The Kootenai herald. [volume] (Kootenai, Idaho) 1891-1904, 1891-11-28
CREDITOR INSURANCE.
SEVERAL NEW WAYS TO SECURE
The PAYMENT OF DEBTS.

Wholesale Dealers and Jobbers Made
secure from Losses by Paying Fixed
Premiums-HOw the Business Is Car
ried On-A Sample Case.
Insurance is becoming a science with
many branches Everything, from human
life to an express package, is protected by
policy guaranteeing pecuniary satisfaction
AS balm for the grief of the unfortunate
owner or heir. The latest addition to the
insurance fold is that much abused chap,
the creditor. The list of contingencies,
which began with fire and shipwreck and
grew to include death, railroad accidents,
land titles, wedding dowries, boiler explo-
sious, window fractures, etc, now extends
to business failures.
Money and brains have been expended
for years in trying to apply the doctrines
of averages and chances to protection
against financial misfortune and crooked
ness" 1t was readily seen that if manu-
facturers and wholesale merchants who
necessarily do an enormous credit business,
&eould be insured against loss by the va
carries of their debtors, the harvest of
premiums would be enormous.
The difficulty was, however, how to adj
Just matters so that the seller would not
become reckless in the granting of credits,
knowing that he was insured, and the
buyer careless of his obligations, knowing
that his creditor was protected.
The problem has been solved in two diff
ferent ways, and four or five different con
Germs, big and little, are now competing
for the business of the wholesale houses
large jobbers and manufacturers. The
first general plan may be called the indi-
vdual or personal guarantee plan. The
second has a general and impersonal guar
antee for its basis The first plan is to
guarantee individual accounts up to GER
tain limit, at various rates of premium.
graded according to the underwriters est-
mate of the debtors financial responsible
ity and honesty.
The second plan is to insure the creditor
against losses generally without reference
20 the debtors, so long as said losses are in
Cured while doing business within certain
stipulated rules. Another line of division
may be drawn between schemes in which
only excesses over stipulated average loss
are to be considered
PLAN OF THE BUSINESS.
The individual guarantee plan is being
operated by a number of small companies
and has been on trial for many years, but
has not cone into general use. The basis
of the system must be an organization
similar to the well known mercantile
agencies The company must have accu-
rate information as 10 the financial stand
ing of every debtor From this they esti-
mate the risk and fix the premium which
they will charge in guaranteeing his obi
cations.
In the books of one Of the latest of these
companies the mercantile world is divided
into seven classes, like Shal1espeare's seven
ages. First comes class "A" whose mem
ba,-a bay t1pfforp1lxr IL IN,
business, never suffered from even tenn
porary embarrassment and are of undoubt
ed probity.
Next to this "gilt edge" class comes class
"B," whose members have had their finan-
..cial gliding slightly furnished. And so the
~,scale descends until class &c" is reached,
which include those who have failed in the
past and are likely to do so again.
This classification hasnothing to do with
the extent of the firms possessions. 1t is
qualitative, not quantitative.
Next comes the classification as to the
limit of risks. At the head stand those
firms whose obligations will be guaranteed
mp to any amount. Second, those who will
not be guaranteed beyond total of say
$4,000, and so on down to small amounts.
The company will not issue any more poll
cies on any firm after the total of obliga-
-,tiOns guaranteed has reached the limit.
When a claim has not been paid it is as
signed to the underwriting company, which
saves what it can out of the wreck of the
bankrupt business wherewith to reimburse
itself
RATING.
The next classification is with regard to
the hazard of the business which is in ques-
tion. There are four grades. Probably a
powder mill would be put in the fourth
grade, while the firm handling the staple
and non perishable articles of food would
come in the first grade
Again they are classified as to the gross
amount of business done year. This is
called rating Thus the Thurber Whyland
company would be rated at $l4,000000 as
that amount is about the volume of years
business Of that modest concern.
All of these things will be taken into ac-
count in fixing the rate or per cent. Of pre-
MUM when a subscriber of the guarantee
v company says, 1--WE sold John Jones 81 ,O0C
worth of goods at sixty days. and want
the account insured, +"
After looking over the books the clerk
would say perhaps, 1.-The rate on Mr. Jones
is per cent, but he is limited to $1,000 OF
risk and we are already carrying $500, 50
we can only take $500, or half your account
aud the prer@sum on that will amount to
twenty five dollars. New York Tribune