Clarksville chronicle. (Clarksville, Tenn.) 186?-1872, 1869-01-22
The Profits and Losses
or THE
INSURANCE BUSINESS +!

In the days when insurance was
unknown, every man had to bear the
whole of his own losses by fire or
shipwreck. 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 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
posscssors to begin life anew.
Insurance is a 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 primi-
tive form, it is an agreement between
say hundred men, that they will
all equally contribute to make good
the losses of any one of the mum Der.
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-nine one
hundrcdths 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 q contribu-
ton to replace the property destroy
ed, instead of being dependent upon
their charity.
Tn practice, indeed, no such formal
agreement is made. For the sake Of
economy and convenience, the bust
ness of insurance is carried on by 8
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 then
a surplus as reward for their owl
trouble. If they calculate Alright il
this respect, and no unusual losses
occur, they make money If the,
miscalculate, and unexpected losse
have to be borne, they lose. For tn,
|, safety of the insured in this latte
contingency, fund is usually provi
ded, called a capital, out Of whicl
losses can be paid if necessary. Blu
as general thing, the amount Of tn
premiums must equal or exceed tn
: amount of the losses and expenses
or the business must stop.
There is an impression prevalen
among some who have not becom
acquainted with the facts connecte,
} with the subject, that insurance is al
. extremely profitable business, and tina
. the companies engaged in it receiv
: vast deal more money, in the shap
; of premiums, than they pay out 70
: losses. Statistics, however, demon
strate that this idea is an incorrec
one. In the three years, 1865, 1856
and 1867, the fire and marine com
, panies Of this State received in pre-
] miums S110,720.000, while they pai
; out, for losses and expenses, Sill,
i $4,000. That is the aggregate isnui
anco business, for three years, of a
7 those engaged in it in this State, re
suited in loss of 100000. Som
c of the companies, to be sure, mad
money, but others had to draw upo
y their capitals, ant the public actual
= gained 100000 at their expense.
These considerations show that
: great deal of skill and knowledge
. requisite TO so manage the insuranc
- business as to make the premium
cover the losses and expenses. Care
full estimates Of the risk to whic
each particle of property insured
v exposed, aud of the likelihood Of il
c being destroyed, must be made. A
h the circumstances under which acc
: dents occur must be observed an
Is studied, and differences drawn fro
n them. The average of losses in pa
ticular kinds of business must be N,
n ted, and premiums regulated accor,
.. ingly. Even the personal charact,
Y of those who apply for insurant
. must be taken into account, and ALLOW
a ance made for it. All this, and muC
;s more besides, is essential to the pro
70 er conduct of an insurance Office
i and without it, the business is SUI
o. to come to an unfortunate end.
% Furthermore, it is apparent tn
20 not only must the men who attem
w to carry on the business of insuran
70 be competent to the task, but tn,
% must also have some other resource
"a to meet their losses than merely Il
il premiums they collect. With evel
~ precaution the losses will, as we ha,
seen, sometimes exceed the prem
ums and then, if there be no caI