Wausau pilot. [volume] (Wausau, Wis.) 1896-1940, 1915-09-21
FIRE INSURANCE
By A. H. ZIMMERMAN.


the ak collectors. lie Insurance COM
p l.li.s tax dssi Iii,uJors The prem
iuu paid for indemnity against loss
by tire or tie tax is composed of two
elements. We have that portion that
is used solely Tor the payment of
losses, whicn fiuctuates from year 10
year according to the burning ratio.
The residue is the expense, reserve
and surplus element. This pays the
agent for his work and all the helpers
needed to care for, supervise and
carry on the machinery of collecting.
investing and disbursing the premi-
ums. 1t also is used in adding TO the
legal reserve and to the surplus.
There are three general classes of
fire insurance companies. The first
comprises companies with capital
stock paid in by those who are re-
sponsible for the company and hazard
their investment in getting it started
and maintaining IL. When premium
is paid to stock company there is no
further liability on part of policy
holder
The second class includes the mutu-
al companies. A mutual is incorpo-
rated, but has no capital stock. The
profits, if any, are distributed among
the policy holders to decrease the cost
of their insurance, but on the other
hand, if there are abnormal losses the
policy holders are called upon for
additional premium. The liability of
a policy holder of mutual may not
end with the payment of the cash
premium. There is what is known as
contingent liability. A policy holder
is held for his pro rata share of the
losses during the term of his policy
and is liable to assessment in case of
excessive losses. The liability of the
policy holder is frequently limited to
three or five times the cash premium
he pays.
The third class of insurance institu-
tions are "Lloyds" and inter-insur-
ance associations. The LloydS are
the oldest form of insurance. 1t is
not an incorporated body. A number
Of men form partnership, it may be
so termed, and issue insurance poll
cies in which each personally assumes
a part of the liability.
The best known Lloyds are the
London Lloyds, blanket name that
covers numerous groups of persons
called underwriters or subscribers
that issue policies. Each underwater
signs his name to each policy and the
amount of liability he will assume.
In the United States the scheme is
somewhat changed. The underwrit-
ers do not sign the policy, but dele
gate power Of attorney to some one
who signs the policy. 1t is the usual
rule for each underwater to assume
his pro rata share of all liability. For
instance, in case of a $4,000 policy,
an underwater at LlOyds would
there were twenty underwriters.
Inter-insurance concerns differ some
what from Lloyds. They are not in
corporated. The plan is for number
of business concerns TO insure each
other Suppose, for example, that
five hundred department stores, whole
sale groceries, numbering concerns
and like enterprises, agree to con-
tribute certain sum in case any one
of the number meets with loss by fire.
That is inter-insurance. Such a con-
Germ issues no policy to any one not a
member of the syndicate. An attor-
ney or manager is delegated to sign
the policies and carry on the detail
work. In case of a favorable loss
ratio the subscribers are not required
to pay so high rate, but they must
bear the extra burden in case of ex-
cessive losses.
In addition to these three general
groups or plans of insurance, a second
division may be made. First, there
are companies writing all kinds Of
property, or risks, ranging from a
fire proof dwelling house to a mat
treSs factory. Secondly, come what
are termed the class companies.
These specialize on certain kinds of
risk. One class may write only prop
erty equipped with automatic sprin-
klers. Another may write only -four
mills, another only ice houses and ice,
another only saw mills and lumber,
another only woodworkers, another
only properties rates above 800, 900,
and so on.
Each state has its insurance COM
missioner, who superyises the insur-
ance companies and examines their
financial statements. In several states
the unincorporated institutions are
not under the jurisdiction of the in
surance department.
All stock companies and many mu-
tuals are required to maintain what
Is known as Reinsurance Reserve"
which is carried as liability in their
financial exhibits. For instance in
case of one year policy with a prem
ium of $1,000, most states require 50
per cent of it, or SO 90 to be set aside
as reserve. In case of a three year
policy 10 per cent is set aside and for
five year policy 80 per cent. The
purpose of this reserve is to have
sufficient funds on hand to transfer
them to another company in case the
original company desires to retire
from business or becomes financially
embarrassed.
Troubles are plentiful in the insur-
ance business, primarily on account of
people dealing with incompetent
agents. If we purchase a piece of