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are willing to pay for protection, but just are stopped from doing it. This is the only type of disaster which I know of where there is no means of a man getting protection.

I want to point out to you, too, that my bill does not require the insurance program to be self-supporting. Would that not meet some of the objections that you have raised ?

Mr. Holz. Well, the difficulty with that, Senator, is this and may I add hurriedly that I have not had an opportunity to study the bill which you submitted as carefully as I would have liked to. I received it only a day or two ago. I was in Chicago at an executive meeting of the NAIC.

While I did make a very cursory examination of the bill, I would like an opportunity to study it more carefully and discuss it with my colleagues on the committee to which I referred.

I am not at all sure that it is wise to put the Government in the insurance business on a basis where insurance companies cannot maintain a premium to pay the losses. I am not sure about that. It may have to come to that. I don't know. But my theory in insurance, brought about by my activity, is to see the rates are adequate.

You see we are all charged with the duty, which I cannot dissociate myself from, not only to see that rates are fair, but to see that they are adequate, as well as not excessive.

It is awfully hard for me to dissociate myself from that thinking when I talk about insurance.

But as you have properly pointed out, this becomes a social problem that we have to solve. And it may be solved in association with insurance companies or it may have to be done by the Government alone. If it is to be a subsidy or in the nature of an indemnification by the Government, then we do not have to apply the same standards as we do to insurance companies. If that is the way to solve the problem, of course, I have no comment to make on it. But I would like to study it more carefully and make recommendations along those lines.

I am sure that the companies today, if they have not been before today, are aware of the social need for finding a solution to this problem.

Senator Ives. I think the companies are in sympathy with a solution if it can be found. They have been struggling with it themselves for many years.

Mr. Holz. That is true. They are more conscious of it now than they were before. I think I can say with some degree of correctness that where the companies are confronted with the problem, they know it has to be solved. They are willing to cooperate to the full extent.

Senator, I do not want to give you the impression that we have the answer. But I think it is worth a try to work out something, and I am confident nothing can be worked out without some Government aid. The extent of the aid I am not prepared to say at this moment.

Senator LEHMAN. I think it is perfectly evident from the study which this committee has given to the subject that it is going to be difficult to set a rate which will make this activity self-supporting. I think we all recognize the likelihood of the Government supporting it with a certain amount. I think the Government is already writing insurance. You said the Government does not write insurance, save on a completely self-supporting basis. But they are writing it in some activities, such as crop insurance, where they insure crops against all risks.

Mr. Holz. But, Senator, may I call your attention to the fact that in crop insurance the Government found it necessary to make some exclusions which are now placing a substantial burden upon the farmer. That indicates, as I say, that it is not easy to determine the rates.

The one problem, that I can say in all frankness to this committee, which has been bothering me is the question of ratemaking. I have never met any problem in my entire experience at the bar which has given me as much trouble as ratemaking. You are going to find the more you get into this that the subject of ratemaking is going to plague you no end. To whatever extent the Government can come in and help with that problem, it will be welcomed not only by the companies, but by the people generally.

Senator LEHMAN. There are indications that it would not be possible practicably for the Government to set the rate on a completely actuarial basis, save after some period of time. But you, in the concluding paragraph of your statement, say:

It is the intention of this committee to consult with representatives of the insurance industry and all other persons interested in the subject matter under examination in order to ascertain if it is possible for flood insurance to be written by private insurance companies even though governmental aid in reaching that goal may be necessary during the initial period of operations.

It seems to me that that is an admission that the practicability of this is dependent on how much of a financial responsibility the Government is willing to accept.

Mr. Holz. There is no question about that. That is what I intended to imply by that, Senator. And I think the companies know that.

Senator LEHMAN. Well, I hope you will continue the study. I want to emphasize the fact, and I think I am speaking for many of the members of the committee, that we are more interested in working out a plan, a project, that will grant protection, than we are interested in merely setting an exact mathematical or actuarial base.

Mr. Holz. I might add very emphatically that every commissioner of insurance in the United States is in accord with that view and we are going to try to accomplish that end by a recommendation we will make to your committee. We have every hope we can make some genuine contribution to the solution of the problem.

