The Bismarck tribune. [volume] (Bismarck, N.D.) 1916-current, 1931-07-20

F1rSC aI1u lOICIIlO0I Jul PAoAA VOAA
templates q preliminary step. which
had not been employed prior to las
year. That Is to determine, upon tn
basis of past experience, how mucl
income will be required to take carr
of the probable losses which careful
estimating, based IN past experience
discloses as likely to be incurred dur
ing the year Immediately following
the rate-making. Having made tina
calculation. the next preliminary stel
is to figure the general rate level fol
all of the classifications (the fund a:
a whole) that will develop that nee
| essary income, with the reasonable
requirements Of administration ane
reserves added, Of course.
Never before having planned II
such manner, we were never able tt
do more than guess at what woule
be the result Of rate-making. Blu
| there isn't much use Of employing
a general definite plan, without. also
establishing an equitable method o.
distribution among the cl~assifications
There can be no such equitable meth
cd of distributing rates without some
equitable method Of distributing loss
es-because losses, in the last analysis
determine the rates.
Now, theoretically, each classified
ton Manual Number) has it,
known hazards. We know, for exam
| pie, that the office classification hal
no explosion hazard" although va
rious types Of explosions" may &C.
cur in offices. We know. also, that
the classification of Poultry dealers
especially where live poultry is pre-
pared for marketing) presents a GER
tain definite and distinct infection
hazard" We know. again, that any
classification in which live current is
handled or manhandled will produce
serious cases Of shock and burn, and
that classifications requiring men to
work high off the ground will result
in many permanent disability cases
resulting from fractured bones.
In the attempt to allocate these
theoretical hazards to the particular
classifications. we may find that the
money cost of accidents for a partic-
ular classification Chat is the total
cost does not support the theory of
theoretical hazard. It may be far too
high, or much too low. This Is 'ue,
in much greater degree, in a state like
ours, where there are 10 many low
total payroll classificatiOnS, and SO
many employers with only a few en-
ployes. Certain definite and reason
ably expected results are found, on
the basis of these theoretical hazards,
over long periods of years. Even here,
we shall eventually reach $4,000 to
loo. 900 separate claims in a particular
classification, and we shall then find
a definite type of injury predominant
ing throughout, with q certain aver
age fixed cost therefor.
But while this experience is gather
ing, and particularly in North Da-
kota, periods Of five, ten, Or even
more years, will show something en-
tirely different from the average re-
suit eventually attained. For exam
pie, we find that Manual 9062, the
School Classification. produced two
deaths in n year in little town
Of less than $50 population. Yet 1t
Is well known that the School CLASH
fication ought to and does, in the long
run, produce large numbers Of small
cost injuries, with few permanent dis.
ability cases and q very small num-
Der Of deaths.
The need, therefore, is for q definite
plan that will work over the actual
produced losses into q continuing fac
tor that will approximate the result
that may reasonably be expected to
be the final one, or rather the long
time average one. If the plan can be
worked out, 1t will enable the adop-
ton Of rates more OF less stable, and
II more or less stable, they will, or
should be, more satisfactory.
The new plan seeks to and does
distribute the actual losses produced
upon the basis Of a sound actuarial
and insurance policy. It can not do
It with absolute accuracy, but it will
be so close an approximation after
the first three years as to justify the
statement that 1t approximates ac-
curacy. Such q plan must, Of course,
be general enough to be applicable
to all OF the classifications. It must
also take into consideration peculiar
conditions that play not only upon
the whole structure but upon in
dividual units.
Our very first application Of the
plan demonstrates, at least to the
commission, that it does make equit-
able distribution Of heavy losses and
supplies a normal loss basis that is
quite reliable. That does not mean
that certain details Of the plan may
not have to be altered. For example,
the fact that we start, after thorough
study, by using $50 of the pure prem
iurn developed by the NORMAL loss
es of the particular classification
(Manual Number), it does not mean
that we may not be required to
change this figure to 800 or 97% later
on. Likewise, 1t may be found that
the use Of the sum Of 500 al the limit
Of NORMAL losses does not produce
quite as accurate results as the use
Of the sum of 5000 or $1,000. Or.
again, it may develop that our orig
inal estimate Of 35% Of the Manual
Excess Losses and $50 Of the Fund
Excess Losses Is better than the one
We adopted after actuarial consulta-
tion.
The. fact remains, however, that
the NORMAL leases Of any classilicA-
ton should prove the most accurate
Indicator Of final results. II y more