New-York tribune. [volume] (New York [N.Y.]) 1866-1924, 1921-08-10

(Fc,pth OF Series Of Eight Sketches. Pre-
vioas articles HN Re Mclied Request.
The Futh VA Appear in the Tribune Neat
Weekl
go. CLOSELY are stock insurance
~ companies publicly regulated and
supervised by the authorities Of all
the forty-eight States that little we do
escapes them. All is open to the pub
lie, IN sworn returns, printed in State
reports. The worst is always set out
in cold type. New York and Maasa-
lish public Supervision. Now all States
have officials, usually called "superin-
tendents Of insurance. or Commission
ers of insurance" to enforce their in
surance laws.
Our Offices, records, bookkeeping and
alletransac are open to the scru-
tiny of any and all of the commissions
ers all the time, and at our expense, of
course. Only few years ago examina-
tons OF insurance companies were very
busdensome, as we'll as expensive, and
furthermore greatly interfered with
office routine and the bookkeeping that
is such an essential part of our bust
ness. Here the National Convention
Of Insurance Commissioners has CO.
operated toe bring order out of chaos
by .instituting what is known as Coon
veTftion Examinations" or examination
by several States at one time, the re-
sults of which are generally accepted
by all other States.
Common sense must govern fire
underwriting as it must govern every
other business 1t is easy enough for a
merchant to say that he took in $780,
coo last year and that az he paid out
only $4,000 he made $4,000 profit
Men often go to the wall on that for
nula, and yet it is one of the most fire.
quently misapplied to the business of
stock fire insurance companies. In
other words, your meychant who is not
u
stock by making an inventory and finds
out whether he has made real profit
or whether he has, after ALL only a
trade balance upon which there may be
profit or loss in the future.
Stock fire insurance companies accept
thousands of premiums during a given
month covering policies issued to ter
inmate in varying periods of time-say
in one, three and five years to make il
simpler, and indeed these periods dc
embrace the bulk of our acceptances
Now we do not at once earn" all
these premiums received. The first
month we earn only twelfth of the
one year premiums, one thirty-sixth OF
the three year premiums and one-sixti-
eth OF the five year premiums. The re-
mainder we are required by law to set
aside as liability for unearned pre-
miums."
In other words, the premium you PAID
is ours because we have issued against
it our obligations (policies) to indem-
Nifty you against loss by fire, but we
cannot use all these premiums in oul
business, for we have not earned
them as yet, though our liability con.
TIMES of course until the premiums are
all earned. To Offset our expenses which
we. incur in handling, inspecting, pass
ing upon and recording all these pre-
rniurns of yours which come to us from
agents and brokers expenses that are
very heavy-we draw on our surplu.
funds contributed by stockholders, Sc
cured from appreciated investments, re
ceived as interest or gained from oul
business transactions-a surplus main
tanned for your greater protection ant
to give you greater confidence in oul
business integrity and financial respon
tibility.
This process is repeated over am
over again, month by month and yeal
by *yeer, liabilities being established
against our new premiums as received
and the learned" premiums coming ou
Of the liability account with the me
thoaical approach Of the termination
I'VE call it "expiration") of the variou.
policies. All the while we are dis
charging the losses against contract:
(pohcies) outstanding, so that what is
leftin the course of time-and believe
me st is scant enough for such a haz
ardous business elongs to US. 1t i.
at last learned"
1t is my nope that nave teen aLl,
to explain this rather intricate sub
1ect Of the earned and the not yc
earned 1--WE call them "unearned"
premiums that have been so much dis
cussed Of late.
Many years ago, when laws were
FIRST introduced to establish liabilitie.
for not yet earned premiums, some com
panies were handling their business OF
the income and outgo basis-as wa.
the merchant | described to you who
va not taking an inventory and wcr.
heaoed for inevitable failure. Today
for your safety, the law is rigidly an
p!ied 70 all stock fire insurance com
panies and failures are negligible.
What with the proper handling O
th.s particular accountant it is on,
Of the heavy expenses of our business
80 it can be checked readily by ex
aiming commissioners TO see that i
satisfieS the rigid requirements of law
what with keeping oar funds invcste,
s 80 az 70 observe the laws Of all tn
States and what with all the other re
8 l..