Holmes County Republican. [volume] (Millersburg, Holmes Co., O. [Ohio]) 1870-1895, 1873-11-20

Capital stock, the Mutual, and the Par
ticipation; but judging from actual re-
suits, only one OF these has been sue
eessful. The Mutual system in fire in
surance has, in nearly every case, re-
suited in failure, and the reasons are OBJ
yious. The cost OF insurance is so well
known to the older stock companies,
that it may be affirmed thai the Ordina-
ry rates chai ged by them scarcely afford
a reasonable profit ON the investment.
On the mutual plan, this insurance is
sold on credit-that is, the premiums are
loaned to the insured, to be paid only
when losses occur. These uncollected
premiums being scattered over a large
extent OF country, are only worth, at
best, about one-half their face-value.
OF course then, unless an enormous
profit is made, these deprecated assets
are insufficient to meet liabilities. 1t is
not asserted that all fire insurance COM
panies on this plan are worthless, but
as class they are, and the cause is easi-
ly traced to a wrong theory of business.
The error in the participation plan is,
that it tempts patronage by false preN-
ises and illusions, and it is not sound
business policy to give away that which
has been properly earned, and there can
be nothing to give back, after paying a
fair dividend to the stockholders, unless
exoIbitant rates have first been charged.
This system is being abandoned.
The stock plan is the only one by
which permanent success has been Sc
cured. The capital invested under this,
plan is counted by scores of mi llions,
all of which is reserve fund, or Sc
eurity TO the policy holders for the pay
ment of losses when they occur.
But subscribed capital is not
capital always, and companies
proclaiming large assets OF this kind of
capital are often unsound. Bona fide
capital is capital actually paid in and
safely invested, and there is sufficient of
this at present TO furnish reliable in
surance to all who desire it, and are
willing to pay value for it. While those
who want it for nothing can resort to
the mutual, participation, or any other
principle, and it will answer capitally-
till they burn up, or they have an assess
ment made upon them.
THE MUTUAL PRINCIPAL IN FIRE INsUR-
ANCE.
1t is said that mutual fire insurance,
if honestly, judiciously and energetical-
ly managed, may succeed wholly on
on the credit system; that is, by assess
ments after the iOss-every member en-
tering with the understanding that he
is to pay his share of all losses and ex-
penses that occur during the existence
of his policy; let it be one, three or
five years. Nearly, if not quite all, will
pay when called on under this contract,
thinking they are getting cheap insur-
ance; in fact they are if no losses oc-
cur.
But when each member is required to
pay premium in cash, which he is told
will probably carry him through, with
surplus to be returned at the end, and
to give his note in addition, rather as a
matter of legal form than of actual ne
cessity, the case becomes very different.
A capital consisting of notes thus given,
has generally proved a failure in time
of need. If the directors, at the start,
are active, judicious, and fortunate, and
if they set the law at defiance, by re-
tanning the surplus cash premium, or
good part of it, instead of dividing it,
the company become possessed of a
sufficient cash capital, and the notes are
not needed. The early insurers are, in
fact, made to furnish the grand balance
wheel of success, for the benefit of those
who come after. But as often, or more
so, just the reverse takes place. The
directors divide money which should be
kept. The premiums of new cOmers are
taken to pay losses or dividends to the
old ones. Money is borrowed to do the
same thing, thus still further anticipa-
ting the future business; and, at last
when no more money can be borrowed,
and debts can no longer be put off, re-
sort is had to the notes. Then it is diff
ficult to pursuade members that they
can justly be assessed to pay losses
which, perhaps, occurred previous to
their receipt of cash dividends. Very
little can be collected, and that after
great delay and shocking expense.
There can be no question about the
superiority of the stock, over the mu-
tual plan of fire insurance. The latter
plan was intended to secure the COM
munity against fraud, and prevent the
organization of corporations destitute
of a firm foundation. So far from hav-
ing attained this end, companies have
sprung up under the law that gave them
life, like mushrooms, and have perished
with rapidity, compared to which that
short lived plant is an emblem of per-
manence.
Some Eighty Mutual Companies haye
already been organized, many of which
have failed, and many more must soon
fail. In 1858, there were tnirty-nine
Mutuals in the State of New York do
ing business on the stock plan, with a
nominal capital of 81 200, ,000,and in 1868
every one of these were defunct; show
ing what the short space of ten years
will do with the Mutual plan of insar-
ance. Hear what Mutual Insurance
Company of Freeport Illinois, withdraw
ing from the Mutual plan of insurance
says in circular: "The Mutual plan
of insurance we have abandoned. We
dislike it as enlphatically as the insurance
can. No company can continue any
length of time, and pay losses without
asSeSsingits premium notes; and when
assessments come, then comes dissatis-
faction, because the assured did not ex-
rect to pay so much from year to year
as he is assessed, and there is no consid-
Grafton for the company Thousands
upon thousands may have been paid by
the company property-no matter! The
man who has given a premiums note,
wants out, and will not give you anoth-
er."
1t is fact that nearly all the Eastern
Mutual companies have found unhonor-
ed graves, after few years of faithful
existence, and the same lamentable
truth is proclaiming itself in the West,
and it is only a matter of time with
those yet survive. When man can buy
an insurance with premium note, he
thinks it cost nothing, until some fine
morning his vision of bliss is dispelled
by polite invitation to pay more or less
on his note. We said more or less; but
it is always more and never less than
three or four times as much as he would
have paid in first class stock company {;
and when done he has nothing in the
way of insurance on which to boast
While if he goes into 4 good reliable
stock company, he knows what he has
got, he knows what he has paid for his
insurance and further, he knows that
there can be no assessments made upon
him to pay lssses. No, stock company
in order to pay losses when they occur,
must go back on their capital stock, and
not seek aid from their policy holders
Compare the two plans if you please
A gentleman of this place, relates an ex-
ample of Mutual insurance, that came
from direct observation; it was as fol-
lows: ga gentleman in the town of
Weinsburg, Holmes county Ohio, was
pursuaded to insure i'm the Stark county
Mutual ;(while that institution had life)
after he had insured for some time, he
sold the property, and the purchaser re-
moved the building upon which the in
surance was predicated, and upon the
site, erected new builing, in the mean