ratio, and any savings effected from a 6212 percent loss ratio, in lieu of an additional 22 percent commission, I was to share in the profit of the case.

Mr. DERRICKSON. Was there an agreement to that effect?

Mr. LIEVER. Yes, sir.

Mr. DERRICKSON. Was the 621/2 percent the figure in the agreement? Mr. LIEVER. Yes, it was.

Mr. DERRICKSON. And when was that made, Mr. Liever, the second year of the policy?

Mr. LIEVER. I believe from the second year on, and some time from the second year on, because the first year I think we just got 172 percent flat commission. I don't have my records here before me.

Mr. DERRICKSON. Then, if you decided that 6212 percent would be the point at which you would determine these so-called profits, then the retention rate was 3712 percent, was it not?

Mr. LIEVER. That is right, sir.

Mr. DERRICKSON. Now, in order to get this clear for the record, let me ask you again what this arrangement was. Did this agreement mean that if the losses incurred on this case were less than 621/2 percent of the premiums paid, that whatever that difference was, you and the insurance company would share on a 50-50 basis?

Mr. LIEVER. That is right, sir.

Mr. DERRICKSON. And isn't that difference generally the amount of money that would go to a policyholder in what is called dividends with some companies, or experience refunds in others?

Mr. LIEVER. In 1948 I understand it was general practice by a lot of companies to do that.

Mr. DERRICKSON. It may be general practice, and it might have been, but that is not the question, Mr. Liever. The question is, isn't that ordinarily considered by all insurance companies as a basis for determining what amount of dividends would be paid to policyholders, or experience rating refund?

Mr. LIEVER. The insurance company made an arrangement at that time with the policyholder, yes, but if the insurance company said nothing about giving any refunds to any policyholder, that was standard practice, period.

Mr. DERRICKSON. The trustees were under the impression when this bid was given that at no time would they ever have an opportunity to get any dividends?

Mr. LIEVER. I don't think that was.

Mr. DERRICKSON. Or experience rating refunds, regardless of what the experience turned out to be?

Mr. LIEVER. It was never even mentioned, to my knowledge.

Mr. DERRICKSON. During the first year, there was a good experience; was there not?

Mr. LIEVER. One of the few companies that was; yes.

Mr. DERRICKSON. And when that year was over, and the losses were compared, it was under 6212 percent?

Mr. LIEVER. Yes, sir; I assume so; yes. And I don't have my rate. I know several years I got experience rating refunds, and whatever that was-I don't have my figures, and I am sure Mr. Smith will give you that information.

Mr. DERRICKSON. Mr. Liever, I have here the original questionnaire filled out by the American Casualty Co., regarding this particular case. These are the figures as submitted by the American Casualty Co. It was submitted to the committee in response to the chairman's questionnaire which was sent to practically all insurance companies in the

country.

On that questionnaire, it shows that this policy began in August of 1948, and that from that date on up to August of 1953 the total amount of premiums paid on this case was $139,433.28. Out of that amount of money, you were paid on the basis of your 1712 percent commission rate, $24,334.31. The incurred claims, over that same period of time, was $41,159.18. And under the column headed "Dividends" or "experience rating refunds," the total amount paid to you was $13,868.35.

Mr. LIEVER. From 1948 on to this particular time; is that correct? Mr. DERRICKSON. From the time it started, until August of 1953. Mr. LIEVER. Pardon me for interrupting.

Mr. DERRICKSON. Now, under this agreement that you just told us about, this amount of $13,868.13 which you received, was just half of what the savings were, because from what you said the insurance company got just as much out of this as you?

Mr. LIEVER. That is correct, sir.

Mr. DERRICKSON. Over and above the commissions and other expenses involved?

Mr. LIEVER. How many years was that? How many years does that represent, that $13,000? How many years does it represent refunds?

Mr. DERRICKSON. That represents 5 years, 5 different payments. Now, this you received under what you call a retrospective commission agreement; was it not?

Mr. LIEVER. I don't know the official title. I am assuming that that is the title the insurance companies give you. I call it a commission agreement in addition to my 1712 percent, and I am assuming that that is the title that the American Casualty Co. called it.

Mr. DERRICKSON. It is a commission; is it not?

Mr. LIEVER. It is an additional commission agreement, over and above the 1712 percent, and if the company calls it retrospective commission, it is all right with me. I am assuming that that is the title. of it.

