Omaha daily bee., 1894-03-04
AMONG THE INSURANCE MEN
Progress of Fire Underwriting as Viewed
Through Veterans Glasses.
CAPTAIN PALMER GIVES A FEW POINTERS
Indemnity Contracts and Risi's-Evil Result
OF Competition During the Past twenty
Five Years-Events of the Week
in Insurance Circles.

underwriting, and expressed h1lglf ex-
haustively, as follows:
ITO insure against loss by fire means the
making Of a contract by party, company
or corporation that has, Fl st, the legal
right to make such contrpc'. anl. second,
but not least, the cash to make good the
indemnity promised. 40 such contract
would be valid without consideration,
and no party seeking such protection would
consider insurance good x 10 proln!Um was
demanded or paid, as there is a hazard in
sured agaist, n possibility CT loss. 1t
stands to reason that there must b9 a cost
price for an inurance policy mean, Of
course, a contract that g.vcs what is bar
gained for in case Of loss 10 fnl the cost
price Ia the essence Of underwriting. Per-
feet and correct underwriting comes when
the underwater learns to charge a fair pay
ing rate for every risk insured and learns
to draw up the contract or policy properly;
to fix the proper cost for the indemnity
promise Is the first duty Of the underwater.
To sell goods at profit the successful mer-
chant fixes the price by the pound, yard or
gallon, finding the cost price and fixing the
selling price after adding cost, expense, etc.
The underwater must fix his price on the
same basis. Cost is shown by experience
tables covering in fire underwriting more
than 100 different classincations of risks.
Fire losses and receipts for a given num-
Der Of years show remarkable averages,
proportionate with the growth and wealth
of the country-as wonderful as birth and
death averages, which can be figured as
correctly for the future as can be the next
eclipse Of the sun. Competition in fire un-
derwrting during the past quarter of
century has wrecked experience tables,
caused companies to disregard cost figures,
and as a result has brought the business
of insurance the verge of ruin,
and in disreputs with their pat
rons and the public in general,
desperate struggle is being made by tho
better companies left to return to good prac-
tices in fire underwriting One move is the
so per cent clause-the first step toward
better and safer clause for the companies
and the country in general, three-fourths
clause, no more no less. Take no FISK
beyond three-fourths the actual cash value
of the property at the time of the fire, and
write no risk for less than three-fourths
of its value, basing the premium upon the
value of the property insured and on the
hazard of the particular classification to
which the risk belongs, relying upon eX-
perience tables for the cost price of the
hazard, giving credit for superior con-
struction- location, fire protection, and,
would go farther, even to the financial
standing of the owner, general reputation,
character, prosperity of the business, the
town, the country.
For obvious reasons the last items,
which enter very materially in the hazard,
must be secretly charged for-for the first
items every insurer should be permitted to
see the figures. No good business man
would insure in a company that he knew
was charging too little for its indemnity
contracts. Insurance is not a question OF
friendship. The business of the country de-
mands that the many shall contribute to
the losses of the few-as good government
demands taxes and loyal support, even to
rallying the people to arms otherwise the
fabric must fall. If the idea of insurance
is good, it must be kept good in the full
sense of the word If it is bad it is wholly
wrong and should be done away with. AS
business it has kept pace with the com
mercfal progress of the world for ZOO
years, growing stronger every year, until
now 1t represents absolutely the business
life of the commercial world. Without its
protecting influence-the combination that
lessons the hazard of loss-there would be
sore disaster in every fire loss In every
death If rates are too high the business
interests of the world Will reduce the
same by healthy competition, by reducing
the hazard insured against, by stopping, by
the aid of wholesome laws, fire waste that
is fast bankrupting the whole country the
so per cent clause before mentioned is a
scheme to fix the cost price of insurance
| per cent rate so per cent OF the
hazard is much less profitable than l per
cent rate on so per cent of the hazard, as
$500 is to $500.
''The cost of doing the business for the
only so per cent insurance there is a
greater chance Of total loss. loss with 80
per cent insurance gives the underwater n
chance for salvage on which n premium
has been paid Twenty per cent is safe
margin against moral hazard. An insurer
carrying so per cent insurance is entitled to
better rate than one carrying only so per
cent insurance, thus: 'Tis true that an in
telligent and equitable rate cannot be
charged unless the amount of indemnity
contracted for is known. Every risk should
stand on it's own bottom, as the idea is COM
monty expressed start with basis rate,
charging for every deficiency in construc-
tion for exposure. occupancy and so forth.
This business of insurance must be econo-
mically and honestly conducted by honest,
intelligent agents and managers. To that
end the business public should be protected
by good laws, for the most stringent super
vision of companies, as their ability to meet
their obligations to fulfill to the letter their
contract Both insurer and the insured
should be compelled by the courts to stand
true to the contract made More light
should be given to the business of insur-
ance than to any other business, for 1t is
q business in which the entire public is
Interested The commissions and salaries
paid to agents and officers, the actual cost
OF doing business are items of interest to
the general public, nearly as much 50 as
the reserve for reinsurance net surplus,
ETC."