The New York herald., 1921-08-14

satisfaction it may be stated,
believe, that no business has
played larger or more generous part in
the economic development OF the United
States than stock fire insurance, and
ever since coordination for the purpose
of rating was accorded public approval
and given widespread legislative en-
dorsem Mt, achieve ments in Safeguard
ing America Against Fire have been
signally successful.
It is to the public's interest to pay
fair rate for fire insurance and to get the
best possible indemnity-that which is
as nearly certain as human foresight can
make it. Poor or uncertain insurance is
worse than none at all. This series,
therefore, has been specific in its refer
ences to "stock" FIRE insurance COM
panies, which are those with paid-in
capital stock, adequate reserves (re-
quired by the laws of the several states),
and surplus accumulations held to make
your indemnity the more certain-the
companies that are regulated by the
most rigid laws, whose standards OF SOL
vency are the highest and whose measure
of security for your protection under all
conditions is the greatest.
In introducing this sketch mentio
was made Of the marked development
that has followed public approval Of CO.
ordinated effort. The modern system Of
fire insurance rating, into which the loss
experience on os per cent. of the insured
property Of the country is now gradually
being injected, can in no sense be classed
as trust or a monopoly. Our business,
today, is conducted to prevent discrim-
ination between insurants, to keep down
the cost of the service to the public and
at the same time to offer immediate ir-
ducements in lower rates to those who
safeguard their property from fire, thus
giving them voice in making their own
rates.
In the old days all rating was done by
officers and field representatives OF the
companies themselves, but in later years
the work has passed into the hands OF
trained men, experts, independent in a
large measure from both stock COM
panies and agents, because of the intense
competition in the business between the
various companies and their representa-
tives in every hamlet, village and city
in the United States. No other result
could be expected.
lust how rating is drifting away from
direct company control is told in the re-
port of the Illinois Legislative Commits
sion appointed to investigate the whole
subject. "The work OF constructing
basis schedules" the report says, "in-
stead Of being performed by secret con-
caves Of underwriters themselves under
star chamber methods, as the public has
been led to believe, appears from our
testimony to have passed out of their
hands almost entirely into the hands OF
trained experts. The testimony shows
that fire companies have little or nothing
to do with the construction Of schedules. |
The schedule-maker in fire insurance
today occupies a position analogous to
that OF the actuary in life insurance. He
is expected to deal with fire hazards by
analysis and classihcations of elementary
parts"
Coordination among companies to re-
duce costs and prevent Determinations
between insurants; schedule rating, sub
iect to basic review by the State if de-
sired; and adequate insurance to value,
point touched upon briefly in previous
sketch-these eementals, contend, to-
gether with limitation on the maximum
distributable profit to be realized on the
net transactions of the companies, form
the safest and sanest method yet devised
for the economic administration of any
business Of quasi-public character.
This, indeed, is the present day basis on
which stock fire insurance companies are
operating.
Our agreement with the Nations al
Convention OF Insurance Commissioners
to limit the profits to be derived fro m
net underwriting operations was effected
last spring after years of negotiations.
It ia based on five-year averages, defines
confagrations and covers also the re-
lationship between states--all factors Of
vital Importance.
Under this system there is intense and
healthy competition between the upward
Of three hundred stock compa nies doing
business in the United States, with every
incentive to keep down their expenses.
Of course the best managed companies
will make the most money while the cost
Of FIRE insurance to the public as whole,
expressed in rates, Is limit ed by definite
agreement
Probably no deher bu sness In the
world of the magnitude OF that trans
acted by stock fire insuran ce companies
has entered into voluntary agreement
to limit the profit on its net operations
to only per cent. with an additional
per cent. Qor your create; security to
be applied to the accumulation OF "con-
fagrationi reserve funds" which can be
drawn upon only in event companies es
may not be able to meet their liabilities
out Of surplus funds when conAagratons
come.
To you men Of business ask this
questions: 10 5 per cent. distributable
profit on our net turnover too much for a
business filed with so many intricacies
and uncertainties as stock fire insurance
and requiring 80 much knowledge nd
good judgment nd in which the com pc
tition Is so kecni
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