General Manager Mallalieu of National Board of Fire Underwriters Replies to Chief Counsel of Lockwood Committee of New York Legislature

AN attack on the National Board of Fire Underwriters was made by Samuel Untermyer, chief counsel for the Lockwood Committee of the New York legislature for the investigation of the housing situation in that state, on the occasion of a hearing before the cities committee of the legislature at Albany, on March 9, in which he referred to the board as “a very powerful but not very reputable body.” The bill under consideration was one designed to compel insurance companies to invest 40 per cent, of their assets in mortgages and building loans, and in the course of his remarks in favor of the measure, Mr. Untermyer is reported to have said: “The National Board of Fire Underwriters has appeared here in opposition to this bill. That is a very powerful but not a very reputable body. Our record shows that that board spent $80,000 of somebody’s money for heinous advertising to discredit the work of this committee. In various ways it tried to destroy the State fund. We think that we can save from $300,000,000 to $400,000,000 a year in insurance premiums and still leave a very prosperous business for these companies.” Under date of March 9, Wilbur E. Mallalieu, general manager of the National Board, sent an open letter to Mr. Untermyer, replying to his charges and setting forth the truth of the matter. Mr. Mallalieu’s letter is as follows:

Wilbur E. Mallalieu

March 9th, 1922.

Mr. Samuel Untermyer, 120 Broadway, New York City.

Dear Sir: Since you have made a public Attack upon the National Board of Fire Underwriters, of which I have the honor of being general manager, I am writing you this open letter.

You are reported as saying that the National Board of Fire Underwriters is “a very powerful but not a very reputable body.” There is no more upright and honorable organization than the National Board of Fire Underwriters in the whole United States. It is an association of stock fire insurance companies working for greater safety to life and property from fire, and its activities are recognized as being of a truly public service nature by all who are acquainted with them. It has nothing to do with making or maintaining insurance rates.

You state “that board (the National Board of Fire Underwriters) spent $80,000 of somebody’s money for heinous advertising to discredit the work of this committee.” What you term “heinous advertising” was nothing more or less than an effort to acquaint the public with the truth about fire insurance as opposed to the misleading and absolutely erroneous statements alleged to be evidence brought out by your methods of examining witnesses who were not permitted counsel and who were allowed to answer little more than “yes” or “no” to questions.

Among the errors in your statement appearing in the newspapers of today is the assertion that $314,000,000 a year in premiums go out of this country to foreign companies.

The truth is that during the five years from 1916 to 1920, inclusive, foreign companies admitted to do business in the United States sent $10,000,000 more to this country than they took out of it.

When you say that the bill you propose would save $400,000,000 a year to the holders of fire insurance policies in New York State alone, you make a still more ridiculous error, for the total fire insurance premiums for the year 1921 throughout the United States amounted to approximately $550,000,000. The New York State premiums represented about 15 per cent, of this total, or $52,500,000. The total of $550,000,000 given also illustrates the inaccuracy of your claim that fire insurance premiums aggregate $1,500,000,000.

Despite the heavy fire destruction throughout the country, fire insurance rates continue to be low. Even during the period of inflation commodities rose as much as 600 per cent., the cost of fire insurance was advanced, for a short period only, to the extent of but 10 per cent., and in only certain of the states. However, even this slight advance was not general, notwithstanding the heavily increased expense of doing business, due to the higher price for clerical hire, railroad fares, taxes, stationery supplies and all other necessities of operation.

The underwriting profit of all fire insurance companies, members of the National Board of Fire Underwriters, for the year ending December 31. 1920, shows a minus figure of 2.97 per cent., while for a period of fifteen years—1906 to 1920, inclusive —there is an underwriting loss of .02 per cent. This loss in the underwriting transactions of the country has been taken care of during that fifteen year period by the appreciation in the value of securities in which the companies have invested their assets and surplus through the action of their boards of directors. If, on the other hand, these investments of the companies in bonds and securities, which you criticise, had been in the nature of mortgage loans, as suggested by you. there would have been no appreciation in the value of same, and consequently it would have been necessary for the stockholders— not the policyholders—to subscribe additional funds in order to provide for the surplus depleted by the loss in underwriting business.

Very truly yours,


General Manager.

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