and the frauds of
which that operation has been made the vehicle, let me examine the
subject of supervision by the State over the companies, and the effect
which such supervision has had upon the business. Of course the theory
of a State department is that of supervision. It is based upon the power
of visitation, as exercised by the founders of hospitals and colleges,
for the purpose of seeing that the corporation is carrying out the will
of the founder. Here the State, having conferred a corporate franchise,
has the right to see that the franchise is properly exercised. To that
end an officer is appointed, to whom each corporation is to make annual,
detailed reports of its operations, and who is vested with the power of
examining the companies, to ascertain if their reports be correct, and
if the laws have been complied with. There is no doubt but that if the
power were properly exercised, the action of the Superintendent of
Insurance would have a beneficial effect. The great difficulty in
carrying out the supervision effectively has been, however, the
imperfect character of the legislation on the subject. The laws fix an
arbitrary standard of solvency, which binds the Superintendent hand and
foot.

Insurance experts differ very widely as to the correctness of this
standard. It obliges the companies to have on hand invested a sum of
money, being a certain arithmetical proportion to the amount of
outstanding insurance. A company may not have this amount and yet be
solvent, and have before it a long and prosperous career of usefulness.
Another company may have the technical amount of assets and yet be
rotten to the core. It is said that the very largest and best managed
companies have passed through periods when if this criterion were to
have been applied to their condition, they would have been weighed and
found wanting. The mere amount of assets at any given time cannot be a
positive test of the condition of the business. The expense of doing
business in one company may be small, and all of it taken out of the
premium for the first year, in which case the technical reserve at the
end of the year may be very much impaired; yet the company may be in a
most promising and flourishing condition, with a good business on its
books, and a large future income secure without further cost. On the
other hand, a company may have the full technical reserve and yet have
acquired its business at ruinous application, out of its future