New-York tribune. [volume] (New York [N.Y.]) 1866-1924, 1921-08-07
ADVERTISEMENT
GIVING A THOUGHT
To
FIRE INSURANCE

tttS NV
p,blic Regulation by Forty
.;rht States-Liabilities to Pro.
..ct Not Yet Earned Premiums
examinations by National
Convention of Insurance Com
missioners.
xw.t, Of Series of Eight Sketches. Pre-.
IT, ~, Articles WM Be Mailed on Request
-. rita RM Appear in the Tribnme Ner
Heek).
no CLOSELY are stock insurance
D companies publicly regulated and
supervised by the authorities of al
ia forty-eight States that little we dc
.,,spes them. All is open to the pub.
e. IN sworn returns, printed in State
..rorts. The worst is always set out
u cold type. New York and Massa.
.susests were the first States to estab-
ush public supervision. Now all States
h.ve officials, usually called "superin-
,.,dents Of insurance" or commissions
ara Of insurance" to enforce their in
srrsnee laws.
Our Offices, records, bookkeeping and
III transactions are open to the scru-
tiny Of any and all of the commission
.rs all the time, and at our expense, of
course. Only few years ago examine
tons Of insurance companies were very
burdensome, as we'll as expensive, and
furthermore greatly interfered with
Office routine and the bookkeeping that
Is such an essential part of our bust
rsss. Here the National Convention
Of Insurance Commissioners has CO.
operated to bring order out Of chaos
BY instituting what is known as "Con-
ysn.ion Examinations" or examination
By several States at one time. the re-
suits Of which are generally accepted
BIZ al other States.
Common sense must govern fire
underwriting as it must govern every
other business. It's easy enough for a
merchant to say that he took In $780,
900 last year and that as he paid out
only $4,000 be made $4,000 profit.
Men often 60 to the wall on that for
mula, and yet 1t is one of the most fire.
quently misapplied to the business Of
stock FIRE insurance companies. In
other words, your merchant who is not
deceiving himself takes an account of
stock BY making an inventory and finds
out whether he has made a 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 given
month covering policies issued to ter
inmate in varying periods of time-say,
In one, three and five years to make it
simpler, and indeed these periods do
embrace the bulk Of our acceptances.
Now We do not at once earn" all
these premiums received. The first
month we earn only one-twelfth of the
one year premiums, one thirty-sixth of
me three year premiums and one-sixti-
e'n OF the five year premiums. The re-
malnder we are required by law to set
aside as liability for unearned pre-
miums"
IN other words, the premium you paid
y ours because we have issued against
our obligations (policies) to indem-
aliy you against loss by fire, but we
cannot use all these premiums in our
business, for we have not earned"
mem as yet, though our liability con-
unues OF course until the premiums are
oil earned. 10 Offset our expenses which
W., We incur IN handling. inspecting, pass
'us upon and recording all these pre-
mluns OF yours which come to us from
gents and brokers-expenses that are
.,eiy heavy-we draw on our surplus
LUNGS contributed by stockholders, Sc
.utee from appreciated investments, re-
, s as interest or gained from our
BUSINESS transactions-a surplus main
.a'aea Tor your greater protection and
70 70 give you greater confidence in our
sibility. N ''"4 -''po'-
ms process is repeated over and
Svsr again, month by month and wear
~ year, liabilities being established
ss Sd'a as our new premiums as received,
A. NV sne earned" premiums coming out
y sae liability account with the me-
i isvussi approach Of the termination
n MI esi 1t "expiration"D Of the various
s sS,,slss. All the while we are dis
inol;s.,s the losses against contracts
lsit , !. outstanding, so that what is
ms 1; ~ tue course of time-and believe
s,aom ~ IS scant enough for such a haz-
=. uyus Dusiness-belongs to us. It ia
" last earned" 80
Is my hope that have been able
1.et sAp,ain this rather intricate sub
ksr..S the earned and the not vet
s,s nIa we call them "unearnedn)
esssS ' ~ mat have been so much dis
s,st ;s ~. years ago, when laws were
In na .sa.roduced to establish liabilities
puis. s yet earned premiums, some com
liz ;s were handling their business on
lie m n's0me and outgo basis-as was
sss ms. man. / described to you who
beaded sS' taking an inventory-and were
iar yonr LOT inevitable failure. Today.
sisd v ~ a safety the law is rigidly ap-
hi" al stock fire insurance com