Clarksville chronicle. (Clarksville, Tenn.) 186?-1872, 1869-05-08
The Profits and Losses
Or THE
INSURANCE BUSINESS !

place some portion VI Wndt nau Deen |
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
possessors 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 print
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 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-nine 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 a right
to demand from others 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 then
a surplus as a reward for their OWL
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 tn,
safety of the insured in thiS latte
contingency, fund is usually provi
ded, called a capital, out of which
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.
3 There is an impression prevalen
; among some who have not become
4 acquainted with the facts connecte,
with the subject, that insurance is al
extremely profitable business, and tina
the companies engaged in it receiv
a vast deal more money, in the shap
9 of premiums, than they pay out TO
7 losses. Statistics, however, demon
i strate that this idea is an incorrec
{ one. In the three years, 1865, 1856
4 and 1867, the fire and marine com
!. panies of this State received in pre-
miums S11O,720.0OO, while they pai
out, for losses and expenses, Sill,
500, 200. That is the aggregate isnul
ance business, for three years, of a,
those engaged in it in this State, re
J. suited in a loss of 100000. Som
of the companies, to be sure, mad
money, but others had to draw upo
their capitals, ant the public actual
gained $500, 900 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
exposed, and of the likelihood Of il
being destroyed, must be made. a
}. the circumstances under which acc
dents occur must be observed an
studied, and differences drawn fro
e, them. The average of losses in pa
=, ticular kinds of business must be NJ
=: ted, and premiums regulated accor'
90 ingly. Even the personal charact,
- Of those who apply for insuranc
must be taken into account, and ALLOW
ance made for it. All this, and muc
lie more besides, is essential to the pro
or conduct of an insurance Office
and without it, the business is SUI
to come to an unfortunate end.
Furthermore, it is apparent tn
of not only must the men who attem
"a to carry on the business of insuran
" be competent to the task, but the
II, must also have some other resource
Id to meet their losses than merely Il
ne premiums they collect. With evel
~ prccaution the losses will, as we ha'
seen, sometimes exceed the prem
ums aud then, if there be no car
tai to fall back upon, those who no
policies are really not insured at Il
and in case of loss, fail of the reli
- they counted upon. Hence the n
cessity of some supervision Of insu
ance companies to assure the pub
of their pccuniary ability, and
protect them from such bogus co
Germs as those which lately flourish
: in Jersey City-mere traps to cat
- premiums, without any expectati
on the part of their managers Of pa
ing losses \ ew York Sun.