New-York tribune. [volume] (New York [N.Y.]) 1866-1924, 1921-08-03
GIVING A THOUGHT
TO
FIRE INSURANCE
Principle of Adequate Gov.
erace and Partial Losses
Eighty Per Cent Insurance
70 VaIue-Reason for Co
Insurance or Assured's Par
t;cipation--What Service
Accomplishes.
rTxird Of a Series Of Eight Sketches.
b-srious Articles wa Be Mailed on
n.ouest. The Fourth WI Appear IN
ssTke T~ibane" NEXT Week.l

n ATE making in fire insurance is
II based on the expectation, first,
that most fires win be extinguished
near the point of origin. (thus pro-
ducing what we term partial losses
mr. losses less than the insurance.. and
second that all property will be in
sured for a fair proportion of it's
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 forer premium rate if he fills
10 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," it's 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
gurants, he must share in his own
loss so as not to unbalance the ex-
perience (results) in his class.
Without an understanding of fire
uHlerwriting fundamentals, man
may reason this way: 81 have a we'll
built property worth about 100000
in a good neighborhood, under good
fire protection and not likely to burn,
(all Of which was taken into consid-
Grafton, by the way, in his schedule
rate), 60 l 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 $1,000 fire
insurance without the "co-insur-
ance" agreement), a $4,000 fire would
mean to him property loss of only
5per 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 SS0,0oo insurance and paid
the requisite premium therefor. Then
a $1,000 fire loss would turn that
total" insurance loss into ''par-
tial' loss. We rated that mans
property on q basis as 100 is to so
Is to a and he wants Us to assume
liability--at the same rate of pre-
MUM as 100 is to 5 GO to y. That
would be a gamble pure and simple,
and fire underwriting is not a gam
bic but a 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
ne proposes except at prohibitive
rates.
Above all, "co-insurance" prevents
u
principle. We're some men to carry
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
ilsks 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-
tecqlon provides the $4,000 fire in
suranee. That is why the man who
WIZ 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 q
ieauetion IN the amount he may col
lect when loss comes,
II you believe that "a system of
afe insurance rating which does not
discriminate between safe construc-
aoh ana unsafe construction, and be-
tween earefulness and negligence. is
al injury to the community" (as one.
the students of our business wrote
many years ago when advocating
seheauie rating), we can demonstrate
- you the fairness and the reasona-
.Diehess and the desirability of fire
insurance as today sold by the stock
sompanles that are co-ordinated (not
Somoined) to make your security
greater, to make your property safer.
' prevent your neighbor from dam
sss'ng you, to make your community
psster, TO make your life and the lives
" your neighbors and of all other
c,uzens safer, to make your city
s'eaner and healthier and more habi-
saoie and to help you solve your
housing problems in saving your
psoperty trom destruction by pre-
tsh'able fires and in paying honest
sssses promptly so that your de-
owoyed houses may be rebuilt with
ous needless delay.
.,. ms Is rather large order, but
ssser all it represents an everyday
ssaS'on of stock fire insurance, in
shSuasion 10 indemniication for losses,
, ,savags the underlying service funcA
sS uns so unobtrusively that the unin-
10fmed do not see it.
Stock fire Insurance cnn,nanies