The San Francisco call., 1895-05-19
PROFITS OF INSURANCE,
Insurance Men Declare That
Rates Here Were Ex-
orbitant.
PUBLIC KEPT IN THE DARK.
The Loss Ratio in San Francisco
Was Never Published for
Good Reasons.

The disruption of the late insurance
compact has at the beginning upset many
| pet theories of those most prominent IN
underwriting circles, one of which was an
unwritten understanding between the
members of the compact of an explanation
to property-owners and insurers as to the
actual necessity of fixing their rates at a
certain figure. The public had listened
attentively and heard these theories so
long and patiently that it was almost If not
| fully educated to believe what it heard and
abide by and cheerfully pay an exorbitant
rate.
Insurance men have been making some
little investigation as to actual premium
income and loss and say the rate is ex-
orbitant. The former is matter of
statistics and public record, but the latter
has been a result to the knowledge of
which the public has heretofore never been
invited.
An average premium 'ncome can stand a
loss ratio of so per cent and leave fair
margin of profit for the stockholder. Or to
figure more accurately, let it be assumed
that from each 81 received so cents goes
for losses, 40 cents for management
expenses, leaving 10 cents or 10 per cent of
the premium income for profit. 1t is true
that a 50-per-cent loss ratio is exceeded
some years, and is not reached in other
years, but in the end this average is main
tanned, and, as before, if the loss ratio does
not exceed 80 per cent, well-managed cor
porations are safe to declare the usual
dividend without encroaching upon the
surplus.
There are two kinds of surplus. One is
the net surplus, which is the test of
strength measured by both policy-holder
nd dct0 nor al hot rbioh laft
to the stockholder after paying back the
entire capital and paying off every other
liability of the company. Next is the
policy-holder's surplus, which is the net
surplus after adding to it the amount of the
paid-in capital.
The result of the present rate war, which
has penetrated every insurance center on
the Pacific Coast, will be watched with
unusual interest as to its effect upon the
surplus of the companies occupying this
field.
Should the loss ratio not exceed so per
cent and the premium income equal that
of previous years, companies will show a
profitable margin in making their annual
statements in January, 1896. If the loss
ratio exceeds the 90 per cent mentioned SO
seriously as to cause diminution of profit
In this territory there may be some with
drawals from the list of ninety companies
now transacting business here.
Ii SO, the trouble lies in the fact that this
result may take from San Francisco some
of the stronger of the leading companies
instead of the weaker ones. This would
be deplored by insurers, as there are many
who cannot be supplied by the insurance
already here. Such lines as those carried
at present by Murphy, Grant & Co., the
Phelan block and contents, Levi, Strauss
& Co., Whittier, Fuller Il Co., the Golden
Rule Bazaar, the Sharon estate, the West
Meat Com the Sn1iUaln
and others, require more extended under
writing than is at present afforded by all
| OF tie companies represented in this city.
The loss ratio in San Francisco is never
| published The natural inference is that
1t is so low that the companies fear to do
| so lest property-owners might be led to
| feel that they were overcharged here in
order to meet the losses incurred elsewhere
on the coast. This has for some time sug-
! gested the argument that the San Fran
| cisco insurer is entitled to lower rate of
| premium-not as low as now prevailing,
but from fourth to third less than what
is now known as the tariff rate fixed by
the late insurance compact.
| Why combination so far reaching in
its power, making this field so sure of
| profit to each and all its members. should
fail is beyond the ordinary understanding.
1t has been said that members did not work
for the common good, but that each one
appeared to be training himself in skill, so
as to see what he could prevent the other
members from having. Underwriters ac-
| customed to losing their heads in their
| regular legislative sessions are just apt to
lose their heads in the conduct of their
| individual concerns during the present
decentralization. 1t may teach wholesome
lesson, and in the end work benefit to
both the insurer and the insured. There
are few in the fold who do not see the
gloomy outcome that older heads are pre-
dieting. The low rates now prevailing
have induced a great deal of new or addi-
tional insurance where lines are carried.
and are creating many lines which did not
exist at all during the period of high
ratings.
The deepest cutting is confined largely
to dwellings, all of which are not reached.
and it is safe to say that not one-fourth of
the insurance carried on residence prop
critics has either been Cancelled or renewed
at the reduced figures.