Mr. DERRICKSON. Did the trustees of the fund ever know what your arrangements were with the company, as to your 172 percent commission, and as to this additional agreement?

Mr. LIEVER. I would say not to my knowledge. We didn't say that at the time of the inception of the case, and that is the time we handed in our bids, and there was nothing related to any retention agreements, and I assumed that that is it.

Mr. DERRICKSON. Is that agreement still in effect?

Mr. LIEVER. No; it is not. I am very happy that you asked that question, sir. If I may, I would like to enlarge my reasons, and I think that this is an informative group.

Mr. DERRICKSON. We would like to hear it.

Mr. LIEVER. And I am very happy to enlarge. I think all of us mature in stature by experience. I am not the same individual I was in 1948. I am a one-man operation all over the country. I was

moving so fast all over the country that, frankly speaking, I had forgotten that I had a couple of cases in my Pennsylvania office where I shared that commission.

In July of this year, when I caught up to it, because my Pennsylvania office handled it until this year, I thought I would consolidate everything over there. And, as I told you, I am also selling my business because I may be a hundred percent Californian, but I am a sort of Pennsylvanian at heart. I came across it, and I voluntarily came to the office of the American Casualty Co., in Mr. Darrel Smith's office, and I said: "I understand we still have agreements on several of these cases where I share." And I said: "I want them canceled, period, retroactive to January 1, 1954." And that is exactly what I did. Mr. DERRICKSON. Was it at your request?

Mr. LIEVER. I, myself, walked into the office of the American Casualty Co., because I consider at this particular time that I don't want those kind of deals, because the group-insurance business has matured and I don't want to operate that way.

Mr. DERRICKSON. When was that; approximately when?

Mr. LIEVER. Some time around the end of July of 1954; this year. Mr. DERRICKSON. You had forgotten that for the calendar year of 1953 you had gotten an additional check over and above the 172 percent, of two thousand one hundred and eighty-six dollars and some cents?

Mr. LIEVER. I went to the Pennsylvania office and I looked at the statement once every 6 months that the C. P. A. gives me, and that is the only time I even recall how much money they make there.

Mr. DERRICKSON. What are the present arrangements; just the 1712 percent?

Mr. LIEVER. That is correct, sir.

Mr. DERRICKSON. Mr. Liever, over this period of 5 years the total amount of commissions, plus the additional commission, as you call it, which the insurance company_reported as an experience rating refund, amounted to $38,202.66. Did you know that over that same period of time that the total amount of claims paid to the people who were to get the benefits of this policy amounted only to $41,157.18? Mr. LIEVER. I assume that the figures that the insurance company have are correct, and I just glanced at them. Now, I didn't finish my statement.

I walked into the American Casualty Co. and I said, "From now on, any experience rating to be in this policy, I want it to be given to the policyholder; that is for the American Casualty Co., and for my end of it," and I canceled that voluntarily all of the way down the line. Mr. DERRICKSON. Did they agree to that?

Mr. LIEVER. They certainly did.

Mr. DERRICKSON. Did they agree to give up their share of this, as well as yours?

Mr. LIEVER. That is correct, sir.

Mr. DERRICKSON. There was no misunderstanding on your part that you weren't only giving up your 50 percent of this saving, but they were to give it up, too?

Mr. LIEVER. I made it pretty clear to them.

Chairman MCCONNELL. May I ask a question here? What are the arrangements in other insurance companies for a similar type of busi

ness? Do they have this arrangement of experience rating and so on, additional commissions?

Mr. LIEVER. Mr. Chairman, I think that I can answer that if I may, and I would say for the last 3 years, since I have grown in stature in the business, and all of us have learned this business from its infancy, I wouldn't put a case on the books unless there is a contingent arrangement with the company; or in other words, how much they take which includes my commission, over and above any savings effected from the claims going to the policyholder. That is how I operate.

Chairman McCONNELL. Now, what is the practice in the country? That is what I had asked?

Mr. LIEVER. I am sure that there are a lot of business sold even today by companies who do not operate in a large volume group insurance case, and who are what we call casualty companies, and not life companies, that write life and disability, and this is a casualty company that writes fire and automobile. I am sure that they still, on small cases like that, they still pay agents around 20 percent, on a 30,000 or 35,000 annual payment.