Senator LEHMAN. Thank you very much. One final word. We have been talking about the bill which I submitted. It is purely a tentative bill. That is not the only bill that is being studied or should be studied by the committee. In other words, in addition to the bill which I drafted, there is a bill drafted and submitted-a tentative bill-by Senators Saltonstall and Kennedy, of Massachusetts. There is a bill that was drafted by Senator Carlson, of Kansas. There was a bill that Senator Bush, of Connecticut, has had drafted under his direction. All those bills, I hope, will be studied.

Mr. Holz. We will study them all and be in touch with all of the agencies interested in this to see what information we get.

Again, thank you for the opportunity of appearing before you. And I want to renew my offer. If there is anything we can do in our department, please call on us.

Senator LEHMAN. At this time I wish to read into the record a letter which I have just received from Congresswoman Katharine St. George,

CONGRESS OF THE UNITED STATES,

HOUSE OF REPRESENTATIVES,

Washington, D. C., November 3, 1955. MY DEAR SENATOR LEHMAN: I regret that I will be unable to attend the hearings in Goshen today, as I have to be in New York City with some of my Rochland County constituents on business with the FHA office in that city. Cn. fortunately, this meeting could not be postponed.

I have asked my district secretary, Mrs. Gladys Hamilton, to sit in at the hearings and take notes for me. As you can well imagine, this is a matter of very vital importance to the 28th Congressional District.

As you know, President Eisenhower has asked us all to get together and do everything possible to solve the many problems created by the recent floods. I have no doubt that this is one of the main reasons for your calling these hear. ings at this time in Goshen.

I believe that an exhaustive study should now be made so that when the Congress reconvenes in January some of us may be prepared to introduce constructive legislation, notably on insurance and reinsurance to be backed by the Federal Government.

I intend to introduce some such legislation myself, and will of course be glad to help any of my colleagues along these same lines.

I have found during my studies in the district that there is considerable duplication and therefore wasted effort among the various agencies. Decisions should be taken promptly, and for that reason, I believe, a special session of the New York State Legislature should be called now to promulgate the necessary laws and regulations so that the necessary work can be well underway before the start of our bad winter weather.

Governor Ribicoff seems to me to be doing this very thing in our neighboring State of Connecticut, where the problems are of course far greater and more staggering than here.

I know that your hearings are going to be constructive and I want you to know that you will of course have the full cooperation of myself and my office. This question is in no way political, and I know you will agree with me on this. It is a matter of humanity and one in which we, as public servants, are all going to do our utmost for those who through no fault of their own have suffered so grievously. With kindest personal regards, I am Very sincerely yours,

KATHARINE ST. GEORGE. I am very glad indeed to know that Mrs. Gladys Hamilton, representing Congresswoman St. George, is in the audience. I hope she will stay here throughout the hearing and take as copious and volumiious notes as possible.

Mrs. HAMILTON. Thank you, Senator Lehman. I am very glad to be here.

Senator LEIMAN. You may sit up here at the table if you wish.

Mrs. HAMILTON. Thank you; I will sit here and watch. I can observe perfectly.

Senator LEHMAN. Now we are going to call on Mayor Louis V. Mills of Middletown.

Glad to have you here, Mayor.

STATEMENT OF LOUIS V. MILLS, MAYOR, MIDDLETOWN, N. Y.

Mavor Mills. Nice to be here. Senator. Vy remarks, sir, will be very brief and, I hope, to the point, although I may cover one point that does not come under the jurisdiction of what you are trying to seek here, but it is very closely affiliated with it.

I think a mayor of a small city probably is in as good a position as any, from a block-to-block standpoint, to know the problems of floods. In the last two floods this year, I received dozens of calls from people who were absolutely stunned because they not only had no coverage but they hoped the city could do something for them, and, of course, we could not.

We are trying to do something in the city of Middletown which might be pertinent to your study here. We are about to apply for Federal urban redevelopment, and at least $150,000 of that money we hope to apply to the widening and deepening of sewers in Middletown.

I mention that for this reason: Our problem is not going to be solved by doing that, although most of our damage from floods was created due to our sewer problems. But, basically, the problem in Middletown is that the flood waters back up below the city limits, and I imagine this is characteristic of many cities.

In townships below the city limits, the floodwaters back up. In our case it is in the Wallkill River, and that backs up the sewers in Middletown.

