Clarksville chronicle. (Clarksville, Tenn.) 186?-1872, 1869-01-08
The Profits and Losses
--a--oF THE
INSURANCE BUSINESS +!

Tn tho 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 enice, all of his fortune might
be swept away, and he rendered peu-
niless in q 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 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-nin 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 q
PREMIUM. 1t is the price of a 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 aud convenience, the bust
ness of insurance is carried on by 9
special class of men, or companies o.
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 sucf
, rates as they think will meet all tn,
losses likely to accrue, and leave then
i, surplus as reward for their owl
, trouble. If they calculate Alright il
; this respect, and no unusual lossc,
: occur, they make money If the,
! miscalculate, and unexpected losses
q have to be borne, they lose. For tn,
safety of the insured in this latte
: contingency, fund is usually provi
: ded, called capital, out of which
; losses can be paid if necessary. Blu
y, as a general thing, the amount of tn,
e premiums must equal or exceed tn,
: amount of the losses and expenses
: or the business must stop.
: There is an impression prevalcn
: 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
a vast deal more money, in the shap
d of premiums, than they pay out 70
= losses. Statistics, however, demon
: strate that this idea is an incorrec
q one. In the three years, 1865, 1856
. and 1867, the fire and marine com
q panies of this State received in pre-
miums S110,720.00O, while they PAL
n out, for losses and expenses, Sill,
~ 500, 900. That is the aggregate isnul
n ance business, for three years, of a
If those engaged in it in this State, +,
suited in loss of 100000. Som
y of the companies, to be sure, mad
: money, but others had to draw upo
T their capitals, ant the public actual
i gained $4,000 at their expense.
N These considerations show that
Q, great deal Of skill and knowledge
~ requisite to so manage the insuran,
20 business as to make the premium
G. cover the losses and expenses. Car,
ly full estimates of the risk to whic
each particle of property insured
n exposed, and of the likelihood of i
Or being destroyed, must be made. A
es the circumstances under which acc
dents occur must be observed ar
ne studied, and differences drawn fro
y them. The average of losses in pa
,g ticular kinds of business must be n
iii ted, and premiums regulated accor
ingly, Even the personal charact
of those who apply for inssran
must be taken into account, and allo'
H. ance made for it, All this, and mu,
e. more besides, is essential to the pro
'e er conduct Of an insurance Office
OF and without it, the business is su
i0 to come to an unfortunate end.
H. Furthermore, it is apparent tn
es not only must the men who attem
Il to carry on the business of insuran
ne be competent to the task, but tn
Vi must also have some other resourc
rs TO meet their losses than merely &
premiums they collect. With eve
precaution the losses will, as we ha
80 seen, sometimes exceed the prem
n, ums aud then, if there be no cal
tai to fall back upon, those who no
80 policies are really not insured at a
and in case Of loss, fail Of the reli
% they counted upon. Hence the n
~ ccsSity of some supervision of inst
ancc companies to assure the pub