tion to which you refer was passed in Washington on December 15. That is only 4 days ago.

Mr. MURRAY. That is right, sir.

Senator LEHMAN. So recently I haven't received a copy.

Mr. MURRAY. It was just released, Senator. It was sent to the press on Saturday.

Senator LEHMAN. I am very glad. Thank you very much indeed. Have you any questions, Mr. Edelstein?

Mr. EDELSTEIN. I would just like to ask one question which I also asked Mr. Penny, and it has been asked of other witnesses. From the discussions that have taken place in your committee, what as an insurance man would be the reaction if the Congress saw fit to enact a system whereby the insurance industry would be asked to provide policies with a $15,000 deductible on domestics and residential and $100,000 deductible on industrial?

Mr. MURRAY. I can only say, sir, that in our opinion the need would be best served by programs similar to the War Damage Corporation instead of on a basis of that type. Under the war damage plan, the private companies assumed 10 percent of the risk and reinsured 90 percent, but to my knowledge there was no top limit on it. All policies participated. They were not deductible, and the entire catastrophe was covered. I believe that would be the better program.

Mr. EDELSTEIN. That's all.

Senator LEHMAN. Mr. Rogers?

Mr. ROGERS. No, thank you.

Senator LEHMAN. Mr. Murray, I wanted to ask you a question. Under the fourth point you say:

Catastrophe coverage of the type contemplated should include nuclear fission, earthquake, windstorm, wave-wash, explosion, flood and tidal wave, as well as war damage.

I have included in the bill which I have drafted-subject, of course, to change and amendment-damage from nuclear fission, in other words, A-bombs or H-bombs. I think in the committee and in the Congress itself there is going to be a good deal of difference of opinion as to whether that should be included in one bill or whether it should be included possibly in a separate bill. It is an important question; I admit that.

Supposing that were not included in your coverage, would that affect your judgment?

Mr. MURRAY. Senator, I would prefer that atomic fission be included. I wouldn't like to say that we wouldn't want to see

Senator LEHMAN. What?

Mr. MURRAY. I wouldn't like to say that we would feel that the program was lost if it was not included, but I think it highly desirable that catastrophe insurance cover just that catastrophe-and I ask you, sir, if atomic fission isn't disaster; I don't know what it is.

Senator LEHMAN. There will be a great deal of argument on that and difference of opinion because of the impossibility of estimating what the loss might be.

Mr. MURRAY. I understand that, sir. I can't help but slip in a plug here. You may have noticed that the mutual companies in this past week announced the formation of a pool for the purpose of providing reinsurance against nuclear fission. I am glad we got a little jump on the stocks.

Senator LEHMAN. We certainly will discuss it. Thank you very much indeed.

Gentlemen, that completes the roster of the listed witnesses. I'm here representing the committee. If there is anybody here in this room who feels he can make a contribution to what we have discussed here today, I shall be very glad indeed to listen to him.

Mr. EDELSTEIN. Is Mr. Mann here?

Mr. MANN. Yes.

Senator LEHMAN. Will you come forward, Mr. Mann? I am very anxious to hear from you.

Mr. EDELSTEIN. Mr. Mann represents the crop-insurance program, and I was told that while he did not wish to testify formally, he wished to offer his cooperation to the committee. Is that correct? Mr. MANN. Yes, thank you, Mr. Chairman.

Senator LEHMAN. Mr. Mann, in view of the situation which you described, if I ask you any question which you feel might cause you any embarrassment whatsoever in relation to the position that you hold, don't hesitate to let me know and I will withdraw them.

STATEMENT OF JULIAN MANN, STATE DIRECTOR, FEDERAL CROP INSURANCE CORPORATION, UNITED STATES DEPARTMENT OF AGRICULTURE

Mr. MANN. Thank you, Mr. Chairman.

I would like to say I am Julian Mann. I am State director of the Federal Crop Insurance Corporation of the United States Department of Agriculture. I have held this position since 1945.

Since I didn't plan to testify, I have no formally prepared statement. For the information of those present here-probably you, Mr. Chairman, have gone into this and your committee has gone into the operations of this corporation-it was started in 1939 and has continued in some form or other in every year except 1944 when there was a failure of appropriations for its continuance.

