REPORT OF THE COMMISSIONER OF INSURANCE.


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the commission according to the amount of shares which he owns
in the stock company. As the success of these inter-insurers has
been considerable in the past and the commissions paid the attor-
ney quite large and the expenses small, owing to the fact that
he issues the policies direct to the subscribers, paying
nothing to agents, the amount of net profit accruing to the
attorney-in-fa4t has been considerable. There have, consequent-
ly, sprung up a few concerns that are analogous to stock-promot-
ing schemes. Some of these incorporated bodies are capitalized
as high as from $50,000 to $100,000, and have largely squandered
this amount in promoting the exchange. However, the articles
of incorporation of these subsidiary concerns fully protect the
subscribers. But, it is an evil to which the advisory committee
and the subscribers should not lend their influence. The remedy
for this consists in reducing the commissions of the attorneys-
in fact to a normal amount, and in assuming censorship over
the organization of any incorporated body promoted by the at,
torney-in-fact. The attorney should not be allowed to use his
commissions for the promotion of any subsidiary corporation
which will bring large profits from stock sales.
It is argued that the attorneyship should be incorporated in
order to make it perpetual and to avoid rewriting of contracts
with the individual subscribers in case of the death of the attor-
iey-in-fact. This argument is sound if the power of attorney
(loes not contain a definite provision, lodging with the advisory
(committee the power of substitution of the attorney in this event,
and for other contingencies that may arise.
The general plan of the inter-insurers organizations provide
for the liquidation of the accounts of the subscribers and their
withdrawal whenever they desire. Most of the organizations,
however, have made provisions for retaining a sufficient amount
of the premium or deposit of the subscriber to pay for his pro
rata share of the losses which occur during the life of his policy,
which cannot cover a longer period than one year. After these
losses are paid the subscribers receive the balance with the pro-
portionate share of the savings which have accrued to them.
This includes their equitable share of the reserve set aside for
excess losses and for the unearned premium. It will thus be
seen that the subscribers do not lose their proportionate share of
the reserves set aside for various purposes, but all funds over
and. above the losses and expenses are returnable to them.