Mr. GRAHAM. Do you have the same arrangement with any of the other insurance companies that you deal with?

Mr. LIEVER. I have canceled everything, and I only had a couple of cases with the American Casualty Co., and that is the only company I have ever had.

Mr. GRAHAM. You said it was more or less of a common practice. You also, as a broker, represent other insurance companies?

Mr. LIEVER. At that time I only did business with the American Casualty Co., and I would say 90 percent, and I was only starting in. Mr. GRAHAM. But this arrangement was in effect up until the middle of this year?

Mr. LIEVER. I have no other arrangements on any other business other than what I have told Mr. Derrickson.

Mr. GRAHAM. You said it was a common practice, though, among other companies?

Mr. LIEVER. I understood at that time, in 1948, it was.

Mr. GRAHAM. With what other companies?

Mr. LIEVER. Well, I understood it was a common practice of insurance companies in the casualty group to handle a small case like that, and to do that kind of business. For instance, I sell fire in

surance.

Mr. GRAHAM. Let us keep to this. You said it was more or less of a general practice. You are a broker, and you sell for all insurance companies?

Mr. LIEVER. I am an agent and a broker.

Mr. GRAHAM. And so what other companies had the same policy that you had knowledge of?

Mr. LIEVER. Well, I assumed that was the practice, and I didn't know, on group insurance I don't particularly know; no. I assumed it was the practice.

Chairman MCCONNELL. Now getting back to my original question. In the practice as far as you knew in the country, it is generally to pay 20-percent commission to brokers; is that correct?

Mr. LIEVER. No; I didn't say that, Mr. Chairman.
Chairman McCONNELL. I thought you said that.

53814-54-pt. 2-2

Mr. LIEVER. I said in 1948, on a small case, where a casualty company handles a small case like thirty or thirty-one thousand dollars annual premium, I am assuming the local agent, that it was general practice for them to get 20-percent commission.

Chairman McCONNELL. What would be the general practice now That is what I asked.

?

Mr. LIEVER. It all depends on the size. Now, for example, if I have a case that has a couple of hundred thousand dollars premium and I have a retention with the company of 15 percent, and include my commission and my commission may be standard graded, 3 or 4 or 5—and it all depends on the size of the case. I don't think or I don't have any cases as far as I am concerned that that is a practice, at this particular time.

Chairman McCONNELL. Are you saying that there is no general practice as to commissions in the United States; is that correct?

Mr. LIEVER. I would say that there is no general practice, if you call it that.

Chairman McCONNELL. From your knowledge, what range would there be in commission plans to agents? Would they range from 15 to 20 percent, would you say?

Mr. LIEVER. It all depends on the size of the case, sir.

Chairman MCCONNELL. In other words, a small case would be higher, and therefore about 20 percent, you would say?

Mr. LIEVER. Well, in a case of $31,000 annual premium, and coming from a casualty company-and keep in mind a casualty company operates on a different scale of commissions than a life company. A life company operates on a graduated scale, 20 percent, and if you are a general agent you get 23 percent, and down the line, graded. Chairman McCONNELL. If it is large, how low would they go in their commissions?

Mr. LIEVER. I have some cases where I get 2-percent commission. Chairman MCCONNELL, How much?

Mr. LIEVER. Two percent, on an annual premium of about $90,000 or $100,000. But that is on a level basis over a 10-year level instead of getting the first year 20 percent graded, which is standard commission of all life companies. I sometimes take the so-called level basis, 2-percent level over 10 years, or 1.9 percent or 2 percent

even.

Chairman MCCONNELL. Are you speaking of the same type of business as we are talking about here, where you got 172 percent, and are you saying now that there are some that only get 2 percent?

Mr. LIEVER. Well, in a large case, coming from a life-insurance company, and there is a difference between a casualty company and a life-insurance rate, and that is what I don't seem to make myself understood on.

Mr. GRAHAM. Are you being specific, Mr. Liever, that a life-insurance company handling casualty insurance, or a life-insurance company handling life insurance

surance.

Mr. LIEVER. Every time I say a life-insurance company I mean a life-insurance company that handles life, and disability and inAnd they do not handle fire, or automobile, or casualty or anything like that; as against a casualty company who does not have any life insurance, as the American Casualty Co. which has auto