The Windham County reformer. (Battleboro, Vt.) 1876-1897, 1895-09-06

Ihe insurance IfoDicu
II. NJ. Mcfarland of Hyde Park ha
another letter in the Insurance Stand
ard on the Vermont situation. IL
sensibly takes the ground that thi
periodical raising of rates in which
the companies are engaged will nove
solve the problem, and under sucl
treatment the "last state will easily b'
found to be worse than the first.
Eyperience and common sense alike
demonstrate this to be the fact. Al
Mr.. Mcfarland truly says;
AS YOU enhance the cost of insurance
whether by an increase in rate or the
application of clause compelling
larger lines or make the policy con.
tract burdensome in other ways. you
drive away the better class of insurers,
those who insure for their own protec-
ton and who bring the minimum
moral hazard into the risk: and pro
portionately increase the percentage OF
another class who insure for the pro.
lection of others, those whose moral
hazard is maximum.
For remedy in addition to what he
has suggested before, careful selection
of risks and agents, systematic inspec-
ton. and general scheduling of the
state, he urges 'abrogation by the eX-
change of the so per cent. clause, or
its restriction in application to terri
tory under protection of gravity pres
sure water works or paid fire depart
ment." He was at first a believer in
this scheme, but experience has CON
WINGED him that it's
Application to Vermont, where near
" all losses are either total or exceed
so per cent. of the value, is ridiculous.
Especially is this true in the face of
declining values of real estate, which
have generally prevailed in country
districts for the past twenty years or
more. In fact under the present rule
minimum is offered in a reduced rate
if insured will carry insurance to the
amount of 80 per cent of property
value. This is only little higher bid
for the property insured, little larger
premium offered for that rascality
which manifests itself altogether too
often, when conditions are such that
personal interest demands it, either in
positive criminality or in gross negli-
gence induced by prospective pecuni-
airy gain which, though not a statute
offence, is alike disastrous to the in
surer. In my experinece there
has never been loss where the so or
so per cent. clause attached to the
policy has saved the company a cent.
Where almost any loss is total loss
the so per cent clause is a practical
nullity. except as it serves tc increase
fires and swell the loss ratio.
Avoid any semblance of moral hazard. !
1t is insiduous and more combustible |
than Vermont saw mill. You cannot /
guard against it. There is no rate I
equal to it, and yet when the exchange |
puts premium on 90 per cent. of in, /
surancc it its bidding for moral hazard |
and is getting it. 1t is possibly get
ting more money, but 1t is surely I
getting poorer risks and, as certainly
as the night follows the day. higher
loss ratio If there is not sufficient
confidence in the judgment and integ
,ity of the local agent to fix values,
and, in the place of the SO per cent.
clause, put an endorsement on the
policy limiting recovery in case OF loss
% three fourths fair cash value at
he time of the fire, regardless of the
mount of insurance. This rule would
stop the sale of much property to the
insurance companies and would work
10 injustice, providing that any excess
If premium paid should be refunded in
.ase there should appear to be an over
payment on the basis of values de
ermined on adjustment.
Capt. Mcfarland has here got close
o the right idea. \ rigid limitation to
hree fourths insurance would not al
Ways be practicable or just. Instead
# compelling it. the reform should be
ought by making it an object, by of
ering lower rates, for the insured to
AXE it. or less amount, with a stip
Ilation for proportional recovery in )
ase of partial loss. Then, if a higher
proportion of insurance. 90 per cent. .,
f the value or full value is desired by
he insured, or his business situation
$ such that it is necessary. let him
ay higher rate for it; let that class
risks take care of themselves, with I
he moral hazard they necessarily in q
olive instead of loading the burden on ,
Their classes of risks that involve no
loral hazard whatever, In other !
'ords, exactly reverse the policy now i
ursued. Instead of filming the man '
no seeks so low an insurance as to :
Intimate the moral hazard encourage :.
lst that kind of insurance. Capt.
IcFarand is exactly right when he :.
iys the moral hazard is the most !
'eacherous and deadly foe of insur
lce' 1t is more combus :.
BILE than Vermont saw milf" And Il
i important means of eliminating it =
ould be valued policy law, which q
IMPLY means some sense of RESPONSE u
lity on the part of the companies =
I'd their agents in placing insurance. u
is not sufficient to require, after fire
as occurred, that the companies should ..
pay the excess of premiums they
ave collected by over insurance. They 10
ust be prevented from collecting such a.
emiums in the larger number of u
ses where fires do not occur. Such W
nuine system of reinsurance. be.
use clearly based on right princi-
DC would he alike 4. GOOD fiji 70 =,