% of the claims by number and 83% by amount fell into that category. The effect was that $2,960,635,000 was paid by taxpayers' funds up to December 31, 1946, an amount in excess of the total special dividend to be paid in 1950. The cost up to the end of 1948 has been estimated by the Tax Foundation, Inc., to be over 31 billion dollars. The President’s budget message for 1950 anticipated that Government contributions during the years 1949-1950 would raise the total to 4 billion dollars. Administration expenses, all borne out of general tax money and not out of the premiums paid for this insurance. The sales cost is not borne out of premium, but out of tax money, in addition to the money expended by the Veterans’ Administration in administering, and the assistance rendered by the Treasury Department, Bureau of the Budget, Civil Service Commission and the Department of Justice, áll paid out of the budgets of these departments. More Subsidies The Government has further subsidized NSLI through the issuance to its insurance trust funds of special Government securities bearing a preferred interest rate of 3%, which is considerably in excess of corresponding rates available to Government borrowings for a similar type of security. The annual subsidy has been estimated at about $40,000,000 jn 1948. The most important item is taxpayers’ assumption of excess liabilities connected with service deaths or disabilities. These amounted to over three and a half billion dollars up to 1948. The Tax Foundation, Inc., estimated that administrative expenses, interest subsidies and tax exemptions would amount to one hundred million dollars a year, — a conservative figure. Do you think you could pay dividends if you operated on this basis. Undei-stand, I am not criticizing the Government for making these contributions to this particular purpose. I say to you, however, that if the Government of the United States would sit down and think, it would have found it posible to work out a plan with the large insurance companies of this country and if the Government would have paid to these companies the difference between the premium the Government collects and the premium charged to the individual in the same age and physical condition, the people of the United States could save several hundred million dollars a year in the administration of the NSLI. This is government operation in private industry. It doesn’t work, it never has worked. John L. Lewis Thought He Knew How John L. Lewis decided when certain difficulties arose in this country that for the purpose of the welfare of mine workers they required millions of dollars. The commercial life insurance companies of this country approached Mr. Lewis and tried to sell him on the idea of security, through the medium of life insurance, offering him the services of the best 'life insurance companies in this country. Mr. Lewis turned down and brushed aside these offers. He was going to run it himself. In the short space of two or three years, the fund is practically exhausted. The poor miners, for whose welfare this was started, are not getting one penny out of the United Mine Workers. They would have been better off without such promise of security in the first place. This is what we have to prevent in this country — the dependence for security on some government plan, only to find out at a time when the recipients of the security need it most, that it has not panned out. The people in government service who are not skilled in this particular business have made too many mistakes. I do not believe there is any man or group of men in Government who knows more about business than the business man of this country. They have proven that over the 170 years of life in this country. If we let business men run the business of the country, the happiness, and prosperity and security of the people will be a lot better off . How can the Government provide it? We operate under a political system in this country. We have politics in this country 365 days of the year. This is our system of government and it is okeh. But you cannot expect the average employee of the Government to show as much interest and enthusiasm as one in private employ. He does not have to. He may be a little lax, and if he goes to his political leader he gets straightened out. If you work for United States Steel you have no political leader. There is not the incentive in Goverment service as in private industry, and no advancement or promotion on the basis of the service you render; it is who you know. Gambling With Security You cannot gamble with the security of the American people in the future on that kind of service. It just will not work. 1 say to you that most of these people who advocate provision of this security are advocating it because of the fact that they do not like our kind of government in the United States. There are two ways to ruin the government: 1.) ruin it financially, and 2.) regiment the people. If we are going to depend on our government to provide security for us, you can rest assured that with such bureaucracy in government at Washington, we are going to be regimented. The Challenge Life insurance companies, stock companies, fraternals, I think you have a tremendous challenge. There are still a lot of people in this country who feel that this Government can provide something for nothing. You and I know that it cannot. There is only one way we can be certain of the security we want; 'that’s through the medium of the product you ladies and gentlemen sell. Life insurance industry in every branch can furnish security. You and I, believers in the American system, have to convince the people that this security can be provided; they are entitled to it; it can . be provided through the medium of life insurance. Everyone I talked to in connec(Continued on page 11)