The statements that I would like to make would be primarily in connection with the execution of this program in North Carolina.

In the beginning, of course, as they did in other States, we were insuring wheat and cotton. Tobacco is so important to our economy that we began to insure experimentally the tobacco crop in 1945. Tobacco represents more than one-half of the farm cash income of all farmers in the State. Therefore, it is something that makes it insurable as far as we are concerned.

I'd like to say that our insurance is what we term all-risk. That is, it is insurance against the natural hazards, weather, unavoidable insects, disease.

Because of the investment in the tobacco crops particularly, it being a quota crop and a crop that our farm people depend upon for their cash income, our insurance has been taken by those people in larger numbers, and it has been a more successful insurance coverage than in any other.

In North Carolina today we have 32 counties in which we operate. That is, in 1955.

Senator LEHMAN. How many?

Mr. MANN. Thirty-two of the 100 counties, Mr. Chairman. In two of those counties we are operating in only a portion of them.

I'd like to say that we try to practice sound insurance underwriting throughout, and, therefore, we do not take all of the risks. That is, we don't insure all of the risks in any county. We have certain land that is made ineligible, for instance. We have certain operators who are made ineligible because of their management. So that it is a selected insurance from that standpoint.

As provided in the 1939 act and in the amendments that have come since then, we are now insuring not more than the investments in the crops, and we further limit that term because we say we are insuring the cash investments in those crops. Therefore, our coverage does not exceed in many instances or I'll say in most instances-more than half of the cash investment costs against the unavoidable risks of nature and of certain insects, disease, and even fire in the case of tobacco.

We have been in this State since 1945. Our premium income has been in excess of $6 million.

Senator LEHMAN. Your premium income?

Mr. MANN. Yes, sir. Over that period. Our indemnity outgo has been about $5 million, Mr. Chairman.

These figures are approximate. I haven't them formally. So that overall, that is indemnity outgo compared with premium income.

Our participation has risen to the point that we are now about as large as we have ever been in the State. In 1945, for example, we had around $150,000 premium income compared with a record of 1955 of $1,087,000 of premium income in these 32 counties scattered well over the State.

I think that certainly my experience with crop insurance has been that we cannot get farmers to come in and take all-risk insurance. In order to get widespread participation it's necessary to carry the insurance to the farmer. In other words, it must be sold.

I don't know what parallels this type of operation would have with the study and with your bill, Mr. Chairman, on disaster insurance of another type, but I certainly would volunteer the information as far as I am concerned that probably insurance is not the whole answer in the case of insurance against perils that affect urban property and property other than crops. Since we, of course, cannot insure all types of land and all types of operators, certainly there would probably be exempt in case of disaster insurance certain high-risk places that you couldn't expect the country as a whole to carry. That has been our experience as far as all-risk insurance is concerned.

In North Carolina as of today we have something over 34,000 people insured in these 32 counties. In some counties in the State we have as much as 60 percent of the acreage of tobacco insured. In others it is very much smaller.

There are only one or two things that I would still like to emphasize if I am not repeating too much, and that is that it has to be sold, and we can't expect to take all types of risks.

One point that I haven't stressed is that in our case-it might not be in the case of this disaster insurance in which you are interestedwe have found that this corporation is tremendously more successful if we operate our own program. We have had experience with contracting certain phases of it to other agricultural agencies within the Department of Agriculture. We have had some 5 years of experience in operating our own county offices and our own system of marketing

this as well as adjusting it, and we have found that, insurance being technical as it is, we cannot go fast. We have to go slowly. We have to give it adequate supervision. We have to adjust losses strictly in accordance with contract. We cannot pay for neglected crops. We must also, as I say, intelligently present it to farm people as insurance and not as any subsidy or any manner of collecting from the Government on things that are not paid for.

I may have left out some of the things, Mr. Chairman, that you would be most interested in in the extemporaneous manner in which I have given this testimony.

Senator LEHMAN. Let me ask you this: Is the availability of this crop insurance generally known to the farmers of the State?

Mr. MANN. Well, sir, I would say it is in the counties in which we operate. In the other counties we have found that probably they don't know too much about it. We have had exhibits. We give information through the press, through the radio, through television, and through the other methods of promotion. At the State fair, for example, we had an exhibit, and we found much interest in the counties we haven't been able to go into because of the experimental nature of this program.

