News and citizen. [volume] (Morrisville, Vt. ;) 1881-current, 1893-02-16
CO-INSURANCE.
A CONSIDERATION OF ITS THEORY AND
PRACTICAL APPLICATION.

ing public OF New England, and, in
fact, the whole country, than the
question of co-insurance. In this
view | have asked permission to use
the columns of this paper for the pur-
! pose of giving its readers some little
understanding as to the effect of the
co-insurance clause when attached to
their policies. My purpose is not so
much to attack or defend the princi-
| pies of co-insurance, as to place the
position taken by the companies in
as clear light as | may be able be-
fore the policy-hOlders of the county,
allowing them to be the Judges in the
! case.
To accomplish this, do not know
that | can do better than to refer at
once to the action of the New En-
gland Insurance Exchange, an asso-
citation of insurance men having con-
troll of rates of stock insurance in
New England. In making such ref
erence | shall quote freely from the
report of its Secretary, Mr.. Goddard.
"At a meeting of the Exchange held Satur-
| day, Dec. II, 1892, it was voted -
That all specifically rated risks located in
| (the city of Boston excepted), Rhode Island
| (the city of Providence excepted), and Con-
necticut-that is in the territory under the
| jurisdiction of this Exchange with the excep-
| tiOns as hereinafter provided-are rated on
| the basis that these risks are insured to at
| least 80 per cent of their value, and all poll
| cies written to apply on or after Jan. l, '93,
| covering on such specifically rated risks,
/ must be written with an 80 per cent. Colin
| surance Clause, or. if, for any reason, 80 per
/ aoTat
! the following additions must be charged over
and above the tariff rates.
| l. When risks are written with no insur-
! ance guarantee, or with a guarantee of in
| surance of less than 80 per cent. of value, so
| per cent. must be added to the regular rates.
| 2. If with 90 per cent, or with any per
cent. more than so but less than go per cent.
insurance guaranteed, 30 per cent. must be
| added to the regular rates.
3. If with 60 per cent, or with any per
cent. more than so, but less than 20 per cent.
| insurance guaranteed, 20 per cent. must be
added to the regular rates.
4. If with 20 per cent, or with any per
| cent. more than 40, but less than 80 percent.
! insurance guaranteed, 10 per cent. must be
added to the regular rates.
That risks specifically rated and located as
! above, may have an allowance made of five
! (5) per cent. from the tariff rate if policies
contain guarantee of not less than 80 per
! cent. insurance.
That the above rules apply to both build
| ings and contents.
| That all rules of this Exchange and of
! Local Boards relating to Co-Insurance are
| hereby repealed, and that no rule governing
| Co-Insurance, or rates based upon Co-Insur-
ance, or guaranteed percentage of insurance
other than those contained in, or permitted
by, the foregoing, are to have any further
force or effect.
That the following shall be the form of Co.
| Insurance Clause to be used under the above
| vote
| FORM OF CO-INsURANCE CLAUSE.
1T is a part of the consideration of this
policy, and the basis upon which the rate of
premium is fixed, that the assured shall
maintain insurance on the property described
10y this policy, to the extent of at least eighty
per cent. of the actual cash value there
Of; and that failing so to do, the assured
shall be an insurer to the extent of such de
felt, ana to that extent shall bear his, her
or their proportion of any loss that may
, happen to said property. Provided, how
ever, that in the adjustment of any loss o.
damage on stock or merchandise. no inven
tory for the purpose of ascertaining the ap
plication of the foregoing clause shall be re
quired, unless the amount of damage is Al
least five per cent. of the amount of insuranc,
: on such stock or merchandise. 1t is eX
pressly understood and agreed that in cas-
there shall be more than one item or division
IL the form of this policy, this clause shall
apply to each and every item or division sep
arately.
This action of the Exchange shall go into
effect and apply to all policies written, to ap
ply on or after Jan. l, 1898; and that tn,
: Secretary notify all Local Boards of the ac
tion of the Exchange"
Although apparently not included
the cities of Boston and Providence
are subject to the Co-Insurance rule
under action of the Exchange takeI
prior to above date. In fact, so fal
as the writer knows, the rule is in op
!, Grafton very generally throughout
the whole country.
CO-insurance, though practically
new in it's application to fire insur
ance, is old when considered with re
gard to marine insurance, where it i:
the basis of all contracts, and is held
| am told, by merchants and ship
owners, to be fair in theory and prac
tical application.
What has been the present necessi
ty for this action? is a question fire
,, quently asked. 1t is the necessity
resting on the insurance companies
as claimed by them, of keeping the
balance between premiums received
and losses paid on the right side.
l quote from an open letter of vice
President Evans, of the Continental
to the editor of the New York Sum-
"Many small companies have been recent,
forced to the wall. while the large corpora
tions that have accumulated money in year.
, past, largely by judicious investment, hav,
been doing losing business. OF course, thi
could not go on great while, and it is no
best that it should for fire insurance is tn,
basis of mercantile credit, and is, therefore
= an absolute necessity; so the companies, try
ing to save themselves and be fair to the pub
lie, have agreed to insist upon q percentage
co-insurance clause, which is absolutely nee
? essary in order to make rate that is fai
to all parties -
? Last spring, when the advance il
, rates was made, | did not want tC
l take any mans or company's wore
for the need of the proposed advance
| and gave the matter careful investi
CATION, as set forth in a circular let
ter to my patrons, under date o
April l, 1892, from which | quote -
? ''This advance in rates has been made, al
/ claimed by the New England Exchange off
, cials, because of the fact that insurance com
panies doing business IN Vermont have beer
} doing it at a loss 70" some years past, pay
: ing out for losses and expenses more thar
: has been received in premiums. | have verl
much regretted from the first the necessity
for any advance in rates, and have takeI
2 considerable time to investigate the matter
; | Such investigate has convinced me that tn
, claim, as made by the companies, is vel
/ grounded and that but two alternative
Z were open to them One, an increased reve
nue. by way OF higher rates; the other, to fol
\ low the lead of the German-American an,
withdraw from the State. There can be NJ
I | dOubt as TO which course would be worse TO
: Vermont. | copy the following from tn
e Burlington Free Press of March TO-
S There we're 81 companies doing fire insur
= ance business in the State of Vermont in 1891
! These companies wrote $43 1876 1S1 in risks
u receiving in premiums $6Sl ,904 and pai
Il out in losses S67S ,6O7, leaving balance q
e S3,297 for expense account. The abov
= showing is one OF the worst that has eve
been known in the State OF Vermont
The total expenses of the companies doin
T business in Vermont in 1891 was from 1925
l., 900 to $3.50 900, with only SO, ,297 as abov
with which to meet it. This shows net los
to the companies in Vermont on the pas
years underwriting of upwards of $2OO,OOC
> not taking into account unearned premium
= on policies paid for in 1891 but Tunnin
longer than one year. II this item should
added, the total loss to companies on Vel
t mont business in 1891 would amount I
q over 100000"
:. The last years business has bee
generally somewhat of an improve
g ment over the business of 1891, bu
a has come far short of being yer
v profitable to insurance companies
r either in Vermont or elsewhere.
# Now a word as to the nature an
d effect of the so-called Co-lnsuranC
lr Clauco.