More Scandal in Texas

In Texas, where ten insurance companies have gone broke in 16 months, there was another crash last week. It was the biggest yet. C. B. Erwin, board chairman of General American Casualty Co., * and two other sad-faced executives walked into the Austin office of State Insurance Commissioner Garland Smith and admitted that General American was bankrupt. It was $1,000,000 in debt and unable to pay its claims. General American, which collected $6,000,000 in premiums last year, has 120,000 policyholders in Texas and nine other Southern states.

Three weeks ago Erwin had told the insurance commission that General American can was in serious trouble. Commissioner Smith asked three other Texas companies to take over General American and try to salvage something, but all refused. Then (as Erwin moved up to board chairman) a new insurance man (William H. Green) was brought in as president to try to straighten out General American's finances.

But he quit after a few weeks, so Smith revoked General American's license and the Texas attorney general got ready to start bankruptcy proceedings.

Texas insurance men thought that Erwin, who had gained his experience in the stable business of life insurance, had been out of his depth in the risky casualty business. In his eagerness to expand two-year-old General American, Erwin had taken on too much risk business. Said one insurance agent: "If you were running truckloads of nitroglycerine over the rough road to Acapulco. General American would insure you." The company's loss ratio was estimated to be running as high as 70% (v. a normal ratio of 40% to 50%).

After closing General American, Commissioner Smith sat down and addressed a plaintive letter to 75 state insurance leaders, calling on them to meet him in Dallas this week to figure out a way to clear up the blots on the Texas insurance industry. But at week's end Texas insurance men gossiped that more companies were shaky.

* No kin to General American Life Insurance Co.

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