Omaha daily bee., 1894-04-02

a western insurance company organized
In 1865 with 800, 600 pretended capital, OF
which one-fourth was paid in cash, and
which is all that has ever been paid In
cash, the other three-fourths representing
sO-called secured stockholders notes, the
state law at that time admitting this form
Of organization. This company paid to It's
stockholders during 1893, and every year
prior thereto for seven years, with one eX-
ception, a cash dividend Of $50, 900, or 100
per cent per annum, 10 per cent per month,
on their original and total investment. In
addition to this they have since 1865 accumu"
lated a cash surplus fund in excess Of all
liabilities Of more than ten times the
amount Of their original investment. Let me
add here that OF the 1856 companies reported
as dividend payers, besides the cash divi-
dends paid, they have I'm nearly every case
accumulated very large surplus funds, and
the current market quotations Will show
their stock in many cases to be worth 100
TO 500 per cent above par because OF their
earning powers. II is true that a number
Of companies have been forced out OF bust
ness during '92 and SO, and others have had
to use part Of their surplus to meet current
losses. but | maintain that this is to be ex-
pected in the very nature Of things.
~Third-Saving in expense of management:
The Spectator figures show the aggregate
cost Of management, including local agents
commissions, and Office adjustment expenses,
etc, to be a trile less than 40 per cent OF
the income receipts Of all the American
companies, that Is, It takes two-ifths Of ali
the receipts Of the companies to pay the
expense OF transacting the business. In none
of the Lloyd" companies OF which the
writer has knowledge is this expense feature
allowed to be more than 90 per cent, this
being the limit in the original contract, and
in very many of them the expense is linn
tied to 10 per cent or less. In other words,
the entire expense of the Lloyd" concerns
is very much less than the bare local
agents commissions for the old line com
panies, which is deducted before a dollar of
the premium reaches their home offices. The
saving in this feature alone will amount in
a series or years to a handsome dividend to
subscribers and members of individual com
panies.
Fourth-Elimination Of the moral hazard:
a prominent insurance adjuster said to the
writer: IF we could absolutely eliminate
the moral hazard from our risks we might
be able to reduce our premium rates one
third and make money by the operation"
Individual underwriters practically eliminate
the moral hazard from all of their risks. and
their consequent liability of loss is reduced
to one-third or one-half because of this
elimination.
WHO AFFORDS INDEMNITY.
Fifth-Unsatisfactory adjustments of the
old line companies: The point is raised by
the local agent, or old line insurance man,
also through the circular of Auditor Moore
referred to above, that these contraband
schemes promise all in the name of insur-
ance, but furnish no indemnity One of
the principal features of old line insurance
business is that of being able to effect a
favorable settlement by the company on a
loss previously incurred. Perhaps this is a
business proposition, and we will admit the
imposition practiced on the old line COM
panies in the matter of claims for the settle
ment of unjust losses. A case in fact may
enable us to explain this clearly:
A friend OF the writer was interested in
n small factory in a MnGCaphIJcatS pity Tho
plant of which cost them and was valued at
$40 1000, and they were doing a successful
money making business. They carried $50, 900
insurance.; suddenly had a disastrous fire,
and a total loss; took a careful inventory
and found after liberal allowance for sal
wage, all that could be hoped for provided
they rebuilt, that their net loss was $50, 900.
In due time a dozen expert adjusters
gathered and inspected the ruins for per-
haps an hour. They then went into secret
session at the Office of the best hotel in the
city, remaining there for two days, and then
calling in the managers proposed that they
would pay them $40, 600 in settlement of
their loss. They exhibited no figures and
declined to give any facts, or reasons, as
to how this estimate was arrived at. They
would pay $40, 1000 and no more. If this was
not satisfactory they might bring suit
against them and the matter would be
determined in court. This led to a wrangle
which lasted for six or eight weeks. The
N>N 'N' N"N lSOp'S WAY uiiISl lilS thDtIlSC
OF about 5000 per day of fixed charges, and
while they had bought for a series Of years
and paid for $50, 600 Insurance., they were
Obliged to accept $40, 900 in settlement of
their loss, although mourning loss to full
face Of policy. In other words, their in
surance cost them three times as much as
they thought it had.
| will make the bold statement, which
believe to be susceptible Of proof. that there
are very few district court dockets in the
limited Statpg which do mt contain fnlap
one or more suits against old line insurance
companies, brought by policy holders who
have sustained a previous loss, but who have
not been able to get a satisfactory adjust
ment.
/ am familiar with the affairs Of most of
the Lloyd" concerns doing business in this
country, and | do not know today of a single
contested loss occurring on the policies of
any one of them. In the thirteen years ex-
OF the company referred to at the
beginning, but one contested loss has oc-
Cured, and this was admittedly fraudulent,
and the old line companies declined to pay
for the same reason Ton the part of the in
sured), because they were carrying more in
surance than their books showed they had
merchandise on hand, and they themselves
could scarcely reasonably expect a prompt
without contest. In this case
the insured declined to allow an investiga-
ton OF their books. They refused to arbi- !
trate the loss, and refused all reasonable
propositions for settlement, but rather than
go into contest of the matter, the subscribers
forced their attorney to settle at what was. |
no doubt, an imposition to themselves I'm
this single case.
Sixth-Recent material advances In pre-
MUM rates: This may be given as the chief |
for the recent organization Of a con-
number of Lloyd companies, and
this fact will be the reason for the organlza- |
ton or a very much larger number.
There Is need for radical reform in insur- |
ance methods. The chief reason for the
and scurrilous, as well as uncalled
attacks of the old line companies on
what may be called the new line is that the
pinches. Old line companies are losing
and will continue to lose, in a larger meas
ure than heretofore, the very best part of
their business, both as to physical and moral
hazard. II this radical reform in expense
in doing business, moral hazard, unsatisfac- |
tory adjustment of moral losses is not
brought about, the old line companies will be
forced either to reinsure and so out of bust
ness or to go into insolvency. What com
mercial business would now exist IL 40 per
cent of its entire receipts were exhausted in
the cost OF transacting the business? II, as
has been admitted In old line circles, more
than one-third Of the losses occurring are
ones, what companies can long
the drafts to cover these losses?
Who pays for this? And, If they know it.