New-York tribune. [volume] (New York [N.Y.]) 1866-1924, 1891-06-07
INSURANCE FOR CREDITORS
SEVERAL NEW WAYS TO PAY OLD DEBTS.
WHOLESALE DEALERS MADE SECURE FROM
rosSrs oN pAy1Nc r1YEn ppEMIIMs

WHOLESALE DEALERS MADE SECURE FROM
LOSSES ON PAYING FIXED PREMIUMS.
Insurance is becoming science with many branches
Everything from a human life TO express package
is protected by policy guaranteeing pecuniary ss
faction balm for the grief of the unfortuh"o
owner heir The latest addition TO the insurance
fold is that much abused chap the creditor Inc ns'
of contingencies which began with fire ana sihp"se
and grew TO include DEATH railroad accidents iau
titles wedding dowries boiler explosions "inuo"
fractures, ETC., extends TO business iaiiuoS'
Money and brains have been eXpended lof Se'Ss III
trying TO apply the doctrines OF averages anu 'n0s
to protection against financial misfortune ana "ooA
ednesss 1t was readily that If manufacturers anu
wholesale merchants who necessarily 40 an enormous
crdi. business could be insured against loss by the
vacaries ~ their debtors. the harvest OF premiums
uould he enormous The difficulty was, however, no"
n aaiust matters so that the seller would not become
reckless in the granting of credits. knowing that ne
was insured and the buyer careless OF his oolgauohS
knowing that his creditor was protected
TN nrohlem has been solved in two different ways,
and four or five different concerns, big and little are
now competing for the business of the wholesale houses
large jobbers and manufacturers The hrst general
nlan may be called the individual or personal
guarantee plan The second has general ana I'M
personal guarantee for its basis The first plan Is TO
ruarantee individual accounts up to a certain limit
at various rates of premium graded according 70 tho
underwriters estimate OF the debtors financial respon
shility and honesty. The second plan Is to insure
the creditor against losses generally, without rel
erence TO the debtors, long as said losses are IN
CURED while doing business within certain stipulated
ruIes Another line Of division may be drawn between
schemes in which only over stipulated aver
age loss are to be considered.
The individual guarantee plan is being operated by
number of small companies and has been on trial Tor
many years but has not come into general use. The
basis of the system must lie an organization similar
to the wellknown mercantile agencies. The COM
pany must have accurate information as to the
financial standing Of every debtor From this they
estimate the risk and fix the premium which they will
charge in guaranteeing his obligations.
In the books Of of the latest Of these companies
the mercantile world is divided into classes like
shakespeare's seven ages. First comes class a.
whose members have been uniformly successful in
business never suffered from even temporary en-
barassment, and are of undOubted probity. Next to
this cltedgen class comes class B." whose members
have had their financial gliding slightly furnished
And so the scale descends until class G" is reached
which includes those who have failed in the past and
are likely TO do again. This classification has
nothing to do with the extent Of the firms possessions
II is qualitative. not cumulative
Next comes the classification as to the limit OF risks
AT the head stand those firms whose obligations VIII
DO guaranteed up TO any amount. Second those who
will not be guaranteed beyond total OF say $4,000
and so on down 10 small amounts. The company VIII
not issue any more policies on any firm after the totl
OF obligations guaranteed has reached the limit when
a claim has not been paid it is assigned to the under
writing company, which what it can out Of the
wreck of the bankrupt business wherewh to reimburse
itself.
The next classification is with regard TO the hazard
of the business which Is in question. There are four
grades. Probably powder mill would be put In the
fourth grade while the firm handling staple and non
pershabIe articles of food would come in the first
ACain fhova elias IN
OF business done year. This is called rating Thus
The ThurberWhy land Company would be rated at Sl4-
100000 that amount is about the volume OF year
business Of that modest concern All OF these things
will be taken into account in fixing the rate or per
cent of premium when subscriber of the guarantee
company says: I've sold John Jones $1,000 worth
of goods at sixty days, and want the account IN
sured."
After looking over the books the clerk would say,
perhaps .The rate on Mr.. Jones Is per cent, put
he is limited TO $1,000 Of risk and we are already
CARRYING 500, so we can only take $500, or nall
your account, and the premium on that VIII amount
TO S25."
Another plan has been put in operation by New
Jersey company. To the eye OF this company the
debtor is an abstraction. 1t doesn't want TO know
anything him further than that he comes WITHIN
a certain rating Of the mercantile agencies. me
policy gives the insured protection against excess"
losses up TO the face value of said policy That Is,
taking up the example of the shoe and leather trade
suppose that Jones Co., wholesale dealers In Shoes
desire to insure themselves under this system. The
firm does business Of 100000 year. The average
loss from debts in this trade is say, fveeghths OF
one per cent so that they only be insured against
losses in excess of 1925. They take out policy
OF $4,000. The premium rate is twenty-nhe mills
on the dollar so that Jones a. Co. pay down S39o Tor
their security. The insurance applies only against
debts incurred under substantially the following CON
ditions: to w.t. debts incurred by merchants quoted
above certain rating by of the standard mercantile
agencies, and having capital of over $1,000, the
debt not exceeding 20 per cent Of such capital
If Jones Co. are careful and lucky their losses
during the year Will not exceed S3125 and they VIII
have claim against the underwriting company.
suppose, however that they are unlucky, ana wiiie
trusting .nly those customers who come WITHIN tIe
rules they lose 5000. This gives them claim OF
1855 against the underwriting company, less IL IL
per cent which is deducted in consideration OF the
his customers and Will realize more less from them
when the asslgnecs wind up the business. Thus, II
Robinson they would realize Ss15 from the under
writing company, and them II Robinson ateTyard set
tied with his creditors for hity cents oHNhe doHdr,
they would get $500 more.
The company win write policy for more than
OF a large concern having number Of departments
$4,000 policy on each department might be taken.
$1,000 This. with the other regulations. protects
the underwriting company from annihiation IN case
vided into series OF $50 each As the average
policy Is for $1,000, the total liability under each
set 100000 Of capital and reserve Of 20 per cent
Of the premiums that series, amounting to SIC $50.
The machinery for carrying on the business OF the
company is the simplest possible. The policy is writ
ten and the premium paid The insured then sends
Those coming within the contract Of insurance are
separated from the others and when their total begins
10 eat into the cOmpanys liability they are promptly
settled lp TO the full face OF the policy If necessary
This scheme is proving bonanza to It's orlgnators.
II can be so plauslby presented that merchants
insnring at the rate of 81 100000 worth of risks
wear The amount of profit to the insuring company
NAV be Judged the fact that while they have been
doing business only about two years they have taken
in nearly 100000 in premiums and paid out less than
S75 900 In losses Before long credit insurance may
become as regular and generally adopted as fire In
surance.