I mention this because probably there is going to be less flood damage in the future and, therefore, less need for so much of the insurance you are seeking if the cities are able to receive Federal aid to make major sewer improvements, and particularly sewer improvement probably below their own city limits. In our case a good deal of the damage is created not in the city but below the city.

I stress that because I have a feeling most cities are just like Middletown. The people that are being damaged by floods—and I am thinking now particularly of residential dwellings rather than commercial or industrial-are almost all the poorest people in the cities because storm sewers, major trunk sewer lines, are in the older sections of the city which are usually the lower sections of the city. The newer sections have been built on the heights. But in Middletown as in most cities, the older sections are in the lower parts of the city and those are the sections that are flooding, and those are the sections where the oldest dwellings are, the slums and the areas that are gradually approaching slum conditions.

Therefore, it seems to me that in your study you must consider the fact from an insurance standpoint that the damage is happening mainly to people in the very lowest income groups and that it is being created in many cases, certainly in our community, by factors beyond our control as municipal officials. It is being created due to the fact, in Middletown, that the Wallkill River simply won't carry the flood waters as they come out of Middletown. So you might consider that in your study of any insurance for flood damage.

I can certainly say this, as a mayor of a small city: The people need some sort of protection, as I am sure we are all aware, against this catastrophe.

Thank you very much.
Senator LEHMAN. Thank you very much indeed.
Senator Ives. Thank you.

Senator LEHMAN. I just want to say that I have always been very strongly in favor of urban redevelopment, as I am sure that my colleague, the senior Senator from New York, is.

Whether you would qualify under the Federal Housing Act, in order to permit you to use some of this money for the purposes that you have outlined, I don't know. I would suggest that you check

with the Housing and Home Finance Agency to see whether their broadened public agency loan program can be of help to you.

Mayor MILLS. We have done that, Senator.

Senator LEHMAN. Preference does go to cities, and we have passed some amendments, but that was, of course, limited to 10,000 population.

Mayor Mills. Thank you, sir. We have had many conferences with those agencies and we are pretty far along in preparing the application for filing. I am confident that the city of Middletown will qualify for aid and for Federal aid for sewer improvements.

However, the point I wanted to make was that we can do nothing, as I understand it, under the Federal law about the condition that exists below our city line. In other words, the only Federal money we can apply for is money that we will use within the city; and although that will solve part of our storm-sewer problems, it won't solve the major problem which exists below our city line.

Senator LEHMAN. You have had no ruling on that from the Federal agencies?

Mayor Mills. No, I havent, but I would assume that is the case because, after all, it is not under our jurisdiction. It is under the town of Wallkill.

Senator Ives. I would like to ask Mayor Mills a question. Mayor Mills, were any applications made from Middletown to the Small Business Administration managers for loans following either or any of these floods?

Mayor Mills. I am sorry, I am not qualified to say. Maybe Mr. Abt of our public works department knows. We made an application, I believe to the State.

Senator Ives. I didn't mean the city itself. I meant were applications made to the Small Business Administration for loans by any. body who lost property as a result of the floods?

Mayor Mills. I am not aware of it.
Senator LEHMAN. Thank you very much indeed, Mayor.
The next witness is Mayor James Cole of Port Jervis.
Is Mayor Cole in the room!

The mayor is not in the room. I am going to call on Alderman
James Murphy and Alderman Peter Latini of Port Jervis, who will
please testify together in order to save time.
Will you identify yourself to the reporter, please.
STATEMENT OF JAMES MURPHY AND PETER LATINI,

ALDERMEN, PORT JERVIS, N. Y. Mr. MURPHY. Of course, this is a little unexpected. We are not too well prepared, but we can tell you something that happened on August 19 in Port Jervis. The floodwaters came up so fast that people were unable to get their personal belongings out of their houses, The water was up as high as close to the second floor in some of the areas. There was a great loss of real

property, but I think the greater . loss was from personal property. Foundations were washed away, and some of the houses had to be condemned.

The State came in. We called on Governor Harriman for help. As I say, the State came in and under civil defense and mutual aid, we had about sixty-some units, mostly volunteer fire companies, that came in and pumped out cellars. They were there about 4 days before

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