Senator LEHMAN. Thirty-odd counties in the State are covered by insurance?

Mr. MANN. Yes, sir.

Senator LEHMAN. How many counties are there in the State?
Mr. MANN. One hundred counties.

Senator LEHMAN. Is the fact that only thirty-odd are covered due to the fact that you didn't have applications from the other counties or that there wasn't any interest in the other counties?

Mr. MANN. No, Mr. Chairman.

Senator LEHMAN. Or that you turned them down, as a matter of fact?

Mr. MANN. No, Mr Chairman. There are counties, several in the State, that are very anxious to come into this program now, but we are limited in two ways. We happen to have a large proportionate liability in North Carolina. There is only one State in the Nation that has more liability, and that is the State of North Dakota. So we have to watch getting too much liability in one spot since we must make premiums and indemnities balance as far as we can in accordance with the legislation.

The other is that we depend upon the Congress for appropriations for administrative expenses except for maybe some loss adjustment work that we consider as being indemnity outgo.

And then, of course, another limitation is the act itself, which says that we're not permitted to have but so many counties in crop insurance at the present time.

So we have several limitations on that.

Senator LEHMAN. This has nothing to do with the question we have been discussing all day, but when I was in the textile business 50 years ago I know there was a great deal of Sea Island cotton raised in South Carolina and I believe in Georgia. Is any Sea Island cotton raised in North Carolina?

Mr. MANN. If there is, I don't know it, Mr. Chairman. There may be some, but I don't know it.

Of course, we are insuring tobacco since it is our main cash crop, and we are insuring cotton in about six counties in the western part of the State.

We have found one other thing in insurance so far that we have to watch very carefully, and that is that we don't make our coverage too high. We're mindful always of the moral hazard of neglect of crops by the operator and by our tenant system in the State. If our coverage becomes too high we'd run the risk of people farming their insurance instead of their crops. So we have to hold our coverage down.

There is a second reason for being careful of our coverage, and that is the costs. We find that the rates go up in geometric proportion while the coverage goes up in arithmetic proportion, so that for a little higher coverage the cost is very much greater. And we find agitation for higher coverage all the time among farm people until they have a good crop and have to pay the premium in the fall, and then we have the other side that "we're paying too much for coverage."

Senator LEHMAN. I understand that the main crops which you insure are cotton and tobacco. I also understand that you do not insure fruit.

Mr. MANN. No, sir, we do not.

Senator LEHMAN. Does that insurance on cotton and tobacco cover all and every risk including drought and flood?

Mr. MANN. Yes, sir, it does. It includes all of the natural hazards of weather, including flood, tornado, drought, excessive rain, wind damage, hurricane damage, as well as the hazards of other natural causes such as insects or disease if we find them unavoidable.

Of course, there are places in this State where even though tobacco does bring in half of the cash farm income they don't grow tobacco. Our coastal region in some counties is one example of it. You have heard much about them here today. In the mountain sections there is very little tobacco. It's livestock. So that while we are insuring tobacco, there are places where we don't get into.

We have found one other thing in this that I think is as true as anything that I know in this operation, and that is we must insure the crop that bring in the cash in the operation. If we get into supplemental crops where the main cash enterprise is tobacco or cotton, if, for example, we insure corn under those circumstances, we run into the hazard of the operator attending to his cash crop and failing to attend to his supplemental crop or his crop that he uses for his livestock feed.

So that in those areas where we are insuring cotton, it is the main cash crop, and tobacco, of course, is the main cash crop.

Sentor LEHMAN. Have you any questions?

Mr. EDELSTEIN. A couple. Mr. Mann, on what basis do you or does the Department decide whether to have a program in a particular county? Is it on the application of the county officials or do you decide that this county should or should not be included?

Mr. MANN. Well, I'd have to answer you this way: Lately, I'd say, the last year, we expanded 2 programs, 1 in cotton and 1 in tobacco. They were brought in, and the counties selected were further away from our major areas of liability. The further away from that we could get the better it was. So we selected on that basis since our liability is great in this State compared with surrounding areas. In other areas we have selected by the soundness of the production