| It is sometimes said of insurance companies that | | | | fact not peculiar to the business of insurance. Most |
| "they compete in a great spirit of cooperation." The | | | | industries maintain one or more trade associations to |
| existence of so many different types of associations | | | | carry on activities that are best handled on an |
| in the insurance business is partly responsible for this | | | | industry-wide rather than on an individual-company |
| statement. | | | | basis. |
| A complete directory of cooperative life insurance | | | | These associations engage in lobbying activities in |
| organizations would have to include associations of | | | | behalf of legislation favorable to the industry; they |
| company executives (the Association of Casualty | | | | oppose legislation unfavorable to the business; they |
| and Surety Companies, for example); associations of | | | | engage in cooperative advertising and other means |
| technicians (e.g., the Insurance Accounting and | | | | to improve the public relations of the industry and to |
| Statistical Association or the various societies of | | | | sell the economic system under which they operate; |
| actuaries), associations of insurance agents (e.g., the | | | | they establish codes of ethics for the business, |
| National Association of Insurance Agents), lobbying | | | | gather industry-wide statistics which may be put to |
| groups (e.g., the Insurance Economics Society), and | | | | valuable use, sponsor periodic meetings for the |
| many others-in fact, so many others that the | | | | discussion of problems common to the industry of |
| student would lose himself in a complete list. | | | | affordable life insurance, and engage in cooperative |
| A few of these associations are not voluntary for, in | | | | educational and research activities. |
| some states, membership is required by state law, | | | | Carriers find that cooperative rate making is essential |
| especially in rating organizations. The insurance | | | | in most lines of insurance. This cooperation is |
| business is one in which competition can be | | | | maintained through rate-making organizations or |
| destructive. The wrong kind of competition can be | | | | through some subterfuge when such organizations |
| detrimental to everyone concerned: the companies, | | | | have been illegal. These rate-making organizations |
| the holders of different types of life insurance | | | | may be independent bodies offering advisory rates |
| policies, and the general public. To protect the | | | | to the carriers at a contract price; or they may be |
| interest of the companies as well as the interest of | | | | cooperative organizations owned, financed, and |
| the public, competition needs to be controlled either | | | | managed by the member companies (The state of |
| by governmental regulation or by cooperative action | | | | Texas owns and operates its own rating bureau). |
| among the companies. | | | | In the many states which require membership in a |
| As a general rule, the companies prefer the latter | | | | rating bureau and adherence to its rates and rules, |
| method; and they have made efforts to discourage | | | | rating organizations are closely regulated to assure |
| destructive competition. This they have done in spite | | | | that they will not be guilty of unfair, discriminatory |
| of strong opposition from those who believe that the | | | | practices. Where membership in a rating bureau is not |
| only socially desirable alternatives are state control or | | | | required, most companies find it desirable to join one |
| perfectly free competition. | | | | in order to save the expense of making independent |
| The more serious obstacles to cooperative action, | | | | filings in all of the states. |
| however, come from within the business itself rather | | | | Sometimes, however, you'll find a life insurance |
| than from outside it. Here, we find those that refuse | | | | company that prefers to remain outside the rating |
| to cooperate-among them the rugged individualist, | | | | bureau and file their own rates independently. These |
| the new life insurance company seeking growth, and | | | | carriers are called "nonconference companies" and |
| the company that fails to see the point in | | | | sometimes are a thorn in the side of conference |
| cooperating, because they think they are the best | | | | companies because of their rate-cutting practices. |
| life insurance company. It is these carriers which tend | | | | Cooperative rating organizations exist in the various |
| to make government regulation the best solution to | | | | lines of insurance. For example, workers |
| the problem of protecting the public from undesirable | | | | compensation rates for stock and mutual carriers are |
| competition. | | | | made by the National Council on Compensation |
| There are four areas in which competition may exist | | | | Insurance; some inland marine insurance rates for |
| in the insurance business-areas that are not peculiar | | | | stock companies are made by the Inland Marine |
| to the business of insurance. They are prices (rates), | | | | Insurance Bureau; the Transportation Insurance |
| products (policy terms), service, and representation in | | | | Rating Bureau makes inland marine rates for mutual |
| sales outlets (agencies). Competition can be | | | | companies; rates for many casualty insurance lines |
| dangerous in any of these areas except service. | | | | are made for stock companies by the Natural Bureau |
| Reasons for cooperative organizations are not all | | | | of Casualty Underwriters and for mutual companies |
| limited to restricting competition, however-again, a | | | | by the Mutual Casualty Insurance Rating Bureau. |