Clarksville chronicle. (Clarksville, Tenn.) 186?-1872, 1869-02-12
The Profits and Losses
Or THE
INSURANCE BUSINESS !


whole of his own losses by fire or
If he was poor, and his
case appealed especially to the SYM
pathies Of his friends, contribution
might be made on his behalf to re-
place some portion of what had been
taken from him; but this was moth
ing which he could certainly count
upon. Like Shakespeare's Merchant
of Venice, all of his fortune might
be swept away, and he rendered pen
niless in a single night. This hap
pens even now, often, to those who
are improvident enough not to insure
their property. The hard earnings
of years vanish before the flames or
the waves, and leave their former
possessors to begin life anew.
Insurance is device whereby the
effects of such calamities, instead of
being concentrated upon single indi-
viduals, are divided up among many,
and the burden thus borne by each
is comparatively light. In its print
tive form, it is Enlargement between
say hundred men, that they will
all equally contribute to make good
the losses of any one of the number.
IF merchandise, ships or buildings
belonging to one are destroyed, each
of the other ninety-nine pays his one
hundredth part of their value, and
thus the particular owner receives
from his associates ninety-nino one
hundredths of his whole loss. The
hundredth part of the amount, which
he and all the rest pay, is called a
PREMIUM. 1t is the price of right
to demand from others a contribu-
ton to replace the property destroy
ed, instead of being dependent upon
their charity.
In practice, indeed, no such formal
agreement is made. For the sake Of
economy and convenience, the bust
ness of insurance is carried on by a
special class of men, or companies of
men, who collect from each one of
the insured his premium in advance,
and out of the total thus collected
pay to the losers the sums to which
they are respectively entitled. Usu-
ally the men or companies fix the
amount Of the premiums at such
rates as they think will meet all the
losses likely to accrue, and leave them
surplus as reward for their own
trouble. If they calculate Alright in
!. this respect, and no unusual losses
occur, they make money IF they
miscalculate, and unexpected losses
have to be borne, they lose. For the
safety of the insured in this latter
5 contingency, a fund is usually provi
: ded, called capital, out of which
8 losses can be paid if necessary. But
as general thing, the amount of the
premiums must equal or exceed the
amount of the losses and expenses
or the business must stop.
There is an impression prevalen
s among some who have not becom,
S acquainted with the facts connecte,
= with the subject, that insurance is al
y extremely profitable business, and tina
Il the companies engaged in it receiv
l. a vast deal more money, in the shap,
T. of premiums, than they pay out 70
O losses. Statistics, however, demon
II strate that this idea is an incorrec
/. one. In the three years, 1865, 1856
II and 1867, the fire and marine com
It panics of this State received in pre-
d miums S1l0,720.C00, while they pal
20 out, for losses and expenses, Sill,
Ie $40, 900. That is the aggregate isnui
Ie ance business, for three years, Of a
re those engaged in it in this State, II
y suited in loss of 100000. Som
1t Of the companies, to be sure, mad
id money, but others had to draw upo
&c their capitals, onC the public actual
SO gained 100000 at their expense.
DC These considerations show that
m great deal of skill and knowledge
Or requisite to so manage the insuranC
es business as to make the premium
rs cover the losses and expenses. Car,
nc full estimates Of the risk to whic
It. each particle of property insured
al exposed, and of the likelihood of i
ia being destroyed, must be made. A
of the circumstances under which acc
he donts occur must be observed an
i'll studied, and differences drawn fro
ct them. The average Of losses in pa
as ttular kinds Of business must be n
til ted, and premiums regulated accor
to ingly. Even the personal oharact
y. of those who apply for insuran,
re must be taken into account, and allo'
ty ance made for it. All this, and mut
". more besides, is essential to the pro
of or conduct of an insurance Office
ct. and without it, the business is su
Or. to come to an unfortunate end.
sh Furthermore, it is apparent tn
re. not only must the men who attem
cd to carry on the business Of insuran
ks be competent to the task, but tn
ok must also have some other rcsourc
he to meet their losses than merely t
not premiums they collect, With eve
ks, prccaution the losses will, as We Ia
m, seen, sometimes exceed the prem
I'M ums and then, if there be no ca
ul. tai to fall back upon, those who he
.rd policies are really not insured at 4
mt and in case of "A loss, fail of the rel
to they counted upon. Hence the |
he cessity of some supervision Of insl
,se auce companies to assure the pub
om of their pecuniary ability, and
A., nrotect thcm from such bogus e