Clarksville chronicle. (Clarksville, Tenn.) 186?-1872, 1869-04-10
The Profits and Losses
INSURANCE BUSINESS (!
or THE

unhnoWn, every man nau TO pear tne
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
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 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
hpndredth part of their value, and
thus the particular owner receives
from his associates ninety mine 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 a contribu-
tion 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
contingency, fund is usually provi-
ded, called a capital, out of which
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 prevalent
among some who have not become
acquainted with the facts connected
with the subject, that insurance is an
extremely profitable business, and that
the companies engaged in it receive
vast deal more money, in the shape
of premiums, than they pay out for
losses. Statistics, however, demon
strate that this idea is an incorrect
one. In the three years, 1865, 1866
and 1867, the fire and marine COM
panies of this State received in pre-
miums Sl10,720.000, while they paid
out, for losses and expenses, SILL
52O,O 900. That is the aggregate ispur-
ance business, for three years, of all
those engaged in it in this State, re-
suited in a loss of 100000. Some
Of the companies, to be sure, made
money, but others had to draw upon
their capitals, ant the public actually
gained $500, 900 at their expense.
These considerations show that a
great deal of skill and knowledge is
requisite to so manage the insurance
business as to make the premiums
cover the losses and expenses. Care
full estimates of the risk to which
each particle of property insured is
exposed, and of the likelihood of its
being destroyed, must be made. All
the circumstances under which acct
dents occur must be observed and
studied, and differences drawn from
them. The average of losses in par
ticular kinds of business must be no.
ted, and premiums regulated accord
ingly. Even the personal character
OF those who apply for insurance
must be taken into account, and allow
ance made for it. All this, and much
more besides, is essential to the prop
er conduct of an insurance Office
and without it, the business is sure
to come to an unfortunate end.
Furthermore, it is apparent that
not only must the men who attempt
to carry on the business of insurance
be competent to the task, but they
must also have some other resources
to meet their losses than merely the
premiums they collect. With every
precaution the losses will, as we have
seen, sometimes exceed the prcmi-
ums; and then, if there be no capt.
tai to fall back upon, those who hold
policies are really not insured at all,
and in case of a loss, fail of the relief
they counted upon. Hence the me-
cessity of some supervision Of insur-
ance companies to assure the public
Of their pecuniary ability, and to