Cleveland morning leader. [volume] (Cleveland [Ohio]) 1854-1865, 1860-11-01

Ihere are now IN operation three uluerenL
plans of Fire Insurance: that known as the
Mutual, the Stock, and that on the principle
of participation. The Mutual, the simplest
and doubtless the first plan ever adopted,
gives all the profits Of Insurance to the in
sured; the stock gives all the profits to the
stockholders, and to the insured only the in
demnity contingent upon loss. In each of
these plans there are defects, and in each ad-
vantages; and insurance upon the plan Of
participation is an endeavOr to secure to the
insured the advantages Of each, and to secure
him against the defects of both.
We propose to consider here, the advan-
tages of this third system, and as bearing
negatively upon them, the advantages of the
other;
The principal disadvantage Of the stock
plan is the comparative impOssibility of get
ting at a correct average, so that while the
insured shall not think the rates oppressive,
the company shall be safe. For a series Of
years the stockholders may receive large
dividends, and then new companies are
formed and competition runs high. The in
sured feel that injustice is done them by the
high rates of the old company and they 60
to the new; thus rates are cut down in every
direction, sometimes ruinOusly, and the COM
panies, old and new are impoverished, and in
case Of calamity and rendered very shaky
This is, of course, particularly the case with
companies of small capital. There is in this
the double mischief that stockholders are ru-
ined and the door is frequently opened for
every species Of chicanery. Companies take
risks where they are unable to make good
the losses. and sharp practices generally are
likely TO prevail-because there is a tempta-
ton and possibility in that direction.
The great defect in the pnrely mutual plan
- c-.t, 4la-44-arat of n read z
,uash capital, and the necessary delay 81 as
sessing in caseOf loss; and, second, the want
of interest in the directors. Premiums are
generally so small that even the insured
themselves do not take proper precaution in
the election, and the directors are not always
the right men.
The plan Of Participation without any of
the defects, claims all that is really good in
the Stock plan and in the Mutual plan. With
the ready cash capital, which is the strong
point of the Stock COmpany-it combines
the fair average which is so excellent feature
Of the other. Unlike the Mutual, company
on this plan will have an able board of di-
material interest in the success of the compa-
ny, thus securing constant supervision of its
operations and an efficient management of its
affairs; and, unlike the Stock Company, the
interests of the stockholders and the insured
will not clash, but will be one; for if rates
are high, those who pay them will get the
benefit.
A very strong point of the Participation
plan is, that a company working upoL it, and
being successful, must necessarily make that
| accumulation Of capital which a stock com.
pany may, but so seldom does make, and
which is so strong an additional security tC
the insured. Thus the largest security il
proportion to the risk incurred is given 70 the
/ policy holder, and the security increases just
Is fast as a well regulated business demands
/ The company holds the aggregate of diyi-
dends due to ali for the security of each
giving representative scrip, bearing inter
| est and payable when the accumulatiOns ex-
| ceed a given sum, usually $500, ,00O.1
1t is confidently assumed, that guaranty
capital cannot be obtained more cheaply than
by this plan.
The first company organized upon the plan
| of participation was the Republic; which, by
| its charter, is required to divide four-ffths o.
its profits among the insured. The busines:
of the Company has been confined, mostly
to New York City, and has been successful
The Company that few years later intro
duced the plan more largely was the Cont
mental. That comrany was not required t
divide by its charter, but adopted the plan 0
participation after having done business OI
the stock plan, reserving to itself the righ
TO insure without participation, such risks a
it might deem proper. This is to preserve al
equilibrium and to prevent risks Of ba,
character being classed with desirable ones
and must not be regarded as doing injustice
TO the one bad risk, but as doing the larges
Justice to the ninety-nine that are good.
With this plan the Continental, Just allu
ded to, has been eminently successful. Com
mencing on it in Is56-its assets have gOnt
up in three years from $780, to $3.50, 900
besides very fair dividends to stockholders
The scrip dividends to policy holders hav,
averaged forty per cent. per annum. TIT
business Of the Company in premiums re
ceived is annually increasing, and the exam
pie of its success has induced other COmpa
nies to enter upon the same plan.
We give a list Of the New York City Fir
Insurance Companies, which have adopted
the Participation Plan;
Date of Assets Is
| organization Jan, lS6O