• (p324-) - Statement of Herbert S. Denenberg, Professor at the Wharton School of Finance and Commerce, University of Pennsylvania
• Prepared statement__ 332
  Appendix 1 - 342
  Appendix 2 - 345
  Appendix 3 - 353
  Appendix 4 - 359

• (p326-327) - Herbert S. Denenberg -  I do cite many similar illustrations which indicate that the State insurance regulator cannot adequately protect the public. I am not necessarily advocating Federal regulation. My own view is that State regulation may be lousy but Federal regulation might be lousier.
  • Sometimes the insurance commissioner has the time, resources and inclination to protect the consumer, but often one or more of these essential ingredients are lacking.
• This brings us to the next question: Are there serious abuses in the marketplace calling for new and more effective remedies ? 
• (p327) - Cash value life insurance represents another difficult problem in which the consumer has no idea of the real costs of different kinds of policies.
  • [Bonk: Typo - represents - in hearings it is "rperesents"]
• (p329) -  I could cite another example. I think another serious problem is the life insurance policyholder who simply cannot figure out how much his life insurance costs because of the complex nature of the transaction.
  • Even the experts are having difficulty figuring out-given a series of policies, given different premiums, given different cash values and dividends-which policy represents the lowest premium.
  • Many agents do not understand that, and even their experts can not grapple with the problem. Because of this, I think the consumer is being misled in many ways.

• (p330) - Senator Moss. We have before us a bill that would pose an insurance fund, that is , like a deposit insurance fund on bank deposits, to indemnify policyholders of insurance companies, casualty companies that became insolvent. What is your opinion about legislation of that sort?
• Mr. DENENBERG. Actually, I expressed my views on this in connection with the advisory committee that I am on with the Department of Transportation's automobile study.
• Six or seven of us, including several State insurance commissioners, presented the view that the consumer needed protection against insolvency, but it should be given on the State level rather than with the Federal Government moving in.
  • There should be legislation to indirectly require the States to provide this insolvency protection.

• (p331) - Senator Moss. I wonder, since we are talking about State insurance law and State regulation, if the consumer's point of view is represented in the forms of the State insurance laws?
• ...
• Mr. DENENBERG. For all these reasons, I think very often the consumer is not adequately represented.

• (p331) - Senator Moss. Do all of the States or a majority of the States have laws on their books that outlaw fraud and deception in insurance?
• Mr. DENENBERG. Yes, they do, but it is the problem of enforcement. The easiest thing in the world is to pass a law, but you need personnel and resources to enforce these laws. Very often the commissioner is simply too busy. 

• (p332) - Mr. DENENBERG. The consumer encounters incompetence, indifference, bad advice, misrepresentation, and fraud in many places.
  • Nowhere are his problems more difficult than in the area of insurance.
  • Nowhere are new and more effective remedies more urgently needed than in the area of insurance.
  • Nowhere are problems likely to get worse before they get better than in the area of insurance. 

• (p332) - Senator Moss. Really, the main thrust of your presentation is that if a class suit were made available for insurance consumers, that this would release a lot of expert manpower in the form of competent lawyers to assemble the data and present the matter to a court for relief for the consumers; is that right?
• Mr. DENENBERG. Yes. I think every study of regulation that I have ever seen says one of the big problems is that the insurance regulator is so busy with a lot of little things; he never has the fix on the big picture.
• This is especially true at the moment, because insurance is really going through a revolution.
  • I think it would be more efficient to take some of the problems that the commissioners face and turn them over to able private attorneys. This would also develop this consumer bar. Now it does not pay an attorney to get involved very often in insurance matters.
  • But if you could get experienced attorneys who are now doing other things to represent the consumer, I think that would have a good effect, not only in  reducing frauds, but it would also produce the kind of attorney that could go in and represent the consumer on regulatory matters before legislative bodies.

(p337) -[re: Surplus Lines] - ¹³ [1963 - GOV (Senate) - The Insurance Industry: Surplus Lines Insurance, Part 11. 

• This particular problem is noted for several reasons.
• First, it shows again that even the most sophisticated corporate insurance buyers run into trouble in the insurance marketplace, ranging from phony companies on down.
  • Even the most sophisticated corporate insurance buyers run into trouble in the insurance marketplace, ranging from phony companies on down.
• Second, it shows that many serious problems of the insurance marketplace are perennials.
  • There is a tendency to think that after a certain amount of talk and investigation a problem is solved, but in fact it turns up in some new form, or even in its original form.
• Third, it illustrates a problem that state regulation has always had a difficult time in controlling due to the interstate and international scope of some of these operations.