The Wilmington daily Republican. (Wilmington, Del.) 1890-1902, 1891-07-09
CREDITOR INSURANCE.
eEvERAL NEW WAYS TO SECURE
THE PAYMENT OF DEBTS.

Wholesale Dealers and Jobbsrs Made
seoure from Losses By Paying Fixed
Premiums-How the Business Ii Car
ried on-A Sample Case.
Insurance Is becoming science with
many branches. Everything, from human
life to an express package, is protected bya
policy guaranteeing pecuniary satisfaction
as o 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-
sions, 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" It was readily seen that II manu-
facturers and wholesale merchants, who
necessarily do an enormous credit business,
could be insured against loss by the va
carries Of their debtors, the harvest Of
premiums would be enormous.
The difficulty was, however, how to ad-
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
vidual or personal guarantee plan. The
second has 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 esti
mate of the debtors financial responsible
| ity and honesty.
! The second plan Ia to insure the creditor
| against losses generally without reference
| to 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 excuses over a stipulated average loss
are to be considered.
| PLAN OF TIE BUSINESS.
The individual guarantee plan Is being
operated by number of small companies
and has been on trial for many years, but
has not come into general use. The basis
of the system must be an organization
similar to the we'll known mercantile
agencies The company must have accu.
rate information as to 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 Shakespeare's sever
ages. First comes class "A" whose mem
bers have been uniformly successful In
business, never suffered from even a tenn
porary embarrassment and are of undoubt
ed probity
Next to this ''gllt edge" class comes class
"B, whose members have had their finan
cial gliding slightly furnished. And so tn,
scale descends until class &C" Is reached
which include those who have failed in tn,
past and are likely to do SO again.
This classification has smoothing to do witt
|, the extent of the firms possessions. 1t Il
qualitative, not cumulative.
. Next comes the classification as to tn,
limit OF risks. At the head stand thos,
firms whose obligations will be guaranteed
up to any amount. Second, those who will
not be guaranteed beyond q total of sa,
, | SlutuuV, huu 80 On uOMn w siillii hlilOunbA
The company will not issue any more poll
cies on any firm after the total of obliga
lions guaranteed has reached the limit.
When a claim has not been paid 1t Is as
signed to the underwriting company, whicl
saves what it can out of the wreck of tn
bankrupt business wherewith to reimburs
, itself.
RATING.
The next classification Is with regard Il
the hazard of the business which is in ques
ton. There are four grades. Probably
powder mill would be put in the fourtl
grade, while the firm handling the stapl
and non-perishable articles Of food woul
come in the first grade
Again they are classified as to the gros
amount of business done year This |
called rating. Thus the Thurber- Whylan
company would be rated at 1000, 900, a
TINT amount is about the volume of a year
business of that modest concern.
All of these things will be taken into az
count in fixing the rate or per cent of pre-
> MUM when subscriber Of the guarante
company says, "Ive sold John Jones 81 90
: worth Of goods at sixty days, and wan
the account insured
After looking over the books the clerl
would say perhaps, 1.-THE rate on Mr.. Jone
is 5 per cent, but he Is limited to 81, 600 G
risk and we are already carrying &, 500, s
we can only take $500, or half your account
y and the premium on that will amount t
=