The New York herald., 1921-08-03

tnat most nres VIII DC eAtln-
guished near the point Of origin, (thus
producing what we term partial losses" !"
or losses less than the insurance., and
second that all property will be insured
for fair proportion Of its value.
Eighty per cent. insurance to value,
for instance, fairly meets everyday con-
ditions. Furthermore, on an So per cent.
basis the owner has personal interest
of 20 per cent. in his property's safety.
This does not mean that he must carry
20 pei cent. Of his own liability, for we.
will give him still lower premium rate
il he fills up the gap between so per cent.
and 100 per cent, but in consideration Of
a premium rate based on So 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 prevent rate discrimination
between insurants, he must share in his
own loss so as not TO unbalance the ex-
perience tresults) in his class.
Without an understanding of fire un-
derwriting fundamentals, man may
reason this way: Il have well built
property worth about SIoo, 900 in good
neighborhood, under good fire protection
and not likely to burn, (al of which was
taken into consideration, by the way, in
his schedule rate), so | will insure for
$1,000 which will cover my probable
loss"
He has reckoned without his host, be-
cause we cannot issue our policies on
that basis. With only $1,000 fire insur-
ance without the "co-insurance" agree
ment), S. 1000 fire would mean to him
a property loss Of only S per cent. but TO
us an insurance loss Of 100 per cent.
On the basis Of the premium rate pro-
duced by schedule, he should have car
ricd $4,000 insurance and paid the
requisite premium therefor. Then a
$4,000 fire loss would turn that total"
insurance loss into partial" loss. We
rated that mans property on basis as
100 is to SO Is to AZ and he wants US to
assume liability-at the same rate Of
premiums 100 is to 5 (1o to ~. That
would be gamble pure and simple, and
fire underwriting is not gamble bur
calculation based on the law Of average
when spread over many thousands OF
separated properties and period OF
years. We could secure no average on
the basis'he proposes except at prohibi-
tive rates.
Above all, ''co-insurance" prevents
rate discriminations-a cardinal prin-
ciple. Were some men to carry only
Ss 900 and Others $50, 900 at the same
rate of premium on practically identical
risks, equal in value, il would result in
unbalancing the whole 'experienc on
that class OF risks by reducing the pre-
mums and increasing the losses. This
would be gross discrimination against
and at once establish unfair rates for the
prudent man who for his own protection
provides the $4,000 fire insurance.
That is why the man who will not paw
the premiums 10 meet the requirement
of so per cent. fre insurance to property
value, must pay the penalty at the other
end in a reduction In the amount he may
collect when loss comes.
II you believe that "a system OF fire
insurance rating which does not dis
criminatc between safe construction and
unsafe construction, and between care
fulness and negligence, is al injury 10
the community" (as one OF the students
OF our business wrote many years ago
when advocating schedule rating), we
can demonstrate 70 you the fairness and
the rcasonableness and the desirability
OF FIRE insurance as today sold by the
stock companies that are co-ordinated
(not eombined) to make your security
greater, to make your property safer, 10
prevent your neighbor. from damaging
you, TO make your community better,
to make your life and the lives Of your
ncighbors and OF all other citizens safer,
TO make your city cleaner and healthier
and more habitable and to help you
solve your housing problems in saving
your property from destruction by pre-
ventabc fires and in paying honest
losses promptly 80 that your destroyed
houses may be rebuilt without needless
delay.
This is a rather large order. but after
all il represents an everyday function Of
stock fire insurance, in addition to in
identification for losses, though the
underlying service functions so unob-
trusively that the uninformed do not see
il.
Stock FIRE insurance companies stand
behind the business credit Of the nation.
OF all the insurance carriers their stand
ard Of solvency is the highest; their su-
pervision the most rigid; their taxes paid
10 the State the largest, and their con
tracts the safest and the best
JOHN B. MORTON,
President
NrArr~>NyAr nNAnD ~r-