New-York tribune. [volume] (New York [N.Y.]) 1866-1924, 1921-07-31
GIVING A THOUGHT
TO
FIRE INSURANCE
Principle of Adequate Gov
erage and Partial Losses
Eighty Per Cent Insurance
TO Value-Reason for Co.
insurance or Assured's Par
ticipation--What Service
Accomplishes.
Third Of a Series of Eight Sketches.
Previous articles WI Be Mailed on
Request. The Fourth VIA appear in
"Tse Tribune" Neat Week.l

IN based on the expectation, first,
that most fires will be extinguished
near the point of origin. (thus pro-
dIcing what we term partial losses"
or losses less than the insurance.. and
second that all property will be in
sured for fair proportion of its
value.
Eighty per cent insurance to value,
for instance, fairly meets everyday
conditions. Furthermore, on an 80
per cent basis the owner has a per-
sonal interest of 20 per cent in his
property's safety. This does not mean
that he must carry 20 per cent of his
own liability, for we will give him
still lower premium rate if he fills
up the gap between 80 per cent and
100 per cent, but in consideration of
= premium rate based on 80 per cent
insurance, we do insist upon his con-
tracing to take out policies for that
agreed percentage of his values-or
stand in the place of the insurance
he does not provide. This is usually
called "co-insurance," its technical
name being Reduced Rate Average
Contribution Agreement" because if
an owner carries less fire insurance
than the average necessary to pre-
vent rate discrimination between in
surants, he must share in his own
loss so as not to unbalance the ex-
perlence (results) in his class.
Without an understanding of fire
underwriting fundamentals, a man
may reason this way: 81 have we'll
built property worth about 100000
in good neighborhood, under good
fire protection and not likely to burn,
Gall of which was taken into consid-
Grafton, by the way, in his schedule
rate), so I will insure for $4,000
which will cover my probable loss"
He has reckoned without his host,
because we cannot issue our policies
on that basis. With only $4,000 fire
insurance without the "co-insur-
ance" agreement), $4,000 fire would
mean to him property loss of only
5 per cent but to US an insurance loss
of 100 per cent.
On the basis of the premium rate
produced by schedule, he should have
carried $4,000 insurance and paid
the requisite premium therefor. Then
a $4,000 fire loss would turn that
"totaP insurance loss into "par-
tial" loss. We rated that mans
property on basis as 100 is to so
6 to Al and he wants US to assume
a liability-at the same rate of pre-
mium-as 100 is to GO to y. That
would be a gamble pure and simple,
and fire underwriting is not a gam
BILE but calculation based on the
law of average when spread over
many thousands of separated prop
critics and a period of years. We
could secure no average on the basis
he proposes except at prohibitive
rates.
Above all, "co-insurance" prevents
rate determinations "a cardinal
nrJnrin1a
only $4,000 and others $4,000 at the
same rate OF premium on practically
identical risks, equal in value, it
would result in unbalancing the
whole experience" on that class of
risks by reducing the premiums and
increasing the losses. This would be
gross discrimination against and at
once establish unfair rates for the
prudent man who for his own pro-
lection provides the $4,000 fire in
ssurance. That is why the man who
will not pay the premiums to meet
the requirement of so per cent fire
insurance to property value, must
pay the penalty at the other end in
reduction in the amount he may COL
lect when loss comes.
II you believe that "a system of
fire insurance rating which does not
discriminate between safe construc-
zion and unsafe construction. and be-
tween carefulness and negligence. is
an injury to the community" Gas one
OF the students of our business wrote
many years ago when advocating
schedule rating), we can demonstrate
TO you the fairness and the reasona-
bleness and the desirability of fire
insurance as today sold by the stock
companies that are co-ordinated mot
combined) to make your security
greater, to make your property safer.
TO prevent your neighbor from dam
aging you, to make your community
better, to make your life and the lives
OF your neighbors and of all other
cltlzens safer, to make your CITY
cleaner and healthier and more habi-
table and to help you solve YOUR
housing problems in saving YOUR
property from destruction bv pre-
ventabie fires and in PAVING hones+
losses promptly SO that YOUR de-
stroyed houses may be rebuilt with
out needless delay.
Inis IS a rather large order. but
alteI ali 1T represents an everyday
lanction OF stock fire insurance. in
aaaltion to Naturalization for losses.
though the underlying service func,
ions SO unobtrusively that the unin-
formed do not see it.
Stock fire insurance cor,ar;..
stand behind the business credit of
the nation. Of all the insurance cav
riers their standard of snlrasa,.